Lawmakers and the courts have been drawn into the controversy over the complicated distinction between observation status and a hospital admission, which carries a high cost differential.
Several states are adopting or studying laws to alert hospital patients about the potential financial consequences of observation vs. admission status.
Victoria Veltri, JD
This month, a new Connecticut law requires hospital staff to inform patients in writing about the nuances of observation status, which include exposure to out-of-pocket expenses.
Under the law, a written notice provided to patients must indicate "that observation status may affect the patient's Medicare, Medicaid, or private insurance coverage for (A) hospital services, including medications and pharmaceutical supplies, or (B) home or community-based care or care at a skilled nursing facility upon the patient's discharge."
The written notice must also recommend "that the patient contact his or her health insurance provider or the Office of the Healthcare Advocate to better understand the implications of placement in observation status."
Victoria Veltri, JD, who leads Connecticut's Office of the Healthcare Advocate, says her agency is monitoring the new law. "We will be watching the implementation of this bill closely, tracking the calls that come in on this bill, and may intervene, when warranted, on the behalf of an individual consumer to challenge observation status," she says.
Early Adopters
According to the Connecticut Health I-Team, Connecticut, Maryland, and New York are the first states to adopt observation status notification laws, with Massachusetts, New Jersey, and Pennsylvania considering similar legislation.
Officials at the Maryland Hospital Association said that state's observation status law is helping patients navigate the complicated distinction between observation and admission.
"The state and MHA worked with hospitals on a standardized communication template that provides this information to patients, in addition to sharing best practices for hospitals to tailor to their individual situations," the hospital association officials said in a prepared statement.
MHA officials say the Maryland law is adequately crafted to ensure patients are informed about the consequences of being listed in observation status.
"Since the move to observation status was strongly encouraged by the state rate setting commission, federal government, and commercial insurance companies to cut costs by shifting them from insurance companies to patients, patients have understandably been confused when they [have] found themselves in a hospital bed but categorized as outpatients and responsible for the accompanying extra out-of-pocket costs," the MHA said. "We think the law and hospitals' response to it will help patients."
The "standardized communication template" recommended for use at Maryland hospitals starts with this advisory: "When a patient is at the hospital the doctor caring for you must determine whether you require care as an inpatient or an outpatient. Your doctor has assigned your status as an outpatient in observation. You have not been admitted as an inpatient to the hospital."
The Maryland communication template lists information targeted specifically at holders of commercial health insurance and Medicare coverage.
Financial Liabilities
One of the biggest financial liabilities Medicare patients face when designated for observation status is paying a high share of the bill if they are transferred to a nursing home or other skilled nursing facility. The Maryland communication template includes an advisory to patients about this potential cost.
'A Burden on Top of a Burden'
Hartford Hospital, an 819-bed acute care facility in Connecticut, says its state's new law, which is similar to Maryland's, places an undue burden on medical staff.
Maureen Zukauska, RN, is the nurse manager who leads the Hartford Hospital Case Coordination Department, which is charged with advising patients about outpatient status. "Our focus is supposed to be caring for the patient, and it's very prickly to get into conversations about finances," she said.
Mitchell McClure, MD, director of the Hartford facility's Division of Hospital Medicine, says the new observation status law puts doctors in a difficult position. "Physicians have certainly talked about this with patients before, but not in a formal way," he said. "It is an issue that has been contentious with patients, and I understand that. We're in the middle of this conversation."
McClure says hospital staff members were already feeling pressure to comply with a dizzying array of rules and regulations before the new law was enacted. "It's a burden on top of a burden that was already there," he says.
Ajay Kumar, MD, chief of the Hartford Hospital Department of Medicine, says officials at the Centers for Medicare & Medicaid Services who have been the driving force behind patient admission status reform need to take more responsibility for educating the public.
Ajay Kumar, MD
"I have found that very little has been done by CMS and Congress to inform the public," he says. "We do not find that the beneficiaries are well-educated."
Placing the educational onus on hospitals requires a burdensome amount of time to train staff members, he says. "It is an enormous amount of undertaking for us. We're educating a lot of staff in a short period of time."
CMS officials did not respond to a request for comment about Connecticut's new law or about a federal lawsuit linked to observation status. The federal agency does have information online that clarifies the differences between hospital observation status and admission.
Pressing the Feds
In 2011, the Willimantic, CT-based Center for Medicare Advocacy filed a class action lawsuit against the federal government on behalf of Medicare beneficiaries who were placed on observation status at hospitals and then paid thousands of dollars for post-hospital skilled nursing facility care because they had not been admitted to hospitals for at least three days.
"The case challenged Medicare's use of observation status, as well as the lack of an appeal mechanism for beneficiaries to challenge the classification," Alice Bers, an attorney at CMA, said last week.
"In September 2013, the court dismissed the case. We have appealed to the U.S. Court of Appeals for Second Circuit, but limited the appeal to the issue of the right to an effective notice and appeal process for beneficiaries placed on observation status."
Oral arguments on the class action lawsuit appeal have been scheduled for later this month.
Terry Berthelot, senior attorney at CMA, says there is a pressing need for federal legislation to help clear up confusion about the difference between observation status and admission.
"There should be federal legislation requiring both notice and expedited appeal rights for Medicare beneficiaries admitted to the hospital as outpatients," she says. "Whether a patient requires an inpatient level of care is a factual issue. When the hospital and the patient disagree as to whether the patient needs to be hospitalized or could be treated in an outpatient setting, a third party arbiter should step in and review the case. A meaningful appeal process would ensure that Medicare beneficiaries receive the kind of care they need without having to spend large sums of money out-of-pocket."
