Piper Report
Blog on Medicare, Medicaid, health reform, and more. Insights and resources on hot issues. Kip Piper, editor.
Healthcare consultant, speaker, and writer. Expert on Medicare, Medicaid, health reform, and pharma, biotech, and medical technology industries. President, Health Results Group LLC. Senior advisor to Sellers Dorsey, TogoRun, and Fleishman-Hillard. Visit KipPiper.com. Or email Kip here.
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posted: December 10, 2010

Medicare Payment Primers for 2010.jpgThe federal Medicare program has an array of complex payment policies for health care providers, health plans, and prescription drug plans. Fortunately, the outstanding staff at the Medicare Payment Advisory Commission (MedPAC) offer a series of crisp primers on Medicare reimbursement policy. MedPAC updates these annually to reflect changes in CMS payment rules and Congressional legislation.


Medicare Hospital Payment Policies:


  • Inpatient Hospital Payment (Inpatient Prospective Payment System or IPPS)

  • Outpatient Hospital Services Payment (Outpatient Prospective Payment System)

  • Critical Access Hospital (CAH) Payment

  • Psychiatric Hospital Services Payment

  • Medicare Post-Acute Provider Payment Policies:


  • Skilled Nursing Facility (SNF) Payment (SNF Prospective Payment)

  • Home Health Care Services Payment (Home Health Agency Prospective Payment)

  • Inpatient Rehabilitation Facility Payment

  • Long-Term Care Hospital (LTCH) Payment

  • Hospice Services Payment

  • Medicare Payment Policies for Physicians and Other Ambulatory Providers:


  • Physician Services Payment System

  • Ambulatory Surgical Centers (ASCs) Payment

  • Outpatient Dialysis Services Payment (including new fully bundled payment method)

  • Medicare Health Plans and Prescription Drug Plan Payment Policies:


  • Medicare Advantage Plan Payment (Medicare Part C)

  • Medicare Prescription Drug Plan Payment (PDPs and MA-PDs in Medicare Part D)

  • Medicare Payment Policies for Other Providers, Labs, Medical Equipment, and Supplies:


  • Durable Medical Equipment (DME) Reimbursement

  • Clinical Laboratory Services Reimbursement

  • Outpatient Therapy Payment

  • Oxygen and Oxygen Equipment Payment

  • posted: September 8, 2010

    Thumbnail image for ACO Primer by Kip Piper.jpgThe Accountable Care Organization (ACO) model is a new Medicare option for physicians, hospitals, and other providers to share in cost-savings. ACOs represent a dramatic change in Medicare policy and an opportunity to transform care delivery and provider alignment.


    The Medicare Gain Sharing Program, part of the newly enacted healthcare reform law, creates the option for healthcare providers to form ACOs. Through an ACO, providers will take responsibility for quality and overall care of their Medicare patients. Medicare will
    then share with ACO providers the savings from improved quality, fewer hospitalizations, and the elimination of unnecessary costs.


    Starting in 2012, the ACO model will be a nationwide option in Medicare fee-for-service (FFS). In addition to shared savings, the ACO option includes freedom of choice for Medicare beneficiaries, national quality measures, evidence-based medicine, patient-centered care delivery, advanced care coordination, and information sharing.


    Because the ACO model is designed to break down old barriers for providers to work together to improve care and reduce medical costs, state Medicaid programs and private health insurers will likely join Medicare in supporting the ACO model. Medicare may give preference to ACOs that are participating in similar arrangements with Medicaid, private payers, and other third parties - that is, multi-payor ACOs.


    Specifically, Section 1899 of the Social Security Act governs the new Medicare Shared Savings Program and the option for providers to form ACOs. The law was created by Section 3022 of the Patient Protection and Affordable Care Act of 2010 (PPACA). The Centers for Medicare and Medicaid Services (CMS) must implement the ACO option no later than January 1, 2012. CMS plans to release proposed rules by late 2010.


    To learn more about Accounable Care Organizations, please read my primer article on ACOs in the journal American Health & Drug Benefits.

    posted: September 1, 2010

    Piggy bank with stethoscope.jpgUnder the Patient Protection and Affordable Care Act (PPACA) of 2010, Medicare providers, including physician groups and hospitals, will soon have the option to form Accountable Care Organizations (ACOs) to improve quality and efficiency.


    ACO providers may share financial gains generated from improved clinical and economic performance, provided that quality goals and patient safeguards are met. Through future regulations, the Centers for Medicare and Medicaid Services (CMS) must implement the Medicaid ACO option no later than January 1, 2012. Proposed rules are expected by late 2010.


    In this interview, Dr. Mark B. McClellan, former CMS Administrator and FDA Commissioner, discusses the extraordinary implications of the new ACO option for improving patient care and reducing unnecessary costs.


    Mark is director of the Engelberg Center for Health Care Reform at the Brookings Institution, a influential think tank in Washington, DC. The Engelberg Center is engaged in several interesting projects.


    To read this interview in the journal American Health & Drug Benefits, click here (opens PDF).

    posted: July 27, 2010

    Primer on CER.jpgComparative Effectiveness Research holds extraordinary implications for healthcare stakeholders, notably the pharmaceutical, biotechnology, and medical technology industries; patients; physicians; hospitals; the federal Medicare program; state Medicaid programs; and health plans. In addition to guiding and hopefully improving day-to-day decisions by clinicians and patients, Comparative Effectiveness Research will be extraordinarily influential in coverage and reimbursement decisions.


    Here is a quick primer on the massive new Comparative Effectiveness Research program in the U.S., including major changes enacted in the new health reform law.


    Comparative Effectiveness Research Defined:


    Comparative Effectiveness Research (CER) means research evaluating and comparing health outcomes and the clinical effectiveness, risks, and benefits of two or more medical treatments, services, or items (e.g., drugs, biologics, devices).


    More specifically, this includes comparisons of:

    • Prescription drugs and biologics
    • Medical devices
    • Diagnostic tests and diagnostic tools
    • Surgical procedures
    • Protocols or guidelines for patient treatment
    • Care management practices
    • Prevention activities

    Conceptually, CER looks at medical interventions across the range of prognostic, preventive, diagnostic, therapeutic, rehabilitative, and palliative care. Health policy experts have increasingly proposed that CER should also assess the effectiveness of models or systems of health care delivery. Therefore, there is a degree of interaction and overlap between CER and health services research.


    CER studies may compare similar treatments - like comparing several drugs in a therapeutic class - or compare clinical effectiveness of different approaches, like comparing a drug and a surgical procedure for the treatment of the same condition.


    CER employs a variety of research methods, including randomized controlled trials, meta-analyses, and observational cohort analyses. In addition to conducting the clinical effectiveness and comparative effectiveness research itself, CER also involves building of the necessary infrastructure (data, research methods, staff, training, etc.). To meet the demands of CER, researchers are developing and testing new methodologies and data sources.


    To have any real value, the results of CER must be actionable, with findings effectively translated for and disseminated to the full range of decision makers.


    Challenges and Controversies in Comparative Effectiveness Research:


    The goal of CER is to increase our collective knowledge of what works and to improve decision making by physicians, patients, purchasers, and payors. However, by its very nature and because of the aggresive use of CER in the UK and other countries, CER raises many difficult or controversial questions. Here are a just a few examples:

    1. Should CER look only at clinical effectiveness, with eye to giving physicians and patients more information to guide their decisions?
    2. Should CER also look at cost effectiveness and cost-benefit analysis?
    3. Should CER influence or drive coverage and reimbursement decisions by Medicare and other government health programs?
    4. Who should set research priorities? How should research priorities be set? What are the research priorities?
    5. Since many studies look at large populations, how do we ensure research reflects special populations and doesn't unintentionally discriminate against sub-groups? For example, if a drug, device, or surgical procedure works best for 80% of patients, what about the other 20%?
    6. How should CER guide physician decision making or should government and payor policies be used to incent or require physicians and other providers to practice consistent with CER findings?

    In a new issue brief, Gene Rich, MD from Mathematica Policy Research and Elizabeth Docteur, MS from the Center for Studying Health System Change discuss key challenges to successful implementation of the large and ambitious federal CER program. They explain how resolution of these challenges "may prove critical to the future role of this research in U.S. health care."


    Comparative Effectiveness Research in Other Countries:


    Here is an interesting new comparison on the Use of Comparative Effectiveness Research in Drug Coverage and Pricing Decisions in Denmark, England, France, Germany, the Netherlands, and Sweden.


    Comparative Effectiveness Research Prior to 2009:


    In the U.S., federally sponsored Comparative Effectiveness Research has been conducted largely by the HHS Agency for Healthcare Research and Quality (AHRQ). The bulk of the AHRQ managed CER is conducted through university-based research centers under contract with AHRQ.


    Prior to 2009, the AHRQ Effective Health Care Program spent a modest $15-$30 million annually. The AHRQ Effective Health Care Program was established under the Medicare Prescription Drug, Improvement, and Modernization Act of 2003 (MMA).


    AHRQ posts a wealth of reader-friendly information at www.effectivehealthcare.ahrq.gov.


    Expansion of Federal Comparative Effectiveness Research in 2009:


    In 2009, as part of the ARRA (Recovery Act), Congress appropriated $1.1 billion for comparative effectiveness research - $300 million for the Agency for Healthcare Research and Quality (AHRQ), $400 million for the National Institutes of Health, and $400 million for allocation at the discretion of the HHS Secretary.


    Congress created a Federal Coordinating Council through which various federal agency heads could set CER priorities. Under a federal contract, an Institute of Medicine (IOM) committee recommended 100 priorities for CER.


    HHS' latest status report on Recovery Act spending details how AHRQ, NIH, and the Secretary's office are using the $1.1 billion.


    Major Changes to Federal Comparative Effectiveness Research in Health Reform Law:


    In the new federal health reform law - Patient Protection and Affordable Care Act (PPACA) - Congress created several major changes to the federal Comparative Effectiveness Research program.


    Starting October 2010, a new Patient Centered Outcomes Research Institute (PCORI) will be responsible for overseeing the federal comparative effectiveness research program. PCORI will set the national CER agenda and conduct research through contracts with federal agencies and grants and contracts with universities and researchers.


    PCORI will operate as federally funded quasi-independent non-profit organization. The PCORI 19-member governing board will have 17 members appointed by Comptroller General of the US (head of the Government Accountability Office, an agency of Congress) plus directors AHRQ and NIH. The Comptroller General will designate the board chair and vice chair. Congress disbanded the Federal Coordinating Council for CER.


    Patient Centered Outcomes Research Institute has a a very broad mission in the law:

    Assist patients, clinicians, purchasers, and policy-makers in making informed health decisions by advancing the quality and relevance of evidence concerning the manner in which diseases, disorders, and other health conditions can effectively and appropriately be prevented, diagnosed, treated, monitored, and managed through research and evidence synthesis that considers variations in patient subpopulations, and the dissemination of research findings with respect to the relative health outcomes, clinical effectiveness, and appropriateness of medical treatments, services, and items.


    The actual research will be delegated by PCORI to AHRQ and NIH. AHRQ and NIH, in turn, will contract out work to universities and research centers.


    The Patient Centered Outcomes Research Institute will use a variety of expert panels. To help to ensure rigor of research methods, this includes a 15-member Methodology Committee appointed by the Comptroller General.


    By law, PCORI is required to use open, transparent processes for decision making and include peer review. Wide, fast dissemination of research finding is also required. AHRQ will be responsible for translation and dissemination of evidence from CER to patients, clinicians, and other decision makers.


    Expect to see federal officials, particularly the Obama Administration, using terms like "patient-centered research" instead of comparative effectiveness.


    Permanent Funding Stream for Comparative Effectiveness Research:


    PPACA, the health reform law, establishes a new, permanent funding stream for CER that, once fully implemented, will generate about $600 million annually for PCORI research priorities.


    Specifically, health plans and self-insured employers (via TPAs) must pay a new federal tax of $2 per person they insure, generating $300 million or more each year starting in FY 2013. Another $150 million will come annually from Medicare. Finally, Congress also appropriated $50 million in FY 2011 and $150 million annually from FY 2012 through FY 2019. In effect, PCORI will also have unused ARRA CER funding at its disposal.

    posted: June 30, 2010

    Medicare Data Book 2010.jpgMedPAC released its Medicare Data Book for 2010, with a wide range of useful information on Medicare spending, utilization, beneficiaries, providers, health plans, drug plans, access, and quality. The format is reader-friendly charts and tables with bulleted summaries.


    Specifically, the latest MedPAC Data Book includes information on:


  • Medicare spending, including Medicare spending compared to national health care spending.

  • Medicare beneficiary demographics.

  • Dual-eligible beneficiaries.

  • Medicare quality and access.

  • Medicare beneficiary cost sharing and other payer liability.

  • Medicare Part B drugs and biologics.

  • Medicare Advantage program, including Medicare Advantage plans, Special Needs Plans (SNPs), and enrollment figures.

  • Medicare Part D prescription drug program.

  • MedPAC also provides an array of charts and tables on Medicare providers and care settings, with data on Medicare spending, percent of beneficiaries using the service, number of providers, volume, length of stay, and, where available, profit margins, if
    applicable. Provider types covered include inpatient hospitals, outpatient hospitals, physicians, skilled nursing facilities, home health agencies, long-term care hospitals, inpatient rehabilitation facilities, ambulatory surgical centers, dialysis facilities, and hospice.


    MedPAC - the Medicare Payment Advisory Commission - advises Congress on Medicare policy.

    posted: April 25, 2010

    AHDB Wellness.jpgCreating a wellness-based healthcare system is the focus on a new series of articles published by American Health and Drug Benefits, a peer reviewed journal. They cover a wide spectrum of topics on how to build and support prevention and wellness, particularly for chronic conditions. The ideas and information are particularly timely given the array of prevention and wellness initiatives in the Patient Protection and Affordable Care Act (PPACA):


    The 5 Eras of Healthcare Finance: Wellness as a Clinical Model by Thomas McCarter, MD, FACP; Farrah N. Daly, MD, MBA; and Keri Cooper


    Epidemiology and Impact of Chronic Diseases: The Promise of Prevention by Nirav R. Shah, MD, MPH


    Bending the Curve, Changing Provider Organization: Implications for Wellness-Based Healthcare by Lawton Robert Burns, PhD, MBA


    Wellness-Based Healthcare: Economic Incentives and Benefit Design by Gene Reeder, RPh, PhD


    Wellness-Based Healthcare Policy: Medicare, Medicaid, and Private Insurance by Kip Piper, MA, FACHE


    FDA Policies and Wellness-Based Healthcare: Approving and Paying for Prevention by Scott Gottlieb, MD


    The Diabetes Ten City Challenge: Value-Based Benefit Design for Wellness-Based Care by Toni Fera, BPharm, PharmD


    The Role of Wellness for Large Corporations: Trends and Models by Wayne M. Lednar, MD, PhD


    Employers and a Culture of Health by Alberto M. Colombi, MD, MPH


    Healthcare Reform: Impacts on Business by F. Randy Vogenberg, RPh, PhD


    Pharmaceutical R&D Strategy and the Transition to Personalized Healthcare Planning by Michael F. Murphy, MD, PhD


    The Role of Health Plans in Prevention and Wellness by Gary M. Owens, MD


    Patient Engagement: From Medication Adherence to Health and Wellness by James T. Kenney, Jr, RPh, MBA


    The Geisinger Model: Research Is a Core Asset by
    Nirav R. Shah, MD, MPH; J.B. Jones, PhD, MBA; and Walter F. Stewart, PhD, MPH


    Click here to read or download the above collection on Wellness-Based Healthcare System of Chronic Diseases: Prevention, Intervention, and Innovation (PDF).


    Kip Piper is health policy editor of American Health and Drug Benefits. The journal's 30,000 subscribers include decision makers in health plans, drug plans, Medicare, and Medicaid.

    posted: April 3, 2010

    Medical Malpractice.jpgAn interesting new report assesses a variety of medical malpractice reforms. The study synthesizes the evidence or theoretical predictions regarding several leading medical malpractice reform ideas.


    The report synthesizes published evidence on 8 reforms widely used by states:

    • Caps on non-economic damages
    • Pretrial screening panels
    • Certificate of merit requirements
    • Attorney fee limits
    • Joint and several liability rule reform
    • Collateral source rule reform
    • Periodic payment
    • Statutes of limitation or repose


    These reforms are evaluated based on their effects on frequency and cost of malpractice claims, medical liability system overhead costs, health care providers' liability costs, defensive medicine (including utilization and spending), supply of health care services (including physician supply and patient health insurance coverage), and quality of care.


    The report also reviews 6 other, more innovative but largely untested medical malpractice reforms:

    • Schedules of non-economic damages
    • Health courts
    • Disclosure and offer programs
    • Safe harbors for physician adherence to evidenced-based clinical practice guidelines
    • Subsidized reinsurance that is made conditional upon meeting particular patient safety goals
    • Enterprise medical liability


    Based on theoretical predictions, the authors suggest that most of these latter reforms are promising enough to merit demonstrations.


    The study was commissioned by the Medicare Payment Advisory Commission (MedPAC) and produced by Michelle M. Mello, JD, PhD, professor of law and public health at the Harvard School of Public Health and Allen Kachalia, MD, JD, assistant professor at the Harvard Medical School and medical director for quality and safety, Brigham and Women's Hospital.

    posted: March 18, 2010

    MedPAC March 2010.jpgThe Medicare Payment Advisory Commission (MedPAC) has released its Medicare payment recommendations to Congress for 2011. In addition to specific recommendations for payment updates for fee-for-service providers and Medicare Advantage plans, MedPAC's report includes interesting information and analysis on spending trends, consequences of rapid spending on Medicare and the overall health care system, and the process of assessing payment adequacy.


    MedPACs informative, 381-page report includes detailed Medicare reimbursement recommendations for:

    • Inpatient hospital services (Inpatient Prospective Payment System or IPPS)
    • Outpatient hospital services (Outpatient Prospective Payment System or OPPS)
    • Physician services
    • Ambulatory surgical centers
    • Outpatient dialysis services
    • Hospice services
    • Post-acute care providers: Skilled nursing facility services, home health services, inpatient rehabilitation facility services, and long-term care hospital services
    • Medicare Advantage plans (Medicare Part C)

    The report also includes:

    • Status report on the Medicare Part D prescription drug program.
    • Comparison of quality among Medicare Advantage plans and between Medicare Advantage and fee-for-service Medicare.

    To read or download the full report, click here (PDF). To select specific topics in the report, click here.

    posted: February 4, 2010

    Health Spending to 2019.jpgThe Centers for Medicare and Medicaid Services' Office of the Actuary (CMS/OACT) has released its projections of U.S. health care spending for the ten years 2010 through 2019, with premliminary estimates of 2009 health spending. The projections, released each year around this time, offer a fascinating, detailed look at patterns and trends in public and private health spending across programs and provider types.


    Health Care Spending in 2009:


    In 2009, National Health Expenditures (NHE) is projected to have reached $2.5 trillion, up 5.7 percent from 2008. This compares to 1.1 percent GDP decline in 2009. Health spending grew by a slow rate of 4.4 percent in 2008.


    The health care share of GDP is expected to jump from 16.2 percent of GDP in 2008 to 17.3 percent in 2009 - the largest one-year increase in history.

  • National health spending accelerated in 2009 due to several factors, notably:

  • Fast grow in Medicaid, driven by higher enrollment in the recession. Medicaid grew by 9.9 percent in 2009, compared to the 4.7 percent increase in 2008.

  • Medicare spending growth of 8.1 percent.

  • Higher utilization of services by consumers seeking treatment for the H1N1 virus.

  • Increased take-up rate for COBRA coverage due to federal subsidies of COBRA premiums.

  • Medicare, Medicaid, and Private Health Insurance in 2009:


    In 2009, Medicare was projected at $507.1 billion, a 8.1 percent increase over 2008. Medicaid spending is estimated at $378.3 billion (federal and state funds), an increase of 9.9 percent.


    The fast grow in Medicare and Medicare compares to continued slow growth in spending on private health insurance premiums, again largely due to the poor economy and unemployment. CMS projects spending on private health insurance premiums at $808.7 billion in 2009, up 3.3 percent from 2008.


    Hospital, Physician, and Prescription Drug Spending in 2009:


    Estimating Health Spending.jpgIn 2009, hospital spending increased by 5.9 percent to $760.6 billion (inpatient and outpatient). Physician and clinical services spending is expected to have reached $527.6 billion or a 6.3 percent increase in 2009. Note that in 2008 hospital and physician spending increased at more moderate rates of 4.5 percent and 5.0 percent, respectively.


