By John Reichard, CQ HealthBeat Editor

July 16, 2010 -- In some respects, the health care overhaul law is getting a bad rap when critics in Congress say it fails to address rising health care costs.

Not only does the law launch experiments to test possible solutions to what everyone acknowledges is a complex problem—it also gives the Health and Human Services secretary the power to push a redesign of how health care is delivered in the United States.

Case in point: the secretary's new authority to contract widely starting in 2012 with entities called "accountable care organizations"—groups of doctors, hospitals, and other caregivers that work together to improve the quality and efficiency of care.

Such an organization that contracts with Medicare, for example, will agree to take charge of the care of at least 5,000 beneficiaries. It will deliver a full spectrum of services, such as doctors, hospitals and skilled nursing care. And it's supposed to do it in a highly organized and coordinated way to better serve patients and lower costs.

Democrats see the groups as a way to begin retooling the payment and organization of health care and possibly to "bend down the curve" in health care spending.

So, too, do Republicans who are otherwise hostile to the law. Chief among them: House members such as Charles Boustany Jr. of Louisiana and Michael C. Burgess of Texas, both physicians.

Whether the organizations can actually live up to the hype right now surrounding their creation is questionable. But the bipartisan interest in the concept suggests that it's one approach to cost control that may get a thorough test—even if Republican gains in Congress lead to major changes in the law.

The idea behind the groups is to begin moving away from financial incentives that drive up health care spending by paying doctors and hospitals more for providing each additional service and delivering more complicated types of care.

The law aims to shift that dynamic by creating a "shared savings program" that charts expected spending growth for a particular mix of Medicare patients served by one of the organizations.

Doctors, hospitals and other providers and suppliers in the organization are supposed to coordinate to deliver good preventive care, avoid duplicative tests and services and assure treatment in the most cost-effective setting.

The theory is that by doing so, the groups can keep spending below the projected level. If they meet quality performance standards in the process, they will be rewarded by getting to keep some of the savings.

In May, Boustany took a break from the rancor surrounding the overhaul by showing up at a Capitol Hill forum regarding the organizations, where he said nice things about the concept and about another supporter, Sen. Max Baucus, D-Mont.

"I admire what you attempted to do," Boustany told Baucus, referring to his efforts to negotiate Republican support for the overhaul. Boustany also praised the sponsor of the forum, the hospital coalition Premier Inc., for launching 19 accountable care organizations covering 1.2 million patients in 15 states. "We will learn a lot from this initiative," he said. Baucus, too, gave a big pat on the back to the coalition backing the new care organizations. "You are on the cutting edge of the most important part of health care reform," he said.

Adding to the sense of bipartisanship surrounding the care organizations is the leadership of Mark McClellan, who ran Medicare and Medicaid for President George W. Bush. Now at the Brookings Institution, McClellan, together with Dartmouth researcher Elliott Fisher, has established a "learning network" of some 100 provider and payer groups testing the organizations.

Enthusiasm for the groups leaves some analysts feeling a little queasy, however. They wonder whether they will produce the efficiencies and cost savings promised. Paul Ginsburg, president of the Center for Studying Health System Change, a Washington, D.C.-based research group, notes that the organizations will still operate in a "fee-for-service" system that rewards providers for doing more.

And financial rewards in the shared savings programs may simply be too small for hospitals to justify the lost revenue from reducing admissions, he said. Robert Berenson, research fellow at the Urban Institute, noted that while collaboration among providers can improve clinical efficiency, it also can give such groups more leverage to demand higher fees and wipe out savings.

McClellan acknowledged the concerns but sees the shared savings program as a way to begin spurring providers to better track costs and treatment outcomes—and, increasingly, to be paid on that basis rather than on volume of services. "It's very hard to do anything radical" in health care, he said.

Doubts aside, however, Berenson and Ginsburg see value in testing the care groups. On that score, there's bipartisan harmony. "Given the cost concerns facing Medicare and of course all aspects of health care, we cannot afford to sit on the sidelines and not act on trying to find out what those best practices are" in provider collaboration, Boustany told the Premier forum.

By Rebecca Adams

July 13, 2010 -- The Department of Health and Human Services (HHS) released a final rule Tuesday setting standards for the electronic health records of hospitals and doctors that eased some of the requirements medical providers had complained about in an earlier proposal.

