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October 24, 2011

Washington Health Policy Week in Review Archive 0d9688fe-14e2-49b8-a297-c2c579c2747f

Newsletter Article


Medicare ACO Final Rule Includes Changes Designed to Attract Industry Interest

By Rebecca Adams, CQ HealthBeat Associate Editor

October 20, 2011 -- The 696-page final rule for Medicare’s core program to encourage providers to coordinate patient care differs significantly from an earlier proposal panned by provider groups. Officials hope the new version released Thursday will help create as many as 270 ACOs, double the number in the proposed regulation.

The program would give providers the opportunity to earn bonus Medicare payments if they save money by working closely together through so-called accountable care organizations, or ACOs, which each oversee care for at least 5,000 patients.

The final rule, designed to address providers’ complaints, includes revised provisions allowing providers to avoid penalties if they do not meet savings targets. It reduced the number of measurements to assess the quality of care from 65 to 33 metrics; relaxed requirements for provider use of electronic health records; and gave physicians and rural providers access to up-front capital through an “advanced payment” program.

Centers for Medicare and Medicaid Services (CMS) officials estimated that about 50 to 270 provider groups would participate under the revised plan. Actuaries said that the Medicare program could lose money on the program. But if it works as intended, a median estimate— which assumes about 90 ACOs would join—shows that the federal government would save about $470 million, and all of the participating provider groups collectively could save $1.3 billion, over four years.

The ACO program is a key element of the 2010 health care overhaul law (PL 111-148, PL 111-152).

Some Providers, Groups Still Worried
Medical providers who had sharply criticized the early draft of the regulation applauded most of the changes in the final rule, although some said they were disappointed that regulators did not include all of the changes they wanted. For instance, the American Hospital Association was pleased that the agency had reduced the amount of reporting that hospitals would have to do to show that they are providing high-quality care, and it was also pleased that hospitals will have an option to allow them to avoid penalties if they do not hit their savings goals. But hospital officials were disappointed that the final version did not allow providers to keep as much of the savings as they would like.

And some manufacturers of medical products were concerned that physicians or other medical professionals might try to save money by limiting the use of high-priced products, even if they improve patient care.

“The ACO program may have the effect of limiting treatment options and discouraging physicians from adopting new advancements in care,” said Ann-Marie Lynch, executive vice president of the Advanced Medical Technology Association.

Still, CMS Administrator Donald M. Berwick said that the new version was “a stronger ACO program than was contemplated” in the first draft, which was released in March, and a thoughtful response to more than 1,300 comments the agency received, many of which were negative.

The so-called shared-savings program is a signature issue for Berwick, whose appointment expires at the end of the year. His goal is to engineer an incentive for providers to coordinate more closely on patients’ care.

“With ACOs, we have a chance to transform health care delivery,” Berwick said on a call with reporters.

But it is unclear how much of that opportunity will be realized. The regulation repeatedly says a wide range of outcomes is possible. And some analysts said that it would take years and an enormous amount of effort to change the incentives in the nation’s current health care system, which generally pays piecemeal for individual procedures rather than for the complex holistic care of a patient.

“The new rule is an easier pill to swallow, but still difficult for most systems to fully digest,” said Dan Mendelson, CEO of Avalere Health, a consulting company. “Fundamentally, most health systems continue to struggle with the fact that their present operations are oriented toward billing per service, and not taking on risk and responsibility for quality.”

The changes in the final rule “reflect a desire by CMS to encourage providers to participate and its willingness to listen to industry,” said Paul Keckley, executive director of Deloitte Center for Health Solutions.

Some Penalties Gone From Final Rule
One issue in the proposed rule that had caught providers by surprise was that it would have exposed everyone who participated in the program to penalties if they didn’t meet their savings goals. The final rule modified that provision.

The program will still offer two options for participants.

