Gregory M. Adams, FHFMA

Greg Adams is the Chief Strategy Officer for Panacea Healthcare Solutions and has over 35 years of experience in the field of healthcare including 20 years experience as a hospital CFO. His experience includes financial operations, managed care contracting, physician practice management, patient accounting, patient access, health information management, materials management and real estate development.  Greg is the Past Chair of the National HFMA, having served as the Chair of its Board of Directors in 2011-12. In that role he oversaw the services the organization provides to its 40,000 members. Greg speaks extensively on healthcare reform and the transition to a value based payment system. His speaking engagements include national, regional, and state programs. He has previously served as a member of the National Board of Directors for the Healthcare Financial Management Association from 2002-2005 and as President of the New Jersey chapter in 1997-98. He has also served as a member of the Board of Trustees and Chairman of the Finance Committee at St. Ann’s Home for the Aged, Jersey City, New Jersey.

Well the election is over, and regardless of which side of the political arena you were on, I think we can all agree that changes are coming – and that includes healthcare. During the campaign, the Trump camp pledged to repeal the Patient Protection and Affordable Care Act (PPACA). Now, was that campaign talk or for real? There is general agreement that some components of PPACA make sense and should be maintained. The questions are, what will the structure of the program look like, and at what cost will it be implemented?

So let’s first review the basic tenets, good and bad, of the PPACA.

  1. The biggest benefit is providing insurance for millions of people who previously did not have coverage. Approximately 20 million previously uninsured U.S. residents now have coverage through the PPACA. This includes 13 million who obtained coverage through the federal marketplace, with the balance obtaining coverage through Medicaid expansion and including young adults on their parents’ plans.
  2. It requires all insurance plans to cover essential health benefits, including treatment for mental health, addiction, and chronic diseases.
  3. Insurance companies can no longer deny anyone coverage for preexisting conditions, drop them, or raise premiums if get sick.
  4. Lifetime and annual limits on coverage were eliminated.
  5. Enrollees up to the age of 26 can remain on the health insurance plans of their parents.
  6. States are required to set up insurance exchanges or to use the federal government's exchange to provide easy access for consumers to shop for plans, and tax credits are provided based on income to reduce costs.

Now, what are some of the problems resulting from the PPACA?

  1. Many consumers have had their plans cancelled by their insurance companies because the plans don’t comply with the law regarding the provision of the 10 essential health benefits. In many cases, the cost of replacement insurance is higher. Others have lost their company-sponsored healthcare plans when businesses find that it is more cost-effective to pay the penalty and let their employees purchase insurance plans on the exchanges.
  2. Those who don't purchase insurance are assessed a tax, and in some cases, citizens opt to pay the tax rather than purchase insurance.
  3. Medicare taxes were raised on higher-income individuals and there was a reduction in the deductibility of medical expenses implemented to help fund the cost of the PPACA, as well as increases on taxes on manufacturers and pharmaceutical companies.

With the above as background, let’s discuss the issues surrounding repealing and replacing the Act. From a political and practical perspective, this may not be an easy task. Politically speaking, it will be difficult to take back some of the benefits currently in place as a result of the PPACA. Eliminating health benefits for those who now have access to health insurance through the health insurance exchanges or the expansion of Medicaid and the rollback of coverage for those up to age 26 may not be politically acceptable. From a practical standpoint, new insurance products need to be in place before the elimination of others so that current participants can move easily from one to the other.

In terms of specifics, some of the essential tenets of President-Elect Trump’s plan include the repeal of the individual mandate, the creation of high-risk pools by states for at-risk consumers, replacement of insurance subsidies with a tax deduction for purchase of individual insurance, increased flexibility for health plans to sell insurance across state lines to increase competition, and the promotion of health savings accounts to increase savings for healthcare costs. For Medicaid, Trump’s proposal would replace the current entitlement program by providing block grants to the states. This would provide states with more discretion in how to spend the funds, enabling the tailoring of allotment to suit each state’s individual circumstances and needs. He also favors removal of barriers inhibiting the lowering of drug costs, currently the third-largest area of healthcare spending. These include opening current markets to the importation of drugs from foreign markets that have been proven to be safe and reliable.

Clearly, we see a shift in the structure of healthcare insurance reform from one of increased government involvement to more of a free-market philosophy. This shift is based on the fundamental belief that more competition will result in a greater level of innovation, an increase in health insurance options to individuals at lower costs, and products that better meet the needs of consumers. It will be interesting to see whether this change in approach accomplishes the overall goal of providing greater access at lower cost to those in need of healthcare services. I’m sure these issues, proposed solutions, and the political landscape will become clearer upon the installation of our new president in January 2017.

Stay tuned …

About the Author

Greg Adams is the chief strategy officer for Panacea Healthcare Solutions and has over 35 years of experience in the field of healthcare, including 20 years’ experience as a hospital CFO. His experience includes financial operations, managed care contracting, physician practice management, patient accounting, patient access, health information management, materials management, and real estate development. Greg is the past chairman of the national Healthcare Financial Management Association (HFMA), having served as the chair of its Board of Directors in 2011–12. In that role he oversaw the services the organization provides to its 40,000 members. Greg speaks extensively on healthcare reform and the transition to a value-based payment system. His speaking engagements include national, regional, and state programs. From 2002–2005, he served as a member of HFMA’s National Board of Directors and as president of the New Jersey chapter in 1997–98. He has also served as a member of the Board of Trustees and chairman of the Finance Committee at St. Ann’s Home for the Aged in Jersey City, N.J.

