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May 31, 2005

Washington Health Policy Week in Review Archive a600d1b5-4a6e-4769-a5fc-beccc824f18f

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Democrats Just Say No to Medicaid Commission

MAY 26, 2005 -- House and Senate Democrats said Thursday they would not appoint members of their party to a commission charged with finding $10 billion in cuts to Medicaid, the federal–state health insurance program for the poor and disabled.

Health and Human Services Secretary Michael O. Leavitt will appoint up to 15 voting and 15 non-voting members to the commission, while lawmakers of both parties were asked to appoint eight members to serve in non-voting positions.

"An invitation to Democrats to select four members of the Senate and House to advisory roles without a vote is wholly inadequate to lend any commission even the air of bipartisanship," House Minority Leader Nancy Pelosi, D-Calif., and Senate Minority Leader Harry Reid, D-Nev., said in a statement.

Pelosi, Reid, and other Democrats said they opposed a requirement that the commission make recommendations by Sept. 1 on how to reduce federal spending on Medicaid by $10 billion. "Regrettably, the primary initial charge of the administration's commission is to engage in a budget-driven, rather than policy-driven, exercise to produce $10 billion in 'scorable' Medicaid cuts," Sen. Max Baucus, D-Mont., and Rep. John D. Dingell, D-Mich., said in a statement.

HHS Spokesman Craig Stevens said Leavitt was "disappointed" by the Democrats' decision "but it does not deter his commitment to have a fair, balanced, open, and bipartisan commission."

The commission was a compromise struck between the Bush administration and Sen. Gordon H. Smith, R-Ore., who succeeded in March in stripping a provision from the Senate budget resolution that would have directed the Finance Committee to cut $15 billion over five years, almost all of it from Medicaid.

In talks with the White House and Senate GOP leaders, Smith agreed to accept $10 billion in Medicaid cuts if a presidential commission were created to recommend ways to wring savings from the program without hurting beneficiaries.

While Smith and other lawmakers urged the administration to give the National Academy of Sciences Institute of Medicine the power to administer the panel, Leavitt did not. Nor did he give members of Congress power to appoint voting members of the commission, as the lawmakers had requested.

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Experts Predict Gainsharing Legislation Could Move by Summer

MAY 25, 2005 -- Experts were split Wednesday on the outcome of allowing doctors and hospitals to share the savings from treating patients more efficiently, a concept known as "gainsharing," which the experts said would either revolutionize the health care industry or undermine patient care.

The concept is gaining attention on Capitol Hill, with the bipartisan leadership of the Senate Finance Committee sponsoring legislation (S 1002) that would have the secretary of Health and Human Services establish criteria for when hospitals and physicians could engage in such arrangements.

The Medicare Payment Advisory Commission (MedPAC) has urged Congress to give the HHS secretary the authority to regulate gainsharing arrangements between hospitals and physicians so that quality of care is protected and financial incentives that could affect physician referrals are minimized.

Experts at a Wednesday forum sponsored by the Washington Legal Foundation said legislation to permit gainsharing could move as early as this summer.

David Nexon, senior executive vice president for the Advanced Medical Technology Association, urged lawmakers to proceed cautiously. Permitting such arrangements, Nexon said, could create a "fundamental conflict of interest" because physicians would be given incentives to under-treat patients. Nexon is a former health policy staff director to Sen. Edward M. Kennedy, D-Mass.

Gainsharing would also limit physicians' choice of "the most appropriate technology" for a particular patient, Nexon said, because hospitals would want physicians to select only from a list of medical devices from manufacturers who have agreed to discount their prices. Patients could be hurt, he said, because they may not know about that arrangement.

Proponents of the idea believe gainsharing will help cut health care costs without harming patient care. "It's not necessarily less care. It's about different care," said William T. Mathias, a principal in the Baltimore office of the law firm Ober Kaler.
D. McCarty Thornton, a partner in the Washington office of the firm Sonnenschein Nath & Rosenthal, said gainsharing will give hospitals a "new and potentially powerful strategy in pricing battles with device manufacturers" a more than $20 billion market that is a "huge hospital cost center."

"That sets up a bargaining dynamic that hospitals have never dreamed about," Thornton said. "That is the promise of gainsharing."

Physicians who disliked the "gainsharing" idea could decide not to participate and could use devices not on the specified list if it were medically appropriate for the patient, Thornton said.

Physicians would not be given financial incentives to increase their volume of procedures, nor would they be allowed to "cherry pick" the lowest-risk patients, he said.

