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Paying For The ‘Doc Fix’


March 26th, 2015

For years now it has become apparent that the Sustainable Growth Rate (SGR) system is not sustainable.  However, fixing the SGR will require increases in budgeted costs, and so one of the major barriers to replacing the SGR is figuring out how to pay for the fix. Towards this end, it is important to understand the appropriate cost-comparison.

Federal scorekeepers (appropriately) assess the cost of the SGR fix relative to current law, which assumes that fees will follow a trajectory defined by current policy. But as near as I can tell, few advocate for that path or believe it will occur; rather the current system will continue to require regular “patches”.  Therefore, the appropriate measure of the cost of the doc fix is spending with the fix relative to spending without it.  The latter includes the costs of future “patches” necessary to ensure continued operation (as well as any savings that can be achieved because of continued SGR related negotiations).  Substituting this realistic alternative into the cost calculus likely substantially lowers the incremental cost of any SGR fix.

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The Final Stage Of Meaningful Use Rules: Will EHRs Finally Pay Off?


March 25th, 2015

Six years ago, President Obama signed into law the HITECH Act, which spelled out a path to a nationwide health information technology infrastructure.  The goal was simple:  every doctor, nurse, and hospital in America should use electronic health records — and do it in a way that leads to better care delivered more efficiently.  The Act provided $30 billion in incentives for providers and hospitals who met the criteria for “Meaningful Use”, which the Obama administration was given the authority to define.  The rules were set up to be rolled out in three stages, and while the first two stages have been out for a while, the criteria for the third and final stage of Meaningful Use (MU) were finally released on March 20.

David Blumenthal, the first national coordinator under HITECH, used the analogy of the Meaningful Use program as an escalator — with the first stage focused on just getting people on board and each stage requiring a higher level of use — which would focus on demonstrating better care through advanced EHR use.  Put more simply, the goal of the three stages was to first get providers to just start using EHRs, and then over time to get them to use the systems more frequently, more robustly, and ultimately, in ways that lead to better, more efficient care.

The new stage 3 rule reflects both the successes and the failures of the first two stages.  It moves toward making the EHR market more open and competitive, and providing more choices, in ways that I think are helpful — but possibly not helpful enough.

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Unpacking The Burr-Hatch-Upton Plan


March 24th, 2015

Anticipating the upcoming Supreme Court decision on King v. Burwell, which could halt health insurance subsidies available through the federal exchange, Republican Senators Richard Burr and Orrin Hatch joined with Representative Fred Upton to propose a comprehensive replacement for the Affordable Care Act (ACA). The Patient Choice, Affordability, Responsibility, and Empowerment Act, or Patient CARE Act, is modeled on a proposal of the same name offered last year by Senators Burr, Hatch, and Tom Coburn, who has retired from the Senate. The Burr-Hatch-Upton plan, like its predecessor, adopts consumer-based reforms of the insurance market, modernizes the Medicaid program, and makes other changes intended to lower cost and increase choices.

In an earlier post, we described in detail the provisions of the Burr-Coburn-Hatch bill. In this post, we discuss how the Burr-Hatch-Upton plan differs from the earlier proposal. We also discuss the impact of the new proposal on health insurance coverage, premiums, and the federal budget based on a new analysis from the Center for Health and Economy (H&E), a non-partisan think tank focused on producing informative analyses of trends in U.S. health care policy and reform ideas. We conclude by commenting on the direction Republicans are likely to take in reforming the health system in the aftermath of a Supreme Court decision in the King v. Burwell case.

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What Is Behind The Post-Recession Bend In The Health Care Cost Curve?


March 23rd, 2015

It has been a while since I last had the opportunity to analyze the slowdown in health spending and the extent to which it represents a lasting bend in the cost curve, as opposed to lingering effects of the “Great Recession or other temporary changes.” (See Note 1)

Distinguishing Health Care Cost Curves

When we discuss bending the health care cost curve, two questions arise: “Which curve?” and “Short run or long run?” In this post, I focus on the curve represented by the growth rate in national health expenditures (NHE) pre- and post-recession. Other curves of interest include “excess growth” (health spending growth in excess of gross domestic product [GDP] growth) and the closely related health spending share of GDP. For analysis of all three curves over the very long run, including a provocative “big bang” theory about the origins of excess growth, see Tom Getzen’s blog. A fourth curve that has gotten my attention, through the work of Gene Steuerle, is the health spending share of the growth in real per capita GDP. (See Note 2)

I now turn to the present topic, the record low growth in NHE that began in 2009 (the year in which the recession ended) and continued through 2013 (the most recent year for which we have official data). There has been extensive discussion about whether these low rates are the result of temporary cyclical factors, such as the recession, or more permanent structural factors. As detailed below, I conclude that, to a surprisingly large extent, the answer is neither: the bulk of the decline in the health care spending growth rate resulted from lower economy-wide price inflation and some temporary factors not tied to the recession.