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Recent headlines, like the one in USA Today, “Health Care Costs to Rise in 2017,” are creating a stir in the world of health insurance exchanges.

Aetna’s recent decision to drop out of exchanges in 11 states will mean less competition and possibly result in increased premiums to enrollees. The general consensus is that this move was inevitable as payers move to compete on price in place of enrolling the healthiest consumers. Recent reports of substantial increases from some insurers have led to concerns regarding the stability of the Affordable Care Act’s (ACA’s) marketplaces.

A recent study by the Kaiser Foundation of the two lowest cost silver plans found that premiums will be increasing by a weighted average of 9 percent compared to a 2 percent increase from 2015–2016. This increase is not the amount the typical enrollee will see since approximately 80 percent of the people enrolled in the exchange plans receive federal tax credits to help pay for their premiums.

However, it should be noted that, as they say, there is no free lunch, and the increase in premiums will be paid for through an increase in federal tax credits, which is ultimately paid for by the tax-paying public. While the initial premise was that subsidies would eventually be paid for through Medicare program savings and through increased taxes on high-income individuals, the question remains whether the projected savings will ever occur.

 Some state exchange programs are seeing even larger increases. For example, in California, premiums are anticipated to increase 13.2 percent next year. The increase in premiums is driven by several factors, including the risk pool—in other words, the utilization of healthcare services by those enrolled in the specific plans of the exchanges. That is why it is important for the pool to include a portion of healthy enrollees with minimal healthcare service utilization who offset those in the pool who are heavy users of healthcare services.

As we know from our college statistics class, the larger the pool of enrollees the greater the likelihood the distribution will include a sufficient number of low users so that the premiums can be held at a reasonable level. Far and away the largest portion of premiums is the actual cost for the healthcare services being provided. These costs consist of two main components: the unit cost for the service and the number of units that are consumed.

Other drivers include administrative costs related to product development, sales, enrollment, claims processing, customer service, and regulatory compliance. Probably the most significant impact on premiums, outside of pure healthcare costs, will be the sun-setting of the reinsurance program funding. The ACA provided payments to health plans from 2014–2016 declining each year. Next year (2017) will be the first year with no funding, which will result in a corresponding increase in premiums.

Given these variables and the movement by some of the larger payers to decrease their participation on the exchanges prompts the question of whether it will be more difficult for current and future enrollees to obtain health insurance at affordable prices. Couple this with the upcoming election and the vastly different views on the ACA by the Republican and Democratic nominees and the variables increase exponentially.

So while projections for 2017 indicate much larger premium increases and some fallout by the payers, it is too early to tell whether these changes will have any long-term impact on the continued growth and evolution of the healthcare exchanges.

Stay tuned …

About the Author

Greg Adams is the chief strategy officer for Panacea Healthcare Solutions and has over 35 years of experience in the field of healthcare, including 20 years’ experience as a hospital CFO. His experience includes financial operations, managed care contracting, physician practice management, patient accounting, patient access, health information management, materials management, and real estate development. Greg is the past chairman of the national Healthcare Financial Management Association (HFMA), having served as the chair of its Board of Directors in 2011–12. In that role he oversaw the services the organization provides to its 40,000 members. Greg speaks extensively on healthcare reform and the transition to a value-based payment system. His speaking engagements include national, regional, and state programs. From 2002–2005, he served as a member of HFMA’s National Board of Directors for and as president of the New Jersey chapter in 1997–98. He has also served as a member of the Board of Trustees and chairman of the Finance Committee at St. Ann’s Home for the Aged, Jersey City, N.J.

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G AdamsWell, the $64,000 questions are this: what are the early results of value-based purchasing (VBP), and is the healthcare industry making progress? Some may argue that it is a little too early to tell; however, there are some early preliminary results we can scrutinize.

Let’s start with results from the Centers for Medicare & Medicaid Services (CMS). For the fourth year of the VBP program, CMS announced that more hospitals will receive incentive payments for their base operating MS-DRGs than penalties. In total, 1,800 hospitals will have positive payment adjustments. This is an increase of approximately 600 more hospitals in comparison to reductions in the fiscal year.

For the highest-performing hospitals, the net change in payments will be just north of 3 percent, after the 1.75-percent withhold. On the flip side, the poorly performing hospitals will see the maximum reduction of 1.75 percent. However, a new report from the U.S. Government Accountability Office (GAO) found that the financial and quality effects of the program have been minimal in its first three years. The GAO’s report concluded that almost 75 percent of hospitals had their Medicare payments change by plus or minus one-half a percentage point, with the median bonus and penalty being $39,000 and $56,000, respectively. They also found no discernable positive trends in quality measures performance. However, they did note that trends may change as new quality measures are implemented to the program. One exception was in the area of readmissions, where there has been a positive shift in performance.

