Filtering by Tag: healthcare costs

Expert Panel Weighs In On Value-Based Reimbursement

Earlier this month, I had the privilege of moderating a panel on Value-Based Reimbursement (VBR) at the Georgia HIMSS annual conference. Panelists were:

  • Mary G. Gregg, MD, FACS, MHA – Enterprise Director, CareSource

  • Raymond Snead, Jr., D.Sc., FHFMA, FACHE – long-time CFO/CEO who recently served as Interim CEO at Grant Memorial Hospital, Petersburg, WV

  • Barry S. Herrin, FAHIMA, FHIMSS, FACHE, Esq. – Founder, Herrin Health Law, PC

GA HIMSS Oct 2018 Panel Cropped.jpg

Here are some of the highlights from our lively interchange:

  • There has been little true progress toward containing healthcare expenditures despite decades of trying various approaches including HMOs, PPOs, DRGs, ACOs, CON, and other efforts.

  • For the most part, VBR amounts to transferring risk to providers and does little to truly improve care.

  • Each party in the healthcare equation has a different definition of “value.” Patients want the most care for the least amount of money. Payers and employers want to pay providers as little as possible. Providers want to be adequately compensated for the care they deliver.

  • By and large, VBR does not allow for variability in patient differences, including the extent to which they follow good health practices and adhere to suggested care guidelines. Chronic illnesses represent a huge part of health status and medical costs. Patients can do more to improve their health and, thereby, help moderate costs through better lifestyle choices and compliance with care guidelines.

  • Technology can help identify and address health and, therefore, tamp down coats. However, some organizations merely throw new technology or an app at a problem without adequately defining it or developing a comprehensive plan to address root cause issues.

  • Hospitals must get physician involvement from the very beginning whenever proposing a change in medical practice or adopting new technology. Walking three-quarters of the way through a process and then inviting physicians into the discussion guarantees failure.

  • The days of considering data security as an afterthought are over. Ironclad practices must be baked in from Day One.

  • We need better analytics for identifying and tracking the 20% of patients who require the greatest level of care.

  • Patient mental health issues contribute greatly to total costs but are not being effectively addressed.

  • Cost coverage is being relegated to a smaller and smaller percentage of patients with insurance policies that fully cover the cost of care. As the number of plans covering costs dwindles, in order to stay in business, hospitals continue to shift more and more costs to those with more adequate plans. This effectively makes hospitals taxing agencies.

  • With increasing pressures from all sides, physicians are burning out faster than ever before.

  • Innovation is not being rewarded within the current delivery and payment system.

  • Amazon and others outside the traditional healthcare arena may be the source of truly disruptive innovation.

You can see the conversation went well beyond just VBR since all these issues covered interlock. The overall consensus was that the enormous complexities of the healthcare system make it impossible for a single approach like VBR to “tame the cost beast.”

Cherry-Picking and Cost-Shifting Are the Name of the Game

The following letter was published in the August 27, 2018 issue of Modern Healthcare magazine.

MH Sept 27 2018 cover.jpg

The statistics in the Aug. 13 Data Points regarding where emergency services providers choose to locate (“Stand-alone EDs flock to affluent ZIP codes,” Data Points, p. 31) point to a trend that some fail to grasp. I agree that in most retail situations – cars, flat screen TVs, etc. – competition encourages increased quality and tamps down prices. Your data reveals that potentially profitable service lines gravitate toward more affluent areas. This is especially true for facilities like free-standing surgery centers, and it amounts to cherry-picking. I don’t see people rushing to set up trauma centers in downtown Atlanta or Chicago to siphon off the uninsured car wreck, overdose and gunshot cases.

Everyone knows about the cost shifting to commercial payers because of less-than-cost payments from Medicaid, the uninsured and, in many cases, Medicare. But there is another type of cost shifting that takes place within the hospital. Since many of the vital services they offer cause a financial drain, they make up the difference from other areas that do yield net income. If they lose too many profitable patients, their ability to prop up the necessary but financially draining service areas declines.

One bright spot in your statistics is that two-thirds of the freestanding EDs are hospital-affiliated, meaning they are presumably helping the profitability of the hospitals that operate them.

Glenn E. Pearson, FACHE


Pearson Health Tech Insights, LLC

Marietta, Ga.

Will Value Based Reimbursement Finally Bend the Cost Curve?

On April 19, I had the pleasure of moderating a Georgia Association of Healthcare Executives panel addressing The Shift to Value-Based Purchasing.  Panelists were Ray Snead (Interim CEO, Grant Memorial Hospital in Petersburg, WV), Ellis “Mac” Knight, MD (SVP and CMO, The Coker Group), and Mike Cadger (Founder/CEO, Monocle Health Data).  