"We reduced the number of requirements and introduced flexibility into the attainment of those objectives," said David Blumenthal, the national coordinator for health information technology at HHS, calling the final standards "realistic but still ambitious."

Obama administration officials have made a priority of pushing providers to adopt electronic records that they say will reduce errors, streamline operations, reduce unnecessary tests and lower medical costs. The regulation governing the "meaningful use" of electronic records is part of a larger health information technology program included in the 2009 economic stimulus law that will provide up to $27 billion in incentives over a decade. The administration has touted the digitalization of health information as a critical development that will support its overhaul of the nation's health care system.

Blumenthal acknowledged, however, that moving medicine into the Internet age is not as fast as turning on a light bulb. "We understand it will be some time before a robust exchange exists" so physicians in different states can easily share a patient's records in a way that also protects the person's information from being seen by unauthorized individuals.

The regulation, the first of a three-stage plan aimed at motivating physicians and other providers to implement electronic systems that meet HHS standards, is part of an effort aimed at overcoming the reluctance of some physicians and hospitals to invest in the technology. In 2011 and 2012, providers who meet a set of goals such as electronically recording patients' demographic information, allergies and vital signs could receive bonus Medicare or Medicaid payments of more than $2 million for individual hospitals and at least $44,000 for physician practices.

By the third stage in 2015, the carrot will be replaced with a stick. Providers will be penalized with lower Medicare payments if they have not complied.

The final version released Tuesday differs from January's original proposal in several ways. HHS officials received more than 2,000 comments from interested parties, many of whom wanted to see changes. The requirements of the original proposal were seen as too stringent even by health systems that are internationally renowned for their health IT efforts, such as the Mayo Clinic, which began investing in health IT in 1992.

Originally, the proposal would have required providers to meet all criteria on a list, with hospitals having to meet 23 objectives and clinicians facing 25 requirements. Providers complained that the all-or-nothing approach was virtually impossible to meet, noting that if a hospital completely met 22 requirements and most of the last one, they still would get no additional funding.

The final rule takes a different approach by setting core mandates that must be met, then giving providers some flexibility to choose from other goals on a list. Hospitals would have to meet 19 goals in total and providers such as physicians would have to meet 20, but the providers would be able to choose five of the goals from a menu of 10 options. The rest of the goals would be non-negotiable.

Some examples of the core mandates that must be met in order to receive funding include requirements for providers to record more than half of patients' demographic data and vital signs; maintain diagnostic, drug and medication allergy information for more than 80 percent of patients; record smoking status for more than half of patients; order medication electronically for more than 30 percent of patients; test the ability to exchange information with other providers; provide more than half of patients who request their records with copies of within three days; and conduct IT security checks.

Other optional goals that providers could get credit for include incorporating more than 40 percent of certain lab results into electronic records; providing summaries of care for more than half of patients who are going to another provider or setting; and providing immunization or disease surveillance data electronically to government agencies. Regulators also heeded concerns from consumer groups who wanted advanced directives to be part of patients' electronic records, and will allow hospitals to count the inclusion of advanced directives for more than half of seniors as a voluntary objective that would help them meet the goals of the regulation.

The final rule also lowered the percentage of patients required to qualify for many of the goals criteria and scaled back reporting requirements. For instance, the original rule had required physicians to electronically transmit 75 percent of the prescriptions that they prescribe, while the final version requires only 40 percent.

Another regulation clarifies some of the technical aspects of building a health IT system and what elements should be included.

Hospitals and physicians voiced general support for the changes in the rule, although some had specific remaining concerns.

American Hospital Association director of health information technology Chantal Worzala said meeting 19 criteria still constitutes "a high bar."

She voiced concern that one of the core mandates would require that providers order at least one medication electronically for more than 30 percent of patients. That was scaled back from the original version, which had included not just medications but also other services such as lab tests, but AHA officials worry that many hospitals will still have a hard time meeting the revised requirement.

They also worry that the timeline does not provide much lead time for hospitals and other providers to get their systems certified.

Regulators also declined to change a requirement that hospitals on the same campus be treated as one system, instead of as separate systems. Hospital lobbyists complained that each hospital within a system should be eligible for bonus payments separately and should not be penalized if a different part does not meet the requirements.

Officials at the Centers for Medicare and Medicaid Services said they felt that they needed to treat hospitals on a campus as one provider in order to remain consistent with other policies.