The first route is for providers with little experience in operating an ACO. Unlike in the proposed rule, those groups won’t have to worry about penalties if they don’t save enough. CMS officials said that ACOs will have to save between 2 percent and 3.9 percent of an amount set by a formula that will be based on what providers would have gotten under the traditional Medicare program. But once they have saved that much money, Berwick said that agency officials will go back and credit the providers so that they will share in all of the savings that have accrued. Providers in this track will get as much as half of the savings.

Under the second track, providers will get up to 60 percent of the savings. These providers, who are more experienced in operating ACOs, will still, as in the proposed rule, risk losses if they don’t achieve savings.

But under both tracks, Medicare officials are capping the total amount of savings that provider groups can keep.

Under the proposed rule, patients would have been assigned to an ACO long after care was delivered. Under the final version, beneficiaries will be assigned each quarter. Patients who have received a plurality of their treatment by a particular physician would be assigned to an ACO that includes that physician.

After many groups complained that the first version seemed designed mostly for hospitals in urban areas, officials working on the final rule made an effort to include and build interest from physicians, federally qualified health centers and rural providers. Medicare officials say the advance payments for physicians and rural providers that join the program in 2012 will make a big difference. An average-size group could expect to get about $3.5 million for start-up costs under the advance payment program. The providers would have to pay back those funds later from any savings that develop. The total amount of funding for the advance payments will be $170 million.

Providers who want to participate do not have to join right away. They could sign up on a rolling basis in 2012, 2013 or 2014.

Separate provisions affecting anti-trust rules also were issued Thursday.

Rebecca Adams can be reached at [email protected] .

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CDC: Hospitals Report 'Impressive' Drop in Health Care Infections

By John Reichard, CQ HealthBeat Editor

October 19, 2011 -- Central line infections—which are associated with tubes placed in the neck or chest of a hospital patient to deliver important medicines—dropped by 33 percent in 2010, according to an analysis announced Wednesday by the Centers for Disease Control and Prevention (CDC).

The agency also reported a 10 percent drop in surgical site infections and a 7 percent decline in hospital infections associated with catheters inserted in the urinary tract. And the number of people who contracted methicillin-resistant Staphylococcus aureus (MRSA) infections from health care facilities declined by 18 percent.

The findings suggest that health care services can be retooled in a way that improves safety and lowers costs when the public and private sectors unite on achieving specific goals.

CDC Director Thomas R. Frieden said in a news release that hospitals “continue to make impressive progress in driving down certain infections in intensive care units through implementation of CDC prevention strategies.”

Declines weren’t limited to intensive care units, but Frieden said that in general hospitals and state health departments need to do more to extend progress in ICU units to other areas of health care delivery and to other types of health care infections. He cited as examples dialysis and ambulatory surgery centers and diarrheal infections such as clostridium difficile.

Central line infections are particularly serious because they involve patients who are critically or seriously ill. These infections occur when the central line tube is inserted improperly or isn’t kept clean.

When that happens, “central lines can become a freeway for germs to enter the body and cause serious bloodstream infections,” the CDC news release said.

Frieden revealed the findings at a policy forum in Washington, D.C. sponsored by the National Journal.

Infection reduction is the goal of a variety of public and private sector efforts that go back a decade or more.

The “100,000 Lives” campaign launched in 2004 by the Boston-based Institute for Healthcare Improvement” targeted central line and surgical site infections among other safety goals. Some 3,000 hospitals participated in the voluntary campaign led by Centers for Medicare and Medicaid Services (CMS) Administrator Donald M. Berwick, the head of the institute at the time.

On other fronts, states have passed laws requiring public reporting of central line infections in the ICU, the CDC launched a major initiative targeting health care associated infections, and under the health overhaul law (PL 111-148, PL 111-152) Medicare will cut payments to facilities with many such infections.

“I don’t think we can point to any one thing” to explain the improvements, said CDC spokesperson Abbigail Tumpey.

Tumpey noted that 28 states have passed laws requiring some form of public reporting of central line infections. “It really results in culture change in many of these hospitals,” she said.

