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2019 Predictions: a rocky road for hospitals, new players, artificial intelligence and more

2019 Predictions: a rocky road for hospitals, new players, artificial intelligence and more

2019 Predictions: a rocky road for hospitals, new players, artificial intelligence and more

By Dr. David C. Pate, News and Community
January 1, 2019

The landscape for health care has significantly changed with the mid-term elections that resulted in a shift of control of the U.S. House of Representatives from Republicans to Democrats. What can we expect in 2019?

Health Care Reform and the Affordable Care Act

Given the Democrats’ control of the House, the only changes the Trump administration can make to the ACA, other than those that would have support from the Democrats, are those that the administration can make under their rule-making authority. I don’t expect to see any significant changes to the ACA in the next two years, unless the ruling in Texas v. United States is upheld on appeal. I wrote about the case and the ruling for a post Dec. 17.

Medicare for All

“Medicare for All,” the idea of a publicly funded, single-payer health insurance program for all Americans, has been championed by progressive Democrats. Public support for such a program has been growing and has reached majorities in both parties, though support significantly drops off, especially among Republicans, when the discussion turns to payment for this through new and increased taxes.

Political support for Medicare for All is picking up steam, given that health care was the single most important issue for voters and Democrats gained the largest pick-up of Congressional seats since Watergate. It has been particularly fascinating to me that Medicare for All supporters also won elections in swing districts and traditionally conservative states.

Despite the growing support, there is no chance that Medicare for All will come to pass in the next two years. President Trump would veto it, even if it could get enough support in the Senate, which is highly unlikely. We might see the House try to pass a Medicare for All bill to get Republicans to vote against it in the face of increasing public support in anticipation of the 2020 races.

Medicaid Expansion

Proposition 2 passed by popular vote last month in Idaho, but there remain two threats to Medicaid expansion in Idaho.

One is whether the Legislature will vote to overturn the law or refuse to fund it. I predict that neither will happen. Prop. 2 won by a pretty clear margin. I think that lawmakers will realize and respect that the vote represents the will of the people. I do believe that lawmakers will fund the expansion, as I think they will believe it is their responsibility to the people to do so.

There is some concern that Idaho may seek to implement work requirements as some other states have, but I think that while the Legislature will look at this, they will realize that putting a process in place to monitor work status is expensive and will add to the bureaucracy of government and ultimately decide against it.

The other threat is a constitutional legal challenge to the law that will be heard by the Idaho Supreme Court early in 2019. I predict that the challenge will fail, and the Supreme Court will uphold the validity of the law.

Hospitals

Next year will be a very challenging year for hospitals. Among the negative factors that will result in weakened financial performance: a continuing payor mix shift to governmental payers (Medicare and Medicaid), which is lower-margin or even negative-margin business; an increase in bad debt as employers and insurers continue to shift more costs to patients in the form of deductibles, co-insurance and co-pays; and a continued shift of business activity from inpatient to less profitable outpatient services.

Insurers

Medicare for All may or may not be an existential threat to insurers, depending upon whether there is still a role for insurers to administer plans for the Medicare program, as they currently do with Medicare Advantage. No doubt insurers will be developing their lobbying strategy.

Insurers face another threat as more providers take on managing risk. Payers are, for the most part, reluctant to become third-party administrators. For those that fear this, the adoption of risk by providers remains low. However, the pressures on providers to take on risk will only increase over time.

On the other hand, some insurers are embracing this change and realizing that if providers successfully manage risk, this will confer a premium advantage that will result in market share gains when they are able to offer and sustain lower premiums than those plans that retain risk and rely on traditional unit cost pressures to keep costs down. This will be a particular challenge, given that I think premiums must and will stabilize close to current levels to appease regulators and to avoid pricing more people out of the market.

Some insurers will enter the provider space. Others will be acquired by providers, as we saw recently with the acquisition of Aetna by CVS Health. It remains to be seen whether CVS can leverage its acquisition of Aetna to lower costs and advantage Aetna health plans by enabling them to keep premiums down compared with competitors. As best I can tell, CVS is pinning its hopes on reducing unnecessary hospital admissions by managing patients more effectively in its MinuteClinics; I am unaware of any data showing that retail medicine services have been able to do this.

New Market Entrants

2019 will usher in the next generation of disruptive market entrants. One example: Carbon Health, a health-care startup that is trying to disrupt primary care by changing the model from one that is centered around doctors and hospitals to one that is centered around the patient. Key to this is the use of technology, including video visits and an artificial intelligence-assisted messaging system. Other startups similarly are attempting to leverage technology to disrupt primary care.

Babylon is a disruptor that seeks to combine the “computing power of machines with the best medical expertise of humans to create a comprehensive, immediate and tailored health service.” Babylon offers telemedicine services and a symptom-checker. I used the symptom-checker while I had a disease in mind, answering questions as if I had the symptoms of that disease, and it didn’t identify the disease as the most likely diagnosis, but it did fairly well and came up with a reasonable alternative diagnosis. Babylon also states that it uses artificial intelligence to help patients understand their current health condition and gives them practical insights into staying healthy.

These new market entrants are worth keeping an eye on to see if they can improve the outcomes of chronic diseases, better coordinate care, reduce unnecessary emergency room visits and admissions and reduce the total cost of care.

Many are variations of direct primary care (for example, offering subscription services for monthly payments above and beyond insurance premiums for prompt access and free office visits), so if traditional primary care practices can figure out how to make their services easily accessible, as I predict they will, the disruptees will become the disruptors.

Technology

Artificial Intelligence

Up until now, AI’s impact on health care has been limited. 2019 will be an inflection point. AI will improve the speed and accuracy of medical diagnosis by analyzing data quickly and accurately. These applications will improve the efficiency of physician workflows.

The research and development process for medications is painfully slow and expensive. AI will be able to explore chemical and biological interactions and early-stage clinical data to identify new treatments that are much more likely to prove to be effective, especially in the area of cancer treatments.

AI also has the potential to automate surgical procedures by robots, assisting the surgeon or in some cases, replacing the surgeon. Eventually (not in 2019), this technology could be used to perform emergency surgery in rural areas where there is no surgeon and little time to transfer the patient to a metropolitan center.

The Internet of Medical Things (IoMT)

Technology will advance remote monitoring of patients through wearables, smart sensors and mobile apps. Thirty billion IoMT devices are expected to be deployed worldwide by the end of 2019. Uber and Lyft are already creating health-care divisions to connect patients with providers. Uber will deliver meals; don’t be surprised to find Uber and Lyft delivering prescriptions to patients’ homes from the pharmacy.

Telemedicine

Telemedicine is not a new concept, but its adoption has been rather slow. Expect utilization to increase significantly in 2019. More and more insurance companies are providing this as a covered benefit. As more people experience it, they will be repeat users and will expand use through word of mouth.

Virtual/Augmented Reality (VR/AR)

VR/AR has tremendous utility in clinical education and training. Expect more medical and nursing schools to adopt this technology. We will also see more use of VR/AR in surgery to assist and guide the surgeon in small spaces of the body or under complicated circumstances. This technology may also assist first responders in caring for the ill and injured, while recording critical information about the patient prior to arriving at the hospital. Finally, there is great potential for VR/AR to assist patients in treating their pain and reducing the use of addictive opioids.

Big Data and Data Analytics

The most widespread application of big data in health care is electronic health records systems. Data analytics will be developed that allow providers to glean meaningful, actionable data to improve care for patients and populations of patients, the insights from which would not be available from a casual review of the medical records. Predictive analytics will be developed that allow providers to identify patients at high risk for admission to the hospital or deterioration in their conditions, making possible proactive outreach and modification of their treatment and care plans to avoid costly hospitalizations, complications or even death.