Nexon countered that deciding whether one medical device was clinically equivalent to another one was "a very slippery concept" due to differences between individual patients. Physicians' expertise levels also vary, and they would have to be trained in how to implant devices they are not accustomed to using, he said.

Gainsharing, Nexon said, would provide "no benefit to me—just a benefit to the physician's bottom line," Nexon said.

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'Integrated, Incremental' Strategy Needed to Advance Health IT, Group Says

MAY 27, 2005 -- Interest in improving the quality and safety of health care and moving forward with health information technology are at "an all-time high" but a well-integrated approach is needed to keep the momentum going, according to a new report from the eHealth Initiative.

The report, titled "Parallel Pathways for Quality Healthcare," outlines what the group describes as an "integrated, incremental" strategy to help create a safer and more efficient health care system.

Any incentive program focused on quality should also include some level of incentive to improve the quality of health information technology, the report notes. In addition, any financing or incentive program concerning "health IT" should help improve the quality, safety, and efficiency of health care and should provide incentives to allow health care computer systems to talk to one another, a process known as "interoperability."

President Bush has called for most Americans to have electronic medical records within the next decade and has created an office with the Department of Health and Human Services (HHS) to accomplish that goal. In addition, a federal task force is working with health care industry experts to develop a set of standards for interoperability, and federal agencies are awarding grants to promising "health IT" projects around the country.

"We are at a unique point in time, where public and private sector interests are at an all-time high in two key areas: improving the quality and safety of health care and moving forward on a health information technology agenda," Janet M. Marchibroda, chief executive officer of the eHealth Initiative and Foundation, said in a news release. "Approaching these two key issue areas in a siloed manner—without strong integration across both—will result in missed opportunities, unintended consequences and possibly reduced impact in both areas."

Another step that may help speed the use of health information technology around the country is a new national network of "quality improvement organizations" (QIOs) that will work with physicians to help them adopt electronic health records and other aspects of "health IT."

Under a new three-year contract with the Centers for Medicare and Medicaid Services, the QIOs will target the physician practices that often need the most help—smaller and medium-sized practices that make up the majority of primary care practices in America, according to the American Health Quality Association, which represents QIOs.

The organizations will assist the physicians and their practices in a variety of areas, such as tracking how often they provide preventative services or how certain treatments work, such as annual blood sugar testing helping manage diabetes.

The QIOs' work does not duplicate the systems or assistance from private computer firms, AHQA David Schulke said at a May 25 news conference to discuss ways to help communities adopt personal electronic health records.

Getting smaller physician practices to adopt electronic health records will be tough, said Dr. John Tooker, executive vice president and chief executive officer of the American College of Physicians. While electronic medical records help physicians provide better care and can reduce health care costs, "it is a challenge to communicate and get every practice to change," he said, noting that the cost and complexity of taking such a step often stops a practice from doing so.

Panelists at the forum said they did not expect the federal government to fund the shift from paper to electronic medical records. "We've got to able to pay for this ourselves," said John Glaser, vice president and chief information officer of Partners HealthCare.

Heavy federal funding may also bring unwanted interference from federal officials, said Francois deBrantes, program leader, Health Care Initiatives, for General Electric. "We're always nervous about too much federal involvement" because of the rules and regulations it brings, he said. "Once they do it we can't step back."

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Report: Change the System to Cover Millions, Save Billions

MAY 23, 205 -- A series of changes to the nation's health care system could provide health care coverage to the 45 million Americans who do not now have it while trimming billions off the nation's health care bill, according to a report released Monday by the National Coalition on Health Care.

The group, a non-partisan alliance of more than 90 organizations, found that system-wide savings would begin soon after the changes were phased in and by the tenth year would save $125 billion annually.

The proposed changes include requiring employers to provide health care insurance for their workers, supplemented with a requirement that individuals are enrolled in health care coverage. Expansion of current public health insurance program, such as the State Children's Health Insurance Program, was another proposal, along with creating a new targeted public program, such as one modeled on the current Federal Employee Health Benefits Plan. Establishing a "universal publicly financed program" would also provide coverage while lowering health care costs, the commission found.

Emory University professor Kenneth E. Thorpe said that employers who provide coverage now and the employees who receive it would save if such changes were made. Employers would save at least $195 billion per year a decade after such changes were made while employees collectively would save at least $40 billion. Annual savings would grow each subsequent year.

Cost savings would be achieved through a variety of ways, Thorpe said, such as reductions in administrative costs, accelerated use of automated patient safety and error reporting systems, and controls on provider payments and premiums to assure a target rate of growth.