Federation of American Hospitals president and CEO Chip Kahn protested and called on Congress to change that part of the law.

"Patients of a hospital should be confident that their hospital is receiving the full [statutory] incentive, regardless of whether that hospital has an individual provider number or shares a provider number with other hospitals," Kahn said. "So, it is essential that Congress clarifies the definition of an eligible hospital to put all hospitals on a level playing field for the distribution of incentive payments."

Overall, however, Kahn supported the rule, saying the final version "recognizes many of the practical concerns" that the for-profit hospitals in his association had expressed about the original proposal.

The American Medical Association voiced some skepticism about whether a large number of physicians would be able to benefit in the first stage of the program.

"Physicians recognize the potential for health IT and want to adopt new technologies, but costly [electronic health record] systems are out of reach for many physicians," said Steven J. Stack, an AMA board member, in a statement released by the organization.

At a public briefing held to explain the regulations, Secretary Kathleen Sebelius shared a personal anecdote intended to explain why the move to electronic health records is so important. Sebelius spent Monday night with a friend in the emergency room who had internal bleeding. The woman had been in a hospital in another city over the July 4 holiday, but was sent home. When the symptoms started again and the woman went to a Washington-area hospital, the HHS secretary watched as different providers scribbled down her friend's medical history and medication list four separate times. Speculating that the doctors may have stuffed the information in their pockets instead of sharing it with other providers, Sebelius shook her head at the inefficiency of it all, and how "ripe it is for possible mistakes."

She called it a "good reminder of why we're here today."

By Rebecca Adams, CQ HealthBeat associate producer

July 14, 2010 -- Preventive care services for about 41 million people next year will not require cost-sharing such as co-pays, co-insurance or deductibles, under a rule announced Wednesday by First Lady Michelle Obama and administration officials.

The elimination of cost-sharing for preventive care services such as cancer screenings, vaccines, smoking cessation counseling and tests that could indicate a risk for heart disease could push premiums up by an average of about 1.5 percent, according to administration estimates. That translates into a shift of about $54 for an average $3,606 policy sold in the individual market and $72 for an average $4,824 employer-sponsored plan affected by the proposal.

The new regulation is an interim final rule that has the force of law. The administration will collect comments on the rule for 60 days and then finalize it. It could be modified but typically would change little, if at all.

The guidelines will apply to new health plans beginning Sept. 23, which the administration estimates will affect 31 million people in employer-provided plans and 10 million in plans bought by individuals next year. Plans that were in effect before the health care overhaul passed in March will be exempt unless the benefits for the plan change. As health plans are modified over time, the number of people affected could rise to about 88 million by 2013.

The regulations are part of a broader effort under the health care overhaul law (PL 111-148; PL 111-152) to prevent medical problems rather than simply treat disease after it strikes. The law calls for about $15 billion in spending on preventive care over a decade through such initiatives as the elimination of cost-sharing for preventive services under Medicare. Many health policy analysts and researchers believe that routine preventive care can keep people healthier, but that costs can deter people from seeking it.

One questions about the administration's plan is which services would count as "preventive."

Some of the services are straightforward—based on recommendations by the Advisory Committee on Immunization Practices at the Centers for Disease Control; the Health Resources and Services Administration and the American Academy of Pediatrics; and the U.S. Preventive Services Task Force, best known for releasing mammography screening guidelines for breast cancer last year that suggested that most low-risk, asymptomatic women do not need annual mammograms.

But guidelines for some services affecting care for women are still being written. They are expected to be released by Aug. 1, 2011. Reproductive rights groups are already lobbying lawmakers for birth control to be included, while groups such as the U.S. Conference of Catholic Bishops say that it should not be covered.

Some women's groups applauded the overall regulations but noted their concern about the coverage of contraception.

"When these regulations take effect, all insured women will have access to critical preventive care including mammograms, screenings for cervical cancer and sexually transmitted infections, and the HPV vaccine, which many girls now forgo because the cost is prohibitive," said Debra Ness, president of the National Partnership for Women and Families. "The next step in making our health care system work better will be to act swiftly to release additional requirements that extend this coverage to the family planning and contraceptive health care that women rely on."

Even though increased preventive care often enjoys some bipartisan support, some congressional Republicans were not impressed with the proposal. "Some would say this preventive care is free, but there is no free lunch, and mandates are passed on to consumers in the form of higher premiums and less access," said John Hart, a spokesman for Sen. Tom Coburn, R-Okla.