St. Luke’s Health System

St. Luke’s Health System is going through a transformation. We are well on our way from fee for service to pay for value, with nearly a third of our revenue at full risk (global capitation). We are going through an organization design reshaping that moves us away from the hospital-centric model of most health systems to one that is truly population health-based. We are also focusing our service lines on improving outcomes and lowering the total cost of care and completely redesigning our end-to-end utilization. My predictions for next year are that we will see measurable improvement in outcomes and a bend in the cost curve for those populations we have under risk agreements.

About The Author

David C. Pate, M.D., J.D., is president and CEO of St. Luke’s Health System, based in Boise, Idaho. Dr. Pate joined the System in 2009. He received his medical degree from Baylor College of Medicine in Houston and his law degree from the University of Houston Law Center.

The Cost Shift Myth: Read Colorado Health Institute’s Report

The Cost Shift Myth: Read Colorado Health Institute’s Report

colorado health institute

The Cost Shift Myth

New State Report Suggests Existing Policies Haven’t Controlled Hospital Costs. Will New Strategies Be Needed?
Published: February 13, 2019 | Updated: February 15, 2019

Key Takeaways

  • Advocates for Medicaid expansion promoted the idea that hospitals charge extra to patients with private insurance to make up for underpayments from the uninsured and public programs.
  • A new report from Colorado’s Medicaid agency calls into question this theory of the “cost shift.”
  • Leading economists have debunked the cost shift, saying instead that hospital prices depend on market dynamics and competition.

Conventional wisdom holds that hospitals charge higher prices to people with private insurance to make up for the losses they take on Medicare, Medicaid, and uninsured patients. Advocates used this theory of the “cost shift” to help pass Colorado’s Hospital Provider Fee and the federal Affordable Care Act (ACA).

Their reasoning was that if fewer patients were uninsured and Medicaid paid more, hospital prices — and insurance premiums — for privately insured patients would fall.

But a draft report1 released by Colorado’s Department of Health Care Policy and Financing (HCPF) in January backs up what health economists have been saying about the cost shift: It doesn’t exist.

The report shows that, contrary to expectations, Medicaid expansion did not lead to more affordable insurance premiums, and hospital prices continue to rise.

Addressing the Cost Shift

Two important policies have shaped Colorado’s health care landscape over the past decade. First, the legislature created the Hospital Provider Fee in 2009 to boost payments to hospitals to help them offset the cost of caring for people covered by Medicaid. Hospitals pay a fee, which attracts federal matching funds, most of which are paid back to hospitals along with the original fee. This creates a net positive for most hospitals.

Second, the ACA paved the way for Colorado to substantially expand Medicaid eligibility, covering more than 400,000 additional people (most of whom had previously been uninsured). As a result, hospitals received payments for many patients who could not pay before Medicaid expansion.

These two policies share a common goal: to use Medicaid payments to lessen the cost shift and thereby decrease the price of private insurance.

Controlling the High Cost of Private Insurance

Hospitals provide care to the uninsured but usually don’t get paid for those services. They can try to recoup these costs by charging other patients higher prices. This so-called cost shift is viewed by some as a hidden tax on people and businesses that buy insurance.

Policymakers have reasoned that expanded Medicaid coverage benefits everyone because less cost shifting could help control the rising price of private insurance.

For example, Gov. Bill Ritter, who signed the legislation that established the Hospital Provider Fee and began Medicaid expansion in Colorado, argued that it would “address cost-shifting and the high cost of uncompensated care, two of the main reasons for skyrocketing costs for small businesses and health care providers.”2

However, HCPF’s new report suggests that the Hospital Provider Fee and expansion of Medicaid have had little impact on the high price of insurance.

An Unfulfilled Hope

In theory, at least, the Hospital Provider Fee and the ACA could improve hospitals’ bottom lines and reduce the costs shifted to privately insured patients.

But in fact, these policies have done little to control the cost of private insurance.

Medicaid expansion and the accompanying drop in the uninsured population have reduced the amount of uncompensated care delivered in Colorado. Hospitals in Colorado lost roughly $700 million annually due to uncompensated care prior to Medicaid expansion. That amount dropped to about $300 million after expansion in 2014.1

Many of the uninsured gained coverage through Medicaid, and hospitals are now reimbursed for some of their costs.

However, hospitals and providers have long pointed out that government reimbursements through Medicaid and Medicare often don’t cover the actual cost of care, resulting in “undercompensated care.”

In 2009, Medicaid payments covered about 54 percent of the actual cost of care provided. But reimbursement increased to 69 percent of the cost of care by 2017, according to the HCPF report. Medicare payment rates have also increased slightly since 2009, but not enough to keep pace with the growth in hospital costs.

In total, uncompensated and undercompensated care in Colorado amounted to $2.3 billion in 2017 (see Figure 1). This shortfall is the amount by which the cost of care exceeded reimbursements. The shortfall has increased by about 34 percent since 2009, when there was a $1.7 billion difference between the cost of care and reimbursements.

Those shortfalls are more than offset by private insurance payments to hospitals. Private insurance paid hospitals $3.5 billion more than it cost to provide care in 2017. That is $1.2 billion more than what would be needed to exactly offset the $2.3 billion shortfall in 2017. The HCPF report questions whether this “overcompensation” is justified. As shown in Figure 1, the amount of compensation over the break-even point has grown substantially since 2009, when it stood at $400 million.

HCPF’s estimate of overcompensation will be controversial because it implies that hospitals should break even on the services they offer and not make a profit or put away cash reserves. There could be many explanations for why the surplus varies over time, including changing patient demographics and health care needs. In addition, HCPF’s analysis is based on aggregate hospital data that could obscure important differences across hospitals and geographic regions.

The HCPF report argues that policymakers need to further scrutinize the causes of this apparent surplus and what hospitals are using it for. For example, HCPF suggests that hospitals are overbuilding new hospital facilities on the Front Range and using revenues from private insurers to foot the bill. However, HCPF’s report also notes that the number of hospital beds per capita in Colorado is well below the national average.

The Cost Shift Myth

Evidence shows that the policies intended to address hospital cost shifting have not been effective at reining in the costs borne by private insurance. If anything, the situation has worsened.

This should not be a surprise. Although the cost shift theory sounds logical, most economists have found that what hospitals charge private insurance actually has little to do with how much money they may be losing on Medicare, Medicaid, or the uninsured.3

Studies have found that the prices paid by private insurance depend primarily on competitive market dynamics among hospitals and insurance companies. If hospitals have market power when they negotiate prices with a private insurer, they can use that leverage to charge higher prices, regardless of the amount of undercompensated care they have.

Hospitals’ market power may be increasing in Colorado, according to the HCPF report. In 2009, six hospital systems controlled 23 hospitals, but by 2017, seven systems controlled 41 hospitals. Some hospitals are also increasing their market power by acquiring physician groups, which can allow them to influence where patients are sent for hospital care.

Recent studies reveal that changes in government payment rates have little or no effect on private insurance. In fact, some studies show that hospitals dealing with cuts in government payment rates have lowered private insurance payments — the opposite of what the cost shift theory predicts.

How could this be? Hospitals can respond to lower government payments by reducing their operating costs and charging all patients less — those with private insurance or government coverage. Or hospitals may respond by reducing prices for private insurers in order to attract more patients with high-paying private coverage.

Conclusion

The HCPF report is an attempt to frame a billion-dollar debate over the role of hospitals in Colorado.

State leaders once promoted the theory of the cost shift as a rationale to create the Hospital Provider Fee and expand Medicaid. The HCPF report builds a convincing case that paying hospitals more for Medicaid and uninsured patients does not lower costs for people with private coverage.

As a result, policymakers will need to consider new ideas to actually bring down charges for everyone.

