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Proposed Rule Change Would Make U.S. Healthcare System Even More Complicated and Potentially More Costly

November 01, 2023
1:27 pm

The last thing the U.S. healthcare system needs is more paperwork. Unfortunately, the federal Centers for Medicare & Medicaid Services (CMS) is proposing a policy change that would assign more “busy work” to key players across the health sector.

The proposal specifically targets Medicaid, the government program that provides health care for millions of low-income Americans and people with disabilities.

Back in 1990, Congress passed legislation requiring drug makers to pay rebates to Medicaid in exchange for their medicines being covered by the program. For brand drugs, these rebates are set at either 23.1% of a drug’s average manufacturer price (AMP), or the difference between the AMP and the “best price” available to any public or private entity purchasing the drug.The best price requirement has worked well for over three decades, saving taxpayers money while preserving access for patients in need. Manufacturers, clinics, insurers, pharmacies, and others have grown to rely on it.

Yet, CMS’s proposal would completely upend this system. The agency seeks to redefine a drug’s best price as the net price of the combined total of rebates associated with that drug across the entire pharmaceutical supply chain.

Imagine for a given drug, the manufacturer offers a 30% rebate to private insurers, a 10% rebate to pharmacies, and a 10% rebate to community clinics. Under existing rules, the manufacturer would have to offer the highest discount of the three — 30% — to Medicaid. But under the proposed formula, all of the rebates are added together — resulting in a 50% rebate.

This practice of rebate “stacking” is problematic for a few reasons.

First, it’s impractical. The modern U.S. healthcare system is incredibly complex. To comply with the new rule, entities across the drug supply chain — including wholesalers, distributors, pharmacies, hospitals, clinics, and insurers — would have to create complicated new databases and coordinate with each other to meticulously track drug transactions down to the last cent. This would divert finite resources away from where the focus should be: treating patients.

Second, rebate stacking could indirectly lead to higher costs. If the proposal is finalized, any rebate a manufacturer offers to a public or private entity would factor into Medicaid’s best price calculations. Such a system would encourage drug makers to dole out discounts more sparingly than they currently do.

We all share the goal of reducing costs and improving quality across the healthcare system. But CMS’s proposed overhaul of the best-price requirement would be a step in the opposite direction.

A Multisectoral Approach to Patient-Centered Care

August 08, 2023
12:22 pm

The Healthcare Leadership Council (HLC) hosted a webinar focused on how various healthcare organizations have approached value-based care and the outcomes associated with those methods. While, historically, providers have been financially compensated for the volume of services they provide, it has been increasingly recognized that a holistic view of patients’ health includes additional lifestyle factors and results in a healthier population while reducing the cost of care. The panel consisted of four expert representatives from HLC’s membership.

Dr. Adam Solomon, chief medical officer of MemorialCare Medical Foundation, compared traditional fee-for-service (FFS) care to different types of accountable care organizations (ACOs), highlighting the notable difference in relationships between services and payments, as well as outcomes. Lack of coordinated care in a FFS system leads to a separation of clinical data, pharmacy data and claims data, whereas ACOs enable the communication necessary to provide a coherent record of the patient’s medical history. Dr. Solomon mentioned the importance of incentivizing innovative alternative payment models outside of Medicare, and also stated that Congress and CMS should continue to support the migration from Medicare FFS to value-based Medicare Advantage to ensure seniors have access to coordinated care, which improves both patient experience and outcomes.

Dr. Justin Barclay, vice president of consumer insights and analytics at Tivity Health, discussed how his organization partnered with HLC on a study of care coordination perceptions among FFS enrollees, using a nationally representative sample of seniors aged 65 and over who are enrolled in FFS Medicare coverage. Some key takeaways from this study include: seniors in FFS Medicare agree that care coordination leads to better healthcare decisions and increases access to quality healthcare; despite high awareness, only four in ten seniors have experienced care coordination; and seniors who have experienced care coordination place greater trust in their primary care physicians, specialists, pharmacists and health plans over social media and traditional news media. Dr. Barclay recommended further research to examine the differences in experienced care among underserved populations.