Pending Bill
Berthelot says federal legislation sponsored by U.S. Rep. Joe Courtney, (D-CT), and U.S. Sen. Sherrod Brown, (D-OH), would help clear up the controversy. "If Medicare counts time on observation status toward the three-day qualifying hospital stay required for Medicare coverage of subsequent care in a nursing home, the observation status problem would largely go away," she said.
A panel of distinguished academics gathered at Harvard University last week gave federally driven healthcare reform efforts high marks, but cautioned that several daunting hurdles remain.
Theda Skocpol, PhD, a Harvard professor and director of the Scholars Strategy Network, which co-sponsored the "Taking Stock of Health Reform" forum, delivered a stirring defense of the Patient Protection and Affordable Care Act.
Skocpol highlighted three areas where she believes the PPACA has made tremendous strides:
Creating "new rules of the game" for insurance companies that improve quality of care and reduce costs;
Boosting subsidized care through mechanisms such as Medicaid expansion to ensure health insurance coverage becomes more affordable;
Launching exchanges that serve as marketplaces where people can compare health insurance products.
"It is surprisingly successful. It didn't look that way a year ago," she said.
Lawrence Jacobs, PhD, a political science professor at the University of Minnesota, pointed to polling data indicating that Americans are supportive of the core elements of the PPACA. They like the healthcare reform law more as they learn more about it, he added.
"The reality is, there's quite a bit of support for it," he said, citing polling data collected at Stamford University in California. "As knowledge increases, support for the Affordable Care Act rises to about 88 percent among Democrats. Even among Republicans, support rises to about 40 percent… Support for the law rises as people actually experience the benefits of the law."
In a brief interview after the forum, Jacobs noted that public support for the PPACA mirrors the historical experience with other major pieces of social legislation. "We find that the knowledge about Social Security is greatest among people who are in the program," he said.
Linda Blumberg, PhD
Senior fellow, The Urban Institute
Linda Blumberg, PhD, a senior fellow at The Urban Institute, noted that the PPACA has generated major improvements in the health insurance marketplace over a relatively short period of time.
"There has been significant reduction of the uninsured relative to the expected trend," she said, noting that millions of previously uninsured Americans have gained health insurance coverage through Medicaid expansion and the PPACA-spawned exchanges.
"We've also seen increasingly competitive insurance markets, particularly in the non-group markets… These are all very good signs."
PPACA Obstacles
The forum participants identified several impediments to the successful implementation of the PPACA, including political, financial, operational, and legal hurdles.
"The politics remain rancorous and poisonous," Skocpol said, noting that an appetite for repeal of the PPACA is "still on the table" for many of its political foes. "That reacts with a media that over-hypes the possibility of repeal."
Just two days before the Oct. 2nd forum on the Harvard campus, U.S. Rep. Kevin Brady, (R-TX), released a statement peppering the PPACA with harsh criticism.
"Today, Americans were supposed to be able to enroll in an Affordable Care Act plan for the second year, but the opening of 2015 enrollment was delayed [until] after the mid-term elections to avoid consumers finding out that much of the backend of healthcare.gov still doesn't work, and that they may face higher premiums and a more narrow network," the chairman of the House Ways and Means health subcommittee wrote on Oct. 1.
"While this poorly written law has helped some, it has hurt many, many more," Brady wrote. "One year later, too many families have had the plans they liked cancelled and can no longer see the local doctor they trusted. That is not the healthcare reform they were promised."
Jonathan Gruber, PhD
Professor, MIT
Skocpol places responsibility for the troubled political prospects of the PPACA squarely on the Democratic Party. It has done a poor job of explaining the law to the public, she says. "Most Americans still don't know what is in this law; so it's wrong to conclude that if they did know, they wouldn't like it."
Blumberg said the prevalence of cost sharing seen as high-deductible health plans on the new exchanges has emerged as a key financial stumbling block to offering affordable healthcare coverage to all Americans. "The cost sharing can be very high relative to their income," she said.
Katherine Swartz, PhD, a professor of health policy and economics at Harvard, said the PPACA stopped insurance carriers from denying coverage due to pre-existing conditions, but she noted that risk selection remains a threat to healthcare access.
Carriers have cast a wary eye on the least profitable markets and public exchanges and "they could stay out of certain marketplaces," Swartz said.
Narrow Networks
In response to a question from the forum's audience of about 75 people, Blumberg said "price gouging" of patients who seek medical care outside of narrow networks is a concern in many states. "We're at the beginning of what is going to be a very tension-filled conversation," she said of the simmering debate over network adequacy.
Blumberg said operational problems, such as last fall's nearly disastrous rollout of healthcare.gov, are likely to be a perennial. "What we had before was a very patchwork kind of system," Now, she said, "You've got more patches on the patches."
She believes the struggle to optimize healthcare.govreflects the PPACA's byzantine set of regulations. "The policy we have created has complex operational needs," she said. "What we don't recognize is that it's the policy that drives the complexity of this system."
Timothy Jost, JD, a professor of law at Washington and Lee University in Virginia, said court challenges seeking to eliminate health coverage subsidies in federally administered insurance exchanges could have disastrous consequences for the PPACA. If those challenges reach the U.S. Supreme Court and are successful, he said, they "will not only gut the federal exchanges but also gut the non-group market."
"I don't think the judges really understand that," Jost said.
Educating the public
One of the most challenging obstacles to effective implementation of the PPACA is the woeful status of healthcare literacy among Americans, several forum participants argued.