One option involves the Hospital Provider Fee, which has been a windfall for hospitals. In FY 2017-18, hospitals paid nearly $900 million in fees into the program but received $1.3 billion — a net gain of $400 million for Colorado hospitals.

HCPF wants to redesign the provider fee to use some or all of that $400 million to incentivize hospitals to find ways to charge less and provide better care that is more integrated with their communities. The effort is known as the Hospital Transformation Program.

This is one of several policy proposals at the state Capitol to cut health care costs. CHI is tracking these ideas closely. See www.coloradohealthinstitute.org/analysis for our recent work.


Endnotes

1    Colorado Healthcare Affordability and Sustainability Enterprise. “Cost Shift Analysis Report.” Draft, January 22, 2019. Available at: https://www.colorado.gov/pacific/sites/default/files/2019%20January%20HCPF%20Cost%20Shift%20Analysis%20Report%20Draft.pdf

2    Office of the Governor. “2007-2009 Ritter Administration Accomplishments.” Available at: http://hermes.cde.state.co.us/drupal/islandora/object/co%3A7731/datastream/OBJ/download/2007-2009_Ritter_administration_accomplishments.pdf

3    See for example: Frakt AB, “How Much Do Hospitals Cost Shift? A Review of the Evidence,” The Milbank Quarterly, 2011;89(1):90-130. White C, “Contrary to Cost-Shift Theory, Lower Medicare Hospital Payment Rates for Inpatient Care Lead to Lower Private Payment Rates,” Health Affairs, 2013;32(5):935-943. Wu VY, “Hospital Cost Shifting Revisited: New Evidence from the Balanced Budget Act of 1997,” International Journal of Health Care Finance and Economics, 2010;10(1):61-83.

Hospital Revenues Since 2009
US Healthcare From an International Perspective

US Healthcare From an International Perspective

First, spoiler alert – there is no perfect healthcare system. Every system has pros and cons, and if you don’t believe us, maybe you would consider the conclusions reached by the Organisation for Economic Cooperation and Development (OECD) in their report, “Health Care Systems: Getting More Value for Money”:

  • “There is no health care system that performs systematically better in delivering cost-effective healthcare.”
  • “It may thus be less the type of system that matters but rather how it is managed.”
  • “Both market-based and more centralized command-and-control systems show strengths and weaknesses.”

Nevertheless, we continue to see healthcare systems rankings in the media, with the US consistently at the bottom, while the system ranked best changes depending on whom you ask, what you ask, and what measures you use.

If you were trying to rank a country’s healthcare system, what criteria would you use? We often hear that the US system is terrible because we spend a lot (which we do), but our life expectancy is not commensurate with the spending. But is life expectancy a good measure of the healthcare delivery system? The US is a big country with a diverse population and when we look more closely, what we find is that sub-segments of the US population have the best life expectancy in the world, while others are on par with developing nations, despite getting care in the same system.

Moreover, if fatal injuries are excluded from life expectancy calculations, US life expectancy rises to the top. Should we really hold the healthcare system accountable for murders, car fatalities, and drug deaths (although the healthcare system bears significant responsibility for the recent opioid related epidemic)?

Some of the reasons for why higher US healthcare spending does not translate to higher life expectancy include:

  • Focus on acute care, rather than measures to address lifestyle, environmental, and social circumstances that have a much greater impact on overall population health than health care delivery. Moreover, as we have discussed previously, the money spent on these social determinants of health isn’t generating a good return on investment.
  • High use rate of expensive diagnostics (e.g., CT, MRI) and interventions (e.g., C-sections, knee replacements), that again have limited impact on life expectancy.

Thus, we would argue that life expectancy is a poor measure of the healthcare delivery system, since it depends on many additional factors beyond healthcare delivery.

So, if not life expectancy, what can we use for comparison? We feel that mortality amenable to healthcare is a better measure of the healthcare delivery system and especially so, when applied judiciously. What do we mean by that? Again, taking into consideration that the US is a large and diverse country, it makes more sense to compare for example MN and WI with Sweden.

So, what does mortality amenable to healthcare look like for the US as a whole? Once again we find that some segments of the US populations have access to the best healthcare in the world, while others fall significantly far behind. In fact, the top five states in the United States consistently rank among the best OECD nations, while the bottom five states trail all of OECD. Perhaps, when it comes to healthcare quality, we may be better served by within-US, rather than international comparisons, and strive to learn from those providers who are consistently able to deliver high-value care within the context and constraints of the current US healthcare system.

That said, there are still opportunities for the US as a whole to learn from other nations, for example along the following dimensions:

  • Universal coverage is a very good goal and there are multiple ways to get there. UK, Netherlands, and Singapore are three good examples of that. All have universal coverage, but very different ways to get there, using the approach that takes into consideration each country’s culture. For example, Netherlands offers choice of private insurance plans and gets to universal coverage by imposing significant penalties for not having insurance (130 percent of the premium over the period of being uninsured).
  • Value-based evaluation of new diagnostics and interventions. The UK analyzes expensive new drugs and technologies for both outcomes and cost per patient through The National Institute for Health and Care Excellence (NICE). If we are seriously concerned about healthcare costs, these analyses are important.
  • Cost and patient outcomes transparency. The website of the Singapore Ministry of Health publishes data on average hospital bills for common conditions/procedures. Patients have access to information on the costs of specific surgeries and diagnostic procedures, by insurance and ward type.

In conclusion, we once again agree with the position of the OECD, “Policy makers should…adopt best practices from many different health care systems that exist in the OECD and tailor them to suit actual circumstances.”

Integrating Medical Care With Behavioral Health In Pain Management

Integrating Medical Care With Behavioral Health In Pain Management

When suffering from chronic pain, symptoms affect more than just the body. Physical pain also affects mental health, emotional well-being and quality of life. Chronic pain may also cause or increase worry, anxiety, frustration, anger and depression, making the physical pain worse and hampering abilities to cope. In addition, prescription opiates,  which are commonly used to treat chronic pain, can pose a challenge for some patients, including hyperalgesia (increased sensitivity to pain) and a risk for addiction. Needless to say, physical, emotional and mental health care are connected, especially for patients with chronic pain.

That is why a whole-person, comprehensive approach is the optimal model of care treatment. Yet, despite mounting evidence that integrating behavioral medicine can offset the ongoing cost of chronic pain treatment [1], the two disciplines tend to operate in silos.

New Health Pain Treatment Center has implemented an integrated traditional medicine and behavioral health model that allows patients to experience optimal pain relief and feel empowered to more fully participate in their lives. Patients learn valuable tools and skills to help minimize or avoid opiates while practicing how to successfully navigate the mental and emotional difficulties that almost always accompany physical pain.

This is critical now more than ever since as a country we are seeing a high risk for opiate addiction in patients with chronic pain as well as the overuse of opiate medications. In our state alone, more than 22,000 Coloradans report dependence on opioids.[2]

Components of Integrated Pain Treatment

Pain treatment – like many other areas of health care – has historically operated in isolation, with different entities providing diagnosis and treatment planning, imaging, physical therapy, surgery and other services.

Under traditional models, patients are often referred to different providers for different symptoms, increasing the likelihood of incomplete and fragmented care, delays in care, gaps in communication and less-than optimum outcomes.

Almost always missing from the equation is behavioral health.

The following approach describes an integrated approach to medical care, designed to improve outcomes and patient experience, while reducing cost.

Medical and Behavioral Health Assessment

During the initial visit, a medical and behavioral health assessment helps identify the physical, psychological and social factors impacting health.

The medical assessment is a comprehensive assessment of the patient’s history of pain, followed by the initiation of therapeutic modalities. The medical history includes a detailed intake of the initial causes of the patient’s pain, the exacerbating factors of the pain over time, any previous medical and surgical interventions that have been offered or administered to the patient and an assessment of which previous modalities of treatment have been most and least successful.