Dr. Mark Montoney, chief medical officer of Wellvana, explained the burnout experienced by primary care providers stemming from the burden of administrative tasks and poor work-life balance, while receiving less reimbursement for services than other types of providers. Addressing this dilemma, Wellvana manages three ACOs across 22 states, which provide support to providers in areas such as coding, care management and patient education. Dr. Montoney described how care constantly improves in this environment because ACOs cannot succeed unless patients and providers win first, and better care coordination results in shared savings for the care team through improved outcomes. He shared that ACOs have generated over $17 billion in gross savings for Medicare over the last decade and patients have received elevated care between visits.

Dr. Hirsh Sandesara, the lead medical director for value-based provider engagement at Blue Cross NC, described his organization’s efforts to rapidly build a network of ACOs across the state in order to balance rewards for better health outcomes and lower cost of care rather than incentivizing a greater volume of services. This transition has led to a significant and sustainable long-term impact on quality and affordability. The data for the 1.4 million members has shown increased screening for colorectal cancer, improved management of high blood pressure and a reduction in hospital readmissions. These improvements in quality have translated into reduced healthcare costs, with a cumulative of nearly $500 million in savings since 2019, and over $300 million going back to providers as incentives for maintaining the health of their patients. Blue Cross NC is committed to bringing payers and providers to the same table to collaborate most effectively toward a patient-centric system.

Don’t Backpedal on Progress: Fix Proposed Changes to Medicare Advantage Before Beneficiaries Feel the Effects

March 09, 2023
3:41 pm

It’s no wonder why Medicare Advantage (MA) is so popular among America’s seniors, with a greater share of the Medicare population choosing MA plans as its coverage of choice each year. MA has consistently outperformed conventional fee-for-service Medicare in reducing avoidable hospitalizations, lowering hospital readmissions, and encouraging utilization of preventive services. Patients have benefited from supplemental benefits such as vision and dental care as well as programs to affect the social determinants of health, addressing food insecurity, social isolation and transportation needs, to name a few examples.

This progress should be encouraged. So, needless to say, we were concerned at the proposed changes from the Centers for Medicare and Medicaid Services (CMS) for the 2024 plan year. Three changes – revisions in the MA risk model resulting in a 3.12 percent reduction, reduced quality bonus payments under the Medicare Star Ratings program of 1.24 percent, and a 2.09 percent benchmark, which is less than half of the five percent projected per-enrollee growth in Medicare costs – would result in an average 2.27 percent reduction in MA payment rates in 2024. While not all plans would be affected equally, many enrollees could see higher premiums or a loss of programs and benefits that have a direct impact on health outcomes.

As well, there are concerns about proposed changes to health data, specifically the precision that enables providers to identify a patient’s condition and administer effective treatment. The CMS regulatory proposal would remove nearly 2,300 ICD-10 diagnosis codes. Restricting the ability to recognize asymptomatic diseases would result in an unwanted increase in avoidable emergency room visits and hospital admissions. We could see physician revenue cuts and the closure of clinics in underserved urban and rural areas.

The solutions here are evident.  The proposed MA payment growth rate for 2024 should be adjusted to reflect document increases, including inflation, in Medicare costs. Other proposed changes should be delayed in order to gather stakeholder input and fully understand the potential impact on health providers and patients. We have an opportunity to continue the momentum that MA plans have successfully generated, enabling the 65-and-older population to live healthier lives and better manage the chronic illnesses that become more prevalent as we age. CMS should make the adjustments to ensure that we don’t take an unnecessary step backward.

Is Mandatory Participation in Medicare Demonstrations Necessary?

May 25, 2022
10:31 am

Recently, Health Affairs Forefront, published a post by Dan L. Crippen, former director of the Congressional Budget Office and currently a Healthcare Leaddership Council consultant, that should be a catalyst for discussion on a critical element of the Center for Medicare and Medicaid Innovation’s future direction.