So from this perspective, there doesn’t seem to be much of a financial or quality impact from the federal VBP programs to date. Now, this may be related to hospitals still ramping up and changing operational practices to be prepared as VBP becomes a larger component of their total reimbursement. It also could be due to the fact that the VBP targets change and are driven by a hospital’s relative improvement compared to its peers – so over time, the entire industry performance will improve as a result of VBP.

One of the recent CMS initiatives that will drive an increase in the movement towards value-based purchasing is the bundled payment program for hip and knee replacements: the Comprehensive Care for Joint Replacement Model (CJR). As you are probably aware, this is the first bundled payment program that is mandatory in 67 geographic areas, as defined by metropolitan statistical areas (MSA).

Why were these services selected for this program? Well, in 2014, a total of $7 billion was spent by Medicare for these services, covering 400,000 patients. The program will run for five years and is projected to save Medicare $343 million. The savings will be generated by adjusting the target price to be paid to an average regional price, which tends to be lower than current payments. The payments will be transitioned, with one-third of the target price being based on the regional amount in year one, two-thirds in year two, and up to 100 percent in year five. Since this program was only implemented this year, there are no results to report on just yet. It will be interesting to see how hospitals and physicians adapt to the reductions in payments.

In addition to the VBP initiatives occurring on the federal level, the private sector has also been busy moving forward.

On the private sector side, new models of collaboration are emerging between providers and payors. These include the development of integrated network arrangements such as joint ventures between providers and payors, agreements like the ones Aetna and Blue Cross have entered into with providers, and equity investments by providers with health plans. All of these arrangements constitute an attempt to better integrate the delivery of care with the goals of increasing quality while reducing costs.

Another example of such a plan coming from the private sector is the Health Care Transformation Task Force: an industry consortium that brings together patients, payors, providers, and purchaserswith a goal of aligning private and public sector efforts to transform the U.S. healthcare system. The Task Force recently reported that 41 percent of its members’ business, both among providers and payors, was in value-based payment arrangements. This was an increase from 30 percent in 2014. The goal of Task Force members is to have 75 percent of their business be value-based by 2020. However, it is too early to tell whether the movement to a higher percentage of business being value-based will positively impact the quality provided and the cost of care.

Now, back to our original question.

What are the early results of value-based purchasing, and is the industry making progress? The answer is this: the industry is moving forward with the movement to a value-based system, and a greater portion of provider payments are now value-based. With the U.S. Department of Health and Human Services (HHS) setting the tone and moving toward its goal of having 90 percent of Medicare payments tied to quality or value by 2018 (and the private sector following its lead), the industry has moved and will continue to move forward with this transition. The big unanswered follow-up question is this: will this transition result in a more integrated healthcare delivery system, with improved quality at an affordable price? It will require more experience and time before we know the answer.

About the Author

Greg Adams is the chief strategy officer for Panacea Healthcare Solutions and has over 35 years of experience in the field of healthcare, including 20 years’ experience as a hospital CFO. His experience includes financial operations, managed care contracting, physician practice management, patient accounting, patient access, health information management, materials management, and real estate development. Greg is the past chairman of HFMA, having served as the chair of its Board of Directors in 2011-12. In that role he oversaw the services the organization provides to its 40,000 members. Greg speaks extensively on healthcare reform and the transition to a value-based payment system. His speaking engagements include national, regional, and state programs. He has previously served as a member of the National Board of Directors for the Healthcare Financial Management Association from 2002-2005 and as president of the New Jersey chapter in 1997-98. He has also served as a member of the Board of Trustees and chairman of the Finance Committee at St. Ann’s Home for the Aged in Jersey City, N.J.

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Tuesday, 22 March 2016 06:27

Are ACOs the Answer for Value-Based Care?

One of the concepts being used to move the healthcare industry from the current fragmented, episodic delivery-of-care model to a value-based model is the accountable care organization (ACO). In theory, this concept should allow providers to work in a much more collaborative and cohesive manner and provide better quality care at lower costs. What are the early results? The answer may depend on who you ask.

To evaluate this, let’s review some of the associated CMS initiatives and their results.

CMS has expanded the number of ACO models under the Patient Protection and Affordable Care Act in an attempt to improve quality of care, better coordinate care delivery, and bend the cost curve. These models include the Pioneer model, the Medicare Shared Savings Program (MSSP), the Next Generation model, and the Comprehensive ESRD care model.

Currently, in total there are 477 ACOs participating in these programs, covering 8.9 million beneficiaries, and 64 ACOs are in risk-bearing models. In 2014, the 20 ACOs in the Pioneer program and the 333 in the Shared Savings program had a combined level of program savings of $411 million. However, 45 percent pf participants cost Medicare more than projected, and after paying bonuses, the ACO program incurred a $2.6 million net loss to the Medicare trust fund.

From the perspective of CMS, the early results are revealing success, as the agency cites improved care based on common quality metrics when compared to fee-for-service providers. Pioneer ACOs improved in 27 of 33 quality metrics, and Shared Savings participants improved on 26 of 33 quality measures. The Pioneer model was designed for healthcare organizations that have already had experience in coordinating care across settings. There have been three years of results recorded for the Pioneer program, and in Year 3, a total of 11 of the 20 participants received payments for their share of the shared savings, three had to make payments back to CMS, and six were revenue-neutral.