Coalition President Dr. Henry E. Simmons said rising health care costs "is no longer just a health care issue. It is now a major economic problem" because such costs are a drag on economic growth, cutting into operating margins and reducing firms' ability to grow by investing in research, capital spending, product development and marketing.

S. Gary Snodgrass, executive vice president and chief human resources officer of Exelon Corp., a New Jersey electric and gas utility, said his firm's firm health care costs had increased by more than 70 percent from 2001–2004, even as current workers and retirees were asked to pay more toward the cost of their health benefits. If gasoline had risen by the same amount, Snodgrass noted, "we'd be paying $2.89 a gallon for regular gasoline."

Such increases must cease, he said. "We cannot afford to write blank checks indefinitely for health care benefits," Snodgrass said.

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Ways and Means Questions Nonprofit Hospitals' Tax Status

MAY 26, 2005 -- Invoking the infamous bank robber Willy Sutton, House Ways and Means Committee Chairman Bill Thomas, R-Calif., led his panel Thursday through an examination of the nonprofit hospital sector. "I think it's obvious if we begin an examination in this area—the old Willy Sutton motto of 'Why do you rob banks? He said 'That's where the money is,'" Thomas said in his opening remarks.

The session was part of the panel's ongoing series of hearings on charities and the breaks they receive under the tax code. Nonprofit hospitals and health care organizations make up the single largest segment of the tax exempt charitable community, accounting for three-quarters of the sector's revenue.

Nonprofit hospitals also receive tax breaks at the state and community level and finance expansion through tax exempt bonds. Many communities rely on nonprofit hospitals to provide medical care, and a change in tax status could have serious financial and public health implications for hospitals and the communities they serve, lawmakers and lobbyists said.

Thomas said it was appropriate to ask what taxpayers were getting in return for tens of billions of dollars in tax subsidies given each year to nonprofit hospitals. He cited data from the American Hospital Association, a trade group representing both for-profit and not-for-profit hospitals, that said the average percentage of uncompensated care in 2002 was 4.4 percent in nonprofit hospitals and 4.5 percent in for-profit hospitals.

"If blindfolded and taken to a hospital, would a patient know whether he or she was in a for-profit or a nonprofit?" Thomas said to the hearing room, which was packed with hospital and health industry lobbyists. Rep. Charles B. Rangel, D-N.Y., said there was "no answer" to the question of why the committee was "picking on" nonprofit hospitals. "Clearly there's been no evidence of wrongdoing," Rangel said, asking if other nonprofits such as universities or churches would also be brought before the panel.

IRS Commissioner Mark W. Everson told the committee it had become "increasingly difficult to differentiate" for-profit hospitals. "We regularly find ourselves engulfed in paper as we attempt to discern whether those in control of a particular nonprofit health care provider are acting more as investors for their own account or as stewards of charitable assets," Everson said.

A Government Accountability Office study presented at Thursday's hearing found that government hospitals generally devoted "substantially larger" shares of their patient operating expenses to uncompensated care than did nonprofit and for-profit hospitals. While the nonprofit groups' share was higher than that of the for-profit groups in four of the five states studied, the difference was small relative to the difference found when making comparisons with the government hospital group, GAO found.

Centers for Medicare and Medicaid Services Administrator Mark B. McClellan testified that between Medicare and Medicaid, "disproportionate share" payments, indirect medical education, bad debt payments, and other funding provide tens of billions of dollars to help hospitals pay for uncompensated care. Nonprofit hospitals will also realize several billion dollars more in tax exemptions, he said.

McClellan suggested that the funding streams for nonprofits required further review. "The question that should be asked is whether the funding mechanisms I have mentioned most effectively target those funds to the programs and settings that provide the best value in terms of the type of care they provide," he said.

The American Hospital Association did not have anyone testify at the hearing but released a statement that nonprofits' tax exempt status was the "key to community care" and "an essential ingredient" to helping uninsured Americans get medical care.

Jill R. Horwitz, an assistant professor at the University of Michigan Law School, said the differences between nonprofit and for-profit hospitals "depends on where you look." For-profit hospitals are more likely than their nonprofit counterparts to offer the most profitable services, and less likely than either nonprofits or government hospitals to offer services that are unprofitable yet valuable, she said in prepared testimony.

But John D. Colombo, a law professor at the University of Illinois College of Law, said there was "no reason to believe" nonprofits offered better medical care to communities. "Empirical studies on quality of care, costs of care, and free care for the poor show decidedly mixed results," he said in prepared testimony. "So if we are looking to empirical evidence to justify the 'trust me' approach of community benefit, the evidence simply isn't there."

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