Republicans also are suspicious of the involvement of the U.S. Preventive Task Force in setting coverage policy. They recall the controversy when the mammogram recommendations were released last year and some women felt that their health could be compromised if they reduced the frequency of breast cancer screening. They say that allowing the government and advisory groups to mandate which services private insurers must cover is a step toward government-run medical care. "These entities are going to be empowered to effectively determine the scope of care and what's funded and reimbursed," Hart said.

But supporters say that preventive care is a wise investment that can improve health care outcomes and lower costs for the country. "Getting access to early care and screenings will go a long way in preventing chronic illnesses" that consume up to three-fourths of the nation's health care spending, said Obama. The first lady views preventive care as another element of her campaign to reduce childhood obesity, an issue that she said first came to her attention when her pediatrician expressed concerns about her own children's weight.

Health and Human Services Secretary Kathleen Sebelius cited a study that found that preventive care in five areas—colorectal and breast cancer screening, flu vaccines, regular aspirin use to avoid cardiovascular problems and smoking cessation—could prevent 100,000 deaths a year.

The administration said that the proposal could lower out-of-pocket costs significantly. They said the new proposal could save $300 a year for a 58-year-old woman who got a mammogram, colon cancer screening, tests for diabetes and cholesterol, a flu shot, and a Pap smear test for cancer.

"The things that are being covered are important services that I don't think you can know ahead of time whether you need or not," said DeAnn Friedholm, the director on health reform at Consumers Union.

Patients advocacy groups also applauded the regulation. "These new regulations will make disease prevention more accessible and affordable for all Americans," said American Heart Association CEO Nancy Brown.

By Marian Jarlenski and Frances Symes, CQ Staff

July 14, 2010 -- The House of Representatives on Wednesday passed legislation that would clarify a number of Medicare and Medicaid policies, but the debate gave Republicans a chance to once again criticize the recent health care overhaul.

Among the corrections in the measure (HR 5712), which was passed by voice vote, are several to provisions created by the health care overhaul that was enacted in March. Many of the clarifications had been included in legislation (HR 4213) that the House passed in May, but that bill—which would extend certain tax cuts and social safety-net programs—has languished in the Senate.

On Wednesday, Republicans took the opportunity to outline what they called "the fundamental flaws" in the recently enacted health care overhaul law (PL 111-148, PL 111-152).

"While I support the bill before us, it is not enough," said Wally Herger of California, the ranking Republican on the Ways and Means Subcommittee on Health. "We must move beyond technical corrections and fix the fundamental flaws of the Democrats' health care law by repealing it and replacing it with solutions that work."

Specifically, the bill passed Wednesday would:

• Provide $95 million for the Centers for Medicare and Medicaid Services (CMS) to retroactively reprocess claims for services that were affected by the health care overhaul law.
• Clarify Medicare enrollment rules for those eligible for Tricare, the military's health care plan.
• Permit implementation of a new payment system for skilled nursing facilities.
• Permit certain children's hospitals to continue to receive discounts for "orphan drugs" used to treat rare conditions.
• Extend through fiscal 2011 a law that permits hospitals to be reclassified in a higher-wage index area for Medicare reimbursements.
• Ensure that medical residency spots shared by affiliated hospitals would not be reallocated to other hospitals.

To offset the expected costs, the measure would reduce each year the funding available for the Medicare Improvement Fund, which is intended to allow CMS to make improvements to Medicare hospital and physician services.

The Congressional Budget Office estimates that the bill would result in a net reduction in the deficit of $12 million over 10 years.

By Rebecca Adams, CQ HealthBeat

July 12, 2010 -- Private insurance companies are concerned about federal rules that will force them to direct most premium money toward benefits, instead of other items such as profits or administrative costs. Now insurers say that an unlikely ally is helping to make their case that the rules could be overly burdensome.

Maine insurance commissioner Mila Kofman is a strong proponent of the overall health care legislation that President Obama signed this spring. Kofman, who was appointed by a Democratic governor, even appeared at a White House ceremony last month celebrating the 90-day anniversary of the act. But she also holds the distinction of being the first commissioner in the nation to request that Department of Health and Human Services officials exempt her state from the rules governing the so-called medical loss ratio, or MLR, that could limit insurance companies' profits.