Based on CDC work with Pennsylvania hospitals and an easy-to-follow checklist developed by Peter Pronovost of Johns Hopkins University, CDC recommendations have spurred hospital staff to take a variety of steps to prevent the infections, she added. Hospitals that carefully follow the checklist have reduced the infections by 70 percent, she said.

And CMS now requires hospitals that have a central line infection to report it to the agency as part of an emerging program under the health law to lower Medicare payments when health care-associated infections occur. The agency’s voluntary “Partnership for Safety” program launched this year seeks to widen improvements in reducing infections and enhancing safety.

The specific declines reported by CDC Wednesday were against various national averages or “baselines.” The 33 percent drop in central line infections occurred relative to a national average based on 2006–2008 data. The drop that occurred in 2009 against that average was 18 percent, suggesting continuing steady improvement in 2010.

The 10 percent drop in surgical site infections was compared to a national average calculated from 2006-2008 data. The 2009 drop compared to that average was 2 percent.

The 7 percent decline in catheter-related infections was compared to a 2009 average. And the 18 percent reduction in MRSA infections was compared to a national average calculated from 2007-2008 data. The 2009 decline against that baseline was 12 percent.

Pennsylvania program
State infection tracking
Detailed CDC data on improvements

John Reichard can be reached at [email protected] .  

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Officials: New CMS Rules Would Cut Red Tape, Save Billions

By Dena Bunis, CQ HealthBeat Managing Editor

October 18, 2011 -- Hospitals and health care providers could save more than $5 billion over the next five years as a result of new Medicare and Medicaid rules that would allow medical professionals to spend more time on patient care and less time on bureaucratic red tape, federal officials said Tuesday.

Health and Human Services (HHS) Secretary Kathleen Sebelius and Centers for Medicare and Medicaid (CMS) Administrator Donald M. Berwick unveiled two proposed rules and issued one final one.

One rule—the Medicare Conditions of Participation—would essentially free hospital officials to customize many of their procedures rather than follow strict federal regulations.

For example, critical access hospitals must have such services as radiology and lab work done in-house. The proposed rule would allow them to contract out that work. It also would allow one governing body to oversee multiple hospitals that are part of a single health system. Hospitals also would be allowed to have a single, interdisciplinary care plan that supports coordination of care instead of a separate plan just for nursing.

Currently, hospitals are required to have a single director of outpatient services. That requirement was fine years ago when most care in hospitals was inpatient, Sebelius said. Now, she said, more and more care is delivered on an outpatient basis. So under the proposal, hospital administrators would be free to decide their own management structure for outpatient care.

“In meeting with health care leaders, we found places where regulations were getting in the way of the best care,’’ Sebelius said during a conference call with reporters. The rules announced Tuesday, she said, “will reduce those burdens.” They were developed in response to President Obama’s charge to all federal agency heads to eliminate unnecessary regulations, she added.
Sebelius said that the proposed changes would remove many outdated billing practices, “saving hospitals and physicians time and money.’’

Under the new rules, hospitals would be free, for example, to use advanced practice nurses, physician assistants and other non-physician health care practitioners “to their greatest potential.” In many cases, Sebelius said, state laws allow greater flexibility in terms of what those professionals can do, while federal law imposes more limits. Under the proposal, hospitals would be able to credential and privilege these employees based on the more expansive state laws.

The second proposed rule—Medicare Regulatory Reform—is designed to eliminate “duplicate, overlapping, outdated and conflicting regulatory requirements for health care providers and suppliers, including hospitals, ambulatory surgical centers, end-stage renal disease facilities, durable medical equipment suppliers and a host of health care providers and suppliers regulated under medicare and Medicaid,’’ CMS said in a fact sheet.

For example, under this proposal CMS would eliminate the current Medicare requirement that automatically deactivates a provider or supplier who has not submitted a claim for 12 consecutive months, preventing providers from being barred from re-enrolling in Medicare for a certain period. CMS estimates that this provision alone would save $26.7 million a year.

CMS will take comments on the two proposed rules for the next 60 days.