"We have a conglomeration of media and political parties that make fact-based evaluation [of healthcare by] regular citizens all but impossible," Jacobs said, noting the shift from the "Cronkite era" when there were limited sources of information on public policy to the prevalence of media outlets today that package news to fit viewers' preconceived notions. "There's a business and political reward to feeding that hunger."
Jonathan Gruber, PhD, a professor of economics at the Massachusetts Institute of Technology in Cambridge, and an architect of the healthcare reform law, stressed the need "to try lots of different mediums" to improve healthcare literacy.
"It's not a lack of material. It's a lack of getting people to be interested in it," he said of matching the vast amount healthcare reform information linked to the PPACA with individual members of the public.
Blumberg suggested that the need for healthcare literacy education is greatest among Americans who were previously uninsured and are now shopping for insurance coverage on the new public exchanges. "When you look at the specific target population in the exchanges… about half of them don't know what a premium is," she said. "What we need is a lot more hand-holding."
The healthcare landscape is dotted with new health plan ventures, including a bevy of opportunities to make money in federally sponsored insurance products.
Government-sponsored healthcare is the new black.
Thousands of Americans are newly eligible to enroll in Medicare every day, while millions of previously uninsured citizens have gained healthcare coverage through the new public exchanges as well as expansion of Medicaid in more than two dozen states.
One of the most attractive government business lines in the health insurance marketplace is Medicare Advantage, a value-based alternative to traditional fee-for-service Medicare.
Blue Cross Blue Shield of Michigan has embraced Medicare Advantage, scoring among the MA leaders in the federal government's 5-star system that rewards health plans for achieving high quality standards. "We're one of the few plans that leaves zero dollars on the table," Julie Smith, VP of federal business at BCBSM, told me last week.
She says there are several keys to success when operating an MA plan: managing quality to attain at least 4-Star ratings, reducing "retrospective coding" to ensure providers accurately document patient health status during visits, investing in the expertise needed to operate government-sponsored health plans, playing close heed to compliance, and building strong relationships with healthcare providers.
Smith says insurers expose themselves to grave risks if they view operating MA health plans or other government-sponsored health insurance products as an extension of their commercial business: "If you make a mistake, it can take years to turn it around," she says. "Treat it differently. Make sure you have dedicated resources. The mistake people make is they believe you can do this with the same people and technology you used in the past."
BCBSM did just that by bringing in new people and technology to achieve government-sponsored healthcare success through a partnership with Southboro, MA-based ikaSystems Corp.
"Two years ago, Blue Cross Blue Shield of Michigan switched to a new platform from their legacy platform," Joseph Marabito, president and CEO of ikaSystems, told me last week. "In the process, they halved their administrative costs. They avoid having to process manually 3.2 million claims annually."
Marabito says expertise and the ability to scale operations are critical factors to succeeding in government-sponsored healthcare markets. "You need to know what you're doing in the government business. If you do it poorly, you can really lose a lot of money," he says.
"Most health plans are regional plans; most are not national… How are you going to be competitive with a plan ten times your size? You need to be on a new platform [with] technology [that] scales better than a legacy platform."
In addition to expertise and the ability to scale up operations, Smith says BCBSM looks for a "proactive management infrastructure" when selecting partners in government-sponsored healthcare ventures. "I need my partners to be out there ahead of what the market trends," she says.
Marabito says he also carefully gauges the management of his company's health plan partners.
"I assess how committed they are to the [government-sponsored] business and how realistic they are. I look for people who are collaborative, people who are open-minded. Most health plans have been around for a long time. With that can come practices that are hard to change."
Marabito and Smith both say that insight about the inner workings of Washington and flexibility to adapt to regulatory changes are critically important when operating a government business line.
"The fact is, the rules change every day," Marabito says. "You just don't always understand what's going to happen. You have to be flexible."
Smith says the Medicare Advantage 5-Star quality program is a great example of the vagaries involved in government-sponsored healthcare.
"I plan for change, and I plan for surprises all the time because I know I'm going to have them," she says. "We are always striving to be ahead of what the expectations are of the government—high quality, members knowledgeable about the product. You have to pivot, and you have to have leadership that is willing to work in an abstract world."
The decision to shutter a proton beam therapy center in Indiana is shining light on the precarious financing of the costly facilities used to treat some cancers.
The planned closure of the Indiana University Health Proton Therapy Center early next year is unlikely to derail investments in the costly cancer-fighting technology across the country, according to officials at the university and the National Association for Proton Therapy.
IU officials announced the decision to close the Bloomington facility for financial reasons last month based on the recommendation of an independent review panel.
The IU Health Proton Therapy Center, which is the third-oldest proton beam facility for tumor treatment in the country, has been spilling red ink on the university's balance sheet since it opened in 2004. IU has already lost $20 million on the facility and could lose as much as $15 million more, university officials said in the prepared statement announcing the closure decision.
Earlier this week, a university official said the IU Health Proton Therapy Center faces insurmountable financial pressure.
"This center was one of the first of its kind in the United States, but the competition has increased significantly in the last several years, which has affected patient volumes," said Mark Land, associate VP of public affairs and government relations at IU.
"The facility, which is a bit unusual in that it is not located in a hospital, but rather is a free-standing facility that was created to make additional use of the proton beam at the IU Cyclotron, has operated at a financial loss for most of its existence. It would take a significant investment to make the facility cost competitive with new centers with no reasonable hope that such an investment would ever be recouped," he said.