    Prescription drug spending increased by an estimated 5.2 percent, for total of $246.3 billion in 2009. Part of this increase was driven by higher use of antiviral drugs. Political perceptions and grandstanding notwithstanding, drug spending continues to grow more slowly than other, much larger components of health spending and has declined as a proportion of total health costs.


    Projected Health Care Spending in 2010:


    Assuming that Congress stops the 21.3 percent cut in Medicare physician payment rates required under the Sustainable Growth Rate (SGR) provisions of current law, total U.S. health care spending is projected to increase by 4.7 percent in 2010. If Congress fails to stop the physician rate cuts, overall NEHs would grow by a more modest 3.9 percent. Fixing SGR could easily cost over $300 billion but a fix is likely, especially given the enormity of the cuts and fact this is an election year.


    Private health care spending in 2010 is projected to grow by 2.8 percent because of declining private health insurance enrollment because of high unemployment and the expiration of federal subsidies for COBRA coverage.


    Out-of-pocket spending is expected to have slowed from 2.8 percent in 2008 to 2.1 percent in 2009, reaching $283.5 billion in 2009. The recession slowed the ultization of medical services, thereby slowing growth in out-of-pocket spending on co-payments and deductibles.


    Ten Year Projection Through 2019:


    For 2010 through 2019, the CMS team of actuaries and economists project:


  • Overall national health spending will grow by average annual rate of 6.1 percent (compared to projected GDP growth of 4.4 percent annually).

  • Medicare spending will grow at average annual rate of 6.9 percent.

  • Medicaid spending will grow at average annual rate of 7.5 percent.

  • Out-of-pocket spending will grow by an average 4.8 percent per year.

  • Hospital spending will increase by an average 6.1 percent per year.

  • Physician and related clinical spending will grow by average annual rate of 5.9 percent.

  • Perscription drug spending will grow by average 6.3 percent per year.

  • Not surprisingly, public sector spending on health care is projected grow faster on average than private spending for 2009 through 2019. Average annual growth rate of 7.0 percent for taxpayer financed health care versus 5.2 percent for private spending (by employers and individuals).


    Public health care programs (Medicare, Medicaid, CHIP, VA, TRICARE, et al) will account for half of all health spending by 2012.


    By 2019, CMS Office of the Actuary projects that U.S. health spending will reach $4.5 trillion or about 19.3% of the economy as measured by GDP. (Yikes!)


    Learn More About Health Spending Projections:


    The CMS Office of the Actuary projections for U.S. health spending are nicely summarized in a new article in Health Affairs. To read the article, click here (PDF).


    To learn more, check out CMS' projections, historical tables, and methodology here.

    posted: November 19, 2009

    Global Payments Report.jpgPayment reform is an integral part of national and state-based health reform efforts. Indeed, payment reform is essential to moving from quantity-based reimbursement to a performance-based health care system. That is, moving from fee-for-service to fee-for-value. Payment innovations, such as global payment, are designed to reward efficiency and higher quality, while supporting providers as they invest in patient-centered models of care.


    Massachusetts, a leader in health policy innovation, is exploring global payment concepts in an effort to rein in costs and improve care coordination and quality. The Massachusetts Medicaid Policy Institute (MMPI) has released a new report on global payment in the Medicaid context.


    The report, prepared by Mark Heit of Sellers Dorsey and Kip Piper of Health Results Group, assesses global payment options while addressing the concerns of applying the innovative payment mechanism to MassHealth, the Massachusetts Medicaid program.


    To read the report, click here (PDF).


    Global payments have been recommended for public and private payors by the Commonwealth's Special Commission on Health System Payment and the Massachusetts Health Care Quality and Cost Council.


    The MMPI report was funded through a grant from Blue Cross Blue Shield of Massachusetts (BCBSMA). BCBSMA is implementing global payments with select hospitals and physician groups.


    The Massachusetts Medicaid Policy Institute is an independent and non-partisan source of information about the Massachusetts Medicaid program. Learn more at www.massmedicaid.org.

    posted: November 7, 2009

    Brain Scan.jpgA series of new articles from the journal American Health and Drug Benefits address key issues in stroke prevention and management, with a special focus on transient ischemic attacks. A transient ischemic attack (TIA), a transient stroke that lasts only a few minutes, can be a warning sign that a person is at risk for a more serious, debilitating, and potentially deadly stroke.


    Many strokes can be prevented by heeding the warning signs of TIAs, a carotid ultrasound test, and treating underlying risk factors (e.g., smoking, high blood pressure, obesity, and high cholesterol). Unfortunately, our health care system under diagnoses and under treats patients at risk for stroke, leading to preventable deaths and disabilities and significant costs, particularly for Medicare and Medicaid.


    The articles are based on presentations given at a symposium earlier this year on stroke prevention and treatment strategies:


    Epidemiology of Stroke:

    Nirav R. Shah, MD, MPH discusses stroke as the third-leading cause of death in the U.S. and a crushing burden on patients, families, the healthcare system and the economy. Dr. Shah gives an overview of the two main types of stroke, ischemic and hemorrhagic, as well as describes typical patients. He highlights areas of stroke and TIA incidence throughout the U.S., as well as the average Medicare cost in per region. Dr. Shah is assistant professor of Medicine, New York University School of Medicine, and a researcher and clinical investigator, Geisinger Health System, Danville, PA.


    TIA and Stroke: Pathophysiology, Management, and Prevention:

    Mitchell S.V. Elkind, MD, MS explores the risk factors for both TIA and stroke as well as how advances in imaging techniques have enhanced the understanding of stroke and called into question the traditional definitions of the difference between TIA and stroke. These advances have also led to new concepts of managing stroke, and have, in turn, led to new advances in therapies, with several new compounds now in clinical trials. Dr. Elkind is associate professor of neurology, and associate chairman for research and training, Columbia University.


    An Actuarial Analysis of TIA and Recurrent Stroke Costs to Commercial Payers and Employers:

    Kathryn Fitch, RN, MEd, examines the link between TIA and stroke and the costs to health plans and employers. Ms. Fitch outlines the risk factors for key populations and underscores the overall costs to employers and insurers for both primary and secondary strokes and TIA. She concludes that educating patients about risk and implementing stroke prevention initiatives can dramatically reduce the exposure of employers and insurers to these conditions. Ms. Fitch is a principal and healthcare management consultant at Milliman and based in New York.


    TIA and Recurrent Stroke Prevention Practices: Current and New Developments:

    Robert J. Adams, MS, MD looks at the gaps in the U.S. healthcare system in its approach to TIA and ischemic stroke. Dr. Adams concludes that these gaps result in barriers to the delivery of proper stroke management and prevention. He examines the unresolved issues of stroke prevention and management, as well as the place of stroke in the disease pantheon in the U.S. Unlike diabetes or heart disease, stroke does not receive its due attention as the third largest killer despite its enormous financial and human toll. Dr. Adams is a professor of neuroscience; director, South Carolina Center of Economic Excellence; and director, MUSC Stroke Center, Medical University of South Carolina.


    Care Management for TIA and Stroke Patients: Riding the Quality Improvement Wave:

    Barbara Lennert, RN, BSN, CRRN, MAOM connects the quality improvement movement to the problem of stroke management and discusses how many quality-focused organizations still do not see stroke and stroke prevention as key concerns. Ms. Lennart asserts that while there is widespread agreement on the seriousness of stroke and TIA, there is also agreement that these diseases are not taken seriously enough by health plans and quality / safety groups leading to inadequate attention to prevention and care. Ms. Lennart is director of quality improvement at Xcenda, part of the AmerisourceBergen Specialty Group.


    Healthcare Reform and Public Programs: Opportunities for TIA / Recurrent Stroke Prevention:

    Kip Piper, MA, FACHE links stroke prevention and management to health policy changes underway as a result of health reform, particularly as they relate to Medicare and Medicaid. These two programs provide valuable models as to how to include stroke care in policy. As health reform moves forward there are risks that stroke prevention and management may be left out of the equation. Mr. Piper insists that it is critical to ensure that elements of health reform are aligned with stroke prevention, care, and management.


    Integrating Patient-Centered Care and Clinical Support: A New Research Paradigm:

    Nirav M. Shah, MD, MPH explains how a "smart" electronic health record (EHR) can increase efficiency and substantially improve outcomes in the prevention and care of stroke. Dr. Shah describes how EHRs can identify and target risk factors and help modify patient behavior by allowing shared decision-making, thus improving outcomes. Dr. Shah and his colleagues at the Geisinger Health System have developed one of the nation's most sophisticated and flexible health information platforms to support patient care and clinical research.


    TIA and Recurrent Stroke: The Case for Prevention in Working Populations:

    Alberto M. Colombi, MD, MPH addresses the importance of ensuring that working populations are included in programs that focus on prevention and management of cerebrovascular diseases. With more and more people delaying retirement, government and employers must find ways to confront stroke and TIA proactively through a broad range of health programs that will reduce costs and improve outcomes among older working populations. Dr. Colombi, a top thought leader in health and productivity management (HPM). is corporate medical director, PPG Industries


    For all the articles in a single PDF, click here.


    Kip Piper is health policy editor for American Health and Drug Benefits, a peer review journal with 30,000 subscribers. Issues are available at www.ahdbonline.com.

    posted: November 2, 2009

    Medicare Payment Primers.jpgThe Medicare Payment Advisory Commission (MedPAC) has updated its excellent series of reader-friendly primers on Medicare payment methodologies for hospitals, physicians, Medicare Advantage plans, prescription drug plans, and other health care providers. MedPAC is an advisory agency to Congress and is highly influential, particlarly on payment methods, delivery systems, and Medicare reforms.


    Medicare Part A Reimbursement of Hospitals:


  • Medicare Inpatient Prospective Payment system (IPPS) for acute care hospitals

  • Critical Access Hospital payment system

  • Psychiatric hospital services payment system

  • Hospice services payment system

  • Medcare Part A Reimbursement of Post-Acute Providers:


  • Home health agency (HHA) services payment system

  • Skilled Nursing Facility (SNF) services payment system

  • Inpatient Rehabilitation Facilities (IRF) payment system

  • Long-Term Care Hospitals (LTCH) payment system

  • Medicare Part B for Physician Services, Other Outpatient Services, Medical Equipment, ad Supplies:


  • Physician services payment system

  • Outpatient hospital services payment system

  • Clinical laboratory services payment system

  • Ambulatory surgical centers payment system

  • Durable medical equipment payment system

  • Outpatient dialysis services payment system (ESRD facilities)

  • Outpatient therapy services payment system

  • Oxygen and oxygen equipment payment system

  • Medicare Payment of Health Plans and Drug Plans:


  • Medicare Advantage plan payment system (Medicare Part C)

  • Medicare Part D Prescription Drug Plans (PPDs and MA-PDs)

  • posted: August 8, 2009

    ARHQ CER Spending Plan.jpgThe HHS Agency for Healthcare Research and Quality (AHRQ) has announced plans for spending its $300 million share of the $1.1 billion Congress appropriated for comparative effectiveness research (CER) under the American Recovery and Reinvestment Act of 2009 (ARRA or Recovery Act for short). AHRQ plans to solicit grant applications this fall and award grants and contracts by spring 2010. The $300 million must be encumbered by end of FFY 2010.


    AHRQ Spending Plan for Comparative Effectiveness Research in 2010:


    New Grants ($198.5 million):


    $148 million for evidence generation, including prospective studies and patient registries:

    • $100 million for the Clinical and Health Outcomes Initiative in Comparative Effectiveness (CHOICE), a new national effort to establish a series of prospective pragmatic clinical comparative effectiveness studies that measure the benefits treatments produce in routine clinical practice. This will include novel study designs focusing on real-world and under-represented populations (children, elderly, racial and ethnic minorities, and other understudied populations).
    • $48 million for the establishment or enhancement of national patient registries that can be used for researching the longitudinal effects of different interventions and collecting data on under-represented populations.

    $29.5 million to support innovative translation and dissemination grants.


    $20 million to support training and career development.


    $1 million for other grants.


    New Contracts ($19.5 million):


    $9.5 million to establish an infrastructure to identify new issues for comparative effectiveness research.


    $10 million to establish a citizen's forum to engage stakeholders and to expand and standardize public involvement in the federal comparative effectiveness research program.


    Expand Existing Contracts ($79 million):


    $50 million for evidence synthesis.


    $24 million for evidence generation.


    $5 million for translation and dissemination.


    Administration ($3 million):


    $3 million for salary and benefits for new AHRQ staff to administer the CER program.


    Health Conditions Selected for Comparative Effectiveness Research:


    For the time being, AHRQ is going to use the same 14 priority conditions designated earlier by the HHS Secretary under the Medicare Modernization Act. The priority conditions were selected because of their high interest for Medicare, Medicaid, and the Children's Health Insurance Program (CHIP):

    1. Arthritis and non-traumatic joint disorders
    2. Cancer
    3. Cardiovascular disease, including stroke and hypertension
    4. Dementia and other brain and nerve conditions, including Alzheimer's Disease
    5. Depression and other mental health disorders
    6. Developmental delays, attention-deficit hyperactivity disorder, and autism
    7. Diabetes mellitus
    8. Functional limitations and disability
    9. Infectious diseases including HIV/AIDS
    10. Obesity
    11. Digestive system conditions (peptic ulcer disease and dyspepsia)
    12. Pregnancy including preterm birth
    13. Pulmonary disease and asthma
    14. Alcohol and drug abuse


    For more information on AHRQ's CER program, visit effectivehealthcare.ahrq.gov.

    posted: July 28, 2009

    Boy in Hospital.jpgThe Children's Health Insurance Program Reauthorization Act of 2009 (CHIPRA) created the Medicaid and CHIP Payment and Access Commission (MACPAC) to advise Congress on a wide range of Medicaid and CHIP issues. MACPAC will start operating in early 2010.


    MACPAC Membership and Staff:


    Modeled closely after the long standing and highly influential Medicare Payment Advisory Commission (MedPAC), MACPAC will be a Congressional agency like MedPAC, the Congressional Budget Office (CBO), and the Government Accountability Office (GAO). Like MedPAC, the 17-member MACPAC will include an executive director and a professional staff of ~25-40. MACPAC appoints the executive director.


    The 17 Commission members will be appointed for three-year, staggered terms, by the Comptroller General (head of the GAO), with representation from health financing experts, physicians, health professionals, employers, third-party payors, consumers, and current or former state Medicaid / CHIP officials. Non-health care providers must constitute a majority of the MACPAC membership. MACPAC appointments must be made by January 1, 2010.


    Qualifications for MACPAC Membership:


    In general, MACPAC's membership must include individuals with direct experience as:

    • Medicaid / CHIP beneficiaries or parents of beneficiaries.
    • Individuals with national recognition for expertise in Medicaid, CHIP, health finance and economics, actuarial science, health plans, integrated health systems, reimbursement, health information technology, or health care providers (e.g., pediatricians, dentists).

    In particular, the MACPAC membership must include physicians and other health professionals, employers, third-party payors, and individuals with expertise in the delivery of health services. This must include:

    • Members representing children, pregnant women, the elderly, and individuals with disabilities
    • Current or former state Medicaid agency officials.
    • Current or former State CHIP agency officials.

    Congress seeks a mix of different professionals, broad geographic representations, and a balance between urban and rural representatives.


    Role and Duties of MACPAC in Advising Congress on Medicaid and Children's Health Insurance Program:


    Starting in 2010, MACPAC will:

    • Review Medicaid and CHIP policies affecting children's access to covered services and make recommendations to Congress, with a report due by March 1 each year.
    • More broadly examine issues affecting Medicaid and CHIP, including implications of changes in care delivery and the marketplace. Make recommendations to Congress, with report due by June each year.

    More specifically, Congress directs MACPAC to regularly review and assess:

    • Medicaid and CHIP payment policies, including state payment methodologies and factors affecting expenditures in different sectors, including the process for updating reimbursement rates for hospitals, nursing facilities, physicians, and community health centers.
    • The relationship of payment policies to access and quality of care for Medicaid and CHIP beneficiaries.
    • Interaction of Medicaid and CHIP payment policies with health care delivery.
    • Implications of health care delivery changes and other marketplace changes on access to care for Medicaid and CHIP beneficiaries.
    • The effect of other Medicaid and CHIP policies on access to covered health care services, including transportation and language barriers.

    MACPAC must also:

    • Create an early warning system to identify provider shortage areas or any other problems that threaten access to care or the health care status of Medicaid and CHIP beneficiaries.
    • Review and comment to Medicaid and CHIP related reports to Congress by HHS.
    • Upon request of committee chairs or ranking members, conduct studies, produce special reports, and make recommendations to Congress on Medicaid and CHIP issues.
    • Periodically consult with Congressional leadership (committee chairs and ranking members), make its reports available to the HHS Secretary and the public, record and report votes on all recommendations, and examine the budget consequences of recommendations.
    • Before making any recommendations, MACPAC must consider the budget consequences of such recommendations, directly or through consultation with experts.

    CHIPRA also contains provisions on MACPAC operations, data collection and access, authority, funding and staffing. Again, these closely align with existing policies governing MACPAC's sister agency MedPAC.


    Committee Jurisdictions in Congress:


    MACPAC will be accountable to the Congressional committees with jurisdiction for Medicaid and CHIP, namely:

    posted: January 13, 2009

    Management%20Challenges.jpgThe incoming leadership at the U.S. Department of Health and Human Services (HHS) face a number of serious management challenges. These challenges, recently identified by the Office of the Inspector General (OIG), will require close, sustained attention by the Secretary's Office and the agency heads, particularly at CMS and FDA.


    The nominees for Secretary and Deputy Secretary - Tom Daschle and Bill Corr, respectively - are wise choices, especially given President-elect Obama's policy perspective and strong interest in national health reform. They are smart, seasoned policy gurus with strong relationships on the Hill. However, as the Obama Administration populates the agencies with appointees, the White House and HHS leadership should seriously consider the need for strong executives and senior management types for top positions at agencies like CMS, FDA, CDC, and NIH. Yes, they will need requisite policy and technical expertise, but at the agency level management savvy should be a priority.


    The reason is simple. The existing management challenges certainly require attention. Further, the ultimate success of the Obama Administration's health care agenda may well depend on fixing these problems. Also, the HHS Secretary's Office and the new White House Office of Health Reform will have their hands full with health reform legislation, Medicare fixes, and FDA legislation. And the White House and HHS leadership will need strong executives to effectively implement the range of major, complex new policies expected in 2009 and 2010. The Democrats have a fairly deep bench when it comes to policy wonks, researchers, and academics generally. Their bench for executives and managers is relatively thin - but they could look within the agencies themselves and in state government for management talent friendly to the Administration's policy views.


    Here is the OIG's list of top management challenges at HHS:


    Oversight of Medicare Part D Prescription Drug Benefit:

  • Drug pricing and rebates

  • Fraud and abuse safeguards

  • Access to accurate information

  • Medicare Program Integrity:

  • Contractor oversight

  • DME fraud, including error rate and competitive bidding

  • Medicare Advantage

  • Integrity of Medicaid and State Children's Health Insurance Program:

  • Prescription drugs, including fraud and pharmacy reimbursement

  • SCHIP reauthorization and eligibility

  • Home and community-based care in Medicaid

  • Quality of Care:

  • Quality measurement

  • Pay for performance (P4P)

  • Failure of care and never events

  • Transparency of ownership and performance

  • Indian health care

  • Emergency Preparedness and Response:

  • Pandemic influenza

  • Select agent transfers

  • Laboratory security

  • Oversight of Food, Drugs, and Medical Devices by FDA:

  • Food safety and security

  • Drug and medical device safety

  • Transparency of provider financial interests

  • Grants Management:

  • Grant oversight and closeout

  • President's Emergency Plan for AIDS Relief expansion

  • Head Start facility safety and compliance

  • Integrity of Information Systems and the Implementation of Health Information Technology:

  • Security of sensitive and personally identifiable information

  • Safeguards and controls over HHS information systems

  • Electronic health records and e-prescribing

  • Ethics Program Oversight and Enforcement:

  • Management of conflicts of interest by extramural grantees

  • Oversight of financial interests of clinical investigators and advisory board members

  • Oversight of HHS employees' outside and post-employment activities
  • posted: December 22, 2008

    IOM%2020%20Indicators.jpgThe Institute of Medicine (IOM) has identified 20 key indicators that together "reflect the overall health of the nation and the efficiency and efficacy of U.S. health systems."


    Each of the 20 indicators can be readily measured over time using existing, publicly collected, reasonably high quality data. In addition to supporting nationwide snapshots, they permit drill-down views based on geography, population subgroups, and socioeconomic status.


