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At IHI Event, Discussion Of Trading Hospital Cost Reductions For Flexibility



November 20th, 2012
by Chris Fleming

Hospitals have resigned themselves to an austere revenue environment but would like some things in return, Susan DeVore, president and CEO of the hospital and health systems alliance Premier Inc., said at “Out of the Blocks: Where Do We Go from Here?” a recent post-election conference convened by the Institute for Healthcare Improvement.

Premier members are not counting on revenue relief even with the Affordable Care Act’s Medicaid expansion and the arrival of the ACA’s state health insurance exchanges in 2014, DeVore said. “Many of them have already determined they are going to try to run their operations at Medicare rates; some of them are determining they’re going to run their operations at Medicaid rates,” DeVore told panel moderator Don Berwick, IHI’s former president and CEO and the former Administrator of the Centers for Medicare and Medicaid Services. Member hospitals are getting very tactical and very specific about ways to reduce costs, because “under any scenario the [needed] cost reductions are going to be very, very significant.”

“What requests would you have of the policymakers?” asked Berwick, who is now a senior fellow at the Center for American Progress. “What [other than revenue relief] would help you the most?” DeVore’s reply – “Oh my gosh, I have many requests” – generated laughter. “The regulatory environment: the certificate of participation requirements; the [health information technology] meaningful use definitions; the three-day hospital stay required before you can be paid by Medicare for skilled nursing — things that are just crazy and regulatory that get in the way of people being able to make changes.”

What Do Hospitals Want From Policymakers?

“You would make a deal on that? You would say, ‘We’ll deliver the costs reduction if you give us this relief?’  Is it that simple?” Berwick asked. DeVore’s response: “I think if we could get standards, fewer measures, regulatory relief, FTC [Federal Trade Commission] relief — all these things you need to get out of the way in order to actually effectively reduce the cost — I think people would talk about that.

“I think what they would want is a shared-savings way of transitioning,” DeVore continued. “If there is a way that we have a cost target, we have regulatory relief, we have a way of sharing it that as we learn, as we change – I think they would do that.”  She said she would ask for a “national voluntary bundled-payment program with shared savings, like what is embedded in [accountable care organizations], as opposed to in the [Center for Medicare and Medicaid Innovation]. Most of our health systems believe that bundled payment and delivery is the big next step in terms of how you change the way care is delivered and how it is paid for. If we could have a national voluntary program that was scalable” and we “shared the savings along the way, we’d move the whole thing down the line a lot faster.”

A Tension Between Promoting Integrated Care And Preventing Collusion?

Berwick warned that the FTC, the Department of Justice, and the HHS Office of Inspector General would “all say this is collusion in disguise, you guys just want to control prices and markets.” DeVore answered, “You can’t have it both ways. You either want coordinated integrated care or you don’t, and if you have coordinated integrated care, you’re going to have people working together. I think transparency is the great equalizer: If you have data on costs and data on clinical outcomes and data on community health, and data on the Medicare and Medicaid costs, it is [a remedy] for this worry about consolidation and collusion.”

DeVore’s comments were seconded by two copanelists. Benjamin Chu, Kaiser Permanente Group President, Southern California and Hawaii, and Chair-Elect of the American Hospital Association, said he was “thoroughly surprised at how far people have come in terms of thinking about payment reform” since his first term on the AHA Board several years ago.  Chu spoke of hospital leaders’ desire not to continue to “straddle the middle … between fee-for-service and a more value-driven payment system,” although he suggested that most hospitals systems – unlike Kaiser Permanente – were likely not ready to move to full capitation.

Chu called bundled-payment discussions “the key to moving people over. The field is really anxious to make that step. If we are going to go there — and everyone sees we’re going to go there — let’s do it quickly, like ripping off the Band Aid, instead of just consistently taking these tiny baby steps.” He pointed out that “fundamentally, the changes you are going to make in the delivery system are different if you are operating in the fee-for-service world as opposed to the bundled payment/capitation world, and the systems that you need to pull together are sometimes contradictory, so we might as well make a choice and move forward.”

William Pully, the president of the North Carolina Hospital Association, said the Obama administration “basically has two different policies: One is to encourage integration and consolidation and all the things we’re doing to coordinate care, and the other side of the administration is saying, ‘No, you can’t do that.’ That uncertainty in itself has had a chilling effect on what we need to do.” Berwick asked whether Pully’s constituents were “ready to accept transparency about contracting, prices, the full Monty, so that the FTC will say, ‘OK, we can watch it.’ ” Pully called that “a big challenge. We’ve accepted levels of transparency that I never thought we’d see, especially in the areas of quality and patient safety.”  He continued, “The next step is going to be whether we are ready to accept transparency in pricing. I’m not sure I can answer that except to say that I am happy to lead them to that and tell them that’s where they need to get … but I’m not sure they’re ready to get there.”

“For the record,” Berwick summarized, “it sounds like the components of a deal could be promised savings – we’re not going to go back on that – in return for more flexibility. I would say the third part of that has to be transparency.”

More from IHI’s event in future posts.

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1 Trackback for “At IHI Event, Discussion Of Trading Hospital Cost Reductions For Flexibility”

  1. Action For Better Healthcare » Trading hospital cost reductions for flexibility
    November 27th, 2012 at 4:37 pm

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