Land describes the circumstances involved in the development and operation of the IU Health Proton Therapy Center that placed the facility at a competitive disadvantage. "As I understand it, proton therapy centers today are being constructed primarily within hospitals and for specific purposes. In our case, we had an existing proton beam and used that as an opportunity to provide patient care. While that allowed us to get into the field, it's not the way you'd build it today."
Construction costs for PBT centers range as high as $200 million for facilities with multiple treatment rooms from about $30 million for "compact machines" with a single treatment room, says Leonard Arzt, executive director of the National Association for Proton Therapy in Silver Spring, MD.
He contends that the impending closure of the IU Health facility is not a bad omen for PBT in the United States.
"The Indiana proton center faced financial challenges from the beginning when it opened about a decade ago. It started with a very old cyclotron in a physics research facility that eventually needed costly upgrading and maintenance," Arzt said.
"The closure will have minimal to no impact on the proton community outside of Indiana. There are currently 14 operating centers across the United States, with a dozen more currently in development. … We are confident proton facilities are here to stay for the long-term treatment and benefit of cancer patients worldwide."
Not Aging Gracefully
Whether or not the closure of the IU Health Proton Therapy Center is the beginning of a negative trend, the findings of the review panel that examined the facility's viability tell a cautionary tale.
The panel found that the oldest U.S. proton beam therapy facilities face financial and technological challenges. "This facility is outdated and requires significant investment to continue to operate. Because of both the expense of these investments and the high operating costs of an aging facility, it does not appear that IUHPTC can ever achieve a positive margin," the review panel members wrote in their report.
The panel asserted that the IU Health Proton Therapy Center is at a significant disadvantage compared to newer facilities. "Although the replacement of the cyclotron would permit the facility to continue to function, it would not permit the development of state-of-the-art technology, which would require multiple other components," the review panel members wrote.
The oldest proton therapy center for cancer treatment opened in California at Loma Linda University Medical Center in 1991. Massachusetts General Hospital has the nation's second-oldest proton therapy center, with its facility opening in 2000.
A Proton 'Bubble?'
In terms of technology, the review panel found PBT is facing stiff competition from refinement of older technologies and from development of new radiation therapies.
The panel noted that historically standard radiation therapy based on photon physics "has closed the gap with proton beam to an unanticipated degree." The panel also noted the development of potentially superior technologies such as carbon ion beam facilities.
Based in part on these finding, the panel drew a disturbing conclusion about the country's oldest and most debt-ridden proton therapy centers. "It is, therefore, quite possible that we are on the verge of a 'proton bubble' with the more indebted centers or those without a strong patient supply line closing. Those with less or no debt, or those built around academic institutions, will likely survive," the report says.
The Cost-effectiveness Debate
The IU Health Proton Therapy Center review panel noted that cost-effectiveness and efficacy remains an open question and high-risk proposition for proton beam cancer treatment.
"The fact that any proton facility costs 10 to 100 times as much as the next most expensive medical device has placed it in the center of the debate about value-based medicine and some insurers are starting to balk at the cost and to decline coverage."
PBT advocates say it should be the standard of care for isolated tumors, particularly in children, because proton beams can be focused on cancerous tissue while sparing adjacent healthy tissue.
There are no U.S. randomized clinical studies demonstrating "proof in principle" that proton beam therapy is superior to other forms of cancer treatment, the panel concluded.
PBT advocates believe randomized studies currently underway in the U.S. will show the technology is cost-effective.
A study published in May in the International Journal of Radiation Oncologysuggests that for head and neck tumors, "early clinical outcomes are encouraging and warrant further investigation of proton therapy in prospective clinical trials."
Medicare Advantage health plans are slated for a modest premium hike next year, but uncertainty remains over the long-term prospects of the value-based insurance program.
Federal officials released data last week forecasting an average 4% increase in Medicare Advantage health plan premiums in 2015.
Marilyn Tavenner
Marilyn Tavenner, administrator of the U.S. Centers for Medicare & Medicaid Services, said in a prepared statement that the Medicare Advantage program has been thriving since the adoption of the Patient Protection and Affordable Care Act in 2010.
"Since the Affordable Care Act was enacted, enrollment in Medicare Advantage plans is now at an all-time high, and premiums have fallen," Tavenner said.
Between 2010 and 2015, enrollment in MA health plans is forecast to increase 42%, with premiums declining 6%, CMS reported last week. This year, the average monthly premium for an MA health plan is $30.96, according to CMS.
Quality Improvements
The federal agency also reported quality improvement in MA health plans. CMS ranks MA health plan quality on a scale of one to five stars. About 40% of MA health plan contracts are set to receive quality rankings of at least four stars in 2015, an increase of approximately 6% from this year, according to CMS.
MA health plan quality has steadily increased since 2012, the federal agency reported: "About 60 % of MA enrollees are currently enrolled in plans with four or more stars for 2015, an increase of approximately 31% compared to the percentage in four or five star plans based on 2012 ratings."
America's Health Insurance Plans, the Washington, DC-based organization that represents commercial health insurance carriers, reacted cautiously to the CMS announcement.
14 Medicare Advantage Plans Earned 5 Stars in 2013
"The growing number of seniors choosing to enroll in Medicare Advantage is a testament to the value the program provides for beneficiaries," Brendan Buck, AHIP's VP of communications, said in a prepared statement.
"At the same time, the data show that certain areas are feeling the impact of payment cuts to the program. With the majority of cuts still looming, there is potential for further disruption to beneficiaries in the future. That's why the 1.6 million seniors who make up the Coalition for Medicare Choices and more than 270 members of Congress recently came together to protect this program and the millions who rely on it."
On Friday, Sunnyvale, CA-based HealthPocket released an analysis of the 2015 CMS data on the Medicare Advantage program. The company ranks and compares health plans across the country.