In addition, the state’s Prescription Drug Monitoring Program is a valuable tool that can be leveraged to improve prescribing and protect patients who may be at risk of addiction. New Health uses the database to generate a comprehensive, three-year historical report of which pain medications the patient has tried in the past, and this report is reviewed in detail with the patient. A comprehensive physical exam is performed, and patients provide a urine sample for a toxicology screen. The medical team also makes an initial evaluation of the patient’s risk and history of addictive behaviors related to medication use.

Incorporating Behavioral Health into Treatment Planning

The behavioral health assessment is an extensive intake regarding all aspects of the patient’s mental health. It incorporates elements from the Substance Abuse and Mental Health Services Administration’s Eight Dimensions of Wellness (Figure 1).

Source: Substance Abuse and Mental Health Services Administration

The medical and behavioral assessments inform the individualized treatment plan that is developed cooperatively by the medical and behavioral health teams. Patients’ individual treatment plans may include a mix of medical interventions, which may include medication management and/or interventional treatment such as nerve blocks, or epidural steroid or joint injections. The medical team can also coordinate referrals for other treatment modalities, such as physical therapy or massage therapy, as needed. The behavioral health team coordinates behavioral health therapies, including individual or group therapy.

During therapy sessions, patients receive non-pharmacological coping skills that include: stress reduction, mindfulness techniques, dialectal behavioral therapy skills and other tools for managing pain. DBT skills and techniques may include: mindfulness or focusing skills; distress tolerance, including self-soothing using the five senses through aromatherapy, hot showers and baths, etc.; opposite action, where a person identifies the feeling he or she is experiencing and takes an opposite action; and emotion regulation (employing deep breathing, etc.).

These approaches help improve interpersonal effectiveness and increase patients’ “recovery capital” or healthy life resources. These resources may include social resources, as well as better overall health and well-being, all of which help patients move through pain successfully. Throughout treatment, medical providers should follow up on patient adherence not only to medical treatment but also to the use of coping skills and other techniques to navigate pain.

The Importance of Group Therapy

People experiencing chronic pain also often may experience diminished cognitive skills, especially as it pertains to executive functions, which may limit the effectiveness of individual cognitive therapy.  Group therapy allows patients to begin working on emotion regulation and distress tolerance, while enjoying the support of other patients with similar struggles. In a group setting, peers offer support while holding each other accountable. Group members are able to empathize and identify with each other’s challenges, which in turn helps eliminate stigma and address feelings of loneliness and isolation.[3]

Group therapy also provides an opportunity to practice and refine healthy social and relationship skills before taking them back to their family and community systems.

Medication Monitoring

Treating chronic pain is complex, and the risk of addiction must be factored in to individual treatment plans. In 2016, an estimated 3.3 million people aged 12 or older were current misusers of pain relievers, representing 1.2 percent of that population.[4]

The initial medical assessment is designed to help identify patients at risk for potential abuse, and responsible drug testing during treatment helps inform clinical decisions by providing valuable information about patients’ use of prescribed medications, non-prescribed medications and illicit substances.

Qualified physicians may obtain waivers under the Drug Addiction Treatment Act of 2000 (DATA 2000), meaning they are equipped and trained to identify, as well as treat, those patients identified as having addiction issues. New Health’s physicians have obtained waivers and can prescribe buprenorphine in all its forms, including sublingual and subcutaneous. In some cases, physicians may also arrange for and provide long-acting naltrexone therapy, which blocks opioid receptors in the brain, when indicated.

Interdisciplinary Staff Meetings

To have a truly integrated approach to pain management, medical and behavioral health providers must be able to share information in real time, working together to adjust patient treatment plans to reflect patients’ progress and needs. The American Pain Society has developed a list of desirable attributes of interdisciplinary teams (Figure 2).

FIGURE 2 / Attributes of a Well-Functioning Interdisciplinary Pain Team

Source: American Pain Society

Conclusion

An integrated care model helps patients become physically, mentally and emotionally stronger so they can live happier, healthier lives. It is imperative patients receive tools and skills to help minimize or avoid opiates while learning how to successfully navigate the mental and emotional difficulties that almost always accompany physical pain. This is critical now more than ever since as a country we are seeing a high risk for addiction in patients with chronic pain as well as the overuse of opiate medications.


Newhealthservices.com

New Health provides an innovative way to help chronic pain patients become physically, mentally and emotionally stronger so they can live happier, healthier lives. Our doctors and therapists work together to formulate a treatment plan and make sure each patient’s individual physical and mental wellness needs are met. Our unique model helps minimize or avoid opiates while giving patients the tools they need to feel better and to navigate the mental and emotional difficulties that almost always accompany physical pain.

Dr. Nathan Moore, medical director of New Health, is board-certified in family and addiction medicine. He previously served as president and chief executive officer of MedNow Clinics and ARCH Detox. In that role, he oversaw the development of effective outpatient detoxification programs/protocols for opiates, alcohol and benzodiazepine use disorders. A graduate of the Duke University School of Medicine, Dr. Moore serves on the board of Practice Health and Colorado Care Providers and chairs the finance committees of both organizations.

Osvaldo Cabral has worked in addiction and mental health since 2002 and specializes in addiction treatment, dialectical behavior therapy, skills training, aggression replacement training, cognitive behavioral therapy and trauma-focused therapies. As director of integrated services, he coordinates the operations of New Health’s medical and behavioral health professionals to ensure continuity of care for New Health patients.

For more information, please contact Natalie Lamberton, vice president of business development, at 303.668.2177 or nlamberton@newhealthservices.com.


[1] Chiles, JA, MJ Lambert and AL Hatch. The Impact of Psychological Interventions on Medical Cost Offset: A Meta‐analytic Review, Clinical Psychology: Science and Practice, 6, 2, (204-220), (2006).

[2] T Manocchio. The ABCs of MAT (Medication-Assisted Treatment), Colorado Health Institute, May 31, 2017. Accessed Aug. 2018 at www.coloradohealthinstitute.org/blog/Abcs-mat-medication-assisted-treatment.

[3] Center for Substance Abuse Treatment. Substance Abuse Treatment: Group Therapy: 6 Group Leadership, Concepts, and Techniques. Substance Abuse and Mental Health Services Administration (US), TIP Series, No. 41, Rockville, MD (2005).

[4] Substance Abuse and Mental Health Services Administration. Key substance use and mental health indicators in the United States: Results from the 2016 National Survey on Drug Use and Health. Substance Abuse and Mental Health Services Administration, HHS Publication No. SMA 17-5044, NSDUH Series H-52, Rockville, MD (2017).

Foundations’ Role In Creating And Advancing Policies That Prevent Disease And Promote Mental Health And Well-Being

Foundations’ Role In Creating And Advancing Policies That Prevent Disease And Promote Mental Health And Well-Being

 

    • Foundations’ Role In Creating And Advancing Policies That Prevent Disease And Promote Mental Health And Well-Being

Deaths from drugs, alcohol, and suicide are driving the first reductions in life expectancy in the United States in the past two decades.

At the same time, racial/ethnic and socioeconomic disparities in health and well-being have widened since 1980, and a number of emerging trendsthreaten to exacerbate these.

The United States still spends far more on health care than on social services compared to other Organization for Economic Cooperation and Development countries, even though research suggests social services are strongly linked to improved outcomes. And, despite how much we spend, our outcomes don’t stack up to those of other countries.

Thankfully, communities in the United States are working to push back against these trends by actively seeking better health and well-being—not just through their own actions but also by partnering with many others in pursuit of broader changes.

Foundations and their investments (for example, in grantees) often play a unique role in enabling this pursuit of better health. The functions and roles that foundations play are as varied as the communities they serve, and each foundation has a different mission, focus, and interest in policy.