On a gross cost savings basis, as noted above, including both the Pioneer and Shared Savings programs, there was $411 million in savings. And the rate of ACOs generating cost savings has been increasing for those providers that have participated in the program the longest. Of those providers who have been in the program since 2012, a total of 37 percent generated savings, compared to 27 percent and 19 percent for those who entered in 2013 and 2014, respectively. CMS believes this illustrates that with more experience, providers improve performance, and this is a positive long-term trend.

However, when you look beyond the numbers, it’s important to note the following: of the ACOs participating in 2014, there were 196 that saved Medicare money, 157 that cost more than anticipated, but only three that had to repay Medicare for losses.

On the flip side, from the providers’ perspective, there have been mixed results. Providers note that while some ACOs have seen savings, it has been a rather small amount, and when adding in providers’ investments in new data systems, infrastructure, care management protocols, and incentive payments, the net impact has been a loss. There is some speculation that the early results are biased due to the preponderance of large health systems, hospital networks, and large multi-specialty physician groups. Given the large capital expenditures and fixed costs of these organizations and the continuation of the fee-for service payment structure, there is still a volume-based incentive to drive revenue and less emphasis on cost reduction. Another issue affecting performance was that most participating providers were reluctant to assume a higher risk/reward structure, instead opting for a less risky model.

In the short term, Medicare will have to deal with the issue of participation in the program and whether to make the repayment of cost overruns by providers mandatory. This could cause current participants to drop out of the program and limit new participants. However, not implementing repayment may limit the amount of cost savings, since providers will have less incentive to reduce cost.

So in terms of answering the question of whether ACO are the answer to the value-based payment question, it looks like the jury is still out. In order to answer this question more comprehensively, we will need more broad-based participation in the program, a longer period of time for ACOs to fully implement value-based care, and payment models that truly provide incentives to provide quality care at a reasonable cost.

Stay tuned.

 

About the Author

Greg Adams is the chief strategy officer for Panacea Healthcare Solutions and has over 35 years of experience in the field of healthcare, including 20 years’ experience as a hospital CFO. His experience includes financial operations, managed care contracting, physician practice management, patient accounting, patient access, health information management, materials management, and real estate development. Greg is the past chairman of the Healthcare Financial Management Association (HFMA), having served as the chair of its Board of Directors in 2011-12. In that role he oversaw the services the organization provides to its 40,000 members. Greg speaks extensively on healthcare reform and the transition to a value-based payment system. His speaking engagements include national, regional, and state programs. He previously served as a member of the National Board of Directors for HFMA from 2002-2005 and as president of the New Jersey chapter in 1997-98. He has also served as a member of the Board of Trustees and chairman of the Finance Committee at St. Ann’s Home for the Aged in Jersey City, N.J.

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Editor's Note: For continued reading, please download Greg Adam's new white paper, “Hospital Price and Quality Transparency – Evolution or Revolution?” or view our on-demand webcast,"The Evolution of Price Transparency in a Value-Based Payment World".

As the healthcare industry adapts to the new reality of value-based payments, the issue of how best to implement price transparency continues. Given the complexity of how prices historically have been developed by hospitals, it is no surprise that developing rational prices using a methodological approach based on cost and market data can be no easy task. In fact, it could be argued that in order to implement price transparency, hospitals need to start with revamping the way they develop their prices. To focus on the publishing of current prices without having developed a rational methodology as to how prices were established in the first place would be like building a house starting with the roof instead of the foundation. Given the irrationality of some past price development strategies, publishing current prices could be more of a problem than a solution. In many instances this could (and has) led to headlines in the media blasting hospitals for $20 aspirin pills or simple hospital visits costing several thousands.

Now, in a perfect world, hospitals would be able to defer the actual publishing of prices until they completed the development of a rational pricing approach. However, we all know we do not live in a perfect world – and with the increased pressure and initiatives from federal and state governments and the payor community, hospitals do not have the luxury of waiting. One approach to this dilemma is to assess current services and categorize services into groups based upon the competition in the local marketplace. For services that are more of a commodity, such as lab, imaging, and ambulatory surgery, one viable pricing strategy might be to develop prices based off of Medicare or commercial fee schedules or freestanding competitors’ prices. Other high-profile services such as room and board can easily be compared to competitors’ costs and typically reduced, since these services tend to have low contribution factors and therefore decreases have little impact on net revenues. A word of caution here is this: if the hospital has stop-loss provisions in their managed care contracts, it needs to be careful to not negatively impact revenues through these reductions. These measures should be viewed merely as stopgap measures to allow hospitals time to develop a true rational pricing approach based on cost and competitors’ rates while preserving sufficient net revenues based upon net income objectives.

Once the development of rational prices has been completed, hospitals cannot stop there. They need to continue down this path and begin incorporating quality measures into their pricing strategies. While the publishing of quality scores has lagged behind the publishing of price data, it is moving quickly to the forefront of a value-based payment system. As we can all appreciate, this is no different than the other goods and services for which we currently pay. In fact, given the personal nature of healthcare, I would argue that quality is more important than price. Along these lines, hospitals should be assessing their current performance on the quality indicators being published, evaluating their accuracy, and, when necessary, taking corrective action to address any quality issues. On the other hand, where quality is clearly better than that of competitors, hospitals should use this to their advantage in their pricing strategies. Since we already know that Medicare is paying for value and penalizing for poor quality, and the payor community is implementing its own value-based payment methodologies, hospitals need to be proactive in responding to these initiatives.