    Here are the IOM's key indicators:


    Health Outcomes:


    1. Life Expectancy at Birth (number of years that a newborn is expected to live if current mortality rates continue to apply).


    2. Infant Mortality (deaths of infants aged under 1 year per 1,000 live births).


    3. Life Expectancy at Age 65 (number of years of life remaining to a person at age 65 if current mortality rates continue to apply).


    4. Injury Related Mortality (age-adjusted mortality rates due to intentional and unintentional injuries).


    5. Self-Reported Health Status (percentage of adults reporting fair or poor health).


    6. Unhealthy Days Physical and Mental (mean number of physically or mentally unhealthy days in past 30 days).


    7. Chronic Disease Prevalence (percentage of adults reporting one or more of six chronic diseases [diabetes, cardiovascular disease, chronic obstructive pulmonary disease, asthma, cancer, and arthritis]).


    8. Serious Psychological Distress (percentage of adults with serious psychological distress as indicated by a score of > 13 on the K6 scale, with scores ranging from 0-24).


    Health Related Behaviors:


    9. Smoking (percentage of adults who have smoked > 100 cigarettes in their lifetime and who currently smoke some days or every day).


    10. Physical Activity (percentage of adults meeting the recommendation for moderate physical activity [at least 5 days a week for 30 minutes a day of moderate intensity activity or at least 3 days a week for 20 minutes a day of vigorous intensity activity]).


    11. Excessive Drinking (percentage of adults consuming four [women] or five [men] or more drinks on one occasion and/or consuming more than an average of one [women] or two [men] drinks per day during the past 30 days)


    12. Nutrition (percentage of adults with a good diet [conformance to federal dietary guidance] as indicated by a score of > 80 on the Healthy Eating Index)


    13. Obesity (percentage of adults with a body mass index > 30).


    14. Condom Use (proportion of youth in grades 9-12 who are sexually active and do not use condoms, placing them at risk for sexually transmitted infections).


    Health Systems:


    15. Health Care Expenditures (per capita health care spending).


    16. Insurance Coverage (percentage of adults without health coverage via insurance or entitlement).


    17. Unmet Medical, Dental, and Prescription Drug Needs (percentage of [non-institutionalized] people who did not receive or delayed receiving needed medical services, dental services, or prescription drugs during the previous year).


    18. Preventive Services (percentage of adults who are up-to-date with age-appropriate screening services and flu vaccination).


    19. Childhood Immunization (percentage of children aged 19-35 months who are up-to-date with recommended immunizations).


    20. Preventable Hospitalizations (hospitalization rate for ambulatory care-sensitive conditions).


    State of the USA - a new non-profit endeavor developed under the auspices of The National Academy of Sciences and funded by several major foundations - sponsored the IOM project to identify the indicators. The IOM committee of experts was asked to (a) select indicators that, taken together, give "a broad view of health in America, covering health care, health status, and health determinants" and (b) choose only 20 indicators to ensure "maximum clarity and focus."









    posted: December 21, 2008

    Adverse%20Events.jpgHistorically, traditional payment policies - coupled with lax oversight by regulators, weak leadership from many corners of the hospital and physician communities, and an uninformed, reverential public - have served to perpetuate (sometimes even reward) the use of unsafe practices and antiquated technologies in the hospital industry. This, in turn, resulted in a frightening number of adverse events - instances where patients are harmed by medical care. The consequences are tens of thousands of deaths and millions of injuries - the vast majority quite avoidable.


    Fortunately, reduction of adverse events is now a priority. This is led by new payment and reporting policies by Medicare and some state Medicaid programs, influential players like IHI and the Leapfrog Group, the Hospital Quality Alliance, and a growing demand for disclosure of hospital and physician performance. Through realigned payment policies, public reporting of adverse events, and readily available best practices, hospitals are being given powerful new incentives to use safer practices.


    Key Issues in Adverse Event Reporting by Hospitals:


    The HHS Office of the Inspector General (OIG) has identified key issues affecting reporting of adverse events in hospitals:


  • Estimates of the incidence of adverse events in hospitals vary widely. Measurement remains difficult, although methods and tools to support proper reporting are advancing quickly.

  • Nonpayment policies for adverse events are gaining in prominence. Stakeholders see this as a powerful incentive to reduce preventable medical errors. However, there are potential drawbacks, such as perhaps discouraging hospitals from admitting complex cases and encouraging gaming in reporting.

  • Hospitals heavily rely on managers and staff to report adverse events internally, but barriers (cultural, organizational, physician relations, etc.) often inhibit reporting.

  • Hospitals report adverse events to various oversight entities. However, experts suspect substantial underreporting.

  • Public disclosure of adverse events benefits patients but also raises liability concerns.

  • Information on how to prevent adverse events is widely available. Nonetheless, many hospitals and clinicians are slow to adopt or use recommended patient safety practices.

  • The OIG believes we are finally "on the threshold of accelerated progress" in reducing the incidence of adverse events in hospitals. Yeah, their optimism is heavily couched but there has been some genuine progress. The OIG identifies a series of strategies that could hasten this.


    For the OIG report on key issues in reporting and reducing adverse events in hospitals, click here (PDF).


    State Requirements for Reporting Adverse Events:


    Today, 26 states now have adverse event reporting programs. The Institute of Medicine (IOM), which supports mandated reporting, says reporting helps hold individual hospitals accountable for performance while providing information to improve patient safety and save lives. States vary somewhat by the list of reportable events and criteria for identifying reportable events. Most of the 26 state systems focus on adverse events in hospitals but some also require or support reporting in other care settings.


    Most states told the OIG that "hospitals do not always report when adverse events occur." Underreporting is apparently common and probably substantial. To encourage better reporting, states have implemented various strategies. For example:


  • Legal protections to prevent improper disclosure.

  • Monetary penalties for failing to report an adverse event.

  • Giving feedback to hospitals about reported events.

  • Audits or state-led investigations of the hospitals' handling of reported events.

  • Promote learning through reports, training, and patient safety bulletins and alerts.

  • For the OIG report on state reporting programs, click here (PDF).

    posted: December 18, 2008

    CBO%20Health%20Budget%20Options.jpgTo aid the incoming 111th Congress and Obama Administration, the Congressional Budget Office (CBO) released a 235-page report outlining 115 budget options for health care reform. The report catalogs most of the hottest legislative ideas on Capitol Hill, with useful background information and scores of costs and savings. Here's the list of reform ideas in the report:


    The Private Health Insurance Market:


  • Foster the Formation of Association Health Plans

  • Allow Individuals to Purchase Non-Group Health Insurance Coverage in Any State

  • Impose a Pay-or-Play Requirement on Large Employers

  • Establish a National High-Risk-Pool Program

  • Establish a National Reinsurance Program to Provide Subsidies to Insurers and Firms for Privately Insured Individuals

  • Require States to Use Community Rating for Small-Group Health Insurance Premiums

  • Create a Voucher Program to Expand Health Insurance Coverage

  • Limit Awards from Medical Malpractice Torts

  • The Tax Treatment of Health Insurance:


  • Reduce the Tax Exclusion for Employment-Based Health Insurance and the Health Insurance Deduction for Self-Employed Individuals

  • Replace the Income Tax Exclusion for Employment-Based Health Insurance with a Deduction

  • Replace the Income and Payroll Tax Exclusion with a Refundable Credit

  • Allow Self-Employed Workers to Deduct Health Insurance Premiums from Income That Is Subject to Payroll Taxes

  • Expand Eligibility for an "Above-the-Line" Deduction for Health Insurance Premiums

  • Disallow New Contributions to Health Savings Accounts

  • Allow Health Insurance Plans with Coinsurance of at Least 50 Percent to Qualify for the Health Savings Account Tax Preference

  • Levy an Excise Tax on Medigap Plans

  • Changing the Availability of Health Insurance Through Existing Federal Programs:


  • Raise the Age of Eligibility for Medicare to 67

  • Create a Medicare Buy-In Program for Individuals Ages 62 to 64

  • Eliminate or Reduce Medicare's 24-Month Waiting Period for Recipients of Social Security Disability Benefits

  • Create a Medicaid Buy-In Program

  • Require States to Adopt Premium Assistance Programs for Medicaid Enrollees

  • Expand Eligibility for Medicaid Family Planning Services

  • Expand Medicaid Eligibility to Include Young Adults with Income Below the Federal Poverty Level

  • Expand Medicaid Eligibility to Include Parents with Income Below the Federal Poverty Level

  • Establish a Medicaid Outreach Program with Mandatory Funds

  • Permanently Extend the Transitional Medical Assistance Provision in Medicaid

  • Allow People and Firms to Buy Health Insurance Plans Through the Federal Employees Health Benefits Program

  • End Enrollment in VA Medical Care for Veterans in Priority Groups 7 and 8

  • Reopen Enrollment for VA Medical Care Among Priority Group 8 Veterans for Five Years

  • The Quality and Efficiency of Health Care:


  • Bundle Payments for Hospital Care and Post-Acute Care

  • Reduce Medicare Payments to Hospitals with High Readmission Rates

  • Expand the Hospital Quality Incentive Demonstration to All Hospitals

  • Deny Payment Under Medicaid for Certain Hospital-Acquired Conditions

  • Establish Regional Centers of Excellence for Selected Surgical Procedures Covered by Medicare

  • Convert Medicare and Medicaid Disproportionate Share Hospital Payments into a Block Grant

  • Consolidate Medicare and Federal Medicaid Payments for Graduate Medical Education Costs at Teaching Hospitals

  • Allow Physicians to Form Bonus-Eligible Organizations and Receive Performance-Based Payments

  • Pay Primary Care Physicians in Medicare Using a Partial-Capitation System, with Bonuses and Penalties

  • Pay for a Medical Home for Chronically Ill Beneficiaries in Fee-for-Service Medicare

  • Require Medicare Carriers to Provide Information About Peer Profiling to Physicians

  • Require Prior Authorization for Imaging Services Under Medicare

  • Encourage Wider Use of Patient Shared-Decision Aids by Physicians in Medicare

  • Expand Medicare's Least Costly Alternative Policy to Include Viscosupplements

  • Require Drug and Device Manufacturers to Disclose Their Relationships with Physicians Who Participate in Medicare

  • Fund Research Comparing the Effectiveness of Treatment Options

  • Create Incentives in Medicare for the Adoption of Health Information Technology

  • Require the Use of Health Information Technology as a Condition of Participation in Medicare

  • Support Development of VistA to Meet Standards and Encourage Adoption

  • Sponsor Regional Markets for Health Information Technology

  • Geographic Variation in Spending for Medicare:


  • Reduce Medicare's Fees for Physicians in Areas with Unusually High Spending

  • Reduce Medicare's Payment Rates for Hospitals in Areas with a High Volume of Elective Admissions

  • Reduce Medicare's Payment Rates Across the Board in High-Spending Areas

  • Impose a Surcharge on Medicare Cost Sharing in High-Cost Areas and Prohibit Medigap Plans from Covering the Surcharge

  • Paying for Medicare Services:


  • Reduce Annual Updates in Medicare Fee-for-Service Payments to Reflect Expected Productivity Gains

  • Reduce the Update Factor for Hospitals' Inpatient Operating Payments Under Medicare by 1 Percentage Point

  • Reduce the Update Factor for Payments to Providers of Post-Acute Care Under Medicare by 1 Percentage Point

  • Eliminate Inflation-Related Updates to Medicare's Payment Rates for Home Health Care for Five Years

  • Reduce the Update Factor for Medicare's Payments for Skilled Nursing Facilities by 1 Percentage Point

  • Modify the Sustainable Growth Rate Formula for Updating Medicare's Physician Payment Rates

  • Create Service-Specific Updates for Medicare's Physician Payment Rates

  • Use the Medicare Economic Index to Update Physician Payment Rates for Evaluation and Management Services and Create Four Service-Specific Updates for Remaining Services

  • Modify the Equipment Utilization Factor for Advanced Imaging in Calculating Physicians' Fees in Medicare

  • Set the Benchmark for Private Plans in Medicare Equal to Local Per Capita Fee-for-Service Spending

  • Convert Medicare to a Premium Support System

  • Establish Benchmarks for the Medicare Advantage Program Through Competitive Bidding

  • Eliminate the One-Sided Rebasing Process for Establishing Benchmarks for Medicare Advantage Plans

  • Require Manufacturers to Pay a Minimum Rebate on Drugs Covered Under Medicare Part D

  • Establish an Abbreviated Approval Pathway for Follow-On Biologics

  • Financing and Paying for Services in Medicaid and State Children's Health Insurance Program:


  • Convert the Federal Share of Medicaid's Payments for Acute Care Services into an Allotment

  • Remove or Reduce the Floor on Federal Matching Rates for Medicaid Services

  • Equalize Federal Matching Rates for Administrative Functions in Medicaid at 50 Percent

  • Restrict the Allocation to Medicaid of Common Administrative Costs

  • Reduce the Taxes That States Are Allowed to Levy on Medicaid Providers

  • Modify the Amount of the Brand-Name Drug Rebate in the Medicaid Program

  • Apply the Fee-for-Service Medicaid Drug Rebate to Drugs Purchased for Medicaid Managed Care Enrollees

  • Apply the Medicaid Additional Rebate to New Formulations of Existing Drugs

  • Base Medicaid's Pharmacy Payment Formulas for Brand-Name Drugs on the Average Manufacturer Price

  • Encourage Therapeutic Substitution in Medicaid by Applying Federal Upper Payment Limits to Two Classes of Drugs

  • Eliminate Allotment Caps for the State Children's Health Insurance Program and Permit States to Expand Coverage up to 400 Percent of the Federal Poverty Level

  • Adjust Funding for the State Children's Health Insurance Program to Reflect Increases in Health Care Spending and Population Growth

  • Premiums and Cost Sharing in Federal Health Programs:


  • Replace Medicare's Current Cost-Sharing Requirements with a Unified Deductible, a Uniform Coinsurance Rate, and a Catastrophic Limit

  • Restrict Medigap Coverage of Medicare's Cost Sharing

  • Combine Changes to Medicare's Cost Sharing with Restrictions on Medigap Policies

  • Impose Cost Sharing for the First 20 Days of a Stay in a Skilled Nursing Facility Under Medicare

  • Require a Copayment for Home Health Episodes Covered by Medicare

  • Impose a Deductible and Coinsurance for Clinical Laboratory Services Covered by Medicare

  • Increase the Basic Premium for Medicare Part B to 35 Percent of the Program's Costs

  • Permanently Extend the Provision That Provides Cost-Sharing Assistance for Qualifying Individuals Under Medicaid

  • Eliminate the Doughnut Hole in Medicare's Drug Benefit Design

  • Institute a Premium for Higher-Income Enrollees Under Medicare's Drug Benefit Similar to That Used in Part B

  • Increase the Fraction of Beneficiaries Who Pay an Income-Related Premium for Part B of Medicare

  • Base Federal Retirees' Health Benefits on Length of Service

  • Adopt a Voucher Plan for the Federal Employees Health Benefits Program

  • Require Federal Employees Health Benefits Plans to Subsidize Premiums for Medicare Part B and Reduce Coverage of Medicare Cost Sharing by an Equivalent Amount

  • Increase Health Care Cost Sharing for Family Members of Active-Duty Military Personnel

  • Introduce Minimum Out-of-Pocket Requirements Under TRICARE For Life

  • Increase Medical Cost Sharing for Military Retirees Who Are Not Yet Eligible for Medicare

  • Require Copayments for Medical Care Provided by the VA to Enrollees Without a Service-Connected Disability

  • Long-Term Care:


  • Increase States' Flexibility to Offer Home- and Community-Based Services Through Medicaid State Plan Amendments

  • Make Home and Community-Based Services a Mandatory Benefit Under Medicaid

  • Increase the Federal Matching Rate for Home and Community-Based Services and Decrease the Federal Matching Rate for Nursing Home Services

  • Clarify Medicaid's Definition of Permissible Asset Transfers

  • Increase the "Look-Back" Period for Transfers of Assets in Medicaid

  • Implement Policies That Encourage the Use of Advance Directives

  • Require Deposits to Individual Accounts for Purchasing Long-Term Care Insurance

  • Health Behavior and Health Promotion:


  • Impose an Excise Tax on Sugar-Sweetened Beverages

  • Increase the Excise Tax on Cigarettes by One Dollar Per Pack

  • Increase All Taxes on Alcoholic Beverages to $16 Per Proof Gallon

  • Reduce Medicare Payment Rates for Primary Care Physicians Who Do Not Meet Benchmarks for Influenza Vaccination

  • Base Medicare's Coverage of Preventive Services on Evidence of Effectiveness

  • Closing the Gap Between Medicare's Spending and Receipts

  • Increase the Payroll Tax Rate for Medicare Hospital Insurance by 1 Percentage Point

  • Limit Growth in Medicare Per Capita Spending to Growth in Per Capita Gross Domestic Product Plus 1 Percentage Point

  • Design an Enforcement Mechanism for the Medicare Funding Warning

  • Set a Savings Target to Reduce Spending for Medicare by 1 Percent

  • Increase Funding for the Health Care Fraud and Abuse Control Program in Medicare and Medicaid

  • posted: December 16, 2008

    MedPAC%20Primers.jpgMedicare reimbursement policies are highly complex. Yes, that could be the litotes of the decade. Thankfully, the outstanding staff at the Medicare Payment Advisory Commission (MedPAC) produce and routinely update a series of basic primers on Medicare payment methodologies for hospitals, physicians, other providers, Medicare Advantage plans, and Part D prescription drug plans.


    MedPAC's primers are reader friendly and crafted for a general audience. Typically 2 to 4 pages in length, they summarize the basic elements of each given payment methodology, with some history, policy context, and a flow chart(s) diagramming how payments are generally calculated.


    Here are the latest primers on the basics of Medicare payment methods:


    Medicare Hospital Services:


  • Acute inpatient hospital services (inpatient PPS)

  • Critical access hospitals

  • Outpatient hospital services

  • Psychiatric hospital services

  • Medicare Outpatient Services:


  • Physician services

  • Geographic practice cost indexes for physician rates

  • Ambulatory surgical centers (ASCs)

  • Clinical laboratory services

  • Dialysis center services (ESRD facilities)

  • Outpatient therapy services

  • Durable medical equipment (DME)

  • Oxygen and oxygen equipment

  • Payment to physicians for professional liability insurance

  • Medicare Post-Acute and Related Services:


  • Skilled nursing facility services

  • Home health care services

  • Inpatient rehabilitation facilities

  • Long-term care hospitals

  • Hospice services

  • Medicare Health Plans and Prescription Drug Plans:


  • Medicare Advantage plans (HMOs, PPOs, PFFS plans)

  • Prescription drug plans (PDPs and MA-PDs)
  • posted: August 20, 2008

    Medicare%20Policy%20Making.jpgThe next President and Congress will face many fiscal and policy challenges from the $436 billion Medicare program. Following my earlier quick primers on Medicaid policy making and Medicare and Medicaid waivers, here is a similar briefing on the primary vehicles of Medicare policy making.


    As a federal health program operating nationwide, Medicare policies are made through:


    Federal Medicare Statutes:


    Title XVIII of the Social Security Act sets forth the bulk of federal Medicare laws. Given the political importance and visibility of Medicare, Medicare statutes are extremely specific, especially on provider reimbursement, benefits, cost sharing, managed care, and provider conditions of participation. Therefore, CMS' rulemaking discretion is often limited.


    In the House, the Ways and Means Committee has primary jurisdiction over Medicare but often shares jurisdiction on certain issues with the Energy and Commerce Committee. In the Senate, the Finance Committee has primary jurisdiction for Medicare. The Medicare Payment Advisory Commission (MedPAC) advises Congress on Medicare issues and often proposes major policy changes. Like with Medicaid, Medicare legislative changes are typically accomplished through budget reconciliation bills rather than separate stand-alone legislation.


    Federal Medicare Rules:


    Most federal Medicare rules are promulgated by CMS (42 CFR Part 400 through 429). CMS must follow the same rulemaking and clearance processes for federal Medicaid rules. Medicare rules are developed by the relevant operating center or office with CMS, such as the Center for Medicare Management (CMM) for fee-for-service Part A and Part B issues and the Center for Drug and Health Plan Choice (CDHPC) for Part D and Medicare Advantage issues. Legal advice comes from the HHS Office of General Counsel (OGC).


    Before publication in the Federal Register, all proposed and final rules require approval of the HHS Secretary and the White House Office of Management and Budget (OMB). OMB's Medicare rule reviews are conducted primarily by the Medicare Branch in OMB's Health Division.