Yet, despite these differences among funders, policy is the one thing that often undergirds foundations’ work across these concerted efforts to improve mental health and well-being. For instance, the financial backing of foundations often supports the innovation that started in communities. But that is not the end of the road—these efforts frequently live and die by the larger systems and policies that are needed to enable, support, scale, and sustain the work.

That said, while it is essential that foundations play a role in policy, it is often unclear how best for them to do so, and even less clear how to do so with other foundations, grantees, and partners. There appears to be a need for thoughtfully designed and tightly knit strategies that foundations can use to meaningfully affect policy. For example, consider the following case studies.

The Hogg Foundation for Mental Health in Texas launched its Mental Health Policy Academy and its Fellows programs in 2010. Policy fellows are placed at nonprofit, government, or higher education organizations across Texas to increase individual and organizational capacity to advance mental health policy in Texas and to better engage consumers in mental health policy development and implementation. In addition, the Hogg Foundation produces a Mental Health Guide, for advocates and policy makers, to coincide with each Texas legislative session (held every two years), and the foundation follows up after each session with a summary that provides an overview of mental health– and substance misuse–related legislation filed during that session.

The New Hampshire Charitable Foundation has invested in public policy and advocacy to reduce and prevent alcohol and substance misuse—its work has included launching and supporting New Futures, a nonprofit organization that “advocates, educates and collaborates to improve the health and wellness of all New Hampshire residents through policy change.”

The W.K. Kellogg Foundation has supported policy efforts including the development, implementation, and evaluation of a Mental Health Impact Assessment tool to assess the effect of public decisions and actions on the social determinants of mental health in low-income communities. (The Robert Wood Johnson Foundation (RWJF) and the Pierce Family Foundation also support the tool.) Additionally, Kellogg has supported a mental health policy development working group focused on promotion of mental health in schools, child care, and early education. That work has been described in prior Health Affairs Blog posts.

The Lutheran Foundation formed and launched the Regional Mental Health Coalition of Northeast Indiana in 2016, which aims to improve mental and behavioral health and wellness by advocating for policy and systemic changes, developing campaigns to reduce stigma, and ensuring collaboration across government, mental health, health care, judicial, education, faith-based, and workplace communities.

And, in 2017, Trust for America’s Health (TFAH) and Well Being Trustembarked on a joint effort to advance policy solutions to the drug, alcohol, and suicide epidemics. The first product of this partnership was a report, Pain in the Nation: The Drug, Alcohol and Suicide Epidemics and the Need for a National Resilience Strategy, funded by Well Being Trust and the RWJF, and published by TFAH.

That report focuses specifically on practice and policy solutions to reduce deaths from drugs, alcohol, and suicide—ranging from expanding the use and availability of rescue drugs, sterile syringes, and diversion programs, to limiting hours and density of alcohol sales, to supporting state suicide prevention plans, to expanding social-emotional learning and mental health services in schools. The report also calls for—and provides recommendations for building—a National Resilience Strategy, which would take an effective, comprehensive, continuum approach to addressing these epidemics, from prevention and early identification, to connection to services and supports, to treatment and recovery.

What We’ve Learned

The following highlights specific actions mentioned in the report that could be taken to solve some of the problems around substance misuse and mental health. We understand that there are multiple layers of policy action required at each level—local, state, and national—and that each layer will have different types of action that can be taken.

  1. Investing in prevention and creating more resilient families and communities must be a higher policy priority—especially for foundations.

In recognition that many of the issues we face as a society around mental health and substance misuse are grounded in social factors, simply dedicating our attention to working on closing the treatment gap (which is important but is being addressed by many other organizations) is insufficient.

Well Being Trust and our grantees, including TFAH, are investigating policies that can go upstream and prevent mental health and substance misuse problems from even beginning in the first place. We will help support the investment, policies, and practices necessary to enhance protective factors and close the prevention gap.

  1. Foundations can be instrumental in helping their communities create consistent standards for identifying and treating mental health and substance misuse for multiple conditions and across community and clinical delivery settings.

Currently, there are no consistent standards for mental health and substance misuse treatment in the United States. This means that receiving care differs greatly depending on certain critical variables like insurance type, location of service, and type of clinician providing care.

One of the first steps for creating a more equitable and comprehensive system is to have consistent standards for mental health across multiple clinical settings. Foundations and grantees have a critical role to play in identifying these standards and advancing the policies that codify them in practice.

  1. We must make accessing services for mental health and substance misuse conditions easier and make services more affordable for everyone.

Utilizing mental health and substance misuse services requires access to the appropriate clinician and ability to afford the care and treatment. Sadly, both of these items remain problematic in the United States.

The country must consider novel approaches to improve access, rather than simply depending on a referral to a mental health or substance misuse clinician. Redistributing mental health and substance misuse clinicians throughout the health care system is one way to increase access.

And, when we consider that mental health and substance misuse services remain unaffordable for many people, both access and affordability will require us to rethink our strategy and develop innovative policies and solutions.

Certain populations face particular barriers to access. Blacks, Latinos, and American Indians are more likely to be uninsured. Those living in rural areas may not live near treatment and other services. And low-income residents throughout the United States face a number of obstacles to care including the potential loss of income when seeking treatment.

  1. Mental health and substance misuse benefits, services, and policies must be at or above parity for medical benefits, services, and policies.

Undergirding much of what transpires in health care delivery are the benefits that each of us carry through our respective insurer. In many cases, how mental health and substance misuse benefits have been structured make it truly challenging to integrate care in a systemic way. And, in other cases, mental health and substance misuse benefits are not even offered at parity despite federal law mandating it.

Clearly, policies can be strengthened and created to ensure that people have access to the benefits that will help them to realize their fullest potential.

  1. We must redesign how we pay for mental health and substance misuse treatment so as to prioritize prevention, team-based care, and quality and outcomes.

Currently, health care is often driven by disease and sickness. Additionally, fragmented financing keeps mental health and substance misuse services isolated. For the country to solve problems as complex as the deaths of despair, there must be a comprehensive approach that includes simultaneous clinical, operational, and financial changes. As such, alternative delivery and payment models for mental health and substance misuse should be studied, shared, and scaled by foundations. Thankfully, there are new examples emerging each day that highlight innovation in payment reform.

Going Forward

While investing in evidence-based practices and programs—as many foundations are currently doing—is critical to improving health and well-being, a comprehensive, scalable, and sustainable approach requires a greater focus on local, state, and federal policy solutions. Through their grant making, foundations can help change policies or regulations that have implications for health and well-being, as well as influence the direction of government funding in this arena.

In addition, foundations must go further. They need to take risks and be willing to fail.

Government cooperation (and grantmakers’ funding) is, in most cases, critical to having the population-level impacts necessary to close the prevention gap. Yet, government is often required to fund models with an evidence base, which might not always be the most innovative approaches.

At the same time, philanthropies have more leeway to take risks and can put themselves on the line to reduce the risk inherent in certain programs (for example, needle exchange) for government and other foundations. As such, we have to be willing to fail. Not every innovative program is scalable—what works in one town might not work in another town. But we must share our lessons learned—and move forward in a meaningful way together.

Further, to truly move the needle, we must be policy-influencers and advocates. Foundations can harness the power of our endowments through impact investing—using our knowledge of the financial world to ensure that everyone can realize their fullest potential.

It is critical that foundations invest in cutting-edge policies, learn from the case studies highlighted above, and develop novel strategies to engage in this work. Such investment is fundamental to improving mental health and well-being in a comprehensive, scalable, and sustainable way.

This blog post is based on a presentation by the authors at the Grantmakers In Health annual conference, in June 2018, in Chicago.