"Absent a waiver, I believe that the federal MLR standard may disrupt our individual health insurance market," Kofman wrote to HHS Secretary Kathleen Sebelius.

Kofman explained in her letter that she believes that Maine's situation is already tightly regulated and that the market is fragile, with only two private insurers in the state currently offering coverage to new customers. "Loss of one of the two insurers would have a serious destabilizing effect in our individual market," Kofman wrote.

However, officials in other states may not see the environment in Maine as unique.

"Insurance markets are very different in each of the states. Since there are a lot of unknowns with respect to how health care reform will impact these markets, if there were a relatively simple waiver authority available, I imagine a lot of states might be interested in that," said Matt Salo, health policy director at the National Governors Association.

The medical-loss ratio rules are set to affect plans' rates starting Jan 1. This month, the National Association of Insurance Commissioners (NAIC), a group of state regulators, is hoping to meet a requirement for them to develop recommendations for the regulations. HHS officials had originally asked NAIC officials to report back recommendations by June 1, but the association said that it needed more time because the issue is so complex.

The rules will flesh out requirements in the health care law (PL 111-148, PL 111-152) that, starting in January, large group plans must spend 85 percent of premiums on clinical services and activities related to quality of care. Only 15 percent can go to other items, such as administrative costs, advertising and profits. Small group and individual plans can spend 80 percent on premiums and 20 percent on other costs.

Plans that do not meet the minimum standards will have to provide rebates to customers.

Part of the reason that the regulations have been delayed is that NAIC officials are having a tough time sorting out which costs should count as related to medical expenses and which as administrative.

Last month, at a meeting on the issue conducted by the Robert Wood Johnson Foundation's Changes in Health Care Financing and Organization initiative, participants estimated that up to one-fourth of people who buy their insurance in the individual market might be at risk in the short term of losing or needing to change their coverage in the initial years after the regulations take effect. The participants included market analysts, industry representatives, actuaries and regulators. Eventually, most analysts said that many of the largest insurance companies will be able to meet the medical-loss thresholds but some insurers may leave the market because they will not be able to comply.

An administration official said that HHS is working to develop a process for reviewing waiver requests. He declined further comment.

By John Reichard, CQ HealthBeat Editor

July 12, 2010 -- Donald M. Berwick was sworn in as administrator of the Centers for Medicare and Medicaid Services Monday afternoon in Boston by Health and Human Services Regional Director Chris Hager, a CMS spokesman said.

Berwick will make his first public appearance at a press briefing Tuesday in Washington, D.C., to help unveil the final version of regulations spelling out how doctors and hospitals must use health information technology to qualify for higher Medicare and Medicaid payments.

Monday also marks the first day on the job for Harold Varmus as director of the National Cancer Institute. Varmus was scheduled to hold a town hall meeting at NCI Monday afternoon in which he would give a brief talk, take questions, and greet NCI staff.

Neither Varmus nor Berwick went through the Senate confirmation process—Varmus because his position is not subject to Senate confirmation, and Berwick because he was installed in office through a recess appointment.

Berwick is scheduled to appear 10 a.m. Tuesday at a press briefing at the Hubert H. Humphrey Building. Also scheduled to appear are HHS Secretary Kathleen Sebelius, National Coordinator for Health Information Technology David Blumenthal and U.S. Surgeon General Regina Benjamin.

In addition to defining the "meaningful use" of information technology to assure bonus payments, the final regulations announced Tuesday will address the certification of technology. To qualify for the higher payments, providers not only must make meaningful use of IT but also use certified technology. The certification process aims to assure that various types of information systems can be used together.

Hospitals say the proposed version of the IT regs makes it far too hard to qualify for the higher payments. The reg in its proposed form would discourage the adoption of health IT and delay the efficiencies and higher quality care the technology is supposed to foster, hospitals add. It's widely expected that the final regs will ease the standards for qualifying for the payments.

To the extent Berwick is the mouthpiece for such a message it will get him out of the starting blocks with some soothing news to deliver. He's facing a hostile climate, at least where congressional Republicans are involved. "I feel sorry for those seniors who maybe have a family history of Alzheimer's and they're, you know, maybe getting into their 70s, and what kind of care they're going to get," said Rep. Phil Gingrey, R-Ga., on the Fox Business Network on Friday, referring to the Berwick appointment. "They're going to be thrown under the bus!"