Ray Snead, Dr. Mac Knight, Mike Cadger, and Glenn Pearson

Ray Snead, Dr. Mac Knight, Mike Cadger, and Glenn Pearson

To kick things off, I observed that, over my 30+ year career, I have lived through various inflation control attempts:  DRGs, HMOs, Provider-Sponsored Organizations, and others.  Few would argue that the strategies of the last three decades have been a smashing success.  Thirty years ago, healthcare represented 11.0% of GDP, and in 2016 it was 17.9%.  Is Value-Based Reimbursement (VBR) just another in the long string of marginally successful efforts?

One of the great things about panel discussions is the variety of opinions.  True to form, our group had varying predictions about VBR’s ultimate impact.  Dr. Knight had the most positive expectations, while Ray Snead was more skeptical.  

Dr. Knight pointed to evidence from such risk-bearing organizations as Intermountain Healthcare whose emphasis on prevention and coordinating care has yielded modestly favorable results –  Intermountain’s ability to tamp down its inflation level to CPI plus 2%.  

As CEO of a small, rural hospital, Ray was not so upbeat.  Although all hospitals face daunting financial challenges, rurals seem unusually stressed.  The fact that rural hospitals are disproportionately represented in the hospital closure statistics demonstrates their extraordinary hardships.  Ray lives them out every day, and he is not all-that-optimistic about smaller hospitals (or, for that matter, safety net hospitals) being able to adapt the VBR model to their settings.

Although I appreciate the points Dr. Knight made, I lean more towards Ray’s position.  VBR is a great idea.  I’m all for stressing common sense preventive care and aligning incentives.  However, so many factors must be in place for true sustainable impact.  Among other things, hospitals need working relationships with primary care physicians, specialists, community-based services, and post-acute care providers.  Furthermore, patients and their families and/or extended communities must be actively engaged.  Tying all this together requires reliable wrap-around communications processes.  All this is challenging for many hospitals, and all-the-more so for rurals.

For years, I have suspected that the designers of each new approach to cost containment has a particular hospital profile in mind:  a medium-to-large hospital or health system, probably suburban-based and at least reasonably successful financially.  (Intermountain fits this description.)  Even though these systems may include rural hospitals, those rurals have the advantages of a deeper healthcare delivery system backing them up. 

I don’t want to in any way diminish the successes of Intermountain or others in response to VBR incentives.  However, I sympathize with rural and inner-city hospitals that face such extra challenges as poor payer mixes, difficulties in attracting physicians and other clinical personnel, typically out-dated facilities, and other problems.

So will VBR succeed in controlling costs?  I certainly hope so, but I think the complexities healthcare faces outstrip the ability of a single concept to deliver the silver bullet.

VBR Panel GP.jpg

What Do Powdered Wigs and the ACA's Cadillac Tax Have In Common?

At 18% (and growing) of GDP, healthcare remains one of the biggest targets for reform.  The word “unsustainable” is regularly bandied about, and I wouldn’t disagree.

I have been in this field long enough to have seen numerous restructuring initiatives promising to tame the healthcare beast come and go with only limited impact.  DRGs, HMOs, PPOs, Provider-Sponsored Organizations, ACOs, and a host of other concepts were all designed to create new incentives to increase efficiencies and lower costs.  Although each has had some impact, few people would argue that the industry has been significantly transformed.  

As the Affordable Care Act was being debated in 2010, a phrase often heard was “bending the cost curve.”  Despite some positive aspects of the ACA, there is little evidence that the cost curve has significantly changed. 

Why is achieving meaningful improvement so difficult?  There are many, many reasons, and I wouldn’t even begin to try to rank-order them or even identify them all.  Having said that, though, I do believe one factor is that policy makers often – either intentionally or through obliviousness – neglect to factor in changed behavior when incentives shift.

One simple example is the nosedive in revenue from the ACA’s so-called Cadillac tax.  The ACA tax bakes in a 40% tax on every dollar above a predetermined premium level.  This concept has been unpopular with payers and employers from the start, so many found a way around it.

Modern Healthcare reported in March 2015 that the Congressional Budget Office had lowered its estimate of the total revenue generated by the Cadillac tax by a full 41% between January and March 2015.  Plus the January 2015 number was already down significantly from the original pre-passage 2010 numbers.  

Why this dramatic decline?  Here’s Modern Healthcare’s take:  “Many employers have started to scale back benefits in anticipation of the excise tax.”  So a big portion of the ACA’s original revenue will never materialize.

At the risk of being rude, let me say, “Well, Duh!”  People are smart.  When you change the rules, people recalibrate their behavior to optimize their personal outcomes.

This is not a new phenomenon.  The January/February issue of Mental Floss magazine cites an amusing anecdote from the late 1700s:

Powdered Wig.jpg

Britain Wigs Out:  With ever more foreign wars to wage, British Prime Minister William Pitt hit upon a heady idea to raise funds – place a tax on wig powder.  Rather than generating cash, the tax unintentionally changed men’s fashion, and by the 1820s, powdered wigs were considered so 1790s.

You would think politicians would learn.