Final Rule
The final rule announced Tuesday will change the requirements for notifying ambulatory surgical center patients about their rights. Currently, patients must receive this information before they come to the centers for procedures, not on the same day they are having the surgery.

The rule, which is a change from the proposal CMS published earlier this year, allows for same-day notification.

According to the final rule, there were about 7 million admissions to ambulatory surgery centers in 2009. The new regulation will reduce the number of visits a patient must make to the center before having a procedure. CMS estimates that 1.4 million visits a year can be avoided. Taking into consideration how much doctor, nurse and clerical staff time will be saved, the agency estimated that this rule will save providers $17.5 million a year.

Berwick called the regulation changes the “latest step in our movement to create a culture of patient-centered care in America.”

He also said that the savings projected from these rules would not mean staff cuts. Professionals in health care facilities as well as at CMS will be able to do more patient-centered and meaningful work, he said. Money will be saved because “time is money.”

HHS will be seeking comments on the proposed rules for 60 days.

Rich Umbdenstock, president and CEO of the American Hospital Association, welcomed proposed rules.

“The proposed new conditions of participation better recognize how care is delivered today,’ Umbdenstock said in a statement. “They eliminate unnecessary paperwork, allowing nurses more time at the bedside. In addition, the new rules allow multi-hospital systems to have one governing board that can provide comprehensive oversight across their hospitals.”

But Umbdenstock doesn’t want federal officials to think their work is done when it comes to streamlining regulations.

“While we also appreciate the changes made in the regulatory relief rule, there’s more work to be done to allow hospitals, physicians, nursing homes and others to better coordinate care for patients,’’ his statement said.

Dena Bunis can be reached at [email protected].

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HHS Solicits Stakeholder Opinions on Essential Health Benefits

By Jane Norman, CQ HealthBeat Associate Editor

October 18, 2011 -- The Department of Health and Human Services (HHS) held a closed-door meeting involving dozens of provider groups airing their views on what should be included in an essential health benefits package.

The stakeholders in attendance were told that meetings with consumer advocates and insurers are expected to follow soon, as HHS seeks input on how to structure benefits.

The meeting, which was not open to the press and reportedly was organized just late last week, follows the release of recommendations on essential health benefits by the Institute of Medicine (IOM).

It is now up to HHS to develop more specific proposals on benefits for plans that will be offered to individuals and small businesses obtaining their care through the state-based exchanges in 2014. HHS officials said when the IOM recommendation was released that they would be seeking input in that process.

An HHS proposed rule on essential health benefits is expected soon. The IOM said that HHS should develop its package by May 2012.

HHS officials did not respond to a request for a list of those asked to testify. But among them was the American Academy of Pediatrics.

Patience White, who represented the academy at the meeting, said in an interview that she stressed a section of the health care law (PL 111-148, PL 111-152) that says benefits should “take into account the health care needs of diverse segments of the population, including women, children, persons with disabilities and other groups.” White said the academy is concerned that kids will be lost in the shuffle and would not benefit from a benefit plan tied to the average small employer plan, as recommended by the IOM.

“Kids often lose out in these small employer packages,” she said, because much of what they need is preventive care that’s not covered. The academy would like to see the essential benefits package modeled on the package of benefits extended to children in the Medicaid program.

“I think we got their ear,” she said of the session with HHS officials.

White also said in prepared testimony that the health needs of infants, children and adolescents are distinct enough from those of adults that a health care system designed for adults won’t meet children’s needs.

The academy urged that HHS “build in purposeful consideration of the unique characteristics of children in establishing and updating” the essential health benefits.

Jane Norman can be reached at [email protected].  

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There Will Be a Federal Exchange, HHS Official Hill Declares

By John Reichard, CQ HealthBeat Editor

October 18, 2011 -- The HHS official in charge of overseeing the creation of insurance exchanges under the health care law emphasized Tuesday that a federal exchange will be ready to step in to the extent states don’t have their own new marketplaces ready to offer insurance choices to the uninsured by Jan. 1, 2014.