To summarize, hospitals must address the immediate pressure on how best to implement price transparency in the short term while at the same time developing a long-term rational pricing strategy based upon cost and taking into consideration competitor prices, market dynamics, financial goals, and quality metrics in order to be successful in a value-based payment world.

About the Author

Greg Adams is the chief strategy officer for Panacea Healthcare Solutions and has over 35 years of experience in the field of healthcare, including 20 years’ experience as a hospital CFO. His experience includes financial operations, managed care contracting, physician practice management, patient accounting, patient access, health information management, materials management, and real estate development. Greg is the past chairman of the national HFMA, having served as the chair of its Board of Directors in 2011-12. In that role he oversaw the services the organization provides to its 40,000 members. Greg speaks extensively on healthcare reform and the transition to a value-based payment system. His speaking engagements include national, regional, and state programs. He has previously served as a member of the National Board of Directors for the Healthcare Financial Management Association from 2002-2005 and as president of the New Jersey chapter in 1997-98. He has also served as a member of the Board of Trustees and chairman of the Finance Committee at St. Ann’s Home for the Aged in Jersey City, N.J.

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Much of recent discussion about value-based payments in healthcare centers on price. And while price is important to all consumers of healthcare services (just as with any other good or service), quality is equally important – maybe even more important. Only providing price information to patients and employers is presenting half the picture.

In addition, there are advantages to hospitals and physicians providing quality data along with price information. As in any other industry, being able to provide and document better quality can result in an ability to charge more for services. So why is quality transparency so far behind price transparency? Well, for one thing, how to define quality and which metrics to use to measure it is still under debate.

Currently there are thousands of measures used in healthcare to measure performance. The Centers for Medicare & Medicaid Services (CMS) quality measures inventory has nearly 1,700 measures, and the National Quality Forum has over 600! By any stretch of the imagination, this is way too many!

However, this seems to be changing as various constituencies evaluate the many measures in use today. One of the groups on the forefront of this issue is the Institute for Medicine (IOM), which recently called for streamlining quality measures and narrowing the industry’s focus to those that matter most and result in better health.

The IOM, with support from the Blue Shield of California Foundation, the California Healthcare Foundation, and the Robert Wood Johnson Foundation, recently convened a committee to identify core measures for health and healthcare,and it published its recommendations in a report called Vital Signs: Core Metrics for Health and Health Care Progress. The framework is based on four fundamental principles: healthy people, care quality, lower cost, and engaged people.

The measures were selected based upon their understandability, their potential to have broad system impact, their technical integrity, and the ability to be used at multiple levels.

The committee came up with 15 key measures in all: life expectancy, well-being, obesity, addictive behavior, unintended pregnancy, healthy communities, preventive services, care access, patient safety, evidence-based care, care matching patient goals, personal spending burden, population spending burden, individual engagement, and community engagement.

Behind each of these core measures are related priority measures.

Life expectancy: infant mortality, maternal mortality, and violence and injury mortality.

Well-being: multiple chronic conditions and depression.

Obesity: activity levels and healthy eating patterns.

Addictive behavior: tobacco use and drug and alcohol dependence.

Unintended pregnancy: contraceptive use.

Healthy communities: childhood poverty rate, childhood asthma, air quality index, and drinking water quality index.

Preventative services: influenza immunization and colorectal cancer and breast cancer screening.

Care access: usual source of care, delay of needed care.

Patient safety: wrong-site surgery, pressure ulcers, and medication reconciliation.

Evidence-based care: cardiovascular risk reduction, hypertension control, diabetes control composite, heart attack therapy protocol, stroke therapy protocol, and unnecessary care composite.

Care matching patient goals: patient experience, shared decision-making, and end-of-life/advanced care planning.

Personal spending: healthcare-related bankruptcies.

Population spending burden: total cost of care, healthcare spending growth.

Individual engagement: involvement in health initiatives.

Community engagement: availability of health food, walkability, and community health benefit agenda.

The committee realized that in order for these measures to be leveraged in a meaningful way, there needed to be buy-in from all involved parties. In order to accomplish this, the committee developed 10 recommendations. The recommendations outline the specific responsibilities of all parties involved in the provision and use of healthcare services, including the government, clinicians, healthcare delivery organizations, employers, payors and purchasers, individuals and families, communities, and accrediting organizations.

The basic goal of the recommendations is to get all parties involved to agree on the core metrics to be measured, the implementation of the measures, and each party’s role in the success of the transition to a value-based system.

The work of the IOM and this committee is a great step forward in moving the industry toward adoption of consistent, quantifiable quality metrics. This, coupled with an increase in price transparency, should result in further progress towards a value-based healthcare system, which will result in better care at lower cost for all our communities.