Healthcare Reform Across State Lines Exploring differences by state

Healthcare Reform Across State Lines Exploring differences by state

Healthcare Reform Across State Lines Exploring differences by state

 

A recent webinar examined how different providers approach the opportunities and challenges
brought by the Affordable Care Act (ACA). Industry leaders in Florida, Massachusetts, Mississippi,
New Jersey and Pennsylvania shared their views. Below are highlights.

 

Visit our Healthcare Reform Across State Lines webinar replay for more insights.


ACCESS VARIES SIGNIFICANTLY STATE-BY-STATE

Each state interprets the ACA in its own way, driving provider strategy and impacting coverage,
rates and costs. Massachusetts decided early on to maximize access via state health reform.
Access in some other states has been more challenging, with physicians not accepting
Medicaid or Federal Exchange beneficiaries. For Florida, one solution has been proactively
negotiating out-of-network rates for unique services.


EARLY ADOPTER STATES SEE COST BENEFITS

Massachusetts’ early adoption of Medicaid expansion in 2006, plus coverage expansions that
served as a precursor to the ACA, have seen reductions in uninsured individuals and lower costs:

 

  • Per capita health spending growth is lower than the U.S. generally
  • Expansion enabled preventative care and reduced per-member per-month costs when
    compared to other states
  • Insurance participation is more stable than in other parts of the country

STRATEGY/TECHNOLOGY INNOVATION

  • Massachusetts’ early healthcare expansion allowed it to focus on costs and prices as far
    back as 2008. By 2012, its strategy focus was reducing expenditure and encouraging
    alternative payment methods
  • In Mississippi, over 60 hospitals came together to form MississippiTrue, the first
    multi-provider plan in the state
  • Innovations have also emerged in response to the Mississippi Telemedicine Parity Act,
    which mandates that all health insurance and employee benefit plans must provide r
    emote care

UNCERTAIN STATE AND FEDERAL REIMBURSEMENT

Some states have taken pre-emptive measures to cope with a lack of clarity. For example,
53,000 Mississippi residents rely on the Federal Exchange for their health insurance.
There’s uncertainty over whether Cost Sharing Reductions (CSR) will end, which could
increase premiums by 25% in 2018. In response, the state has taken a number of measures:

 

  • It’s allowed exchange providers to submit two sets of rates, one assuming CSR continues,
    and one assuming it doesn’t
  • It has issued waivers to ensure the continuation of coverage through 2018 and to curb
    increases in rates for children under 14


 

ONGOING CHALLENGES

 


A key challenge for providers nationwide is the uncertain outlook for the ACA.
The House of Representatives passed the American Health Care Act (AHCA) to
“repeal and replace” the ACA. It is estimated to achieve more than $100 billion
in Medicaid reductions by 2027.
Being informed and formulating strategies is now more important than ever.

KEY TAKEAWAYS

  • Each state interprets the ACA differently, impacting strategy, coverage and costs
  • Challenges have led to strategy and technological innovation
  • Uncertain state and federal reimbursement, and regulatory changes to the ACA
    make being informed more important than ever

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Insights into Risk-Based Reimbursement

Insights into Risk-Based Reimbursement

Healthcare leaders discuss impact and opportunities

Bank of America Merrill Lynch

 

Five technologies set to transform the healthcare industry

Five technologies set to transform the healthcare industry

Five Technologies Set to Transform the Healthcare Industry

Written by John Hesselmann, Specialized Industries Executive, Global Commercial
Banking at Bank of America Merrill Lynch

The future of healthcare will streamline the way we diagnose and treat health problems. We are already seeing signs of that today: from patients who receive diagnoses and treatment at home via
telemedicine and heart-monitoring wearables, to artificially intelligent therapists diagnosing
PTSD in veterans. Innovation in healthcare can decrease our
dependency on physician availability. To that end, we’re seeing emerging technologies that
deliver diagnoses directly from an app, such as MobileODT, a mobile cancer screening tool,
and Biomeme, which aims to conduct genetic testing for certain diseases within an hour.
Investors should be aware of the innovation set to transform the healthcare industry in the
next few years. Here are five areas expected to undergo tremendous growth:
1. Robotic Surgery: According to WinterGreen
Research, annual sales of robotic surgical
assistants are expected to rise from $3 to
$20 billion over the next five years. While the
notion of a robotic surgeon seems frightening,
it may actually be safer. Robot-assisted surgery
is typically faster and smoother, making
more precise incisions and reducing blood
loss. Currently, the machinery costs a million
dollars or more, however, the advancements
are expected to trim healthcare costs due to
reduced patient stay and aftercare.
2. Genomics: According to MarketWatch, the
international genomics market is estimated to
grow from $12.5 billion in 2015 to $20 billion
in 2020. Advanced genetic testing can help
people discover whether they have inherited
diseases so they can begin treatment before
symptoms occur. Advanced gene editing
has the potential to fight cancer and other
diseases by altering genetic instructions at
the cellular level. Genetic Engineering and
Biotechnology News reports that in the next
10 years it will be possible for every new baby
to have their genome sequenced and stored
with other health records.

Bank of America Merrill Lynch

HOW TODAY’S M&As ARE PREPARING HEALTHCARE ORGANIZATIONS FOR A NEW FUTURE

HOW TODAY’S M&As ARE PREPARING HEALTHCARE ORGANIZATIONS FOR A NEW FUTURE

HOW TODAY’S M&As ARE PREPARING HEALTHCARE ORGANIZATIONS
FOR A NEW FUTURE

Brent McDonald
Head of Healthcare Strategic Advisory,
Managing Director
Bank of America