    Federal Medicare Guidance:


    CMS uses numerous vehicles to convey Medicare guidance, including tens of thousands of pages of manuals, instructions, and program transmittals to contractors, providers, suppliers, health plans, and drug plans. Within the framework of the statutes and rules, considerable operational and technical policy is also set through the Medicare Advantage and Part D drug benefit applications, bids, and contracts.


    Unlike in Medicaid - where CMS is often criticized for setting substantive policy through sub-regulatory guidance - Medicare guidance is more a product of a layering effect of highly specific statutes and regulations. Therefore, the Medicare administrative guidance focuses on execution issues, operational details (e.g., coding), and clarifications within and across the four complex, sometime conflicting parts of Medicare.


    Under a new Executive Order, OMB now has the right to prior review and approval of CMS guidance, particularly any sub-regulatory guidance involving issues about $100 million, which is virtually anything in Medicare or Medicaid. To learn more, read my earlier post on expansion of OMB's review authority and implications for policy making by CMS and the FDA.

    posted: August 18, 2008

    Medicaid%20Policy%20Making.jpgMany of my clients ask me how Medicaid policy is made, particularly for coverage, reimbursement, and managed care and other delivery systems. The $360 billion Medicaid program is highly complex and there are many nuances and exceptions, but here is a high-level primer on the basics.


    Given the Medicaid program's shared federal-state funding and governance, underlying complexity, and variability across the respective states, Medicaid policy is set through several distinct vehicles, some federal and some state.


    Medicaid Policy Making by Federal Government:


    The primary federal policy making vehicles are:


    Federal Medicaid Statutes:


    Title XIX of the Social Security Act provides the federal statutory framework for Medicaid nationwide. Like its Medicare counterpart, Title XIX is extraordinarily complex and frequently amended by Congress. The federal Medicaid statutes are a mix of mandates and options for states. Medicaid legislative changes are often accomplished through budget reconciliation bills rather than separate stand-alone legislation. Short-term fixes may be made through appropriations bills.


    Federal Medicaid Rules:


    The vast bulk of federal Medicaid rules are promulgated by the Centers for Medicare and Medicaid Services (CMS). As with Medicare rules, CMS must follow the rulemaking process required by federal Administrative Procedures Act (APA) and the same clearance process. Most proposed and final rules affecting Medicaid are drafted by staff in CMS' Center for Medicaid and State Operations (CMSO), with legal advice from the HHS Office of General Counsel (OGC). Before publication in the Federal Register, proposed and final rules require approval of the HHS Secretary and White House Office of Management and Budget (OMB). OMB's Medicaid rule reviews are conducted primarily by the Medicaid Branch in OMB's Health Division but coordinated through OMB's Office of Information and Regulatory Affairs.


    Federal Medicaid Guidance:


    CMS uses several mechanisms to make or clarify Medicaid policy through "sub-regulatory guidance." This includes CMS' State Medicaid Manual and an important and influential ad hoc series of letters to State Medicaid directors - both issued by CMSO.


    Federal law requires formal rulemaking for most substantive policy making, including interpretations of federal statutes. However, CMS often sets policy administratively, either in lieu of or far in advance of formal rule making. For example, if Congress makes significant changes to Title XIX with a tight deadline for implementation, CMS often issue a guidance letter or directive months in advance of issuing necessary conforming regulations. CMS must perform a balancing act to comply with the intent of APA and still implement frequent changes enacted by Congress or expected by the White House or HHS Secretary.


    Officially, letters to State Medicaid directors (SMDs) are not intended to make policy per se but many states and experts believe some of these SMD letters make policy that requires formal rulemaking. Under a new Executive Order, OMB now has the authority to review and approve CMS guidance. This is consistent with its longstanding authority to review rules and waivers and a response to growing use of sub-regulatory issuances by agencies across the Executive Branch. OMB's new role continues to evolve.


    Federal Medicaid Waivers:


    Under sections 1115 and 1915 of the Social Security Act, the HHS Secretary may waive a variety of federal statutes and rules to permit state Medicaid programs to change benefit packages, eligibility, cost sharing, and care delivery in ways not permitted by current law. For my recent primer on federal Medicaid and Medicare waivers, click here.


    State%20Rules.jpgMedicaid Policy Making by States:


    The state-level policy making mechanisms in Medicaid are:


    Medicaid State Plan:


    Each state Medicaid program has its own "State Plan," which serves as the funding agreement between the state Medicaid agency and CMS. The State Plan specifies all of the state's key policies on Medicaid eligibility, benefits, cost sharing, reimbursement, managed care, quality assurance, utilization management, and program integrity. Here's an example of a Medicaid State Plan.


    State Plans are highly detailed (typically 1000-2000 or more pages in length) and subject to frequent revision to reflect changes in federal law or rules, CMS guidance, state policy choices, and court rulings. State Plan Amendments (SPAs) are drafted by the state Medicaid agency and submitted to CMS for approval. Many SPAs are routine, following "preprints" - boilerplate checklists that allow states to propose SPAs needed to conform the State Plan to federal mandatory policies or common practices already approved for other states. States don't have to follow the preprints but it makes routine SPAs much easier. The state publishes a prior public notice for each SPA.


    Routine SPAs are handled by the CMS regional offices but CMSO's central office staff in Baltimore handles all major and controversial SPAs. CMS may ask questions and may deny SPAs that it determines fail to comply with federal requirements. If an SPA rejected, the state may appeal CMS' decision to the HHS Departmental Appeals Board (DAB) and thereafter to the federal courts.


    State Statutes and Administrative Rules:


    Each state also sets some degree of Medicaid policy through state statutes and administrative rules. States vary widely in the degree to which state Medicaid policies are set forth in statutes or rules. Most states set eligibility, benefit packages, and cost sharing in statute and/or rules. Other policies, such as specific reimbursement methodologies and rates, are sometimes set administratively by the state Medicaid agency through manuals and instructions to providers. The basic parameters of hospital and nursing home payment formulars are often set in state statute. Still other policies are made through the state budget process or contracting mechanisms, such as managed care RFPs and Medicaid health plan contracts.


    However, some states, specify a considerable amount of Medicaid policy through rules. While state Medicaid rules are drafted and promulgated by the state Medicaid agency, some states require legislative committee review and approval of all rules. (Note that regardless what is addressed in state statutes or rules, the State Plan must reflect the latest policies.)

    posted: May 9, 2008

    RDHC.jpgSerious and costly performance problems riddle U.S. health care. Because of overuse, under use, and misuse of health care, researchers at the Juran Institute and elsewhere estimate that about 30 percent of health care costs are generated by poor quality. Therefore, poor quality medical care will cost about $720 billion in 2008 (30% of $2.4 trillion).


    Poor quality also reduces productivity. For every dollar of health care spending caused by poor quality, poor care costs an estimated 50 cents in lost productivity. When applied to the $822 billion in care provided through employer-sponsored insurance, this translates to an additional $123 billion in costs.


    A recent study by the Health Research Institute at PricewaterhouseCoopers estimates that wasteful health care spending costs $1.2 trillion annually. Analyzing findings from a wealth of published studies, the PwC researchers looked at the cost of waste from clinically inappropriate care and overt errors, individual behaviors leading to costly health problems, and antiquated operational processes that add costs without providing any value.


    Making matters worse, research on the care patients receive from physicians, hospitals, and other providers paints a frustrating, even scary picture. For example, studies conducted by the respected RAND Corporation show that Americans receive clinically inadequate or inappropriate care at shockingly high rates.


    Specifically, RAND's research shows that acute care for insured adults is appropriate only 53.5 percent of the time on average. In other words, about 46 percent of acute care is clinically incorrect. Similarly, about 43.9 percent of chronic care and 45.1 percent of preventive care is inappropriate according to accepted medical standards. Children receive 68 percent of recommended care for acute medical problems, 53 percent of recommended care for chronic medical conditions, and 41 percent of recommended preventive care.


    The bottom line is health care - whether for adults or children - is inappropriate or unnecessary about half the time. Basically, it's a coin flip.


    Root Causes of Poor Quality, High Costs:


    Ultimately, three immutable laws of economics explain the underlying causes of this poor performance:


    1. Price is what you pay but value is what you get:


    Taking a page from Warren Buffet's playbook, buyers of health benefits must focus on value, not price. Price is an important part of the equation but meaningless if you don't know the value of what you are receiving for that price. Unfortunately, in health care we obsess on unit prices. In no other marketplace or domain of life do Americans - corporations, consumers, federal and state policymakers, news media - pay so much attention to price and so little to value.


    2. You get what you pay for:


    Today, we pay for quantity, not quality. Poor performers are sustained and rewarded. The best performers are financially penalized and professionally demoralized. The consequences are all too obvious.


    3. You can't fix what you can't see:


    In sharp contrast to virtually every other industry, health care is highly opaque. American health care is full of decision makers - consumers, physicians, and other providers, health plans, public officials - who lack the information needed to make decisions.


    Five Steps to Higher Performance:


    The problems are daunting but solvable. To improve the quality and cost effectiveness of health care delivery, purchasers and payors must tightly focus on strategies to expect, measure, disclose, reward, and support results:


    1. Expect Results:


  • Set actionable performance expectations for health care providers, particularly physicians, clinics, hospitals, pharmacies, and long-term care providers.

  • Ensure that expectations are clear, decision relevant, and supported by evidence.

  • 2. Measure Results:


  • Rigorously measure clinical and economic performance compared to expectations.

  • Use consensus endorsed measures such as those adopted by the National Quality Forum.

  • However, don't let the perfect be the enemy of the good or analysis be the enemy of action.

  • 3. Disclose Results:


  • Publicly report the clinical and economic performance.

  • Ensure that reporting of performance is frequent and timely.

  • Use reader-friendly formats that support the differing decision making needs of consumers, providers, health plans, purchasers (employers, Medicare, Medicaid), and the media.

  • 4. Reward Results:


  • Directly align coverage, reimbursement, cost sharing, market share, contracting, utilization management, and other key policies with performance expectations.

  • Specifically, reward higher performance through monetary incentives (pay-for-performance or P4P), greater market share, public recognition, and regulatory flexibility.

  • Reward positive consumer behaviors through incentives like differential co-pays (e.g., low or zero co-pay to see the best physicians, very high co-pay to see poor quality docs).

  • 5. Support Results:


    Support the infrastructure and processes essential to results-driven health care. These include:


  • Evidence-based medicine and value-based benefit designs.

  • Patient-centered care, including stronger physician-patient communication, referrals, and genuine follow-up.

  • Chronic care management.

  • Modern health information technology, including electronic medical records, e-prescribing, and e-lab results.

  • Comparative effectiveness research.

  • Health services research to build our knowledge base on costs, quality, and access.

  • Education and training of physicians, patients, and family care givers.

  • posted: February 29, 2008

    MedPAC%20Policy%202008.jpgThe Medicare Payment Advisory Commission (MedPAC) - the influential independent Congressional agency charged with advising Congress on a wide range of Medicare policy issues - has released its Medicare payment policy recommendations for 2009. The 355-page report includes a weath of information for those tracking Medicare provider or health plan issues, particularly annual provider payment updates, reforms to Medicare Advantage, and quality incentives.


    In summary, here are MedPAC's recommendations to Congress:


    Hospital Inpatient and Outpatient Services:


  • Increase Medicare payment rates for the acute inpatient and outpatient prospective payment systems in 2009 by the projected rate of increase in the hospital market basket index, concurrent with implementation of a quality incentive payment program.

  • Reduce the indirect medical education adjustment in 2009 by 1 percentage point to 4.5 percent per 10 percent increment in the resident-to-bed ratio. The funds obtained by reducing the indirect medical education adjustment should be used to fund a quality incentive payment program.

  • Physician Services:


  • Update Medicare Part B payments for physician services in 2009 by the projected change in input prices less MedPAC's adjustment for productivity growth.

  • Enact legislation requiring the Centers for Medicare and Medicaid Services (CMS) to establish a process for measuring and reporting physician resource use on a confidential basis for a period of two years.

  • Outpatient Dialysis Services:


  • Update the Medicare composite rate in CY 2009 by the projected rate of increase in the end-stage renal disease market basket index less MedPAC's adjustment for productivity growth.

  • MedPAC reiterated its recommendation that the Congress implement a quality incentive program for physicians and facilities that treat dialysis patients.

  • Skilled Nursing Facility Services:


  • Eliminate the update to Medicare payment rates for skilled nursing facility services for FY 2009.

  • Establish a quality incentive payment policy for skilled nursing facilities in Medicare.

  • To improve quality measurement for skilled nursing facilities, the Secretary of Health and Human Services should (a) add the risk-adjusted rates of potentially avoidable re-hospitalizations and community discharge to its publicly reported post-acute care quality measures; (b) revise the pain, pressure ulcer, and delirium measures currently reported on CMS's Nursing Home Compare website; and (c) require skilled nursing facilities to conduct patient assessments at admission and discharge.

  • Home Health Services:


  • Eliminate the update to Medicare payment rates for home health care services for CY 2009.

  • Inpatient Rehabilitation Facility Services:


  • The update to payment rates for Medicare inpatient rehabilitation facility services should be eliminated for FY 2009.

  • Long-Term Care Hospital Services:


  • Update Medicare payment rates for long-term care hospitals for rate year 2009 by the projected rate of increase in the rehabilitation, psychiatric, and long-term care hospital market basket index less MedPAC's adjustment for productivity growth.

  • Medicare Advantage Special Needs Plans:


  • Establish additional, tailored performance measures for Medicare special needs plans (SNPs) and evaluate their performance on those measures within three years.

  • Furnish beneficiaries and their counselors with information on special needs plans that compares their benefits, other features, and performance with other Medicare Advantage plans and traditional fee-for-service Medicare.

  • Require chronic condition special needs plans to serve only beneficiaries with complex chronic conditions that influence many other aspects of health, have a high risk of hospitalization or other significant adverse health outcomes, and require specialized delivery systems.

  • Require dual-eligible special needs plans within three years to contract, either directly or indirectly, with states in their service areas to coordinate Medicaid benefits.

  • Require special needs plans to enroll at least 95% of their members from their target population.

  • Eliminate dual-eligible and institutionalized beneficiaries' ability to enroll in Medicare Advantage plans, except special needs plans with state contracts, outside of open enrollment. They should also continue to be able to disenroll and return to fee-for-service at any time during the year.

  • Extend the authority for Medicare special needs plans that meet the above conditions.

  • Part D Enrollment, Benefit Offerings, and Drug Plan Payments:


  • Make Medicare Part D claims data available regularly and in a timely manner to congressional support agencies (e.g., GAO, CBO) and selected executive branch agencies (e.g., OIG) for purposes of program evaluation, public health, and safety.

  • Medicare Savings Programs and Part D Low-Income Drug Subsidy:


  • Increase State Health Insurance Assistance Program funding for outreach to low-income Medicare beneficiaries.

  • Raise Medicare Savings Program income and asset criteria to conform to Part D low-income drug subsidy criteria.

  • Change program requirements so that Social Security Administration screens low-income drug subsidy applicants for federal Medicare Savings Program eligibility and enrolls them if they qualify.

  • To read the full MedPAC report, click here (large PDF file).

    posted: October 9, 2007

    Comparative%20Effectiveness%20Methods.jpgThe journal Medical Care has published series of outstanding articles on emerging methods and tools to compare the effectiveness of medical therapies, prescription drugs, and devices. The peer-reviewed articles are an outgrowth from a symposium on comparative effectiveness research sponsored by the Agency for Healthcare Research and Quality (AHRQ).


    Here are links to the individual articles in PDF format:


  • Emerging Methods in Comparative Effectiveness and Safety: Symposium Overview and Summary.

  • Medicare Part D Data: Major Changes on the Horizon.

  • Methodologic Challenges to Studying Patient Safety and Comparative Effectiveness.

  • Creating and Synthesizing Evidence With Decision Makers in Mind: Integrating Evidence From Clinical Trials and Other Study Designs.

  • Improving Depiction of Benefits and Harms: Analyses of Studies of Well-Known Therapeutics and Review of High-Impact Medical Journals.

  • Cluster Randomized Trials: Opportunities and Barriers Identified by Leaders of Eight Health Plans.

  • Design of Cluster-Randomized Trials of Quality Improvement Interventions Aimed at Medical Care Providers.

  • Designed Delays Versus Rigorous Pragmatic Trials: Lower Carat Gold Standards Can Produce Relevant Drug Evaluations.

  • Practice-Based Evidence Study Design for Comparative Effectiveness Research.

  • Studying Prescription Drug Use and Outcomes With Medicaid Claims Data: Strengths, Limitations, and Strategies.

  • Assessment of Adherence to and Persistence on Disease-Modifying Antirheumatic Drugs (DMARDs) in Patients With Rheumatoid Arthritis.

  • Out-of-Pocket Pharmacy Expenditures for Veterans Under Medicare Part D.

  • Developing Indicators of Inpatient Adverse Drug Events Through Nonlinear Analysis Using Administrative Data.

  • Real-Time Vaccine Safety Surveillance for the Early Detection of Adverse Events.

  • Evaluation and Overview of the National Electronic Injury Surveillance System-Cooperative Adverse Drug Event Surveillance Project (NEISS-CADES).

  • Using Inverse Probability-Weighted Estimators in Comparative Effectiveness Analyses With Observational Databases.

  • A Simulation-Based Evaluation of Methods to Estimate the Impact of an Adverse Event on Hospital Length of Stay.

  • Evaluating the Validity of an Instrumental Variable Study of Neuroleptics: Can Between-Physician Differences in Prescribing Patterns Be Used to Estimate Treatment Effects?

  • Heterogeneity and the Interpretation of Treatment Effect Estimates From Risk Adjustment and Instrumental Variable Methods: Surgery for Early-Stage Breast Cancer.

  • Increasing Levels of Restriction in Pharmacoepidemiologic Database Studies of Elderly and Comparison With Randomized Trial Results.

  • Use of Propensity Score Technique to Account for Exposure-Related Covariates: An Example and Lesson.

  • Using Propensity Scores Subclassification to Estimate Effects of Longitudinal Treatments: An Example Using a New Diabetes Medication.

  • Adjustments for Unmeasured Confounders in Pharmacoepidemiologic Database Studies Using External Information.

  • Comparison of Meta-Analytic Results of Indirect, Direct, and Combined Comparisons of Drugs for Chronic Insomnia in Adults: A Case Study.
  • posted: October 5, 2007

    Medicare%20Payment%20Policy%20Primers.jpgThe Medicare Payment Advisory Commission (MedPAC), the savvy nonpartisan shop that advises Congress on Medicare program issues, has updated its excellent series of primers. Extremely complex and changing constantly, Medicare payment policy will drive $479 billion in health spending in 2008. MedPAC's primers, typically four crisply-written pages, explain the basic steps and methodologies Medicare uses to reimburse fee-for-service providers, Medicare Advantage plans, and Medicare prescription drug plans.


    Here are MedPAC's updated primers on the basics of Medicare reimbursement policy (click on links to open in PDF format):


    Medicare Hospital Reimbursement:


  • Hospital acute inpatient services payment system (inpatient prospective payment system or IPPS)

  • Outpatient hospital services payment system (outpatient prospective payment system or OPPS)

  • Critical access hospital payments

  • Psychiatric hospital services payment system

  • Medicare Post-Acute Provider Reimbursement:


  • Skilled nursing facility services payment system

  • Inpatient rehabilitation facilities payment system

  • Long-term care hospitals payment system

  • Home health care services payment system

  • Medicare Physician Reimbursement:


  • Physician services payment

  • Medicare payment to physicians for professional liability insurance

  • Geographic practice cost indexes

  • Medicare Managed Care (Part C and Part D):


  • Medicare Advantage plan payment system

  • Medicare Part D payment system (PDPs and MA-PDs)

  • Other Medicare Reimbursement Policies:


  • Outpatient dialysis services payment system (ESRD facilities)

  • Durable medical equipment payment system (DME reimbursement)

  • Oxygen and oxygen equipment payment system

  • Ambulatory surgical centers payment system

  • Clinical laboratory services payment system

  • Outpatient therapy services reimbursement

  • Hospice services reimbursement

  • posted: June 25, 2007

    CMS%20Nomination%20Hearings.jpgKerry Weems, Secretary Mike Leavitt's deputy chief of staff and President Bush's nominee to head the Centers for Medicare and Medicaid Services (CMS), faces tough Senate confirmation hearings in July. A savvy, career HHS insider with a wealth of experience in the fiscal and organizational mechanics of federal health programs, Mr. Weems is a good choice for an administrator to steer CMS in the last 18 months of the Bush Administration. But he nonetheless faces several serious challenges during the confirmation process. A few examples:


    1. Efforts to Hold Confirmation Hostage to Policy Commitments:


    Senators, trade groups, and advocates of all flavors have long policy wish lists. As FDA Commissioner Andrew C. von Eschenbach, M.D. can attest, the confirmation process - in committee and on the Senate floor - is a unique opportunity for Democrats and even some Republicans to hold up confirmation until the nominee or Department concedes to certain policy demands. And the wish lists for the FDA are nothing compared to what many want from CMS.