HealthPocket is pegging the average MA health plan premium increase for 2015 at less than 2%, rising from $61.69 monthly to $62.69. Company officials stated that their figures for monthly health plan premiums are nearly twice as high as the CMS figures because "the government weighted their average by projected plan enrollment rather than averaging premiums across all options available in the market."
While HealthPocket is painting a rosier picture for the percentage increase in MA health plan premiums next year, the company reported the number of $0 MA health plan premiums in 2015 is set to decline 19%.
Kevin Coleman, head of research and data at HealthPocket, says the modest average MA premium increase forecast for next year has to be balanced against the decline in the number of MA health plans with zero-cost premiums.
"The importance of stable Medicare Advantage premiums to the plans that offer them is that premium increases that are perceived as too high are among the two biggest risks for member attrition. The other being poor customer service experiences," he said. "A 2% premium increase is clearly stable. However, this must also be viewed in light of the decline in availability of $0 premium plans."
Coleman says the MA health plan data CMS released last week is unlikely to calm the shrill political debate over the future of Medicare Advantage.
"The jury is still out regarding the long-term prospects of the Medicare Advantage program because there are outstanding questions regarding the funding cuts Medicare Advantage will experience. For example, cuts were scheduled for 2015 and then reversed," he said.
The development and dispersion of cost-effective medical technologies that promise to boost wellness, prevention, and precision care are pivotal to the transformation of healthcare, experts say.
A tsunami of healthcare innovation is sweeping the globe, according to three dozen experts who gathered this week in Boston for a forum organized by The Economist.
"We are in an amazing time. The transformation that is going on in the United States and around the world is unprecedented," Walter Capone, president of the Multiple Myeloma Research Foundation, told forum attendees.
Several of speakers said the biggest global change in healthcare is a growing realization in both developed and developing countries that boosting wellness, prevention, palliative care, and outpatient services are essential elements of establishing sustainable healthcare systems.
"[Developing countries] simply can't replicate the kind of health system we see in the United States," said Peter Berman, DPH, a professor at the Harvard School of Public Health in Boston. "They will not be able to afford in the near-term treating heart disease and cancer the way we have in the West… It really will be more about creating a health system with emphasis on outpatient care and prevention."
Bruce Broussard, president and CEO of the Louisville, KY-based payer, Humana, cited Medicare Advantage as a prime example of an insurance business line that places a premium on prevention. "If we can eliminate the need for care in the first place, we can cut costs," he said.
Humana has deployed about 8,000 nurses who visit health plan members' homes on a daily basis to help them stay healthy, Broussard said. "We help people move furniture, build ramps," he said. "Those little steps have a big impact."
To promote wellness at an early age, Humana has helped build 50 playgrounds across the country. "We've set the goal of improving the health of the communities we serve… and to do that we have to partner with communities," Broussard said. "We're actually improving the community overall."
R. Sean Morrison, MD, professor of geriatrics and palliative medicine at the Icahn School of Medicine at Mount Sinai in New York, advocated for palliative care as part of the solution to treating the world's aging population.
"One of the greatest challenges we face as a country and globally is the [population] growth of older adults," Morrison said. He believes palliative care improves quality, lowers healthcare costs, and increases patient survival rates when combined with interventional treatments such as surgery.
Morrison, in an interview after the event, elaborated on that message, describing palliative care as one of the best examples of a patient-centered approach to medicine.
"In palliative care, we meet with patients and families. We discuss and outline their goals for medical care, and we match our treatments to those goals," he said.
"When goals are unrealistic, for example living for an additional five years with advanced pancreatic cancer, we work with patients and families over time to help them establish more realistic goals while always preserving hope."
Anita Goel, MD, PhD
Chairman and CEO of Nanobiosym
Technology to the Rescue
Beyond the bedside, the development and dispersion of cost-effective technology is playing a key role in transforming healthcare, several forum speakers said.
Anita Goel, MD, PhD, chairman and CEO of Cambridge, MA-based Nanobiosym, spoke about the convergence of several technological developments including the Internet, mobile devices, and emerging communications platforms having the potential to revolutionize healthcare on a global scale.
"I see this whole new generation of infrastructure that's going to usher in a whole new era of healthcare, not just in the developed world, but also in the developing world," she said.
Technology, she says, has become a driving force for decentralization and personalization in the medical field. "Anyone, anywhere, any time can have access to information about their healthcare."
Albert Bourla, group president of vaccines, oncology, and consumer healthcare at the pharmaceutical giant, Pfizer Inc., told attendees of the forum that the biopharmaceutical industry is in the vanguard of technology-driven change in healthcare.
"Cancer is the area where science will develop the most meaningful treatments in the years to come," he said.
The Pfizer executive said biopharma is a leader in precision medicine. "We are developing products that are relevant to a small part of the population, but the effects will be profound," Bourla said. Worldwide, there are about 2,000 cancer drugs currently in development.
"We can't wait ten years for medication; we need it today," said Capone. His organization, the Multiple Myeloma Research Foundation, is working with biopharma companies, regulators, academic centers and other top stakeholders involved in producing medications to shorten development time lines and reduce costs.
Seeing the Light
Transparency was another hot topic at the event.
"The idea that we're going to push data out and make it available to people is revolutionary," said Mitch Rothschild, CEO of Lyndhurst, NJ-based Vitals. "A few years from now, it will be viewed as madness not to know how much a doctor is going to cost before we go."