About the Author

Greg Adams is the chief strategy officer for Panacea Healthcare Solutions and has over 35 years of experience in the field of healthcare, including 20 years’ experience as a hospital CFO. His experience includes financial operations, managed care contracting, physician practice management, patient accounting, patient access, health information management, materials management, and real estate development. Greg is the past chairman of Healthcare Financial Management Association (HFMA), having served as the chair of its Board of Directors in 2011-12. In that role he oversaw the services the organization provides to its 40,000 members. Greg speaks extensively on healthcare reform and the transition to a value-based payment system. His speaking engagements include national, regional, and state programs. He has previously served as a member of the Board of Directors for the Healthcare Financial Management Association from 2002-2005 and as president of the New Jersey chapter in 1997-98. He has also served as a member of the Board of Trustees and as chairman of the Finance Committee at St. Ann’s Home for the Aged in Jersey City, N.J.

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Monday, 10 August 2015 03:31

Price Transparency – Front and Center

As the healthcare industry moves towards value-based payments, one of the key issues that need to be addressed is the issue of transparency. This includes transparency in both price and quality. I’ve spoken recently on Talk Ten Tuesdays about this topic and the public demand for timely, accurate information on hospital and physician prices and quality. One of the leaders in our industry, the Healthcare Financial Management Association (HFMA), recently assembled a task force to address this issue. The task force was composed of industry leaders from the provider community, hospitals and physicians, several hospital association leaders, consumer groups, and, of course, HFMA. As a past chairman of the HFMA, I know that the Association believes strongly in this issue and the need for transparency in our industry.

Why is price transparency needed now? While in the past, pricing primarily mattered to patients without insurance, with the recent significant changes in insurance plan design and employer-sponsored plans increasing, the employee cost-sharing amounts have risen significantly – so there has been an exponential growth in the need for this information.

The results of the task force’s work are based on the guiding principles below and include the following recommendations:

First, the guiding principles:

Price transparency should empower patients and other care purchasers to make meaningful price comparisons prior to receiving care. It also should enable other care purchasers and referring clinicians to identify providers that offer the level of value sought by the care purchaser or the clinic.

Any form of price transparency should be easy to use and easy to communicate to stakeholders.

Price transparency information should be paired with other information that defines the value of services for the care purchaser.

Price transparency ultimately should provide patients with the information they need to understand the total price of their care and what is included in that price.

Price transparency will require the commitment and active participation of all stakeholders.

Recommendation No. 1: Because health plans in most instances will have the most accurate data on prices for their members, they should serve as the principal source of price information for their members.

Recommendation No. 2: Health plans and other suppliers of price information should innovate with different frameworks for communicating price information to insured patients.

Recommendation No. 3: Transparency tools for insured patients should include some essential elements of price information, to include the total estimated price of the service, the network status of the providers, the out-of-pocket responsibility, and other relevant information such as clinical outcomes and patient satisfaction scores.

Recommendation No. 4: Insured patients should be alerted to the need to seek price information from out-of-network providers.

Recommendation No. 5: To ensure valid comparisons of provider price information, health plans and other suppliers of such information should make transparent the specific services that are included in the price estimate.

Recommendation No. 6: The provider should be the principal source of price information for uninsured patients and patients who are seeking care from the provider on an out-of-network basis.

Recommendation No. 7: Providers should develop price transparency frameworks for uninsured patients and patients receiving care out of network that reflect several basic considerations. 

Recommendation No. 8: Transparency tools for beneficiaries in Medicare health plans or Medicaid managed care programs should follow the recommendations for patients with private or employer-sponsored coverage, as detailed in Recommendation No. 3. 

Recommendation No. 9: The Centers for Medicare & Medicaid Services (CMS) and state administrators of Medicaid programs should develop user-friendly price transparency tools for traditional Medicare and Medicaid beneficiaries.

Recommendation No. 10: To supplement information provided by CMS and state administrators of Medicaid programs, providers should offer information on out-of-pocket payment responsibilities to traditional Medicare and Medicaid beneficiaries upon a beneficiary’s request.

Recommendation No. 11: Fully insured employers should continue to use and expand transparency tools that assist their employees in identifying higher-value providers.

Recommendation No. 12: Self-funded employers and third-party administrators (TPAs) should work to identify data that will help them shape benefit design, promote understanding of healthcare spending, and provide transparency tools to employees.

Recommendation No. 13: Referring clinicians should help patients make informed decisions about treatment plans that best fit the patient’s individual situation. They also should recognize the needs of price-sensitive patients and seek to identify providers that offer the best price at the patient’s desired level of quality.

As all of us in the industry know, hospital and physician pricing is different that pricing for other consumer goods and services. Current prices are impacted by costs, levels of uncompensated care, and reimbursement shortfalls from Medicare and Medicaid, to name a few factors. However, regardless of the complexity of price development, it is our responsibility, as an industry, to be more transparent on price information and to help our patients understand their financial responsibility BEFORE they need our services.

About the Author

Greg Adams is the chief strategy officer for Panacea Healthcare Solutions and has over 35 years of experience in the field of healthcare, including 20 years of experience as a hospital CFO. His experience includes financial operations, managed care contracting, physician practice management, patient accounting, patient access, health information management, materials management, and real estate development. Greg is the past chairman of the HFMA, having served as the chair of its Board of Directors in 2011-12. In that role he oversaw the services the organization provides to its 40,000 members. Greg speaks extensively on healthcare reform and the transition to a value-based payment system. His speaking engagements include national, regional, and state programs. He has previously served as a member of the National Board of Directors for the Healthcare Financial Management Association from 2002-2005 and as president of the New Jersey chapter in 1997-98. He has also served as a member of the Board of Trustees and chairman of the Finance Committee at St. Ann’s Home for the Aged in Jersey City, N.J.