    2. A Maze of Medicare and Medicaid Controversies:


    For better or worse, a wide range of delicate issues at CMS were left unexamined during Republican control of Congress. The Democrats now in charge of the Hill are eager to make political hay with health issues, reshape policy, and give their core constituencies a crack, albeit by proxy, at challenging CMS actions in a public forum.


    Regardless of the Administration or the party running the Executive Branch, Medicare and Medicaid are full of dirty little secrets, some real and some imagined, intertwined within a massive level of complexity prone to misconception and manipulation by political foes and those of varying motivations eager for a larger slice of an $800 billion+ pie. Many critics of CMS see the Weems nomination hearings and floor debate as a unique opportunity.


    3. Nomination of a Non-Wonk:


    While Kerry Weems has a lot going for him and CMS would likely benefit from leadership by a career insider, he is not a health policy wonk. That is, he is not a academic, researcher, health policy maker, or lobbyist (not that most lobbyists are mavens but they like playing them on TV). He's a budget and finance guy and a career one at that. Not a bad thing at all, but a potential problem in a town that grossly overvalues what MD's and PhD's typically know about health policy or finance and sees "budget guys" in health programs as somehow being on a first name basis with the devil.


    Some advocacy groups, who naturally have the ear of Dems in the Senate, are concerned that Mr. Weems lacks the requisite substantive expertise in Medicare or Medicaid policy (well, make that Medicare, since unfortunately few inside the Beltway understand or track Medicaid). When a Republican is in charge of the White House, Dems and advocates are much more comfortable with an academic running CMS. And when a Democrat is in charge, they virtually insist on it. In its 30-year history, CMS (formerly named HCFA) has had nearly as many administrators and acting administrators. Add to this extremely high turnover the fact that CMS is rather unique in having a tiny number of political appointees.


    There are notable exceptions. Gail Wilensky, Ph.D., one of the nation's most talented health policy experts, turned out to be an excellent administrator in the early 1990's. And there have been times where the agency was led by a budget guy, most notably Leonard Schaeffer, who ran HCFA is its early days. He came to HCFA from managing health budgets for the State of Illinois and later was the founding chairman and CEO of WellPoint.


    Kerry Weems will have his hands full next month. But he's a smart fellow, with a keen sense for detail, and HHS and CMS staffs are briefing him around the clock in preparation. He'll do well before the Senate if given a fair shake.

    posted: June 19, 2007

    Medicare%20PFFS%20Plans.jpgOf the 45 million Medicare beneficiaries, 19 percent are enrolled in a Medicare Advantage health plan. The other 81 percent choose to remain in traditional fee-for-service Medicare for Part A and Part B services. Governed under Part C of Medicare, Medicare Advantage health plans come in several flavors, most notably HMOs, PPOs, special needs plans (SNPs), and private fee-for-service plans.


    While only about 16% of Medicare Advantage enrollees and about 3 percent of all Medicare beneficiaries are in private fee-for-service plans, these PFFS plans are receiving considerable attention by Congress and Wall Street. To help you understand the unusual dynamics at play, here are some helpful resources:


    An Examination of Medicare Private Fee-for-Service Plans: This paper by Jonathan Blum, et al from Avalere Health, covers the history, features, trends, and policy and market implications of PFFS plans.


    The Medicare Advantage Program: Trends and Options: Congressional Budget Office (CBO) report, with CBO's projections for Medicare managed care enrollment.


    Private Fee-For-Service Plans in Medicare Advantage: Testimony by Mark E. Miller, Ph.D., executive director of the Medicare Payment Advisory Commission (MedPAC) on MedPAC's observations and recommendations.


    Private Fee-For-Service Plans In Medicare: Rapid Growth and Future Implications: In testimony before the House Ways and Means Committee, Patricia Neuman, Ph.D, a Kaiser Family Foundation vice president, offered a thoughtful overview of many of the key issues.


    The Impact of Reductions in Medicare Advantage Funding on Beneficiaries: This study, by Adam J. Atherly, Ph.D. and Kenneth E. Thorpe, Ph.D. of Emory University, shows financial savings Medicare Advantage enrollees receive and therefore the adverse impact on benies of proposed cuts to Medicare Advantage plans.


    Medicare Advantage Program Payment System: An excellent 4-page primer by MedPAC on how CMS sets Medicare Advantage plan payments.

    posted: March 28, 2007

    Effective%20Health%20Care%20Program.jpgNormally, $15 million a year doesn't buy you much in the federal government. A notable exception is the Effective Health Care Program at the Agency for Healthcare Research and Quality (AHRQ). Drug manufacturers, device makers, health plans, state Medicaid agencies, Wall Street analysts, physicians, and patient groups should all follow it closely.


    The Medicare Modernization Act of 2003 (MMA) authorized AHRQ to conduct and support research on outcomes, comparative clinical effectiveness, and appropriateness of pharmaceuticals, devices, and health care services. With a modest budget, a tiny but dedicated staff, and partnerships with top research institutions, AHRQ's Effective Health Care Program involves three approaches to research the comparative effectiveness of different medical treatments, drug therapies, and clinical practices:


    1. Review and Synthesize Knowledge: AHRQ's network of 12 Evidence-based Practice Centers systematically review published and unpublished scientific evidence on what is known. Given the huge volume of studies and journal articles produced every year, it is next to impossible for providers, payors, and other key decision makers to keep up and even harder for them to thoughtfully weigh the evidence. AHRQ and its research partners synthesize the science and build a meaningful evidence base.


    2. Promote and Generate New Knowledge: The DEcIDE Research Network studies new scientific evidence and analytic tools in an accelerated and practical format. DEcIDE stands for "Developing Evidence to Inform Decisions about Effectiveness." Comprised of 13 university research centers and think tanks, the DEcIDE network conducts accelerated practical studies about the comparative clinical effectiveness, safety, and appropriateness of specific health care services, drugs, and devices. In other words, what works best for patients.


    3. Compile Findings and Translate and Disseminate Knowledge to Decision Makers: AHRQ's John M. Eisenberg Clinical Decisions and Communications Science Center takes the research results and transform them into into a variety of useful, actionable formats for stakeholders (e.g., providers, payors, purchasers, patients, manufacturers). Specifically, these include (a) consumer guides (short summaries of health care research that can help with decisions about treatments), (b) clinician guides (brief evidence summaries to assist clinical decision making), (c) policymaker guides (short reports of research evidence for use in health care policy making), and (d) white papers on state-of-the-art concepts in health communication.


    The past couple years, the initiative has focused on ten priority health care conditions, selected because of their high impact on Medicare, Medicaid, SCHIP, and other federal health programs:


  • Arthritis and non-traumatic joint disorders

  • Cancer

  • Chronic obstructive pulmonary disease and asthma

  • Dementia including Alzheimer's disease

  • Depression and other mood disorders

  • Diabetes mellitus

  • Ischemic heart disease

  • Peptic ulcer disease and dyspepsia

  • Pneumonia

  • Stroke and hypertension

  • Later this year, AHRQ will entertain nominations for other priority conditions.


    Here's a sampling of the excellent work already generated. For a directory of these reports, with free access in PDF format, click here:


  • Medication Therapy Management Programs in Medicare Part D Prescription Drug Plans

  • Comparative Effectiveness of Second-Generation Antidepressants in the Pharmacologic Treatment of Adult Depression

  • Efficacy and Comparative Effectiveness of Off-Label Use of Atypical Antipsychotics

  • Comparative Effectiveness of Management Strategies for Renal Artery Stenosis

  • Comparative Effectiveness and Safety of Analgesics for Osteoarthritis

  • Comparative Effectiveness of Epoetin and Darbepoetin for Managing Anemia in Patients Undergoing Cancer Treatment

  • Effectiveness of Noninvasive Diagnostic Tests for Breast Abnormalities

  • Comparative Effectiveness of Management Strategies for Gastroesophageal Reflux Disease

  • The Effective Health Care Program has 40 other reports in the works, covering a wide range of topics. These include more comparative effectiveness reviews of specific drugs as well as tools to measure quality, reduce errors, and monitor therapies. To get notified when new research becomes available, sign up for AHRQ's email list.

    posted: March 3, 2007

    Office%20of%20Management%20and%20Budget.jpgUnder a new Executive Order, President Bush has significantly expanded the authority of the White House Office of Management and Budget (OMB) over policymaking by the Centers for Medicare and Medicaid Services (CMS) and the Food and Drug Administration (FDA).


    Specifically, OMB now has the authority to review and approve a vast array of written guidance issued day-to-day by CMS and FDA. The expansion of OMB's oversight authority has far-reaching implications for Medicare and Medicaid policy and the regulation of the drug and device industries.


    In recent years, an increasing amount of agency policymaking has come in the form of "sub-regulatory guidance." That is, written guidance that does not go through the formal rulemaking process. In the case of CMS, this written guidance shows up, for example, as memorandums to health plans, letters to state officials, and manuals or other instructions. In its role administering the Federal Food, Drug, and Cosmetic Act (FDCA), the FDA has its own system of guidance documents.


    While the FDA approach to sub-regulatory guidance has its own critics and limitations, the FDA approach is better organized and managed than CMS' approach. FDA has been at it longer than CMS but also has (relatively speaking) a narrower, more explicit scope of work. The FDCA and all its amendments is no walk in the park, but Titles 18, 19, and 21 of the Social Security Act are exercises in pure legislative surrealism.


    President Bush's new Executive Order means that much of this written guidance is now subject to prior review and approval by OMB. While OMB has always been a key player, particularly in Medicare and Medicaid policy, the E.O. greatly increases OMB's influence and may result in a substantial power shift in many day-to-day issues affecting providers, health plans, drug manufacturers, states, and other stakeholders. (In the interest of full disclosure, my career includes service on OMB's Medicare and Medicaid team.)


    For those interested in more background, below is a quick overview of the rulemaking process and the increasing role of written guidance in lieu of rules.


    OMB%20Rule%20Review.jpgBackground on OMB Regulatory Review:


    Virtually all CMS and FDA proposed and final rules are subject to prior review and approval of the Office of Management and Budget (OMB), the powerful policy management arm of the White House. (It's important to note that OMB also reviews Medicare and Medicaid waivers, agency budget requests and legislative proposals, and written testimony to Congress.) OMB's regulatory oversight was created by Presidential Executive Order in the Reagan Administration and modified but retained by the Clinton Administration.


    The basic idea is to help ensure that agency rulemaking activities follow the sitting President's policy objectives to the extent possible under the laws passed by Congress. OMB oversight also allows for a more thoughtful and disciplined approach to regulations, to keep track of the impact of agency rules on individuals, businesses, and states and guard against such things as unnecessary or excessive regulations and conflicting rules across different federal agencies.


    In principle, the rulemaking process is designed to (1) inform the public of planned rules in detail; (2) give the public, including stakeholders and experts, an opportunity to comment, provide new information, and suggest alternatives; (3) ensure the rulemaking agency considers and responds to public comments before issuing final rules; (4) ensure that all federal rules can be found in a central publication (published in the Federal Register and formally codified in the Code of Federal Regulations); and (5) provide a comprehensive public record for use by the courts, Congress, and the news media in overseeing an agency's use of power and interpretation of statutes.


    Written Guidance Instead of Formal Rules:


    In other words, the formal rulemaking process provides for far more thoughtful, documented, and transparent policymaking than the so-called sub-regulatory guidance. However, developing proposed and final rules is a laborious process taking months and sometimes even years. And CMS faces the imperatives of implementing massive pieces of legislation, such as the Deficit Reduction Act (DRA) and the Medicare Modernization Act (MMA). Even if CMS always had the necessary staff, expertise, systems, and budget to implement the avalanche of Medicare and Medicaid legislation on time (it never does, unfortunately), there are just not enough hours in the day to promulgate all the necessary rules to meet statutory deadlines.


    Therefore, much of CMS policymaking is done through written guidance, letters, memos, and memos - and not regulations. While it's easy to understand the practical pressures, many legal observers seriously question CMS's compliance with the Administrative Procedures Act (APA). The APA, originally enacted in 1946, governs when and how agencies must go through the formal rulemaking process.


    Privately, several players have told me how CMS's informal approach to many Medicare and Medicaid policies would likely not stand up in federal court. However, trade groups, states, and other stakeholders don't want to anger the increasingly powerful agency - and, in many cases, written guidance today is better than waiting months or even years for a rule.


    Like its sister agency CMS, the FDA is increasingly using sub-regulatory guidance in lieu of formal rules. Given the demands facing the FDA, including a variety of reforms and pending legislative changes, this is expected to increase. To get a flavor, check out the list of guidance documents from the FDA's Center for Drug Evaluation and Research (CDRR). You'll see it includes various backgrounders mixed with policy statements and instructions.

    posted: January 24, 2007

    Bush%20Health%20Reform.jpgPresident Bush has joined the health reform debate with a proposal of his own. The Bush approach is as intriguing as it is controversial.


    First, the Administration seeks to reform the federal tax code to change the tax treatment of health insurance premiums and offer new tax deductions to help make coverage more affordable. Second, the White House wants to give states the ability to extend basic coverage to the uninsured by redirecting funds from uncompensated care pools.


    Changes to Tax Deductibility of Health Insurance:


    Today, most employees are not taxed on the value of employer-sponsored health insurance coverage. That is, the employer's share is not taxed and any employee contribution is taken out of income before taxes.


    Many health economists believe this pre-tax treatment of health insurance tends, over time, to distort the market by giving a tax incentive to take income in the form of health coverage and insulating most working Americans from the cost of medical care. They argue this contributes to health inflation and creates a costly and unfair playing field for Americans without access to group coverage.


    The Bush Administration proposes several major changes to the tax treatment of health insurance premiums:


  • Starting in 2009, a new federal tax deduction for those who obtain health insurance on their own or through an employer.

  • The new deductions would start at $7,500 for individuals and $15,000 for families and increase annually by the general Consumer Price Index (CPI).

  • The new deductions would be available to all individuals and families who purchase health insurance, regardless of the value of their policies or whether they itemize deductions on their federal tax returns.

  • Americans with employer-sponsored health coverage worth more than the proposed allowable deductions would pay taxes on the difference. That is, for the first time the feds would tax the value of employer-sponsored coverage but only the portion above the deduction amount.

  • If the tax changes are enacted, the Bush Administration estimates that about three million individuals who are now uninsured will gain health coverage. Of Americans with employer-sponsored coverage, about 80 percent (roughly 100 million taxpayers) would see a reduction in taxes. For example, a family with an annual income of $60,000 would see tax savings of about $4,500 annually. The other 20 percent - about 30 million, mostly higher income individuals - would see modest increase in their federal tax bill.


    From a federal perspective, the proposal is expected to be budget neutral over the first ten years. In the early years, the proposal would cost the federal government $30-40 billion a year. However, by 2013 the changes are expected to increase net federal revenues. This is because it is structured to redistribute dollars in the system, over time taxpayers will tend to gravitate to health plans falling below the deductible amounts, and tax revenues will increase as more compensation shifts from benefits to wages.


    Affordable Choices Grants to States:


    The second component of the President's health reform package is called the Affordable Choices Initiative. Leveraging existing waiver authority and some likely legislative changes in Medicaid and Medicare, the Administration proposes to give states grants and new flexibility to offer basic, affordable health insurance coverage to the uninsured.


    Specifically, the White House wants to allow states to redirect about $30 billion in dollars now used to help hospitals with uncompensated care. Both Medicaid and Medicare have disproportionate share hospital programs. While the methodologies differ, the federal Medicare program and state Medicaid programs use disproportionate share hospital (DSH) payments to send additional dollars to hospitals that serve a disproportionate number of uninsured patients.


    Given the large number of states engaged in health reform initiatives and the presence of the large pools of dollars, the White House sees a unique opportunity to foster state-based coverage expansions and move dollars to subsidize health plans for the uninsured.


    The Administration has also hinted at an interest in using savings that would result from new proposed federal rules to cap Medicaid payments to publicly owned providers. Right now, if the final rules are issued this summer as expected, many states and public hospitals will lose and the feds will pocket the savings for budget purposes.


    However, because of the dollars involved and the pressure it places on many states and public providers, the proposed cap on Medicaid payments could be used to sweeten the Affordable Choices Initiative. For some states, it could become a case of "use it or lose it." In addition to giving states and public hospitals an added incentive to come to the table and perhaps soften Congressional opposition, it would add several billion dollars to the pool of funds for state-based coverage expansions.


    More Details Forthcoming:


    More details on the tax deductibility proposal and the Affordable Choices grants are expected on Monday, February 5, when the White House releases President Bush's proposed budget for FY 2008.


    The tax deductibility proposal already faces stiff opposition from key Democrats in Congress. And hospital industry groups are lining up to oppose the Affordable Choices Grants. However, the two proposals certainly contribute to the debate and improve the chances of some major health reform legislation in 2007.

    posted: January 14, 2007

    Medicare%20PPS%20Book%20Cover.jpg
    When asked about health care innovations, especially practices directed at controlling costs, most policymakers and wonks point to private sector solutions, such as the cost-constraining effects of HMOs in the 1990's or today's ideation of consumer-directed health plans. But is this conventional wisdom wrong? What about public sector health policies, most notably in Medicare or Medicaid?


    In a fascinating new book, two top thought leaders show how a powerful and complex Medicare payment formula led to fundamental changes across the health care system, facilitating a dramatic power shift from providers (hospitals and physicians) to buyers (Medicare, Medicaid, and employers).


    Influence of Medicare PPS on U.S. Health System:


    In Medicare Prospective Payment and the Shaping of U.S. Health Care, Rick Mayes, Ph.D. and Robert A. Berenson, M.D. describe how Medicare's transformation from retrospective, cost-based payment methods to prospective payment systems (PPS) "both initiated and repeatedly intensified the economic restructuring of the U.S. health care system." In addition to providing a thoughtful history of Medicare PPS from a research concept to the single most powerful financial driver in health care, Drs. Mayes and Berenson make the case that the public sector has been the major innovator.


    In building their case and exploring how PPS works in the real world, they interviewed 65 health financing experts, including several former CMS administrators. Bob Berenson and Rick Mayes do a nice job challenging conventional wisdom, which in health policy is always a good thing.


    Earlier in my career, I cut my teeth on PPS at the White House Office of Management and Budget, where my scope included Medicare Part A and hospital reimbursement policy. Therefore, for me, Medicare Prospective Payment and the Shaping of U.S. Health Care made for a particularly intriguing read. But you don't need to be a Medicare wonk to understand and benefit from this crisp, well-written book.


    Prospective Payment Systems in a Nutshell:


    Medicare%20PPS%20in%20Nutshell.jpgOld style cost-based or retrospective systems are inherently inflationary, reward inefficient providers, and reimburse largely for factors unrelated to the patient. In a nutshell, prospective payment is based on reimbursing health care providers for factors outside their control - notably the diagnosis and other relevant characteristics of the patient and outside, industry-wide factors like inflation and geographic variation in wage rates.


    Under a prospective payment system (PPS), a provider receives a fixed payment to cover an episode of care during a period of time. The payment formulas are highly complex, with many adjustments to address everything from outliers, teaching-related costs, and uncompensated care to more purely political issues. The idea is to set the bundled, prospective payment on what it costs an efficient provider to serve the patient. The efficient players make money; the inefficient lose money.


    Every year, rates are modified to reflect inflation or technical refinements. However, annual increases are often driven by federal budget constraints or attempts to moderate provider profit margins. Also, because PPS is about promoting economic efficiency, payments have little to do with quality of care or patient safety - hence, recent interest in adding elements of Pay for Performance (P4P) into the system.


    Medicare began using the PPS approach for inpatient hospital services in 1983-84. Through a series of Congressional changes, PPS-based approaches are now used in Medicare to pay outpatient hospital services, skilled nursing facilities, home health agencies, and hospice organizations. While each provider type has its own kind of prospective payment method, the concept is the same. Prospective payment is also used heavily by state Medicaid programs and employer-sponsored health plans.

    posted: December 30, 2006

    State%20False%20Claims%20Acts.jpgThe federal False Claims Act has been an effective tool in combating fraud and abuse in government programs, particularly Medicare. Several states have their own state versions of false claims legislation. The federal Deficit Reduction Act (DRA), enacted last February, gives states a powerful new financial incentive to enact state false claims acts modeled after the federal version and directed at fighting Medicaid fraud and abuse.