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What Kind Of Advance Care Planning Should CMS Pay For?


March 19th, 2015

Currently, Medicare does not offer a paid benefit for advance care planning (ACP). As a result, health care providers who want to assist Medicare enrollees with ACP do so voluntarily and neither they, nor their institutions, are compensated for their time and efforts. This is not only an unfair expectation on individual practitioners or health institutions, it is also medically and ethically unsound. Fortunately, two recent events have the potential to reshape the landscape of advance care planning in the U.S.

Cultural And Policy Evolution In Advance Care Planning

On September 17, 2014, the Institute of Medicine (IOM) published Dying in America: Improving Quality and Honoring Individual Preferences Near the End of Life. The report is built on two basic premises:

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Can Safety-Net Hospital Systems Redesign Themselves To Achieve Financial Viability?


March 16th, 2015

Safety-net hospital systems have long played a special role in the nation’s health care system by serving low-income, medically, and socially vulnerable patients regardless of their ability to pay. Beyond caring for people regardless of insurance coverage, safety-net systems provide comprehensive care to meet the needs of their diverse, complex patient populations, including culturally-responsive health and social services that other hospital systems do not.

As providers of last resort, some safety-net systems, especially public hospitals, are expected by their communities and by state and local governments to offer needed but unprofitable services, regardless of whether adequate revenue streams exist to support these services.

 In recognition of that role, national, state, and local government agencies historically have provided supplemental funding to these systems to offset unreimbursed and under-reimbursed care. Under the Affordable Care Act, however, that is changing. With the expectation that most people will be insured under the new law, policy makers have planned to reduce much of this supplemental funding. In this view, safety-net systems will either become financially independent or close.

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Go Slow On Reference Pricing: Not Ready For Prime Time


March 9th, 2015

Editor’s note: This post is part one of two on reference pricing. 

The use of reference pricing by health insurers and employee health benefit plans stands high on the policy and regulatory agenda because it is gaining popularity, particularly now that federal agencies have blessed its use by large group insurers and self-insured plans, while imposing only relatively lax requirements. The purpose of reference pricing is to enable patients to “shop” for care and to spur provider competition by creating a group of “designated” in-network providers that agree to abide by the reference price while others do not (“non-designated providers”).

Patients who select more expensive non-designated providers must pay extra, letting them decide whether the extra out-of-pocket cost is worth it. Providers compete, either by agreeing to the reference price or by lowering their prices to approach it. Prices are driven downward.

Reference pricing is superficially appealing because it invokes powers that consumers exercise every day, as they weigh cost and value for items ranging from cold cereal to new cars. But it also raises significant issues regarding quality and access to care and has the potential to discriminate against sick and vulnerable patients. The strategy may also prove costly in relation to the benefits it confers. We urge a go-slow approach and more careful regulation.

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Where Is HITECH’s $35 Billion Dollar Investment Going?


March 4th, 2015

On April 16, 2013, we released “REBOOT: Re-examining the Strategies Needed to Successfully Adopt Health IT,” outlining concerns with implementation of the Health Information Technology and Economic and Clinical Health (HITECH) Act. Specifically, we asked: What have the American people gotten for their $35 billion dollar investment?

Two years after releasing the white paper, and six years since enactment of the HITECH Act, the question remains. There is inconclusive evidence that the program has achieved its goals of increasing efficiency, reducing costs, and improving the quality of care.

We have been candid about the key reason for the lackluster performance of this stimulus program: the lack of progress toward interoperability. Countless electronic health record vendors, hospital leaders, physicians, researchers, and thought leaders have told us time and again that interoperability is necessary to achieve the promise of a more efficient health system for patients, providers, and taxpayers.