Harold Miller, president and CEO of the Pittsburgh-based Center for Healthcare Quality and Payment Reform, said it is critically important to boost transparency in a meaningful and methodical manner. "Price transparency is a critical element to improving healthcare," he said. But, he cautioned, "price transparency alone could actually be a bad thing."
Miller said price transparency will help drive beneficial change in healthcare as long as it is crafted alongside payment reform efforts.
In addition to publicizing healthcare prices, he said it is necessary for transparency efforts to be paired with paying for healthcare in a different way than has been done in the past.
"Today, it's very difficult for people to know what the total cost will be," Miller said of patient billing. "We pay for healthcare in a fragmented way. We pay for everything separately… Typically, patients don't pay anything near the total cost of care."
The key to making price transparency an effective agent of change in healthcare is getting patients to be "price-sensitive," he said. Miller cited the California Public Employees' Retirement System (CALPERS) requiring patients to pay out-of-pocket for the difference between a low-cost hip replacement physician and higher-cost doctors.
The result? "The expensive healthcare providers changed their costs," he said.
Catholic Health Initiatives is ramping up to offer health insurance products in 18 states by 2016. The nonprofit is determined to avoid pitfalls that have bedeviled other providers hoping to gain entry into the health plans business.
As they seek to boost their bottom lines and population health management capabilities, some healthcare providers are launching their own health plans.
"Some health systems imagine they will be able to get the rates they've always wanted from the Blue plans but couldn't," Juan Serrano, senior VP of payer strategy and operations at Englewood, CO-based Catholic Health Initiatives, told me last week.
Building a health plan from scratch is not as easy or as profitable as it may appear.
Serrano says "getting the math right" is among a host of challenges providers face when they open an insurance business line: "That has been the downfall of many a health plan."
CHI is taking a "methodical approach" in its quest to establish health plans in all 18 states where it operates, he says. "It can take three, four, five years for a health plan to get large enough to break even on its capital development expense. We've given ourselves two or three years… to get to a scale where we are breaking even."
CHI officials believe they have the ability to "shorten that cycle" because the health system has acquired a pair of health plans over the past two years: Soundpath Health in Washington State and QualChoice in Arkansas. "We looked to acquire some of the infrastructure rather than to build it all ourselves," Serrano said.
Juan Serrano
Senior VP of Payer Strategy and Operations,
Catholic Health Initiatives
The acquisitions have allowed CHI to establish toe-holds in two lines of health insurance: Soundpath has experience marketing Medicare Advantage policies and QualChoice has a track record offering commercial health insurance policies.
Acquisitions and consultants are helpful when a health system decides to go into the insurance business, but there is no substitute for having a capable health plan team internally, according to Serrano.
CHI has launched a wholly owned subsidiary, Prominence Health, to build out a portfolio of health insurance products. Fully staffing Prominence has been a top priority, beginning with a skeleton crew of a couple dozen workers in 2012 and employing about 300 people this year.
"We didn't only hire people to start a health plan," Serrano says. Prominence employees include not only underwriters and actuaries, but also experts in population health management and data analytics.
"These types of skills are essential, and all too often people try to outsource these skills to consultants," he says. "Having people within the health plan who understand the risks deeply enough is essential. Ultimately, somebody within the organization has to make business decisions… The consultants are going to stop short of giving a recommendation. They will only give guidance."
In addition to establishing a health plan infrastructure, one of the initial strategic goals for CHI was deciding which health insurance products to offer. The Medicare Advantage program was determined to be an attractive starting point because value-based plans provide an opportunity "to establish deep alignment" between a health system and its new insurance business line, Serrano said.
CHI is choosing its Medicare Advantage markets carefully with a county-by-county analysis in the states where the health system operates. "The first scan is a financial scan of the market," he said. Another key step is conducting actuarial assessments to make sure competitive premiums can be established to cover claims in a way that is stable over time. "The second part of the discernment process is determining the readiness of our hospital or health system from a network perspective. In all cases, we have to round out the network to provide all the services required."
The final steps in assessing a Medicare Advantage market involve answering some tricky questions, Serrano says. "How saturated is the market with competitors? What percentage of the market is Medicare Advantage versus fee-for-service Medicare? How attractive is the market? It starts to get a little more complicated," he says.
"It circles back to having the right team in place. We're careful to counsel folks; some markets are tougher than others, and it's important to understand that."
Based on CHI's experience, building a health plan business from the ground up is not for the financially faint of heart. "It takes a fair amount of capital expense and a long-range view of when that investment will realize a return," Serrano says. "There's a fairly large economic hurdle to doing this and doing it right."
Health plan startup expenses include assembling an infrastructure through acquisitions or internal investments, hiring staff to operate the plan, legal service fees for licensure, and obtaining reinsurance coverage to protect against large unexpected expenses.
Assuming those startup costs are handled properly, Serrano says another set of expenses is needed to operationalize a new health plan. One of them is carrying enough reserves for unexpected claims as well as "run-out costs" in case a health plan is forced to close and claims keep coming in.
"Parking that cash in reserve has to be clearly understood," says. There are also high marketing costs associated with launching a health plan. "Winning the business from employers requires a sizeable outlay of dollars in marketing."
CHI has set an ambitious trajectory for its health plan expansion. With help from its partners at Soundpath and QualChoice, CHI is offering health plans this year in the Pacific Northwest and Arkansas. Next year it plans to offer Medicare Advantage plans in four more states as well as offering more commercial plans. In 2016, the expectation is to have "Medicare Advantage or commercial or exchange plans in virtually all of our markets."