    Specifically, states with state false claims acts that meet certain federal standards are able to keep more of whatever is recovered from fraudulent Medicaid providers or suppliers. The incentive amounts to ten percentage points of any recovery. For example, if a state has a 50% federal Medicaid match, it would normally have to return to the feds 50% of anything recovered. However, if the state has a federally compliant false claims act, the state gets to keep 60% or a 10 percentage point jump in its share. For most states, this could easily result in millions of dollars kept in the state.


    OIG Review of State False Claims Acts:


    Under the DRA, the HHS Office of the Inspector General (OIG) is responsible for looking at state false claims laws (whether new, existing, or amended) to see if they meet the federal standard and therefore if the state gets the incentive. To read the OIG's review guidelines, click here.


    So far, at the request of state officials, the OIG has looked at existing statutes in ten states: California, Florida, Illinois, Indiana, Louisiana, Massachusetts, Michigan, Nevada, Tennessee, and Texas. According to the OIG, the state false claims statutes in Illinois, Massachusetts, and Tennessee meet the DRA requirements and therefore these states' Medicaid programs may keep more of any Medicaid recoveries. The other states will need to amend their statutes if they wish to qualify for financial incentive.


    Background on Federal False Claims Act:


    Since the nation's founding, federal law has permitted private citizens to sue on behalf of the government to combat fraud in public programs. If the fraud or false claim is proven in court, the citizen bringing the suit gets to keep a portion of the funds recovered as an incentive.


    Today, fraud fighters and whistleblowers use the federal False Claims Act, which was enacted in 1863 to stop fraud by military suppliers to the Union Army. Revised several times by Congress, the federal False Claims Act (FCA) has been increasingly used to bring lawsuits against health care providers and suppliers.


    Of course, federal prosecutors may also bring criminal charges but in criminal cases they must prove guilt beyond a reasonable doubt. Civil cases are much easier to win in the complex world of health care claims since the standard is a preponderance of the evidence.


    How the False Claims Act Works:


    How%20FCA%20Works.jpgUnder the False Claims Act, a person with knowledge of fraud against the U.S. government may file a civil suit on behalf of the government against the person or business that allegedly committed the fraud. These are referred to qui tam cases. "Qui tam" (pronounced "key tam" or "kwee tam" and Latin for "who as well") is used in short for longer Latin phrase meaning "he who (sues) for the king as well as for himself." (Okay, for Latin buffs, it's qui tam pro domino rege quam pro seipse. Now you know why everybody just says Qui Tam.)


    Qui tam lawsuits are first filed with the federal district court in secret, to give the U.S. Justice Department time to decide whether to intervene and take over prosecuting the case itself. DOJ takes on about a quarter of these cases. If DOJ decides not to take the case, the qui tam plaintiff or "relator" - who is often an internal whistleblower since they need to be the source of information in the case - may pursue the case on behalf of the federal government but at his or her own expense. However, unlike other civil actions where a person can represent themselves (unwise but possible), the relator must hire an attorney to represent them.


    The False Claims Act provides for treble damages. Therefore, if fraud is proven through the civil case, the defendant(s) are liable for three times the original cost of the fraud to the taxpayers - plus civil fines of $5,000 to $10,000 for each instance of fraud or false claim.


    The amount received by a successful qui tam plaintiff depends on whether the DOJ took the case. If the Justice Department takes the case, the qui tam plaintiff gets between 15% and 25% of the recovery. If the Justice Department declines to take the case and the relator pursues the civil suit on their own, the qui tam plaintiff receives 25% to 30% of the recovery.


    Given the size of some of these incentives, the Justice Department often balks and tries to get them reduced, arguing that the plaintiff lacked the direct knowledge required to qualify. Therefore, the payouts to successful whistleblowers often lead to legal battles long after the fraud is proven and defendants pay up.


    Earlier this month, the U.S. Supreme Court heard oral arguments in just such a case where the federal government was challenging the right of a successful qui tam plaintiff to collect a portion of recoveries. The ruling, expected by this summer, could have a major impact on future qui tam suits.


    Please check out my previous posts on Medicaid program integrity issues.

    posted: December 11, 2006

    Medicaid%20Changes%20in%20TRHCA.jpgThe 109th Congress ended in the early morning hours on Saturday, with both houses passing by comfortable margins the Tax Relief and Health Care Act of 2006. With Democrats taking control of both the House and Senate when the 110th Congress begins the first week of January, GOP leaders were anxious to resolve some key policy items before Democrats take the helm.


    The final legislation, which President Bush is expected to sign, includes an array of changes in tax laws, Medicare, and health savings accounts (HSAs), along with technical corrections to drafting errors in the Medicare Modernization Act (MMA) and the Deficit Reduction Act (DRA). Today, I'll walk you through the Medicaid-related changes of importance to states and Medicaid health plans and providers.


    Medicaid Legislative Changes:


    As I reported earlier, the White House had been signaling its intention to issue a rule to cut Medicaid provider tax rates from a maximum of 6 percent - the ceiling that's been in place since 1993 - to 3 percent. The effect would have been to reduce federal funds to state Medicaid programs by $6 billion or more. Members of both parties were anxious to enact legislation to stop the Bush Administration's planned rule to restrict state use of provider taxes. States, provider groups, and beneficiary advocates were lobbying hard to stop the controversial rule change.


    In Section 403 of the Tax Relief and Health Care Act, Congress codifies the maximum provider tax rate at 6 percent. From January 1, 2008 through September 30, 2011, the rate will be temporarily reduced to 5.5 percent. On October 1, 2011, the cap on tax rates goes back to 6 percent.


    Implications for States and Providers:


    What%20Medicaid%20Changes%20Mean.jpgAh, the joys of Medicaid complexity. In a nutshell, here's what this means:


    1. The planned CMS rule to drop the maximum provider tax rates to 3% is now moot. If the President signs the bill, the section will become law and negate the planned rule change.


    2. The legislated change from 6 percent - which is what's now set in rule - to 5.5 percent is expected to cause few, if any, problems for most states that now use provider taxes to leverage federal match to help finance Medicaid. States not in compliance with the new 5.5 percent cap have a year to either modify their assessment program or make likely modest changes to how the resulting funds are distributed within Medicaid.


    3. The fiscal effect on states is relatively small, especially when compared to the $6 billion hit states were looking if the rule was issued. Specifically, the Congressional Budget Office (CBO) projects the half percent change will only save the feds $200 million over the next five years. As federal budget estimating goes, that's barely above a rounding error.


    The federal requirements governing Medicaid provider taxes are complex, with many moving parts. In general, federal law requires that health care-related assessments are uniform, broad-based, and do not hold providers harmless. The percentage cap is part of how the feds determine whether a state provider tax is compliant with the hold harmless requirement. States needing to revise their policies should consult an experienced Medicaid financing specialist. I recommend Sellers Feinberg, the leading advisors on Medicaid financing and reform.


    Other Federal Medicaid Changes:

    Other%20Medicaid%20Changes.jpgWhile most of the other Medicaid-related changes were technical corrections, the legislation made a couple other substantive changes of note.


    One deals with Transitional Medical Assistance (TMA). TMA is the continuation of Medicaid benefits for up to one year for certain low-income families who would otherwise lose Medicaid coverage because of changes in their income, usually due to increased hours of work or child or spousal support. The legislation extends Transitional Medical Assistance for the first half of CY 2007 (two quarters of funding). Linked to TMA, Congress also provides funding for matching grants to states to provide abstinence education.


    The new legislation also provides Tennessee with $131 million to help cover hospital uncompensated care. The $131 million represents a partial restoration of federal funding for Medicaid disproportionate share hospital (DSH) payments. As part of creation of the TennCare in 1994, Tennessee's Medicaid DSH program was discontinued. This is a big win for retiring Senator Bill Frist.


    State Children's Health Insurance Program (SCHIP):


    SCHIP%20Funding.jpgSome issues were left unresolved and deferred to the next Congress. Most notably, as part of the overall legislative package, Congressional leaders were hoping to address a federal funding shortfall for the highly popular State Children's Health Insurance Program (SCHIP).


    Unlike Medicaid, which has no federal funding cap, states are given state-specific SCHIP funding caps. Some 17 states will run out of federal SCHIP dollars in FY 2007. Nationally, the shortfall is projected at $920 million. Unless Congress reallocates funds or states decide to use 100% state funds to fill the gap, about 630,000 children are at risk of losing health coverage, at least temporarily.


    The Senate Finance Committee wanted to fill the gap by reallocating unused federal SCHIP funds from 2004 and 2005. Unfortunately, this was dropped during negotiations with the House. With many in both parties eager to avoid cuts in kids' health coverage, states hope to get the funding problem fixed in early 2007, either as part of an omnibus appropriations bill or SCHIP reauthorization.

    posted: October 17, 2006

    Medicaid%20Provider%20Tax%20Debate.jpgThe Bush Administration remains intent on issuing new regulations to implement several Medicaid budget cuts proposed in the President's FY 2007 budget last February. Most notably, the Administration wants to reduce state use of provider taxes by capping assessments at three percent, instead of the current six percent. This could be done by mandating that states phase down state provider assessment rates over three to five years.


    The current six percent cap was set in federal rules 14 years ago. Provider assessments, commonly a tax on hospitals or nursing homes, generate revenue for many state treasuries. These tax receipts are then matched with federal dollars, thereby doubling or even tripling or more the dollars available. That is, depending on the state's federal Medicaid matching rate, one dollar raised from a provider tax can ultimately generate anywhere from two dollars to nearly five dollars in new Medicaid funding.


    The total is used in Medicaid to fund provider rates increases and other state Medicaid budget priorities. In 1991, Congress enacted limits on state use of provider taxes to generate federal Medicaid funds. In 1992, federal rules imposed a six percent cap on assessment rates, with any tax higher than six percent presumed to be out of compliance.


    Cutting the maximum assessment in half would reduce federal Medicaid funding by about $6 billion and create big budget holes for affected states. The Administration has drafted the rule but is expected to wait until after the election to publish it, if then. While CMS and the White House are interested in the federal savings such a rule would generate, they are even more interested in the leverage it would provide over states. Specifically, it would encourage more states to come to the table and make deals for major Medicaid reforms using section 1115 waivers.


    A majority of House members and many in the Senate are opposed to the proposal. Therefore, there's a chance the Congress may block, at least temporarily, any rule to cut state use of provider taxes. As part of the annual appropriations bill for the Departments of Health and Human Services, Labor, and Education, the House Appropriations Committee included a provision prohibiting CMS from issuing the rule during FY 2007.


    Because getting a statutory change is so difficult, riders to appropriations bills are another way to stop an Administration action. If passed, such a rider makes it illegal for CMS to spend any staff time issuing or enforcing a particular policy during that fiscal year.


    The full House plans to take up the Labor-HHS-Education appropriations bill in November. However, the Senate would need to agree to the language and there is a good chance the entire appropriations process could fall apart after the election.


    Meanwhile, the Senate Appropriations Committee passed its version the Labor-HHS-Education funding bill for FY 2007. In it, they included a provision asking CMS to hold off issuing new rules curtailing the ability of schools to claim Medicaid payments for administrative and transportation services for children with disabilities. The Committee wants HHS to study the possible impact of proposed cuts to school-based services, with a report on March 1, 2007. They want CMS to take no action until the Committee reviews the study.


    Congress will try to resume the appropriations process after the election. But the two chambers will need to pass their respective versions of the Labor-HHS-Education bill and then resolve differences in a conference. And, given the political environment, that may be tough.

    posted: October 2, 2006

    OIG%20Medicaid%20Work%20Plan.jpgThe Office of the Inspector General (OIG) at HHS has released its 93-page work plan for FY 2007. The OIG plans to examine nearly 100 issues in Medicaid, with particular attention on:


    1. Medicaid reimbursement of hospitals, nursing homes, managed care organizations, home and community-based care, and mental health providers.


    2. Medicaid prescription drug benefit issues, including pharmaceutical industry practices affecting pricing and rebates.


    3. Financing practices used by states, most notably provider taxes, certified public expenditures, and upper payment limit issues.


    4. Budget neutrality of Medicaid waivers, specifically Section 1115 Medicaid reform waivers and Section 1915 waivers for managed care or home- and community-based care programs.


    Role and Influence of OIG in Medicaid:


    The federal government has significantly increased staffing at both CMS and the OIG to review or audit state Medicaid agencies, Medicaid providers, drug manufacturers, and Medicaid managed care organizations. This, in turn, has increased the number, diversity, and complexity of Medicaid issues under review by the two federal agencies.


    OIG studies and evaluations often help states learn about ways to improve Medicaid program efficiency. They also help CMS target its limited resources. OIG reports also provide valuable insights on best practices and program innovations. And, of course, OIG reports can lead to recommendations that CMS recover federal funds from states or recoup payments from providers.


    Part of the OIG's work plan focuses on checking to ensure that CMS, states, or providers are compliant with newly enacted or even long standing federal requirements. Other projects will look to see whether inappropriate or questionable practices recently found in a few locations are isolated cases or indications of a broader, national problem in Medicaid.


    However, several of the OIG's Medicaid related projects for 2007 will look at controversial Medicaid policy issues such as whether waivers approved by the Secretary of HHS are budget neutral and if some states are using Medicaid to pay for non-emergency care for illegal immigrants.


    Medicaid Hospital Payments:


    In the hospital arena, the OIG will look at the reasonableness of cost outlier payments for inpatient admissions, state compliance with OBRA '93 limits on disproportionate share hospital payments, and whether states are correctly determining hospital eligibility for disproportionate share payments.


    Medicaid Long-Term Care Services:


    The OIG intends to look more closely at home and community-based services. For example, the OIG will examine whether states are inadvertently paying for home and community-based services after a beneficiary's death or during a hospitalization. They are also looking at whether certain states are improperly claiming federal match on state costs of administering home and community-based waiver programs. As I mentioned earlier, they are also evaluating whether home and community-based waiver programs are budget neutral. That is, whether they are no more costly than nursing home care.


    Elsewhere in Medicaid long-term care, the OIG plans to study state determinations of nursing home eligibility and the adequacy of state safeguards against improper asset transfers. They also want to know if states are recovering funds from estates as required by federal law. In addition, they plan to study possible duplicate payments to nursing homes and hospitals. Specifically, they want to get a handle on whether some hospitals are being paid for patients already discharged to a nursing home and if nursing homes are being paid while a beneficiary is a hospital inpatient. Further, the OIG plans to see if some home care providers were improperly paid for care provided to residents of assisted living facilities. The OIG also has projects to examine the appropriateness of Medicaid payments to personal care providers and physical and occupational therapists.


    Mental Health and Substance Abuse Services:


    Mental health and substance abuse services and providers are also coming under greater scrutiny. For example, the OIG is looking at the appropriateness of Medicaid payments for community mental health centers, outpatient clinics, day treatment programs, inpatient and outpatient alcohol and drug treatment, and community residencies for persons with mental disabilities.


    Medicaid Drug Costs:


    The OIG work plan for FY 2007 naturally includes a long list of projects looking at Medicaid prescription drug costs. This includes reviews of how drug companies determine average manufacturer price (AMP) and the adequacy of CMS' oversight of Medicaid drug rebates. Other OIG studies will assess drug price fluctuations and whether states overpay for drugs to treat HIV.


    Medicaid Managed Care:


    The OIG work plan also calls for several evaluations of issues affecting Medicaid managed care organizations (MMCOs). For example, the OIG wants to know if some states are inappropriately paying Medicaid MCOs for dual eligibles and if states are paying fee-for-service claims for beneficiaries covered under Medicaid health plans. The OIG also intends to examine the completeness and accuracy of encounter data submitted by Medicaid MCOs.


    State Administration of Medicaid:


    The Office of the Inspector General is also eager to evaluate a wide range of issues regarding day-to-day administration of Medicaid by states. Again, the list of target issues is long. For example, the OIG work plan includes projects to examine state administrative costs, program integrity efforts, information systems, administrative claiming by counties, state overrides of claims system edits and audits, revenue maximization practices, and third party collections.


    To Learn More:


    Those are just some of the Medicaid related topics the OIG plans to study in FY 2007. Most of the OIG projects will likely result in a public report in 2007. To read the full work plan, click here (PDF).

    posted: September 3, 2006

    Medicaid%20Integrity%20Program.jpgWith far-reaching implications for states, providers, and health plans, the Deficit Reduction Act (DRA) dramatically increased the role of the federal government to combat Medicaid fraud and abuse. Together with a substantial increase in funding for federal contractors and staff, the DRA gives the Centers for Medicare and Medicaid Services (CMS) new, potentially massive authority in areas previously managed exclusively by state Medicaid agencies.


    New Federal Authority in Medicaid:


    Under the DRA, Congress mandates that "States must comply with any requirements determined by the Secretary (of Health and Human Services) to be necessary for carrying out the Medicaid Integrity Program...." This new, open-ended authority to impose directives on state Medicaid agencies - and, via states, on health plans, health care providers, and Medicaid fiscal agents - will be implemented by CMS through new rules and instructions.


    Key Components of Medicaid Integrity Program:


    The Medicaid Integrity Program (MIP) includes:


  • New Congressional appropriation starting at $5 million this year, $50 million a year in FY 2007 and 2008, and $75 million annually thereafter.

  • Creation of the Medicaid Integrity Group (MIG) within CMS' Center for Medicaid and State Operations (CMSO), with 100 new federal staff. This is in addition to 100 auditors CMS added recently to crack down on controversial state financing practices.

  • A series of new federal contractors, collectively known as Medicaid Integrity Contractors (MICs), to audit Medicaid providers and health plans, identify inappropriate payments, and educate providers and plans on proper claiming.

  • CMS, after consulting with the National Association of State Medicaid Directors (NASMD), developed a 37-page plan detailing the initiative.


    The DRA also boosts Medicaid anti-fraud funding for the HHS Office of the Inspector General and the Program Integrity Group in CMS' Office of Financial Management (OFM). The OIG gets an additional $25 million a year from FY 2006 through 2010. The DRA also created a new position of Medicaid chief financial officer within CMS.


    The Medicaid Integrity Program is in addition to the Medicaid Payment Error Rate Measurement (PERM) initiative I reported on last week.


    Perspective:


    Overall, the Medicaid Integrity Program holds the promise of saving taxpayer dollars. Like much of American health care, Medicaid is certainly rife with waste, fraud, and abuse. And it's reasonable for the federal government, which covers about 55% of Medicaid costs nationally, to take a more hands on role in combating Medicaid fraud and abuse. However, the MIP creates many challenges for CMS and states, with a high risk of conflict, confusion, overlapping bureaucracy, and worse. This is especially so if CMS fails to work with states as genuine partners and leverage the expertise of state staff.


    Learn More:


    The Kaiser Commission on Medicaid and the Uninsured recently released an excellent report on key issues raised by the Medicaid Integrity Program. This report, which will be followed by a more detailed study later this year, does a good job describing many of the challenges, conflicts, and potential unintended consequences of the MIP.


    The Government Accountability Office (GAO) has long been critical of both CMS and states on issues involving Medicaid financial management. After passage of the DRA, the GAO released its ideas for how CMS should implement the Medicaid Integrity Program and make best use of staff and contractors. A June 2006 GAO report assessed CMS' ability to "identify and address emerging issues that put federal Medicaid dollars at risk."

    posted: August 31, 2006

    Medicaid%20Error%20Reduction.jpgAs part of a larger, federal government-wide congressionally mandated initiative to reduce inappropriate payments, CMS has published its final rule on Medicaid / SCHIP payment error rate measurement. As expected, it represents a significant expansion of federal oversight of day-to-day state Medicaid operations and of the lives of Medicaid providers and Medicaid managed care organizations.


    Medicaid Payment Error Rate Measurement:


    The Medicaid Payment Error Rate Measurement (PERM) initiative is a complicated process but means that every state will undergo a detailed examination of paid claims, capitation payments, reimbursement and premium policies, coding, and more. States must turn over vast amounts of data every quarter, plus virtually everything else on rates, policies, and claims processing edits and audits.


    CMS will hire a series of new contractors to examine all this, run samples, and identify errors. CMS will then set maximum acceptable error rates (based on what it or its contractors determine is an "error") and then state must take corrective action. These corrective actions could include recovering payments, changing reimbursement policies, and revising claims processing requirements.