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Open Payments: Early Impact And The Next Wave Of Reform


March 3rd, 2015

Editor’s note: This post is part of a series stemming from the Third Annual Health Law Year in P/Review event held at Harvard Law School on Friday, January 30, 2015. The conference brought together leading experts to review major developments in health law over the previous year, and preview what is to come. A full agenda and links to video recordings of the panels are here.

The Physician Payments Sunshine Act, a provision in the Affordable Care Act, seeks to increase the transparency of the financial relationships between medical device and drug manufacturers, physicians, and teaching hospitals. Launched on September 30, 2014 by the Centers for Medicare & Medicaid Services (CMS), the Open Payments database collects information about these financial relationships and makes that information available to the public.

As of early February, the Open Payments database includes documentation of 4.45 million payments valued at nearly $3.7 billion made from medical device and pharmaceutical manufacturers to 546,000 doctors and 1,360 teaching hospitals between August 2013 and December 2013. This included 1.7 million records (totaling $2.2 billion) without the names of physicians or teaching hospitals who received the payments.

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The ACA’s Hospital Tax-Exemption Rules And The Practice Of Medicine


March 3rd, 2015

The Affordable Care Act (ACA) and related regulations include obligations for nonprofit (and some government) hospitals to provide benefits, such as free care, to their communities. On their face, these new obligations seem a valuable response to longstanding concerns of some legislators, litigators, and scholars that some nonprofit hospitals are really ‘for-profits in disguise’ and to the related calls to eliminate tax-deductions for gifts to nonprofit hospitals. Moreover, the requirements have been lauded for their potential to improve public health, particularly in leading to better consultation and collaboration with local public health officials.

However, the new requirements are likely to have unintended, undesirable consequences. In particular, the amount that hospitals will spend on new services may be substantial, and that could ultimately affect how medicine is practiced.

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Health Affairs’ March Issue: The Benefits And Limitations Of Information


March 2nd, 2015

The March issue of Health Affairs contains papers focusing on the benefits—and the limitations—of information-gathering processes as a way to solve health system problems. Studies in this variety issue examine US hospital rating systems, disclaimers on dietary supplements, state prescription drug monitoring programs, the value of US versus Western European cancer care and other topics.

National hospital rating systems show little agreement — what’s a consumer to do?

Matt Austin of Johns Hopkins Medicine and coauthors compared four well-known national hospital rating systems designed for use by US consumers: U.S. News & World Report’s Best Hospitals; HealthGrades’ America’s 100 Best Hospitals; Leapfrog’s Hospital Safety Score; and Consumer Reports’ Health Safety Score. They analyzed ratings covering the time period from July 2012 to July 2013.

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Health Affairs Web First: Recent US Hospital Productivity Growth


February 11th, 2015

Between 2002 and 2011, US hospitals increased their productivity in treating Medicare patients for several serious illnesses, refuting fears about a “cost disease” in health care and potentially mitigating concerns about provider payment under the Affordable Care Act.

The study, released today by Health Affairs as a Web First, addresses the quality of care and the severity of patient illness (considerations not fully taken into account by previous studies on this topic) found that during those years, the annual rates of productivity growth were 0.78 percent for heart attacks, 0.62 percent for heart failure, and 1.90 percent for pneumonia.

When the authors John Romley, Dana Goldman, and Neeraj Sood calculated productivity growth rates without factoring in trends in the severity of patient conditions or outcomes achieved after hospitalization, the annual productivity rates were different: -0.64 percent for heart attacks, -0.91 percent for heart failure, and -0.39 percent for pneumonia.

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How The Ebola Crisis Could Help Save 75,000 Patients


February 4th, 2015

It has taken an epidemic in West Africa to expose a troubling issue for U.S. hospitals and health policy: the short shrift given infection prevention.

In a thoughtful December Health Affairs Blog post, Dr. Leonard Mermel, an epidemiologist and infection control specialist, noted that over a three-month period his hospital’s work on Ebola preparedness “significantly strained our ability to manage other infection control challenges.”

That is a red flag for health care policymakers. As hospitals focus on Ebola preparations, we can’t lose sight of the fact that more than 700,000 Americans contract health care associated infections (HAIs) each year. About 75,000 people die from HAIs, such as Clostridium difficile (C. diff), Methicillin-resistant Staphylococcus aureus (MRSA) and vancomycin-resistant enterococcus (VRE).

This is more than 10 times the number of patients who have died from Ebola across the globe.