CHI officials have a high degree of confidence in their methodical approach to building health plans, Serrano says. "We think our strategy is a strategy that strengthens the probability of success for our health plans. There are different ways of being in this space," he says. "We think this is a strong model for us."
At least 15 states are considering a revised draft of the Interstate Medical Licensure Compact, which has the support of the AMA.
An effort to provide physicians a streamlined path to obtaining medical licensure in multiple states appears to be gaining traction.
Humayun Chaudhry, DO
President and CEO of the FSMB
"There's momentum," Humayun Chaudhry, DO, president and CEO of the Federation of State Medical Boards, said this week. "We're seeing many stakeholders across the spectrum expressing support."
The FSMB finalized the draft version of its proposed Interstate Medical Licensure Compact earlier this month and Chaudhry says 15 state medical boards are already considering endorsements of the final version. Many boards "have been awaiting the final version," he said. "State legislators ultimately have to approve the language of the document."
The American Medical Association has endorsed the effort.
"The American Medical Association has long supported reform of the state licensure process to reduce costs and expedite applications while protecting patient safety and promoting quality care," Robert Wah, MD, president of the AMA, said in a media statement.
"We applaud the FSMB for developing the interstate compact and other reforms designed to simplify and improve the licensure process for physicians practicing across state lines as well as providing telemedicine services in multiple states."
Chaudhry says the FSMB hopes that the Interstate Medical Licensure Compact will help address three acute challenges in U.S. medicine: the advancement of telemedicine, the growing physician shortage, and an increased demand for medical services that has resulted from implementation of the Patient Protection and Affordable Care Act.
In August and early this month, the FSMB made a handful of revisions to the draft version of the proposed Interstate Medical Licensure Compact. The revisions include:
A requirement that physicians seeking licensure in multiple states through the Compact would have to pass licensing tests such as the U.S. Medical Licensing Examination within three attempts.
The adoption of a streamlined process for license renewal through the Compact.
A provision allowing members of the general public who serve on state medical boards to also serve on the commission that will govern the Compact.
With the revisions in place, about 80 percent of the country's physicians would be eligible to obtain medical licensure in multiple states through the Compact, Chaudhry estimates.
He emphasizes that the Compact is a state-based effort, "not a national license."
"What is issued at the end of the day is not any document from the Compact," he said. "Physicians are still getting a state license. If the physician meets the requirements of the Compact, the state board is required to issue a license immediately."
Compact Approval Process
The FSMB is now working on the next step to get the Compact up and running: garnering endorsements from state medical boards and legislative approval from statehouses across the country.
"We've finished the deliberations on the final version on schedule. Now we're doing the visits to the state boards," said Chaudhry, who is scheduled to meet with officials at the Michigan Board of Medicine this week.
Based on advice from the Lexington, KY-based Council of State Governments, the FSMB is seeking legislative approval for the Compact in at least seven states before forming the commission that will operationalize the interstate licensing effort.
Crady deGolian, director of the CSG's National Center for Interstate Compacts, says that setting the number of states required to form a compact "isn't an exact science."
"The only hard and fast rule is you must have two states because of the contractual nature of compacts. Beyond that, it typically is left to the discretion of the drafters," deGolian said. "In this case, we felt that seven was large enough to give the organization some political clout, but not so large that it would take years to achieve success."
The CSG official says keeping lawmakers in different states on the same page will be the biggest hurdle for the Interstate Medical Licensure Compact. "The most significant challenge any compact faces is the fact that each state must adopt essentially the same language," he said.
"Compacts are contracts between states and thus require each state to accept the terms of the agreement as drafted and without amendment. That often times presents significant hurdles in terms of achieving wide-scale adoption."
The Compact also faces a more fundamental obstacle, he said.
"The other challenge you see with any compact is they require a degree of trust between the member states," deGolian said. "Whether it is medical licensing, as we're talking about in this instance, or the movement of probationers and parolees across state lines that several compacts address, for a compact to prove successful, states must trust and communicate with one another."
Chaudhry says it may take two or three years to get the vast majority of states to join the Interstate Medical Licensure Compact.
"We're being methodical. The first goal is to get seven states, but our ultimate goal is to get as many states to sign up as possible," he said. "We'll see how many we can get in the first year. All the legislatures meet in 2015."
Research on Massachusetts government workers finds no evidence that narrow network enrollment is associated with a shift towards lower quality hospitals.
A pair of Massachusetts economists has conducted research that casts narrow healthcare provider networks in a favorable light.
"In our study, the evidence suggested that narrow network plans reduced costs by both reducing the prices paid per visit and reducing the quantity of certain services, notably emergency room visits and specialist visits," Robin McKnight, an associate professor of economics at Wellesley College, said last week.
"Interestingly, enrollment in a narrow network plan led to an increase in primary care visits. So part of the way that the narrow network plans reduced costs was by shifting the site of care towards primary care, and away from more expensive settings. We examined several measures of hospital quality and found no evidence that narrow network enrollment was associated with a shift towards lower quality hospitals."
McKnight conducted the research with Jonathan Gruber, a professor of economics at the Massachusetts Institute of Technology, an architect of Massachusetts' healthcare reform effort, and a technical advisor to the Obama administration on the Patient Protection and Affordable Care Act.
The study was funded in part by the National Institute on Aging and the National Bureau of Economic Research.
Gruber and McKnight examined the impact of the narrow network used by the Massachusetts Group Insurance Commission, which provides healthcare coverage for nearly 200,000 state workers and their dependents as well as more than 30,000 municipal employees and their dependents.
In 2012, the GIC provided a golden opportunity for the research duo when the agency gave state workers a financial incentive to join its narrow network. The incentives to switch to the narrow network were not offered to municipal employees, which created a control group for the study.