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Tuesday, 09 June 2015 21:49

Transparency in Healthcare

G AdamsOne question that often gets asked is this – Can healthcare transparency really be achieved, and more importantly, can it promote high-value care?

As we all know, the price for healthcare services is often not really the price, with Medicare and Medicaid paying fixed rates and commercial payors primarily paying case rates, per diems, or using a fee schedule. There is often little or no correlation between providers' charges and the amount that ultimately gets paid. Couple this with insurance covering most of the bill, and it's easy to understand why there was no real push for transparency in the past. But it now seems that we have hit a tipping point, as patients have become responsible for a far greater portion of their healthcare costs.

Consumer groups and employers argue that if consumers were armed with price and quality information, they would make decisions similar to the decisions they make for other goods and services. This, in turn, would create more competition among providers, resulting in better quality and lower cost.

An interesting Congressional Research Services study was done on whether consumers would use price information to make better health spending decisions. However, the study found that early price transparency initiatives did not lead to changes in consumer behavior. Speculation is that this may be due to patients still having the bulk of services costs covered by health insurance – and a perception that lower cost means lower quality.

That being said, there are numerous transparency initiatives continuing to gain momentum. Payors are getting involved and beginning to help consumers by providing price information to their members. Aetna does so through its member Payment Estimator, which provides comparative price estimates for more than 500 common services, taking into account users' specific plan types and deductibles.

Others starting to do the same include Blue Cross and Blue Shield plans and UnitedHealthcare. In United's case, its program also allows members to see whether their physician has met quality and efficiency standards.

As would be expected, where a need is projected, private firms have entered the price transparency marketplace too. Castlight Health and Change Healthcare, both founded within the past five years, use proprietary software to analyze claims data to estimate the costs of common medical procedures. Their reports also include quality data on providers, enabling users to take into account both cost and quality. These tools are not only available to consumers, but the companies sell them to self-insured companies and health plans.

In the case of Change Healthcare, they are proactively reaching out to consumers through texts and emails on how they can save on prescription drugs and other healthcare services.

Similar to the Kelley Blue Book, commonly used for determining car values, there is a Healthcare Blue Book available free to consumers. It uses a variety of sources, including claims data, to provide pricing information to consumers. It recently rolled out a subscription-based service to employers and insurance companies that includes providers ranked in terms of value.

For now, it looks like these products are being used for comparison shopping for basic healthcare services such as lab tests, radiology exams, and medical office visits. These are services that are viewed more as commodities, with little differentiation among providers.

At the governmental level, many states have approved or proposed legislation to promote price transparency. Early efforts were primarily about publishing the chargemaster or median prices for hospital services. However, this information often had no relevance to a patient's financial responsibility. Recent efforts include New Hampshire's using its claims database covering all payors in that state to publish information on total and out-of-pocket costs. In California, hospitals are required to provide patient estimates for the 25 most common outpatient procedures. The state also provides a website with median charges per hospital stay for common elective inpatient procedures. Florida not only provides a range of prices for various procedures, but also includes data on quality such as mortality and infection rates for hospitals and surgery centers.

On a federal level, the Patient Protection and Affordable Care Act requires hospitals to annually publish a list of standard charges for their services.

The bottom line here is that access to both price and quality data continues to grow exponentially. This, coupled with the increasing number of consumers participating in high-deductible plans, the growth of retail healthcare, and a generation of consumers who use their mobile devices to book airfares, make dinner reservations, and do all kinds of shopping online will only increase the demand for transparency of healthcare prices. Providers need to be prepared to respond proactively to the new world of healthcare transparency.

About the Author

Greg Adams is the chief strategy officer for Panacea Healthcare Solutions and has over 35 years of experience in the field of healthcare, including 20 years' experience as a hospital CFO. His experience includes financial operations, managed care contracting, physician practice management, patient accounting, patient access, health information management, materials management, and real estate development. Greg is the past chairman of the National HFMA, having served as the chair of its Board of Directors in 2011-12. In that role he oversaw the services the organization provides to its 40,000 members. Greg speaks extensively on healthcare reform and the transition to a value-based payment system. His speaking engagements include national, regional, and state programs. He has previously served as a member of the National Board of Directors for the Healthcare Financial Management Association from 2002-2005 and as president of the New Jersey chapter in 1997-98. He has also served as a member of the Board of Trustees and chairman of the Finance Committee at St. Ann's Home for the Aged, Jersey City, N.J.

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For value-based purchasing (VBP) to succeed, we all know how important it is for providers of all types, hospitals, physicians, home health agencies, and others to work together to provide a coordinated, seamless provision of services to patients. However, we can’t forget that there are other parts of the healthcare system that need to be actively involved to get the maximum societal benefit. Clearly, this includes payors and patients. Patients must take a more active role in managing their own health, and payors need to work with providers and patients to ensure that healthcare services are provided in a cost-efficient fashion with successful outcomes. After all, the definition of “value” is quality/cost.