In his post, Dr. Crippen enters the debate over whether models being tested by CMMI should have mandatory or voluntary participation on the part of healthcare providers.  Some have argued that demonstration projects have floundered under voluntary participation because providers have brought in cohorts of comparatively healthy patients not reflective of the Medicare beneficiary population at large. He points to several examples, though, to make the case that voluntary participation did not result in adverse selection and that a more weighty problem plaguing CMMI demonstration projects has been the lack of timely data flowing to model participants.

The Crippen post is below and at the link above, which will take readers to the Health Affairs Forefront site.

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The tenth anniversary of the Center for Medicare and Medicaid Innovation (the Innovation Center) was in 2020. This anniversary was accompanied by several retrospectives of the results of the Innovation Center’s first decade of operation. Unfortunately, most of the analysts, including those from the Centers for Medicare and Medicaid Services (CMS), reached similar conclusions: that the demonstrations deployed by the Innovation Center neither saved much money nor greatly improved quality, the two primary objectives set out for the Innovation Center in the Affordable Care Act.

Past and present Innovation Center directors concluded that the primary reason for the demonstrations’ failure to achieve the objectives was selection bias by the providers who had volunteered to participate in the various models. The claim is that the providers brought with them a cohort of healthier-than-average patients, making it easy to show savings relative to the benchmark. Relative to providers with sicker patient populations, these providers were more motivated to participate in the demonstrations due to the potential opportunity to earn a bonus from the Innovation Center if they spent less than the Innovations Center’s benchmarks.

Some of the demonstrations included an alignment algorithm for assigning patients to providers within an accountable care organization (ACO), at least one of which assigned patients depending upon their previous use of participating providers in the ACO. In some demonstrations, there was considerable turnover in both the beneficiaries and providers, which theoretically allowed ACOs the opportunity to alter their risk pool by selecting or changing providers (or other aspects of the model) to create a patient population with certain characteristics or health care needs. The former and current directors concluded that only mandatory participation by providers would overcome this perceived selection bias.

However, before seeking a solution to this problem, the question of whether selection by voluntary providers contributed to the disappointing results of the demonstrations should be explored. This article summarizes a multitude of analyses surrounding the reasons the demonstrations show little savings or quality improvement. The analyses indicate that the failure was not due to voluntary, as opposed to mandatory, participation by providers. The article then suggests several ways that any future selection challenges could be addressed, should they occur, without requiring mandatory participation.

 

The Evidence On Selection Related To Voluntary Participation

As described below, outside observers, papers published by think tanks, academic research, contractors hired by the Innovation Center to provide an independent evaluation of the demonstrations, as well as reports by the Innovation Center itself neither found the existence of selection bias nor recommended mandatory participation. These experts offered many suggestions on how the Innovation Center could achieve its stated objectives, but mandatory participation was not among them.

The ACO model is one of the Innovation Center’s longest running demonstrations, albeit in different forms over time, which attempts to measure cost-effectiveness and quality of treatment. It is the early experience of this model that most proponents of mandatory participation cite as proof of selection bias, primarily because so many providers dropped out at the beginning of the demonstration. Only 123 (36 percent) of the 339 ACOs entering the program between 2012 and 2014 were still participating in 2020.

There were several reasons for the attrition, much of which occurred early in the program. Many of the provider groups were small and ill-equipped to provide the complex reporting and data required by the Innovation Center. The participants did not understand the convoluted requirements before they enrolled, and only thereafter realized they were very unlikely to achieve savings, and therefore the bonuses offered by the Innovation Center. Moreover, participants did not have the processes, experience, or capital to ultimately assume the downside risk required later in the demonstration. In accordance with the rules of the program, they were allowed to drop out and did so.

An outside evaluator concluded: “Pioneer ACO stakeholders also noted that the relationship between the ACOs’ activities and their financial results were not well understood or articulated and that they struggled to firmly understand the Pioneer model rules such as the beneficiary alignment algorithm and financial benchmark calculations…[which] raises the question of whether the alignment algorithm may de-align or not align beneficiaries who are less healthy.”