    States Targeted for Federal Review:


    States will rotate, with each state going through the entire process every three years. The states selected for the first round (FY 2006) are Pennsylvania, Ohio, Illinois, Michigan, Missouri, Minnesota, Arkansas, Connecticut, New Mexico, Virginia, Wisconsin, Oklahoma, North Dakota, Wyoming, Kansas, Idaho, Delaware.


    Second round states (FY 2007) are North Carolina, Georgia, California, Massachusetts, Tennessee, New Jersey, Kentucky, West Virginia, Maryland, Alabama, South Carolina, Colorado, Utah, Vermont, Nebraska, New Hampshire, Rhode Island. Third round states (FY 2008) are New York, Florida, Texas, Louisiana, Indiana, Mississippi, Iowa, Maine, Oregon, Arizona, Washington, District of Columbia, Alaska, Hawaii, Montana, South Dakota, Nevada.


    Opportunities and Challenges:


    If CMS manages the process well and works cooperatively with states, the PERM may help (1) save taxpayer dollars, (2) improve the operations of the less sophisticated state Medicaid programs, (3) showcase the best run Medicaid shops and best fiscal agents, (4) help CMS develop greater respect for the hard work of states, (5) identify inappropriate provider practices across state lines, (6) facilitate comparative research and analysis of Medicaid, and (6) allow CMS and states identify, build, and share best practices.


    However, PERM raises many practical concerns, especially given the enormous complexity of Medicaid and wide technical and programmatic variation among state Medicaid programs. Even if a state has a low error rate, the administrative burden could be intense, with a steep learning curve for CMS and the new federal contractors and endless arguments among the parties on what is or is not a genuine error. For states with high error rates, the implications include need to update systems, modernize procedures, redirect or replace fiscal agents, change payment and claims procedures, and much more. And add to this, controversial recoveries of federal dollars from states and providers.

    posted: June 10, 2006

    Medicaid%20Budget%20Cuts.jpgThe Bush Administration is preparing regulations to cut federal Medicaid funding to states by about $6 billion.


    In the President's budget for FY 2007, the Bush Administration proposed a series of Medicaid budget cuts. Most of these would require legislation and the House and Senate have shown no desire to cut federal Medicaid spending in advance of the November election. However, Administration officials have signaled their intention to proceed with several billion dollars of Medicaid cuts that can be implemented by regulation.


    Specifically, the Bush Administration is eager to (1) restrict state use of provider taxes and (2) cap Medicaid reimbursement to publicly owned hospitals and nursing homes. Together, these changes would reduce federal funding to state Medicaid programs by about $6 billion - perhaps more - over the next five years.


    Currently, many states use provider taxes to help fund Medicaid costs. Revenues received from these assessments - usually on nursing facilities or hospitals - can then be matched with federal funds and used to pay providers. Depending on the state's federal matching rate (which range from 50% to nearly 80% based on the state's per capita income), each dollar of provider tax revenue can in turn generate another $1 to $4 in federal dollars for use in Medicaid.


    Since 1991, federal law has limited state use of provider taxes. Most notably, Medicaid provider tax programs must be broad based, applied uniformly across all health care providers in the same class, and not hold providers harmless for tax payments. (For specific federal requirements, see section 1903[w] of the federal Social Security Act and 42 CFR 433.68.)


    Federal rules also say that taxes imposed on providers may not exceed six percent of a provider's total revenues. The Bush Administration wants to phase down the allowable provider tax rate from 6 percent to 3 percent. This would reduce federal Medicaid funding to states by about $2.1 billion over five years. Because it would also end up to half of state provider assessment revenues, the fiscal hit on states and Medicaid would be magnified by a billion dollars or more.


    The feds are also eager to refine rules to cap Medicaid payments to government-owned providers to no more than the cost of providing services to Medicaid beneficiaries. Projected to cut federal Medicaid spending by $3.8 billion over five years, the change would hit many large public hospitals particularly hard. Federal officials believe that some states pay government owned providers more under Medicaid in order to cross subsidize other state and local costs. However, states and advocates counter by showing how Medicaid funding helps cover fiscal demands of the uninsured and keep key facilities operating.


    Adding to state concerns, federal officials may implement the cuts by bypassing the traditional proposed rule process. In most cases of federal rulemaking, agencies start by publishing a proposed rule and reviewing comments before publishing a final rule. To implement the changes to provider taxes and payment of publicly provided facilities, the Centers for Medicare and Medicaid Services (CMS) wants to issue final rules with comment. While states and other interested parties could still send in comments, the cuts would take effect without further rules. From the federal perspective, the contemplated changes are "clarifications" of policy and therefore don't warrant proposed rules.

    posted: June 5, 2006

    Medicaid%20Benchmark%20Plans.jpgUsing new flexibility created by the Deficit Reduction Act (DRA), states may restructure Medicaid benefits. States may now customize Medicaid health care benefits to specific populations, model some benefit package after commercial-like health plans, and offer additional benefits as incentives to reward healthier patient behavior.


    Based on the concept of benchmark benefit packages first used in the State Children's Health Insurance Program (SCHIP), the new restructuring options are expected to save $11 billion over the next ten years (about $6 billion federal savings, $5 billion state savings) and ultimately affect 1.6 million Medicaid beneficiaries.


    Kentucky, West Virginia, and Idaho are the first states to use the new options. With help from leading consultants, other states are exploring ways to use DRA flexibility to reform some benefit packages and section 1115 waivers to modernize Medicaid, contain costs, and expand coverage.


    Here is a quick briefing on Medicaid benchmark coverage permitted under the DRA:


    1. Through the state plan amendment (SPA) process, states may provide Medicaid benefits through benchmark or benchmark equivalent packages for children and some non-disabled adults. The benchmark packages would replace existing Medicaid benefits for the targeted populations.


    2. The newly designed benefit packages may include wrap-around services or additional benefits not now covered by the state's Medicaid program. Every benchmark benefit package must cover Early and Periodic Screening, Diagnostic, and Treatment (EPSDT) services for children under 19, federally qualified health center (FQHC) services, and rural health clinic services.


    3. Benchmark coverage means the same health benefit package offered by (a) the state for state employees, (b) standard Blue Cross Blue Shield Plan offered under the Federal Employee Health Benefits Plan (FEHBP), (c) the state’s largest commercial HMO, or (d) other models approved by the HHS Secretary.


    4. Benchmark-equivalent coverage means a package with the same actuarial value as one of the benchmark plans. If a state uses this route, benchmark-equivalent coverage must include (a) inpatient and outpatient hospital services, (b) physician services, (c) lab and x-ray services, (d) well child care and immunizations, and (e) other preventive services designated by the Secretary. For prescription drugs, mental health services, and hearing and vision services, a benchmark-equivalent package must provide at least 75 percent of the actuarial value of coverage. States must use generally accepted actuarial principles and methodologies.


    5. States may only use benchmark or benchmark-equivalent packages to beneficiary groups already covered under the state Medicaid plan. Therefore, by itself, the DRA benchmark package option cannot be used to expand health coverage to new populations.


    6. In addition, many beneficiary groups are exempt from benchmark coverage, including (a) dual eligibles, (b) persons with disabilities or special health care needs, (c) beneficiaries needing long-term care services, (d) foster care children, (d) pregnant women with federally mandated coverage, and (e) individuals eligible for Medicaid via the TANF welfare reform law.

    posted: May 20, 2006

    Redefining Health Care.jpgThe world's leading guru of competitive strategy, Michael Porter, Ph.D., has turned his sights on explaining the fundamental cause of high costs, poor quality, consumer dissatisfaction, uneven access, and skyrocketing premiums in American health care.


    In Redefining Health Care, Porter and innovation expert Elizabeth Teisberg, Ph.D. provide a thoughtful, groundbreaking framework to use competition to drive dramatic increases in quality and efficiency.


    Unlike many wonks who foolishly believe that health care is not a market, Drs. Porter and Teisberg see competition " of a sort " in operation. They show us that the current competitive environment in health care is designed to "shift costs, accumulate bargaining power, and restrict services." That is, what we have now is dysfunctional, zero-sum competition serving to limit, even reduce value for patients. And they see all this taking place "...at the wrong level-among health plans, networks, and hospitals " rather than where it matters most, in the diagnosis, treatment, and prevention of specific health conditions."


    Focusing on how to move American health care to positive-sum competition based on economic and clinical value for patients, Redefining Health Care provides a series of specific recommendations for the key players " including physicians, hospitals, health plans, employers, Medicare, and Medicaid.

    posted: April 27, 2006

    Massachusetts%20Health%20Care%20Reform.jpgTo learn about the Massachusetts health care reform initiative, here are two podcasts on this groundbreaking new program to cover virtually all the uninsured in the Commonwealth.


    For Sellers, Feinberg and Associates, the lead consultants on the Massachusetts reform project, I host a biweekly podcast on hot issues in Medicaid. These concise audio briefings help state leaders and business executives keep tabs with Medicaid on Capitol Hill and CMS.


    In Part 1 of the special audio briefing on the Massachusetts health reform initiative, Marty Sellers, President and founder of Sellers Feinberg, describes the key components of the Massachusetts initiative, how it was developed, and implications for other states and the healthcare market.


    In Part 2, Peggy Handrich, the former Wisconsin Medicaid director and now leader of Sellers Feinberg's strategic Medicaid consulting practice, describes the key financial and programmatic characteristics of the Massachusetts health reform.


    To listen directly on your computer, click here for Part 1 and here for Part 2. The podcasts are in the popular MP3 format, so you may also right-click to save and upload them to your iPod or other MP3 player for listening on the road.


    For a useful two-page fact sheet on the Massachusetts health care reform plan, click here (PDF).


    To subscribe to receive the free podcasts on Medicaid, please contact Sellers Feinberg. The folks there are working with a number of other states on health reform and Medicaid restructuring initiatives.

    posted: March 25, 2006

    Medical%20Errors%20and%20Medical%20Narcissism.jpgMedical errors are rampant in American health care, particularly in physician and hospitals services. The human and economic costs are extraordinary. And because these mistakes are virtually 100 percent avoidable, so are the deaths, injuries, pain, and cost.


    A diverse range of players - policy makers, thought leaders, researchers, consumer groups, purchasers, and clinicians - are working to reduce error rates and promote the use of safer systems and practices. However, reformers continue to hit the great blue wall of medical secrecy. Physicians, hospital administrators, and other health professionals are extremely reluctant to disclose or discuss a harm-causing mistake.


    This is not surprising, of course. No one likes to talk about his or her mistakes, especially mistakes that result in injury or death. These conversations are awkward and painful for all concerned. What's more, disclosuring the truth can lead to lawsuits, disciplinary action, embarrassment, self-doubt, and diminished status in society and among peers. But ethically, all this is beside the point. Patients and their surviving family have a right to the unvarnished truth, something they rarely get absent costly and protracted lawsuits. And the health care system cannot fix what it cannot see.


    Medical Errors and Medical Narcissism - a groundbreaking book by John Banja, PhD, assistant director of health services and clinical ethics at Emory University - examines the concept of "medical narcissism." Specifically, Dr. Banja explains why a health professional's need to preserve his or her self-esteem often robs patients and their families of the truth and perpetuates high-error medicine. He describes the "common psychological reactions of healthcare professionals to the commission of a serious harm-causing error and the variety of obstacles that can compromise ethically sound, truthful disclosure."


    In Medical Errors and Medical Narcissism, Dr. Banja explains how and why talented, hard working medical professionals often fall into narcissistic traps. Living in a world of intense stress, long hours, and high, often unfair expectations, the "medical narcissist" works hard to maintain the respect of patients and colleagues. As Dr. Banja says:

    When a medical error occurs, that world of competence, adequacy, and ability is turned upside-down. It is no wonder that even when such persons want to do the right thing and disclose error, they might do it clumsily and make an already bad situation worse.


    This fascinating, thoughtfully researched book includes detailed recommendations, including advice on how to:


  • Disclose errors "artfully and ethically," including words and phrases helpful in these delicate conversations.

  • Create a "moral atmosphere" in clinics and hospitals.

  • Reform tort laws to promote full, appropriate disclosure of medical errors.


    Medical Errors and Medical Narcissism is available at Amazon.com.


    To learn more about the issues involved in medical errors and quality, please check out my lists of recommended books on:

  • Health care quality and patient safety.

  • Medical errors.

  • Medical malpractice.

  • Evidenced-based medicine.

  • posted: March 20, 2006

    Transparency%20of%20Medical%20Prices.jpgIt is an immutable truth of economics. Transparency is an essential ingredient for a market to function with any semblance of efficiency or effectiveness. Lack of transparency - what economists call asynchronous information - leads to rapid inflation, gross inefficiency, gaming and abuse, ignorant consumers, poor quality, rampant error rates, and misaligned resources. In other words, you get America's $1.9 trillion health care system.


    After years of behind the scenes work by top health care thought leaders, the White House and key Congressional leaders are jumping on board and calling for reforms to ensure transparency (read public reporting) of health care provider prices. While prices are only part of the information needs of patients, purchasers, and payors, nationwide transparency of medical prices is essential. Health Savings Accounts and other consumer-driven health reforms such as Medicaid Health Opportunity Accounts are largely pointless in a health care system otherwise rooted in incomplete, inaccurate, and inaccessible information.


    As leaders contemplate specific measures to promote transparency of prices, they should also consider sending every Medicaid and Medicare beneficiary a quarterly report on the cost of their care. (I am not talking about Explanation of Benefits [EOB] notices. EOBs don't give a picture of their overall costs or utilization and offer no comparative, trend, or historical information.)


    Using simple, colorful charts and tables and an emphasis on decision relevant information, a well-designed report would show them what care they received, what providers charged, what public programs paid, how much they paid in cost sharing, and how their medical costs compare to their peers (age group, sex, health status, and geography).


    For Medicare beneficiaries, the reports could help bust a core myth of Medicare financing by showing what Medicare has paid for their care compared to what as an individual they paid in Medicare taxes and cost-sharing to date. In Medicaid, the reports would be invaluable to state efforts to move toward consumer-directed models where chronically ill or disabled patients and their families take active control of their medical lives. It would also help low-income families better understand the health care system. For dual eligibles - the 6.3 million Americans with annual health costs of a quarter trillion dollars - these personalized reports would be truly eye opening for patients and their families.


    Over time, the reports could help Medicaid and Medicare beneficiaries see how their providers, health plans, and drug plans compare on measures of quality, errors, and cost effectiveness. And they could include simple health reminders.


    Of course, not every benie would read the reports much less change their behavior based on the information. But the vary act of creating the reports would require Medicare and Medicaid to modernize information systems, turn transaction data into genuine decision-relevant information, and begin thinking of program beneficiaries as consumers in need of more than monstrously dull doorstops masquerading as handbooks.


    Americans, including Medicaid and Medicare beneficiaries, are not stupid. But when it comes to health care costs, they are too often ignorant or oblivious. That must stop. Yes, there is a learning curve and some people prefer the bliss of ignorance to the dilemmas of judgment. Nonetheless, as consumers, as Americans, as human beings we are entitled to the information we need to make decisions. Keeping Medicare and Medicaid beneficiaries and their families in the dark is as costly as it is insulting.

    posted: February 24, 2006

    Medicaid%20Fraud%20and%20Abuse.jpgSince Medicaid is administered by the states, traditionally virtually all Medicaid anti-fraud efforts were managed by state Medicaid agencies, with civil enforcement and payment recoveries by the Medicaid agency and criminal prosecutions by the state attorney general and the AG's Medicaid fraud control unit (MFCU). States vary widely in their approaches, the relative sophistication of tools used, and staff resources dedicated. For example, Northern and Western states tend to focus on provider fraud and Southern states tend to focus more on beneficiary fraud.


    The recently enacted Deficit Reduction Act of 2005 (DRA) significantly expands the federal government's role in combating Medicaid fraud and abuse. The new provisions have far-reaching implications for states, providers, and health plans as well as for the federal-state relationship. If managed well and in close coordination with the states, it could save taxpayers billions of dollars. If not, it could easily result in chaos and confusion for Medicaid providers and health plans and a time sink for state Medicaid agencies.


    It also creates (1) significant new business opportunities for anti-fraud contractors and systems vendors, (2) new financial incentives for states to beef up their own systems and staff, and (3) new opportunities for whistleblowers and for qui tam suits.


    The DRA creates a federal Medicaid Integrity Program, including new contractors, additional federal staff, and financial incentives for states to increase their own efforts at fraud detection and payment recovery. Congress is giving the Centers for Medicare & Medicaid Services (CMS) an additional 100 staff plus $50-$75 million a year for outside contractors. If a state enacts its own false claims act, it will be able to retain a larger share of any payment recoveries. (Only 15 states and DC now have some form of state false claims act.) The effect is that compliant states could increase their savings from anti-fraud efforts by as much as 20 percent.


    The new law also requires organizations with more than $5 million in annual Medicaid payments to regularly train employees on Medicaid fraud laws and reporting. Across the country, this will apply to thousands of hospitals, nursing homes, home care providers, Medicaid managed care organizations, and counties, as well as many chain pharmacies, clinics, other providers, and the Medicaid fiscal agents like EDS and ACS.

    posted: February 3, 2006

    Navigating%20Medicare%20Drug%20Coverage.jpgFor outpatient prescription drugs, Medicare has two distinct programs with a maze of complex policies. Physicians, Medicare patients, retail pharmacies, Medicare drug plans, Medicare Advantage health plans, nursing homes, and long-term care pharmacies are all struggling with how to navigate Medicare drug coverage under Part B and Part D. To help you, here's an overview:


    Basics of Medicare Part B Drug Coverage:


    Drug coverage applies under Part B under this basic situations:


    1. Drugs billed by physicians and provided incident to physician service for that patient (e.g., chemotherapy drugs).


    2. Drugs billed by pharmacy suppliers and administered through durable medical equipment (DME) benefit (e.g., respiratory drugs given via nebulizer).


    3. Some drugs billed by pharmacy suppliers and self-administered by the patient (e.g., immunosuppressive drugs, some oral anti-cancer drugs).


    4. Separately billable drugs provided in hospital outpatient departments. Increasingly, Medicare is bundling drug costs within outpatient hospital payment rates.


    5. Separately billable End Stage Renal Disease (ESRD) drugs (e.g., erythropoietin). Increasingly, Medicare is bundling ESRD drug costs within ESRD facility payment rates.


    Medicare Part B Drug Coverage in Physician Offices:


    For Medicare Part B drug coverage in a physician's office, here are the basics:


    1. Must be furnished "incident to" a physician service. Normally, this means the drug is physician prescribed and dispensed or physician prescribed and administered during a patient office visit.


    2. As a result, Medicare Part B drug coverage is usually limited to drugs or biologicals administered by injection or infusion.


    3. If the injection is generally self-administered it is not covered under Part B (e.g., Imitrex). That is, in most cases Part B coverage of a specific drug stops if more than half of Medicare beneficiaries on the drug self-administer it.


    4. Medicare uses mix of local and national coverage decisions. Therefore, in absence of a national coverage decision by CMS, local coverage decisions are made my individual Medicare contractors (Part B claims processors, commonly called "carriers"). Therefore, regional differences can and do occur. That is, a specific drug could be covered in one state and not another.


    Formulary Basics in Medicare Part D Drug Benefit:


    1. While Medicare drug plan formularies are subject to CMS review during the annual bidding process, the Medicare Modernization Act (MMA) gives Medicare prescription drug plans (PDPs and MA-PDs) wide latitude.


    2. There is no national drug formulary or mandated formulary. Most Medicare drug plans use commercial-like drug formularies.


    3. Regarding therapeutic classes or categories used to structure a formulary, Medicare drug plans may use USP model guidelines or use their own structure. The USP model is not a formulary and not mandated.


    4. Medicare drug plans must use P&T committees for formulary decisions.


    5. For most drug classes, PDPs and MA-PDs must cover at least two drugs. CMS reviews each formulary to make sure Part D plans are not cherry picking or otherwise discriminating against certain kinds of patients.


    6. Plans must cover "all or substantially all" of the drugs in six classes: Antidepressant, Antipsychotic, Anticonvulsant, Anticancer, Immunosuppressant, and HIV / AIDS.


    7. Step therapy, prior authorization and cost tiers are allowed. Many Medicare drug plans are using four tiers in their benefit designs.


    Coverage of Non-Formulary Drugs Under Medicare Part D:


    1. The Medicare Modernization Act (MMA) requires Medicare drugs plans to ultimately cover any drug (not otherwise excluded under Part D) if "medically necessary" and "medically accepted", regardless of formularies.


    2. Drug plans are not required to list off-label on formularies, but physicians may still prescribe off-label drugs for medically accepted indications. Physicians must justify off-label use and the indication must be listed one of four compendiums accepted by CMS (e.g., DRUGDEX, USP).