One of the strategies payors (which include insurance companies, employers, and federal and state governments) can use is value-based insurance design (VBID). In its simplest form, this means designing health benefits to either reduce barriers or provide incentives to maintain and improve health. This includes things such as covering preventive care, wellness visits, treatments, and medications to control blood pressure or diabetes at low or no cost. Various studies have concluded that lowering copayment amounts for patients needing certain drugs to control a medical condition demonstrated significant increases in patient compliance.

Often, under current health benefit designs, the cost of deductibles or coinsurance results in patients forgoing medications and treatments due to their high costs. To use a slightly altered old adage, it’s a pattern of “pay me now or pay me more later.” Health plans are now finding that reducing deductibles and coinsurance for these preventative services saves them money in the long run by reducing future emergency room visits and the need for expensive medical procedures. On the flip side, benefit plans are also creating disincentives as well, with higher deductibles for health services that may be deemed unnecessary – even when the same outcome can be achieved through alternative treatments at a lower cost. Many payors are beginning to use evidence-based data to identify the cost/benefit of various treatment options and to design their benefit plans.

In fact, the Patient Protection and Affordable Care Act (PPACA) emphasizes increasing quality and efficiency in healthcare through providing access to preventive services. Specifically, the Act requires that all health plans include certain preventive services without a copayment for the patient. For example, the required preventive services for adults include blood pressure screening and colorectal cancer screening.

At the forefront of this transition to value-based insurance design health benefits are many state and local governments. Given the large deficits being faced by many states and the significant unfunded liabilities for pension and health benefits state governments are seeing, opportunities exist to reduce both current budget costs and unfunded liabilities. Examples include the state of Oregon, which has implemented a VBID program for its public employees. Their plan includes lower cost sharing for preventive care, chronic disease medications, and emergency services, along with increases in employee share of costs for health services (which have been identified as overused or not evidence-based). In addition, they have added a surcharge for smokers and will no longer cover some cosmetic procedures, with the cost of certain such procedures becoming the sole responsibility of the employee.

In Colorado, the Colorado Springs school district changed its health benefit plan to provide an incentive for employees to use minimally invasive procedures for certain surgeries. They lowered the copayment amounts for minimally invasive procedures while increasing the copayment for open surgical procedures. This was done only when both types of procedures were an option. In this case, they were not only focusing on the lower direct cost resulting from the use of a minimally invasive technique, but also generating a cost savings from less absenteeism. Since the minimally invasive procedures require less recovery time, teachers were back in the classroom sooner and the cost for substitute teachers was reduced.

And in Wisconsin, in Chippewa County they have implemented a VBID program for county employees, for which out-of-pocket costs are waived for programs such as diabetes education, medications for chronic conditions, and colonoscopies. They also provide incentives for weight management. Their estimated savings from these programs was a reduction in healthcare costs of 30 percent, saving the county $1.7 million in annual health insurance costs.

Employers have also been implementing VBID programs with great success. Caterpillar implemented health risk appraisal and disease management programs for high-risk employees, with very favorable results. Ninety percent of eligible employees participated and results included a 50-percent decrease in the amount of disability days.

In the case of Marriott International, which has annual healthcare costs exceeding $400 million, copayments were reduced for medications for chronic diseases, including asthma, cardiovascular diseases, and diabetes. The company found that the additional cost for the copay reduction was more than offset by the reduction in more costly adverse events, which previously occurred as a result of noncompliance with this group of employees.

These are only a few examples of the impact of value-based insurance design on healthcare costs. The more important conclusion is that VBID programs are an essential component in the development of a coordinated, seamless healthcare delivery system in which providers, payors, and patients work together to deliver services that are cost-efficient and outcome-based. This, after all, is the definition of value.

About the Author

Greg Adams is the chief strategy officer for Panacea Healthcare Solutions and has over 35 years of experience in the field of healthcare, including 20 years’ experience as a hospital CFO. His experience includes financial operations, managed care contracting, physician practice management, patient accounting, patient access, health information management, materials management, and real estate development. Greg is the past chair of the National HFMA, having served as the chair of its Board of Directors in 2011-12. In that role he oversaw the services the organization provides to its 40,000 members. Greg speaks extensively on healthcare reform and the transition to a value-based payment system. His speaking engagements include national, regional, and state programs. He has previously served as a member of the National Board of Directors for the Healthcare Financial Management Association from 2002-2005 and as president of the New Jersey chapter in 1997-98. He has also served as a member of the Board of Trustees and chairman of the Finance Committee at St. Ann’s Home for the Aged in Jersey City, N.J.

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Monday, 16 March 2015 15:20

Value-Based Purchasing Heating Up

One of the many objectives of the Patient Protection and Affordable Care Act is the successful transition from a volume-based healthcare payment system to one that pays for value. Well, to that end, things have really started to heat up!

Last month the U.S. Department of Health and Human Services (HHS) announced some pretty ambitious goals for the healthcare industry. By 2018, the Department wants 50 percent of Medicare payments based on quality of care. This is the first time in the history of the Medicare program that such specific goals have been set for provider payments. 

The plan is by 2016, which is less than a year away, 30 percent of all Medicare provider payments will fall under some form of alternative payment model – which includes accountable care organizations, patient-centered medical homes, or bundled payments.

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