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Exhibit Of The Month: California’s Hospital Fair Pricing Act Reduces Amount Paid By Uninsured


January 29th, 2015

Editor’s note: This post is part of an ongoing “Exhibit of the Monthseries. Readers who’d like to highlight other noteworthy exhibits from the same issue are encouraged to make their pitch in the comments section below.

This month’s exhibit, published in the January issue of Health Affairs, looks at the proportion of hospital charges to and collections from uninsured patients in California from 2003 to 2012.

In the article, “California’s Hospital Fair Pricing Act Reduced The Prices Actually Paid By Uninsured Patients,” author Ge Bai of the Williams School of Commerce, Economics, and Politics at Washington and Lee University, examines how the Hospital Fair Pricing Act affects the net price paid by uninsured patients.

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Competition In Health Care Markets


January 26th, 2015

In this post, I want to focus on the key role economic analysis plays in the Federal Trade Commission (FTC)’s health care enforcement program. I use this lens to look first at how the FTC has become more successful in challenging hospital mergers, and then to rebut the notion that the Affordable Care Act is somehow a “free pass” for health care industry consolidation.

After the federal antitrust agencies successfully challenged a number of hospital mergers in the 1980s and early 1990s,[1] we suffered a string of court losses in the mid- and late-1990s, even in cases involving highly concentrated hospital markets.[2] In 2002, the FTC decided to take a step back and examine the reasons for our losses, and whether our analysis of hospital markets was correct.

We engaged in an in-depth retrospective study, used our authority to collect data from hospitals and insurance companies, and held workshops along with DOJ. (See here, here, here, and here.) Cory Capps of Bates and White, and other economists contributed significantly to our understanding as well. This intense period of reflection led to several important papers demonstrating that the consummated mergers stemming from the hospital merger challenges we lost—including those involving non-profits—resulted in anticompetitive effects, particularly increased prices. We also determined that our losses were due in part to the courts’ acceptance of faulty economic analysis of geographic and competitive effects. (See here, here, and here.)

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Additional Requirements For Charitable Hospitals: Final Rules On Community Health Needs Assessments And Financial Assistance


January 23rd, 2015

On December 29, the Department of the Treasury and the Internal Revenue Service released long-awaited final regulations implementing Affordable Care Act provisions that impose additional obligations on charitable hospital organizations covered by §501(c)(3) of the Internal Revenue Code.  Published in the Federal Register on December 31 2014, the regulations are massive, consolidating a series of prior proposals into a single final body of regulatory law.  The regulations affect more than 80 percent of U.S. hospitals, both the 60 percent that operate as private nonprofit entities and the 23 percent that operate as governmental units.

Because state and local governments typically condition their own sales, property, and corporate income tax exemptions for nonprofit entities to a hospital’s §501(c)(3) status, the final regulations carry broad and deep implications from both a policy and financial perspective.  According to the Congressional Budget Office the 2002 the national value of the federal tax exemption exceeded $12 billion, a figure that undoubtedly has risen considerably.

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New Health Policy Brief: The Two-Midnight Rule


January 23rd, 2015

A new policy brief from Health Affairs and the Robert Wood Johnson Foundation (RWJF) examines the so-called “two-midnight rule,” which takes effect on April 1 of this year for new Medicare hospital claims. The rule, announced in 2013, is an effort by the Centers for Medicare and Medicaid Services (CMS) to clarify when a patient will be considered by Medicare as an inpatient for hospital billing purposes. Under this rule, only patients that a doctor expects to need two nights in the hospital would be considered inpatients for the purpose of Medicare claims.

In the past, CMS provided little guidance to hospitals on this matter. This is important because the Medicare payment structures are very different for inpatients versus outpatients: Hospitals are reimbursed with a single comprehensive payment for all care provided to an inpatient during his or her time at the hospital, but they are paid standard fees for each unique service they provide to outpatients. This brief describes the perceived need by CMS for the two-midnight rule, how it would work, the implications for Medicare payment, and the heated response to the rule by the hospital industry.

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Early Evidence On Medicare ACOs And Next Steps For The Medicare ACO Program (Updated)


January 22nd, 2015

Note: Pratyusha Katikaneni and Carmen Diaz also contributed to this post. They are both research assistants at the Engelberg Center for Health Care Reform, The Brookings Institution.