    3. To justify off-label coverage for a medically necessary, medically accepted drug, the physician must determine that all drugs on plan's formulary for the treatment of the same condition (a) would not be as effective and/or (b) have adverse effects for patient. The same applies to justify an exception from a higher tier co-payment.


    4. A multi-step appeal process is available to beneficiary to seek coverage of a non-formulary drug or an exception from a tier. Steps include drug plan review, independent review, administrative law judge, HHS department appeals board, and the federal courts. The exceptions and appeals process may be initiated by the beneficiary, their physician, or another person designated by the patient.


    Prescription Drugs Excluded from Medicare Part D:


    1. The following kinds of drugs are not covered under Part D:


    - Weight-related, fertility, cosmetic, symptomatic relief cough or colds, vitamins (except prenatal), barbiturates, and benzodiazepines.


    - Over-the-counter (OTC) drugs, unless through a CMS-approved step therapy program and then only if free using the drug plan's non-benefit dollars. Few Medicare plans are covering OTCs this year.


    - Drugs covered by Medicare Part A or Part B for that individual in that instance.


    2. For dual eligibles, Medicaid may cover drugs not covered by Part D. State Medicaid programs must cover if drug is covered for non-dual Medicaid population (e.g., OTCs). This means dual eligibles will obtain drugs through multiple programs.


    Naturally, this is a high-level overview and is neither comprehensive or an official statement of federal policy. For more details, click here to read CMS' draft guidance explaining differences between Part B and Part D drug coverage. There are many nuances, twists and turns. So please be careful and closely monitor guidance from CMS and OIG.

    posted: July 15, 2005

    Mastering the Merger Book.gifThe health care sector is poised for more mergers and acquisitions, particularly in health plan and biotechnology segments. UnitedHealth Group's deal PacifiCare is only the beginning of a hot M&A season the next couple years.


    Mergers and acquisitions (M&A) are often essential to a company's growth and viability. However, a staggering 70 percent of mergers fail, often with devastating consequences for all concerned. For healthcare executives contemplating a deal, Mastering the Merger is filled with excellent, actionable advice. It is written in a tight, compelling way that business leaders will find quite useful.


    Mastering the Merger focuses on the importance of due diligence well before targets are identified and M&A decisions are made. Specifically, it describes:


    1. The most important questions prospective acquirers must ask before consummating any deal, regardless of size. Here the authors show executives how to ask and answer the big questions.


    2. Strategies and tactics to effectively target acquisitions and close deals.


    3. How to decide which aspects of a newly acquired business to leave independent and which to integrate. The authors focus here on how to integrate quickly but where it matters.


    4. How to anticipate and deal with contingencies. The emphasis is on how to predict and manage the unexpected.


    Authors David Harding and Sam Rovit are partners at Bain and Company and write often for the Harvard Business Review. Bain and Company is an elite business consulting firm that specializes in increasing the underlying market value of companies. Because successful mergers are a key method of increasing a company's value, Harding and Rovit are in an excellent position to share what works and what does not.

    posted: June 21, 2005

    By Michael H. Bailit, MBA
    President of Bailit Health Purchasing, LLC


    Introduction


    The serious problems in our health care system have been more than adequately documented in this journal and many others over the two past decades. Rates of uninsurance rise with a steadiness fueled by costs that seemingly know no bound. Quality varies with little or any relationship to cost, and ill-informed consumers cannot be confident that they are receiving the care that they need.


    It initially appears astounding that that these problems are not getting resolved despite the well-intended efforts of many, many people. In fact with respect to cost growth and insurance coverage, the problems with our health care system are getting worse. Much worse. We who work in the field of health policy have failed.


    Yet, the reasons for this failure are not difficult to understand. The health care industry represents a whopping 14.9% of the GDP (Levit, Smith, Cowan, Sensenig, and Catlin, 2004). It is an economic monolith, that becomes larger and, hence, more difficult to change every day. There are two sectors which foot the growing health care bill, neither of which is up to the challenge of curbing the expansion: government and employers.


    Government


    "One person's waste is another person's income.' (Wasson, 2004)


    Federal and state government pay the largest share of the health care bill. They fight valiantly to control health expenditure growth, but rarely, if ever, by addressing the problem. Instead government purchasers often end up shifting costs to private payers. States and the federal government also reduce covered health care services in times of profound economic hardship. Finally, state and federal government assume loans (especially the federal government) and cut other service expenditures to meet the growing demand for health care dollars.


    Ultimately, however, government fails to manage the growth of health care costs for two primary reasons. First, constituting a large economic sector, health care employs many Americans, thus creating a mission conflict for those elected and appointed to serve us. Reductions in healthcare expenditures result in lower income and potentially reduced employment for many Americans, including some who are politically influential. Second, most Americans don't want health cost growth restricted since the impact of costs is not directly visible to most Americans. That is, American taxpayers don't appear to appreciate how growing health care costs reduce available funds for other government programs and contribute to government debt.


    To continue reading, click here.

    posted: May 22, 2005

    Puzzle of State Health Reforms.jpgStates continue to serve as laboratories for health care reform. In recent years, many of these state-based efforts have focused on:


    1. Leveraging Employer-Based Coverage: With the goal of making health insurance coverage more affordable to small businesses and their employees, state tools include (a) premium assistance, (b) reinsurance to moderate high-risk cases, (c) state negotiated health plan options, and (d) hybrids mixing taxpayer and employer-sponsored models.


    2. Pharmaceutical Purchasing: To improve the cost-effectiveness of prescription drug benefits, state-based reforms include (a) intra-state and multi-state purchasing pools, (b) negotiated discounts for low-income populations, and (c) evidence-based coverage combining preferred drug lists (PDLs) and supplemental rebates from pharmaceutical manufacturers.


    3. Care Management for High-Cost Patients: With over 75 percent of Medicaid costs driven by a small proportion of patients, states are developing new programs based on the latest care and disease management techniques.


    4. Modernizing Uncompensated Care Programs: While taxpayers invest billions of dollars each year to help compensate hospitals for serving uninsured patients, most of these efforts are blunt, highly inefficient programs with misaligned incentives. Therefore, some states are exploring alternatives designed to leverage these funds to promote primary care.


    To learn more about state-based reforms, including lessons learned, check out the work of our friends at the Economic and Social Research Institute (ESRI). ESRI�s excellent team, with support from the Commonwealth Fund, has a series of informative reports.

    posted: May 6, 2005

    In Case of Emergency, Push Button.jpgQuality of care in the federal Medicare program remains poor. New evidence shows a wide range of serious, often worsening problems in the physician and hospital care received by Americas 41 million Medicare beneficiaries.

    The bad news includes (1) increases in preventable medical mistakes; (2) inadequate screening and treatment of colorectal cancer, hypertension, depression, high cholesterol, and urinary incontinence; and (3) wide, unjustified geographic and racial disparities in quality of care received.

    There is some good news, including more preventive services and modest improvements in inpatient care of heart attacks and outpatient care of diabetes.

    Medicare, of course, does not operate in a vacuum. Medicare beneficiaries suffer from the consequences of poor quality, inefficiency, and outdated systems just like the rest of us. The costs in lost lives, suffering, and wasted dollars are staggering. And while progress is slow, Medicare has begin several initiatives to improve care.

    posted: February 2, 2005

    Hospital Outside - Cartoon.jpgA new breed of physician is coming to a hospital near you: the hospitalist. And they hold tremendous promise for improving quality and lowering costs.


    Hospitalists, who specialize in caring for hospitalized patients, are specially trained to effectively diagnose and treat high-acuity patients. Assuming primary responsibility for managing medical and surgical patients, hospitalists also help determine admissions from emergency departments and keep the patient's office-based docs in the loop.


    While traditional office-based physicians visit hospitalized patients before or after office hours, hospitalists are onsite and immediately accessible to patients and their families. A fulltime hospitalist can care for ten times the number of inpatients than an office-based physician.


    Supported by an array of new information management technologies, evidenced-driven protocols, and a team-based approach to care, the hospitalist model dramatically improves clinical decision-making. When done right, this translates to fewer medical errors, better patient outcomes, and lower costs from shorter stays and fewer re-admissions.


    The hospitalist model is gaining attention among cost and quality conscious employers, health plans, and hospitals. Hospital services represent some 40 percent of health spending and physician decisions direct more than 80 percent of hospital services.


    An excellent new study by the Center for Studying Health System Change says "Mounting financial pressures, increasing problems with patient flow in hospitals, a growing focus on patient safety, and rising malpractice costs..." are increasing use of the hospitalist model.


    The number of hospitals increased from a few hundred in the mid-1990s to more than 8,000 in 2003, according to the Society for Hospital Medicine, the professional society of hospitalists.

    posted: December 12, 2004

    Pay Here Sign.jpgThe pay-for-performance (P4P) movement continues to grow:


    1. The Medicare Payment Assessment Commission (MedPAC) is calling on Congress to incorporate quality incentives in Medicare payments to hospitals, physicians, and home health agencies. In 2003, MedPAC released similar P4P recommendations for Medicare managed care plans and dialysis facilities. MedPAC says the Centers for Medicare & Medicaid Services (CMS) should earmark between 1% and 2% of Medicare payments to pay bonuses to providers that meet specific quality measures. The quality incentives would into account the severity of patients' illnesses.


    2. The Joint Commission on Accreditation of Healthcare Organizations (JCAHO) released principles for constructing pay-for-performance programs to align provider reimbursement with quality of care.


    3. The American Medical Association released a new report to get physicians ready for pay-for-performance. The report says pay-for-performance is a "tsunami building offshore in a sea of stakeholder unrest, threatening those who are not prepared."

    posted: November 21, 2004

    Empty Hospital Corridor.jpgCommunity hospitals outperform teaching hospitals, according to a new study that compares cost and quality of hospitals in six states. The researchers conclude that patients served by lower-cost community hospital for secondary care receive care of similar quality to that provided in academic health centers.


    Findings include:


    - Inpatient costs per case are 19 percent higher in teaching hospitals, even after even after adjusting for patient case mix, severity, and other controllable characteristics.


    - Community hospitals and academic health centers are comparable in their frequency of poor clinical outcomes.


    - In terms of the likelihood seven adverse outcomes, the teaching hospitals were best on two and the community hospitals outperformed on three. There was no meaningful difference in two of the adverse outcomes.


    - Lengths of stay in the two kinds of facilities are virtually the same.


    The study, released by the Pioneer Institute for Public Policy Research, has implications for consumer-driven health plans. As consumers become more sensitive to the cost of care, the superior performance of community hospitals - at least for common secondary conditions that represent the greatest volume of inpatient care - will present new challenges to teaching hospitals and their affiliated clinical programs.


    The study was authored by Nancy M. Kane, DBA of the Harvard School of Public Health, Jack Needleman, Ph.D. of the UCLA School of Public Health, and Liza Rudell of MassHealth.

    posted: September 24, 2004

    Doctor with Toddler.jpgIn an excellent new piece for HealthLeaders, E. Preston Gee asks an fascinating question with wide ranging implications for health care: "What if the mass merchandising giants like Wal-Mart or Target got into the healthcare delivery business in a big way?"


    Highly efficient, consumer friendly, and tech-savvy companies like Wal-Mart and Target stand in sharp contrast to health care delivery. Many health strategists, including myself, have noodled on what it would take for hospitals and clinics to adopt consumer-focused, competitor-savvy practices of high performing industries like these "big box" retailers.


    As Mr. Gee notes, the big retailers may never enter health care but that is beside the point. Health care providers must adapt to the new market realities. Employers and other demand-side players expect an end to the inefficiency, poor quality, and high error rates that plague much of health care delivery. After providing thoughtful advice on how they can adapt, Mr. Gee calls on health care executives to "lead their organizations into and through this new era of heightened expectations and emerging market-driven dynamics."


    Preston Gee has written widely on market-driven, consumer-oriented strategies in health care. His latest book is Service Line Success: Eight Essential Rules. It shows how provider execs can apply the principles of service line management to meet tough market challenges. Service line / product line management is proven and often profitable in other sectors but rare in health care.

    posted: September 11, 2004

    Quality Health Care Book Cover.jpgThere is ample evidence America has a serious problem with poor quality health care and high rates of preventable medical mistakes.


    Thankfully, there is no shortage of caring professionals motivated to improve care and the problems are solvable. As with any effort to improve performance, measurement is the first step to improving care and reducing medical mistakes. As I often remind clients and colleagues: you can't fix what you can't see.


    However, measuring hospital and physician quality is complex. And too often efforts to measure quality get bogged down - perfect becomes the enemy of good and analysis becomes the enemy of action.


    Quality Health Care: A Guide to Developing and Using Indicators serves as an excellent, up-to-date guide on how to design and implement an effective quality measurement program, particularly in hospitals. While paying close attention to the importance of clinically sound measurement, this guide focuses on providing practical and actionable advice. Specifically, the book provides:


    1. Helpful overview on quality measurement, the increasing demands of consumers and purchasers for public disclosure of provider quality, and the information consumers find most valuable in their decision making.


    2. Practical advice on how to select quality indicators, collect and organize data, and create a dashboard to monitor progress.


    3. Technical guidance on how to analyze data effectively, including how and when to accept limitations and variations.


    4. Cases studies on how to use quality measurement to improve both clinical and operational performance.


    The author, Robert Lloyd, PhD, is executive director of performance improvement at the Institute for Healthcare Improvement and a highly regarded expert in quality measurement.

    posted: September 11, 2004

    BerwickEscapeFireBook.gifEscape Fire is collection of compelling speeches by one of America's leading crusaders for health care quality and patient safety - Don Berwick, MD, founder and president of the Boston-based Institute for Healthcare Improvement.


    Each year, IHI hosts the National Forum on Quality Improvement in Health Care. The influential annual event draws 4,000 health care leaders from around the world in person and 6,000 via satellite.


    In many ways, Dr. Berwick's keynote lectures set the tone for quality improvement efforts across the US. With an effective blend of common sense, real-life stories, persuasive metaphors, and out-of-the-box thinking, Dr. Berwick's presentations make for fascinating reading for anyone interested in improving America's $1.7 trillion health care system.


    For example, in his 1999 keynote, Dr. Berwick recounts the 1949 Montana wildfire that killed thirteen young men and applies lessons learned from the catastrophe to today's health care system.

    posted: September 11, 2004

    Checking Temperature.jpgIn the typical hospital, nurses spend only about 30 percent of their time on patient care. The remaining 70 percent of their long days are spent largely on paperwork. This lopsided situation is seen as a major cause of poor quality, patient dissatisfaction, nurse turnover, and operating inefficiency.


    Thanks to the ideas of the Institute for Healthcare Improvement and funding from The Robert Wood Johnson Foundation, a dozen of the nation's most innovative hospitals are studying ways for nurses to spend the bulk of their time taking care of patients.


    Transforming Care at the Bedside, a two-year pilot program, is designed to improve the patient-caregiver relationship. The effort will look at practical ways to reduce paperwork, improve teamwork among nurses and physicians, reduce medication errors, increase the quality of bedside care, and increase job satisfaction and retention.

    posted: September 10, 2004

    Ambulance from Rear.jpgIf President Clinton had to wait weeks or months for urgent bypass surgery like patients in Canada or the UK, he would be dead. Mr. Clinton's physicians said he was at serious risk of a major, life-threatening heart attack. He needed the bypass quickly and got it.


    In Canada, patients needing urgent attention wait over three weeks to see a cardiologist and another two weeks or more to have an urgent bypass operation. If the surgery is not absolutely ugent, add a couple more months. Waiting lines in other government-run health systems are even longer.


    In an excellent op-ed in the New York Post, Michael Cannon, director of health policy studies at the Cato Institute, shows how the former president should be thankful his massive health reform proposal of 1993 never passed.


    President Clinton was released from the hospital today and is recuperating at home. We all wish him well for a quick and full recovery.

    posted: September 4, 2004

    US Currency Background Colorful.jpgTo address the enormous deficiencies in quality of health care, health care organizations need to make a business care for improvement. That is, they need to demonstrate a compelling rationale for the significant financial investments necessary to improve quality and reduce medical errors.


    To make decisions, businesses traditionally look at the potential return on investment (ROI). However, ROI projections are tough to make in health care. Data sources are limited and decision support tools are often outdated or nonexistent. Most health services research is purely academic, offering no actionable or timely advice to decision makers. The fragmented delivery system means that organizations that invest in performance improvement benefit other players more than themselves. Finally and most critically, incentives are terribly misaligned. Providers are paid for how much they do, not how well they do it. When patient care improves and medical mistakes decline, provider revenues can drop like a stone.


    The savvy folks at Bailit Health Purchasing LLC offer a new framework for building a business care to invest in quality improvement. In an excellent new issue brief published by The Commonwealth Fund, Michael Bailit, MBA and Mary Beth Dyer, MPP provide a mechanism for an organization to consider a broad set of factors affecting a business case for quality.


    Taking into account key financial, strategic, and organization factors, they offer 10 practical business care arguments. By looking beyond bankable dollars, hospitals, clinics, and other providers can create compelling business cases to improve their performance.

    posted: July 30, 2004

    Sign to Emergency Room (Web).jpg
    In a new study, HealthGrades, a respected leader in measuring and reporting health care quality, estimates that preventable hospital mistakes kill 195,000 Americans each year. That's twice the Institute of Medicine's 1999 estimate, which many experts observed was conservative.


    Fortunately, some courageous hospitals are showing their peers how to improve clinical outcomes at reasonable cost. A new report describes the key factors contributing to the success of four high-performing hospitals. In it, my friend Jack A. Meyer, Ph.D. and his colleagues at the Economic and Social Research Institute and The Severyn Group offer an outstanding blueprint for improving patient care and safety in hospitals.


    The study, which was commissioned by The Commonwealth Fund, recommends 18 specific actions hospitals should take to improve patient care and save lives.

    posted: July 11, 2004

    Three Docs.jpgPreventable medication mistakes in hospitals is a leading causing of death. Top patient safety experts and The Leapfrog Group have called upon hospitals to replace risky, paper-based prescriptions with computerized physician order entry (CPOE) systems.


    If installed in every major hospital, CPOE systems would save tens of thousands of lives each year. However, few hospitals have CPOE systems and few plan to get them any time soon. In addition to costing $3-10 million per facility, hospital execs often face stiff resistance from docs unwilling to learn, replace their Rx pads with Palm Pilots, and work as teams. Even worse, because facilities are paid for quantity and not quality, improved patient safety often lowers a hospital's revenue (fewer errors = fewer patient days = lower revenue).


    Harvard Medical School researchers Eric G. Poon, David Blumenthal, and colleagues recently interviewed senior managers in 26 hospitals to identify ways to overcome barriers to adopting and implementing CPOE. Their thoughtful, on-target recommendations appear in the latest issue of Health Affairs.


    Solutions, not unexpectedly, include financial incentives to hospitals, stronger hospital and physician leadership, greater public attention to patient safety, establishing more uniform data standards, and modernizing hospital IT infrastructures.


    For further reading on savings lives through improved technology, check out my reading lists on:

    - Health care quality.

    - Medical errors.

    - Health care information technology.

    - Electronic medical records.

    posted: May 29, 2004

    Med Symbol Over.jpgThe June 2004 issue of the Harvard Business Review contains an outstanding article on Redefining Competition in Health Care by Michael E. Porter, Ph.D. of the Harvard Business School and Elizabeth Olmsted Teisberg, Ph.D. of the University of Virginia's Darden School of Business.


    Their carefully researched, well-argued, actionable recommendations include:

    - Standardized information about individual diseases and treatments should be collected and disseminated widely so patients can make informed choices.

    - Purchasers, providers, and health plans should establish transparent billing and pricing to reduce cost shifting, confusion, pricing discrimination, and a host of other inefficiencies.

    - Providers should be experts in specific conditions and treatments rather than try to be all things to all patients.


    posted: May 23, 2004

    Surgeons Looking at Patient.jpgCanada's Socialized health care system may result in cheaper drugs but far more dead patients.


    The first major study of patient safety in Canadian hospitals has found an extremely high number of preventable medical errors.


    posted: May 22, 2004

    Watch Your Step - Web.jpg Preventable medical mistakes and inappropriate, outdated medical care is the third leading cause of death in America, according to the Institute of Medicine and other experts.

    Consider This
    In ancient China, physicians were paid only when their patients were kept well and often not paid if the patient got sick. If a patient died, a special lantern was hung outside the doctor's house. Upon each death, another lantern was added. This is the first known use of the two most powerful drivers for health care performance - incentives and transparency.
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