In the face of seismic industry shifts, challenging
regulations, and constant uncertainty in Washington,
providers are reshaping the healthcare
landscape themselves by entering into strategic
mergers, acquisitions, and partnerships. Today’s
deals are reflective of the times, says Brent
McDonald, head of healthcare strategic advisory
and managing director at Bank of America Merrill
Lynch. “Most providers who are looking to merge
are focused on achieving powerful and costly
objectives such as transitioning to a value-based
payment model, growing a population health initiative,
and improving clinical integration,” notes
McDonald. “They are seeking partners with the
right combination of capital, infrastructure, intellectual
property, and technology.” McDonald discusses
the benefits of integration and how providers are
structuring today’s complex M&As.
What types of strategic partnerships
are common in the current
healthcare climate?
Brent McDonald: We are seeing mergers that
have clear built-in synergies. Oftentimes, the two
organizations don’t just mirror, but rather they
complement each other in strategic ways. When
they merge, it becomes one plus one equals three,
allowing them to more effectively meet the Triple
Aim. For example, one hospital may have spent
more time developing an urgent care network, a
freestanding emergency room, or a micro-hospital
network, while the other recruited and invested in
developing a network of high-acuity specialists.
It’s common to see an urban or academic medical
center that has invested in tertiary subspecialists
integrate with a successful community hospital that
is associated with more primary care physicians.
And it isn’t necessarily that they have economies
of scale available, but they are a very complementary
clinical fit. Partnering with an organization that
has built scalable competencies makes it easier
to justify the execution risk of integrating. If you
merge with a hospital that has spent the time and
resources on a clinical integration network that is
already functioning with the governance, accountability
measures, and physicians in place, then you
don’t have to take on that risk in building your own
network, which could fail.
What are the primary financial benefits
in a merger or acquisition?
McDonald: Overhead is still the most straightforward
and nonclinical financial economy of scale.
Organizations formed through a merger or acquisition
can expect to gain efficiencies in accounting,
human resources, revenue cycle, supply chain, and
other back-office services. These deals also allow
you to spread the cost of investment in health
information technology and population health over
a broader set of hospitals and a larger net revenue
base. Moreover, there may be clinical core competencies
that benefit the two parties post-merger,
including complementary service lines and geographic
ambulatory access points.
What do leaders hope to gain clinically
when entering into a new partnership?
McDonald: Quality is always top of mind. Without
quality and a reputation of quality, your earnings
and growth will suffer, as well as your ability to
reinvest and continue to be a high performing
organization. That being said, when considering a
partnership today, providers are often looking for
specific clinical competencies. For example, having
expertise in case management and physician
integration, as well as having advanced technology
is desirable. Simply having an electronic medical
record (EMR) isn’t enough anymore. How you use
the EMR to make a difference in providing care
is important to a potential partner. An organization
that has mature physician integration and is
advanced in how it uses its EMR system to impact
care likely has physician leaders who have worked
through the data sets to create best practices,
and has clinical care decision matrices embedded
in the medical record, which enables greater standardized
care.
“Without quality and a
reputation of quality, your
earnings and growth will
suffer, as well as your ability to
reinvest and continue to be a
high performing organization.”
How are mergers and acquisitions
helping organizations meet advanced
population health goals?
McDonald: Achieving population health requires
an investment, and if you are precarious from a
balance sheet or a profit-loss perspective, meaning
you don’t have enough margin to reinvest in the
hospital, then you won’t be able to execute on key
initiatives. Infrastructure and technology are the
two critical components that make up the backbone
of population health. They allow a hospital to
measure clinical information and present cohesive
and timely information back to its clinicians. Both
of these competencies require heavy capital investment
and know-how. Having a strong internal
framework and state-of-the-art IT are not something
that smaller, community hospitals can generally do
alone—typically, because they don’t have sufficient
margin to invest in such initiatives across their
subscale network. For example, if a community
hospital is trying to create a center of excellence
in a clinical service line, they may have trouble in
areas such as recruiting the key specialists and
subspecialists. A larger partner will typically have
the technology, case management, and a better
4 Bank of America Merrill Lynch I Sponsored Material
pipeline of doctors. Our Bank of America Merrill
Lynch analysis reflects that there is a correlation
between scale (or size) of an organization and higher
investment-grade credit ratings.
The goals of MACRA include radically
shifting payment models from fee-forservice
to value-based payment. How
does a merger or acquisition support
and accelerate this shift, as well as
help an organization bear
downside risk?
McDonald: MACRA adds more complexity, which
will probably cause more physicians to organize into
larger groups. Clearly, being able to handle value-based
payment is a different way of practicing.
It requires different skill sets. But, the model is still
being shaken out. Will it be hospitals, physician-organized
super groups, or a hybrid of the two that
will be best positioned to transition physicians to
value-based care? We still don’t know.
In the meantime, a traditional independent physician
practice that has to rely on a high volume of
patients just to keep their office open does not
have a lot of excess capacity in their day to deal
with changing payment and care models. It is an
almost impossible task for independent physicians
to influence the health of their patients when they
leave their office and go to the hospital or to an
urgent care center. It requires competencies they
don’t have to compete in this advanced care and
payment system, including an optimized EMR and
the ability to undergo a care redesign. Therefore,
it is difficult to manage downside risk. You will be
more successful having scale and leverage for
these considerations and, also, for weathering the
unexpected revenue ebbs and flows of value-based
care. In a merger or alignment with a larger, capable
organization, physicians become part of a
larger entity that has a sophisticated EMR and
other advantages. These advantages include case
managers and other staff who are available specifically
to follow and enhance that patient’s journey
across different care environments. A larger system
can track someone who visits the ER, making sure
they receive the right follow-up care, do not have
an unnecessary hospital readmission, and have
a positive experience with their provider and the
healthcare system.
Improving the patient experience is
important in a merger or acquisition.
As organizations come together, how
can they address common challenges?
McDonald: There are betterment and integration
hurdles in this area. Most hospital systems are
constantly working toward a better position when
it comes to improving the patient experience. To
get there requires having the right skills to invest in
all of the resources you need. On the other hand,
mergers are disruptive and patient satisfaction
can be damaged as you integrate to a new culture
or platform. It’s important to have a plan for key
patient perception areas such as scheduling, registration,
and medical records. You need a unified
approach when integrating the patient experience.
For example, patients will be frustrated if the process
is disorganized and they have to register three
times in a visit to the hospital. It requires vigilant
attention to get this right.
Bank of America Merrill Lynch

https://www.bofaml.com/content/boaml/en_us/home.html

US spends too little on social welfare: Fact or fiction?

US spends too little on social welfare: Fact or fiction?

US spends too little on social welfare: Fact or fiction?

As we had alluded to previously (see comments section here), we have been hearing the argument “we don’t spend enough money on social services in the US” for quite some time now. So, let’s dissect this argument one step at a time.

First, what exactly do we mean by social spending and how does the US compare with other developed nations? Since good international comparative data on the topic of social spending are hard to find, it is very easy to adjust available data to suit one’s argument. Thus, rather than trying to come up with a single definition and measure of social benefit expenditures, below we highlight some key categories of spending that fit (at least in our minds) into the broad definition of social welfare expenditures.

In the US, it is politically correct and convenient to count social spending as only public/ government spending. Taking the OECD definition of social expenditures, which includes the following social benefit areas:

“old age, survivors, incapacity-related benefits, health, family, active labour market programmes, unemployment, housing and other social areas…public spending on early childhood education and care up to age 6”

and looking at public expenditures as a percentage of GDP, we find that the US ranks #24 out of 35 OECD members, but still above both Australia and Canada, countries often cited as doing more for their citizens than the US (see Figure 1 here). Moreover, when looking at sub-categories of general government spending, we find that in 2015, US spending as percentage of GDP is ranked (among OECD members) as 1st in health; 2nd in defense; 7th in public order and safety; 8th in education – quite a bit better than our overall ranking.

Moreover, social spending is actually more than public/ government spending alone. Interestingly, when both public and private social spending (as defined above by OECD) are accounted for and include the full range of social benefit transfers, the US ranks second only to France in total net social spending as a percentage of GDP (see Figure 4 in same OECD report).

Since spending on health is included in the OECD definition of social expenditures and the US is a known outlier in terms of healthcare spending, a follow up argument we often hear is: “We spend too much on healthcare and not enough on other social services.” While we absolutely agree that US healthcare is in dire need of improvement (both in terms of effectiveness and efficiency), a look at the available data shows that even if we subtract out healthcare expenditures, total spending on “other” social services in the US stands at roughly 13% of GDP and again above some comparison countries (Australia, Canada, Switzerland).

So, maybe the question we should be asking ourselves is not, “are we spending enough on social services?”  Maybe what we should be asking instead is, “are we getting what we are paying for in social solutions?” This is a question of value, that in many ways parallels the one being asked about the state of US healthcare.

Unfortunately, whether one uses broad measures (e.g., overall social spending vs. income inequality) or more specific examples (e.g., spending on education vs. secondary and tertiary graduation rates), Figures 7 and 9 here suggest that we are not getting good value for all the money we spend. Moreover, while the US government spends more on public safety as a percentage of GDP than many OECD nations or the EU28 (see Table 1 here), our rates of incarceration are some of the highest in the world, with some US states spending more money on incarceration than higher education. And while directing some of the “waste” away from healthcare into other social services seems like a sound idea, simply pouring more money into the existing system without any regard for how it is being spent, is unlikely to generate better social outcomes whether the benefit in question is education or income assistance programs.

Rather than spending more money, the US has to look at existing social expenditures as an INVESTMENT and manage these expenditures on an ongoing basis to continuously improve social outcomes, by relentlessly learning from both international and within-US success stories (does that sound familiar?). Social spending needs to be built into a balance sheet (which the US does not currently keep), otherwise everyone will continue to ignore how the funds are managed with no expectations for measurable ROI. This, in turn, will require a shared vision, a shared reality that recognizes the evidence above, and strong leadership from policy makers – all sorely missing in Washington, DC at this time.