Other credible sources determined that voluntary participation did not result in adverse selection. For example:

  • One analysis concluded: “We also find no evidence that ACOs systematically manipulated provider composition or billing to earn bonuses…. Robustness checks revealed no evidence of residual risk selection…. Careful examination of selection issues revealed that these findings were not driven by nonrandom participation.”
  • A study published by the Brookings Schaffer Center concluded: “Evidence suggests that there was minimal systematic patient-level risk selection by ACOs in the first three years of the Medicare Shared Savings Program (MSSP).”  
  • An internal CMS evaluation noted: “It does not appear that participants are selecting healthier patients.”
  • The Innovation Center engaged outside experts to evaluate the operation of each demonstration, several of whom included explicit conclusions about selection bias. One expert concluded: “This finding suggests that AIM [AIM Investment Model] ACO participant changes over time did not result in selection of certain types of beneficiaries, on average.”

No evaluator of the many demonstrations suggested that that mandatory participation was necessary to produce better results. In one demonstration, the third-party reviewer concluded that the results of the mandatory model were no better than voluntary models. One study directly compared results for mandatory verses voluntary participation and concluded: “spending changes did not differ between the voluntary and mandatory hospitals. This result does not support the concept that organizations perform better when self-selecting into programs.”

If Not Selection, Then What?

While adverse selection did not distort model results, studies did show that there was a myriad of other factors that plagued the initial demonstrations and persisted throughout much of the first decade. A common complaint by providers was a lack of timely data from the Department of Health and Human Services on demonstration operation and performance. One CMS internal evaluator lamented that the inability of CMS technology systems to perform basic tasks for value-based care, including providing performance data to participants, was a key contributor to the reasons providers dropped out.

Additionally, in a 2020 Medicare Payment Advisory Commission meeting, commissioners expressed the view that the multiplicity and overlap of demonstrations made it difficult for participants to sort out the effects of one demonstration from the other. This burden of sorting through the complex requirements for providing data and reports, and inconsistent reporting specifications between the demonstrations, caused many smaller participants to quickly drop out of the demonstrations.

The benchmark calculations, which were intended to measure providers’ effects on costs, were too narrowly drawn and created disincentives that increased over time. The use of historical performance for providers could lock in original calculations of savings/costs. Savings by providers with high-cost patients resulted in lower future benchmarks, which made it more difficult to continue to achieve savings, reducing the incentive to do so.

Many of the shortcomings of previous demonstrations were recognized by the Innovation Center in its assessment of the first decade. The review included a number of suggestions, including health equity a centerpiece of every model; reducing the number, complexity, and redundancy of the many models; re-evaluating how the Innovation Center designs financial incentives to ensure meaningful provider participation (presumably including mandatory participation given the director’s previous comments); better enabling participants to handle down-side risk by providing the tools to participate; reducing the complexity of establishing benchmarks; and expanding the definition of success to include lasting transformation and a broad array of quality investments, rather than focusing on each model’s cost and quality.

Looking Ahead

Despite evidence to the contrary, the Innovation Center has not publicly dropped its position that adverse selection is a problem and that the solution is to require mandatory participation by providers.

Even if selection remains a concern for the Innovation Center, there are ways to detect and correct for selection. One alternative is the expanded use of risk adjusters to assess each participant’s risk before, during, and after the demonstration. Risk adjustment, which is typically used to establish initial payment rates, can also be used to evaluate the risk pools of participants at the end of demonstrations, with payments and shared savings adjusted accordingly.

If benchmarks remain the comparator, risk adjustment will become more important, especially as applied to high- and low-cost beneficiaries as benchmarks converge over time. Risk adjustment is and will continue to be an imperfect process but can be improved by better data, improved statistical techniques, and perhaps, artificial intelligence.