"We find that enrollees are very price sensitive in their decision to enroll in limited network plans, with the state's three-month 'premium holiday' for limited network plans leading 10 percent of eligible employees to switch to such plans. We find that those who switched spent considerably less on medical care," the economists write in "Controlling Health Care Costs Through Limited Network Insurance Plans: Evidence from Massachusetts State Employees."
After the GIC offered state workers the incentive to switch to a narrow network, Gruber and McKnight found that the level of GIC spending dropped 4.2 percent, "implying that the marginal person induced to switch plans by this incentive spent 36 percent less."
Given that Massachusetts has a relatively high density of medical facilities and a relatively high level of accessibility to quality healthcare, McKnight says more research will be necessary to gauge the impact of narrow networks across the country.
"But," she said, "I think the important point is that, in contrast to a lot of the recent rhetoric on this topic, our research suggests that narrow network plans do have the potential to generate savings without any apparent reduction in quality of care."
'Pay Less and Still Get High Quality'
Trade associations for the insurance industry and large employers say the Massachusetts research is a significant contribution to the simmering debate over the costs and benefits of narrow networks.
Brendan Buck, VP of communications for America's Health Insurance Plans, says the Massachusetts study is not the first research indicating narrow networks achieve significant healthcare cost reductions. In July, a report from the Seattle-based actuarial firm Milliman also indicates narrow networks are cost-effective, he said. "It found that [narrow networks] provide coverage options with 5% to 20% lower premiums compared to broader network plans, while placing an emphasis on quality care."
Steve Wojcik, VP of public policy at the National Business Group on Health in Washington, DC, says the Massachusetts study "is good research to show the impact of narrow networks… It's good because in healthcare, people think the more you pay, the better quality you get; but this study shows you can pay less and still get high quality."
Wojcik says the level of narrow network cost savings demonstrated in the research Gruber and McKnight conducted may be hard to achieve in other parts of the country.
In addition to Massachusetts' relatively high density of high-quality healthcare facilities, "the healthcare services are pretty expensive, too," he said.
"It's low-hanging fruit to decrease costs in a high-cost setting. You may not see the same level of cost savings in a state where healthcare costs are lower. But even in those places, when you can use more effective contracting… you are going to reduce costs and keep quality at a high level."
In a survey released last month by the NBGH, 26% of nearly 150 large employers reported offering health plans with narrow provider networks.
Federal officials are urging hospitals to accept a settlement for thousands of Medicare claims denied because of patients' admission status.
In a conference call Monday with hospital executives from across the country, officials from the Centers for Medicare & Medicaid Services highlighted a claims appeals settlement deal that offers 68 cents on the dollar.
Gerald Walters, senior adviser to the CFO at CMS's Office of Financial Management, said the settlement offer is both necessary and worthy of consideration. "There's been an unprecedented growth of claims appeals," he told hospital executives, adding that the federal agency's appellate apparatus faces an overwhelming caseload.
In a memorandum dated December 2013, Chief Administrative Law Judge Nancy Griswold described the caseload: "From 2010 to 2013, [Office of Medicare Hearings and Appeals] claims and entitlement workload grew by 184% while the resources to adjudicate the appeals remained relatively constant."
"To settle these claims appeals, CMS had to make an offer… Take every opportunity that is available to you," Walters implored.
The so-called two-midnight rule that went into effect in October 2013 is expected to reduce confusion over the distinction between outpatient and inpatient status, reducing the number of future appeals, Walters said.
But admission status presents major Medicare payment consequences for healthcare providers: payment rates for inpatient care under Medicare Part A are considerably higher than payment rates for outpatient care under Medicare Part B.
The CMS settlement offer is limited to acute care hospitals and critical access hospitals and they have until October 31, 2014 to submit their signed agreements.
"When we look at these claims, we believe the preponderance of the denials were from acute care hospitals and critical access hospitals, so we chose to focus on those areas," Walters said, noting that CMS has no plans to offer a similar settlement deal to other healthcare providers such as children's hospitals.
Contrary to what some hospitals may believe, organizations with multiple pending appeals will not be allowed to cherry pick from their caseload: "It's all or nothing," he said. "You may not choose to pick some claims [for settlement] and leave others out."
Walters urged hospital leaders to take CMS up on the offer. "Sixty-eight percent: Consider the net present value. It's a good solution," he said.
Key Settlement Rules
Melanie Combs-Dyer, director of CMS's Provider Compliance Group, identified four requirements for a Medicare claim appeal to be eligible for the settlement deal:
Claims have to be pending appeal
Patient admissions status has to be the main reason claims were denied
Date of hospital admission has to be prior to enactment of the two-midnight rule on Oct. 1, 2013
Claims must not have been withdrawn and resubmitted for Medicare Part B reimbursement
Combs-Dyer said one of the most crucial steps in the settlement process is when hospitals email a signed administrative agreement and caseload spreadsheet to CMS. As long as the hospital's caseload spreadsheet matches CMS's records, settlement payments should go out to hospitals within 60 days, she said: "We want to resolve these appeals as quickly as possible."
Settlement payments could take longer than 60 days if hospital and CMS records do not match. Since Medicare Administrative Contractors will be processing settlement deal payments, "The MAC and the hospital will have a discussion to try to resolve any discrepancies," Combs-Dyer said.
"I do not agree that the 68 cents on the dollar is fair," said Mark Bogen, CFO and senior VP of finance at South Nassau Communities Hospitalin Oceanside, NY, when reached for comment. He did not attend the hearing.