Coming to grips with the value of social welfare expenditures is particularly important due to the profound demographic shifts happening around the world over the coming decades. As the OECD social spending report highlights (see Figures 1 and 2) – the vast majority (79%) of public social spending comes in two categories: health and pensions, both heavily influenced by demographics. Thus, rather than focusing simply on the absolute levels of social spending, both the US (with its aging Baby Boomer population) and the EU27 (projected to see a 68% increase in the number of adults over age 65 over the next 50 years) could benefit from a closer evaluation of: a) the sustainability of government social welfare expenditures, given that working age populations will be increasing much less than the older beneficiaries and b) what we get in return for the significant funds already being spent on social welfare.

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“What Maryland’s All Payer Rate Setting Tells Us About Traditional Medicare Payment Rates”

“What Maryland’s All Payer Rate Setting Tells Us About Traditional Medicare Payment Rates”

What Maryland’s All Payer Rate Setting Tells Us About Traditional Medicare Payment Rates

With some political leaders calling for the US to move to Medicare-for-all and California weighing a proposal to have all patient care reimbursed at Medicare rates, it is worth taking a step back to examine the level of traditional Medicare’s provider payment rates. Specifically, do the current payment rates ensure high quality and access for Medicare beneficiaries, while keeping high-value providers in business. Our review of the latest MedPAC report to Congress and statements made by the Medicare Actuary paints a pretty grim picture, as far as delivering on the above objectives.

The March, 2018 MedPAC report shows that aggregate hospital margins from Medicare have gone from -4.9% in 2010 to -9.6% in 2016, and are projected to be -11% in 2018. It is of interest to note that MedPAC looks only at Medicare ‘allowed’ costs – which removes many other expenses incurred by hospitals such as private rooms for patients, telephones and TVs in patient rooms, marketing communications, interest on certain borrowed funds, etc. Thus, true Medicare margins, that are based on total costs, are actually worse than those reported by MedPAC.

Low Medicare payment rates and their implications for both beneficiaries and providers have also been the subject of repeated commentary by the Medicare Actuary, e.g.,

  • “Limiting (Medicare) cost growth to a level below inflation would represent an exceedingly difficult challenge… Providers for whom Medicare constitutes a substantial potion of their business…might end their participation in the program”
  • “…the prices paid by Medicare for most health services will fall increasingly short of the cost of providing such services. If this issue is not addressed by subsequent legislation, it is likely that access to, and quality of, Medicare benefits would deteriorate over time for beneficiaries.”

The CMS Maryland experience
So, how can we estimate the true magnitude of the problem with current Medicare provider payment rates? One state in the US, Maryland, has had all payer rate setting for over 40 years. The Health Services Cost Review Commission (HSCRC), an independent agency established by the Maryland legislature in the early 1970s, is charged with setting uniform hospital service rates. As such, all Maryland payers are charged the same rates approved by the commission (with a modest discount allowed for Medicare and Medicaid). While Maryland can certainly work on improving efficiency (and is moving in that direction with the recent transition to global budgets), one would presume that the present rates are set to meet the following goals of the commission:

  • “Ensure that hospitals have the financial ability to provide efficient, high quality services to all Marylanders
  • Increase the equity or fairness of hospital financing”

If the above presumption is true, then Maryland’s all payer rates can shed light on the adequacy of traditional Medicare’s payment rates to accomplish the same two objectives.

Fortunately, CMS-commissioned evaluation reports of the Maryland All-Payer Model have done some detailed work on this particular topic. Specifically,

  • “The analyses compared the weighted average payment per inpatient admission in Maryland and a comparison group for the same mix of admissions… also examine the weighted average payment per hospital outpatient visit. Using the same mix of admissions and hospital outpatient visits controls for utilization differences between Maryland and the comparison group so the comparison only reflects payment rate differences.”

The latest evaluation report shows that between 2011 and 2016, Maryland Medicare rates for inpatient admissions were 33-40% higher than in the comparison group paid at traditional Medicare rates. The payment gap was even wider for outpatient hospital services, with Maryland Medicare payment rates (FY2013-2016) coming in at 55-62% higher than those of the matched comparison group paid at traditional Medicare payment rates. Clearly, the present policies of increasing traditional Medicare payment rates by less than inflation, have created a major Medicare payment shortfall, which (absent major changes) will get even bigger in the coming years. The rate gap further suggests that the under age 65, privately insured patient population, is currently subsidizing the care of Medicare beneficiaries. Thus, trying to put all patients on traditional Medicare payment rates would make the Medicare Actuary’s worrisome conclusions even more dire. Conversely, assuming Maryland is doing a good job setting payment rates, going to Medicare-for-all using the Maryland model, would require massive increases in rates over what Medicare presently pays everywhere else. Unless there was a change in provider efficiency, there would need to be ~40% increase in what Medicare pays for inpatient admissions and ~60% increase in payment for outpatient hospital services.

Medicare payment policies could benefit from a major overhaul
Based on the various sources of evidence presented above, we believe that Medicare payment rates are too low and getting worse every year. That said, we also believe that it is incumbent on the delivery system to improve efficiency and thus get better value. While providers would certainly welcome increases in Medicare payment rates, changes in payment rates alone will not be sufficient to drive improvement in healthcare delivery.

As we think about what providers should be paid, it would behoove us to remember a Commonwealth Fund blog by Dr. Stuart Guterman and others, which stated that: “… payment levels must be carefully calibrated to ensure providers’ financial viability while providing incentives to reduce costs and safeguards to ensure high quality.” Unfortunately, our conclusion is that traditional Medicare payment rates and policies fall short of the Commonwealth Fund recommendations. The financial viability of the US healthcare provider depends heavily on private payers (and thus the younger and employed population), while traditional Medicare is characterized by wide variation in service utilization, costs, and patient outcomes.

We believe that accomplishing the objectives described by Guterman et al., can best be accomplished by payment structures that ensure the financial viability of high value providers – those getting better patient outcomes at lower than average costs. In turn, the rates should be based on the real costs of doing business by these highest value providers (and not what Medicare currently pays them) plus a 2-4% margin, since even non-profit organizations need reserves to address changing staffing needs, replace aging equipment, etc. With regard to the need for a positive margin by providers, it is of interest to note that the Maryland HSCRC agrees. It has established hospital profitability targets of 2.75% operationally and a 4% total margin.

While we have detailed such value-based payment approaches in previous publications, it may be worth re-iterating a couple of the key components. Again, taking the state of Maryland as an example, Figure 1 shows the distribution of risk-adjusted quality index (based on the 90-day complication rate for hip/knee replacement) vs. the corresponding cost per episode of care. A base payment rate could be set at the 80thor 90thpercentile of the delivery organizations that are in the high value quadrant (i.e., those that get better than average quality at lower than average cost). A further quality withhold (e.g., 5%) could be used to ensure that providers don’t sacrifice effectiveness in the name of efficiency or that we do not reward low quality providers for simply being low cost. HSCRC has an objective establishing “rates sufficient to meet ‘full financial requirements’ of efficient/effective hospitals.” The pay for value approach we outlined above would create a strong incentive for providers to move to high value. If we truly desire a high value healthcare delivery system, we would be more likely to get it, if we actually paid for value.

2 thoughts on “What Maryland’s All Payer Rate Setting Tells Us About Traditional Medicare Payment Rates”

  1. Excellent piece – and the last sentence is so critically important.

    “The pay for value approach we outlined above would create a strong incentive for providers to move to high value. If we truly desire a high value healthcare delivery system, we would be more likely to get it, if we actually paid for value.”

  2. Denis and Bob:

    A great reminder that the Medicare for All advocates do not really understand the financial implications of their aspirations…there also is a hope that administrative savings will arise as marketing, customer service and claims processing needs diminish–really? Hope your summer going well…keep the conversation going…

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