Evidence from many different sources shows that adverse selection has not heretofore been an issue and is not a cause of the failures of past Innovation Center demonstrations in meeting the objectives of savings and quality. Other factors in the operation of the demonstrations are much more likely to explain the results. If selection should ever become an issue, there are ways to adjust models other than forcing providers to participate.

 

Americans Deserve the Full Truth About Medicare-For-All and its Ramifications for their Healthcare

May 05, 2022
4:24 pm

So much of the nation’s discussion about the Medicare-for-all concept takes place through a political prism.  It’s important, though, to fully understand what such a drastic change to our healthcare system would mean for patients and the care on which they depend.  We welcome Barclay Berdan, the chief executive officer of Texas Health Resources, a faith-based non-profit healthcare system, to share his expertise on the subject.

Americans Deserve the Full Truth About Medicare-For-All and its Ramifications for their Healthcare

by Barclay Berdan, chief executive officer, Texas Health Resources

Everyone, advocates and opponents alike, acknowledges that changing our healthcare system from the status quo to a Medicare-for-all concept would bring about a seismic transformation in the way Americans receive care. Given that such an idea has become a frequent talking point in policy and political circles, it’s critical that the public understand the full ramifications of such a complete remake of American healthcare.

Today, roughly 160 million people in this country have private health insurance that is sponsored by an employer. Almost 14 million have purchased private health plans through the Affordable Care Act marketplaces. Even within the Medicare program, 26 million beneficiaries have elected to enroll in private Medicare Advantage plans. Under the predominant Medicare-for-all proposals we’ve seen, these private plans would all go away and be replaced by a single government-run health coverage infrastructure. We would be remiss if we didn’t give thought to how this could affect patient access to hospitals and physicians.

Hospitals are required to think about what we call payer mix. Private health insurance reimburses at a higher rate for healthcare services than Medicare and Medicaid do.  In fact, historically, Medicare and Medicaid payments are less than the actual cost hospitals absorb in providing those services. (According to one study, in 2017, those combined Medicare and Medicaid underpayments totaled nearly $77 billion.).  Hospitals, which generally operate on very thin margins, can afford to keep their doors open and provide care to Medicare and Medicaid patients because of those comparatively-higher private plan reimbursements.

So what happens if every single American becomes a Medicare beneficiary?  Our first concern has to be those communities that are in greatest risk of losing their hospitals even under the current healthcare financing system.  According to the Center for Healthcare Quality and Payment Reform, 130 rural hospitals have closed in the past decade and another 900 are in danger of ceasing operations in the near future.  Many of these healthcare providers have low financial reserves and could not absorb a significant revenue loss.

Then, there are the current and future healthcare workforce shortages that were only exacerbated by the COVID-19 pandemic.  A Mercer study tells us that, just four years from now, we will have a shortage of 3.2 million healthcare workers. Within a system financed entirely by the federal government, how will salary rates be set for healthcare professions and will they be sufficient to encourage more people to pursue health-related jobs?  And will we have enough personnel to meet what will be an expected rise in utilization under a system in which presumably everyone is covered for every healthcare service (or, will a Medicare-for-all system have to impose restrictions on utilization, a topic that has been severely under-discussed up to now).

Of course, it is always possible that, in creating a Medicare-for-all program, Congress could establish reimbursement rates that are sufficiently high to fully replace the loss of private plan payment levels.  That would, however, raise a plethora of questions about total cost for a Medicare-for-all program and the taxes required to pay for it.

The point being that we are likely to hear a lot about Medicare-for-all in the weeks and months ahead. We need more than political rhetoric, though, to rationalize completely overturning a healthcare system that is currently utilized by most Americans.  Tough questions about ramifications and possible consequences need to be asked and answered before we even consider moving from point A to a radically different point B. In the meantime, we should look at how to improve the current system to provide better care to those who don’t currently have access to it, roughly 10 million uninsured individuals without access to subsidies. Also, the administration’s action this month to improve the Affordable Care Act’s coverage affordability for families was an important step.  It is abundantly clear that we can improve both health care and health by improving what we have.