On December 1, CMS released a Notice of Proposed Rulemaking (NPRM) for the Medicare Shared Savings Program (MSSP), which requests feedback for changes CMS is considering for the Medicare accountable care organization (ACO) programs in 2016 and beyond. The proposal suggests significant potential alterations to the program, many of which we recently reviewed, that would address major issues that ACOs and others have raised: uncertainty and inexperience at transitioning to increasing levels of risk, lack of timely and accurate data, changes in attributed patient populations from year-to-year, and financial benchmarks that fail to account for regional variations and continue to reward high ACO performance over time.

The proposed rule raises more issues than it settles, but it clearly indicates that CMS is open to meaningful public comments and will make important revisions in the MSSP. However, the proposal also illustrates the challenges of resolving these issues in a way that both assures substantial ACO participation and improvement, as well as Medicare savings.

Ideally, big changes in key features in a major program like the MSSP would be based on extensive empirical evidence on what determines success in the program. Unfortunately, only limited evidence, including case studies and some comparative data, is available on the determinants of success for Medicare ACOs, and thus on the MSSP. Data released by CMS in September, which we previously reviewed, showed that the MSSP has generated over $700 million in savings to date relative to the spending benchmarks in the program. This is around 1 percent of the costs of care for beneficiaries affected by Medicare ACO initiatives.

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Unpacking The Medicare Shared Savings Proposed Rule: Geography And Policy


January 22nd, 2015

The Centers for Medicare and Medicaid Services (CMS) recently announced a Notice of Proposed Rulemaking (NPRM) for Medicare Shared Savings Program (MSSP) Accountable Care Organizations (ACOs). The rulemaking contains several proposals that if enacted, would fundamentally change the underlying incentives for providers to participate in the program. These proposed reforms address issues such as data sharing, renewals of participation agreements, beneficiary attribution, incentives to move to two-sided risk, and lastly, reforms to the benchmark calculations against which ACOs compete to earn savings.

The NPRM comes on the heels of a September 16, 2014 release of performance results for MSSP ACOs that began their performance years by 2013. Under the current program rules, ACOs that successfully reported quality performance data and whose savings exceeded their “minimum savings rate” were eligible to share in savings with Medicare. The MSSP program allows ACOs to choose either one-sided risk (Track 1, only upside potential to earn savings) or two-sided risk (Track 2, both upside and downside potential to earn savings/incur losses) with the final sharing amount based on achieving quality targets (up to 50 percent for Track 1 and 60 percent for Track 2). A vast majority of ACOs enrolled in Track 1, the one-sided risk option. Of the 220 ACOs in the program that participated in the first performance year, 53 earned shared savings, 52 saved money but not enough to meet the required “minimum savings rates,” and the other 115 did not accrue savings (spending on patients assigned to the ACO was greater than projected).

In February 2014, the CMS asked stakeholders for input as to how to improve its ACO programs, feedback which they used to generate the NPRM. Many ACOs and other stakeholders argued that failures to achieve savings over and above minimum savings rates were a partial result of residing in low spending areas. In this post, we examine the merits of this contention and consider the policy implications of our results and their bearing on some of the modifications of the MSSP program that CMS has proposed. We also discuss other strategies for improving the program CMS did not mention in the NPRM.

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Academic Medical Centers Should Lead The Charge On Price Transparency


January 21st, 2015

A bipartisan campaign to increase price transparency in the medical world has been reverberating through the press, government, and hospitals. Recent examples include CMS’ release of datasets for inpatient and outpatient charges and North Carolina’s House Bill 834, which was signed into law on August 21, 2013 and mandates that the state’s Department of Health and Human Services publish hospital charges. In Time Magazine, Steven Brill’s article, “Bitter Pill,” provided stunning real world examples of how the lack of price transparency can create enormous uncertainty and confusion among both patients and providers.

The momentum will only continue as Section 2718(e) of the Affordable Care Act is implemented. The provision, which took effect on October 1, 2014, mandates that each hospital establish, update, and publicize a list of standard charges for items and services provided. At this critical moment, there is one set of institutions that are uniquely positioned to ensure that price transparency is implemented deliberately and successfully: Academic Medical Centers.

For good reason, there is excitement about the potential of the price transparency movement. A recent Health Affairs study by Wu et al. suggests that when patients have access to health care prices for an intervention such as an MRI, a significant number select the lower-price option. This proof of concept shows that price transparency has the potential to lead to competition between hospitals, thus reducing costs to the patient and health care system.

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