“There’s been a lot of backing and forthing in the press saying the feds won’t do it, it’s not going to happen, we don’t have the ability. Well, I’m here to tell you all of that isn’t true,” Tim Hill told a health care conference sponsored by the American Bar Association (ABA). Hill is deputy director of the Center for Consumer Information and Insurance Oversight at the Centers for Medicare and Medicaid Services.

“We’ve made investments in 2011, we’re making further investments in 2012—in terms of IT, business process, resources that are needed to be able to bring up the exchange,” Hill said. All the things that need to happen to develop a federal exchange are moving forward, he declared.

While the feds are trying to dispel all doubt about whether they will be ready to step in, they are eager to portray themselves as loath to push states around in deciding how exchanges are run. Hill’s mantra during his remarks was that HHS wants a “consumer-centric, state-based exchange.” One size does not fit all, he said, adding that exchanges should be customized to fit the particular insurance market of the state involved.

Hill said officials view the exchanges as an opportunity to make the process of buying insurance unlike anything consumers have ever experienced before. “We want it to mirror and be like any other commercially based transaction that they have today, whether it’s buying a book on or buying a pair of shoes or getting their automobile insurance through Geico,” he said.

The fact is, though, that many states appear to be dragging their feet in creating exchanges. Only 17 have applied for and received “establishment grants” to begin creating them. On Sept. 30, several more applied for those grants. Only 14 states have exchange laws in place. In two other states—Indiana and Rhode Island—governors bypassed their legislatures and issued executive orders to create exchanges, according to an industry tally.

But even the state exchange laws that have been enacted do not address all the details involved in setting up the marketplaces.

In the case of Indiana, there is no commitment to actually create an exchange but only to plan for one.

A handful of states are moving eagerly ahead, said Colleen Gallaher, an official with America’s Health Insurance Plans.

Oregon, New York and Maryland applied for and received establishment grants and “early innovator” money to do pioneering information technology work that other states can copy. “They’re really riding hard and want to get to the finish line, and quite honestly, I think they will,” said Gallaher.

But because of the complexity, lack of certainty about what health plans will be required to offer, and legal challenges to the health care law (PL 111-148, PL 111-152), most states haven’t shifted into high gear.

One questioner at the ABA forum prodded federal officials to say more about what the federal exchange would look like as an incentive to get more states off the dime. The thought is that if the federal exchange is in some way too heavy-handed, states will move faster to set up their own marketplaces.

But Hill broke no new ground in saying what the federal exchange would look like. He referred one reporter to a set of slides presented to state officials at a recent meeting with HHS that did not address some of the things states most want to know, such as whether the federal exchange would be an “active purchaser” that would exclude insurers who don’t offer consumers a good deal.

Gallaher’s remarks carried a strong undertone of uncertainty about whether states—and therefore insurers—will be able to do everything they are being asked to do under the law. She noted that insurers will have to be ready by June of 2013 to file bids to offer coverage on exchanges, with open enrollment to begin that fall. They do not yet know what benefits they will have to cover, among many other questions, including the extent to which federal officials will cushion insurers from losses when they first enter the unfamiliar exchange market.

But states have tighter deadlines. Gallaher noted that states must get HHS certification by Jan. 1, 2013 that they will have a viable exchange ready a year later. “We cannot stress enough that 14 months is hardly enough time to really have mapped-out and sourced-out and vendored- and contracted-out the build-it requirements of an exchange,” she said.

CMS slides

John Reichard can be reached at [email protected] .

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Employers Won't Abandon Health Insurance Coverage, Study Says

By Jane Norman, CQ HealthBeat Associate Editor

October 21, 2011 -- A new study by the Urban Institute bolsters the Obama administration’s contention that the health care law won’t prompt employers to drop their workers’ health insurance.

The liberal-leaning institute says that employer-sponsored insurance likely will remain a staple of the workplace because it is an essential factor in keeping a good workforce for many employers. Decreases in the numbers of people who have such insurance may continue, driven by rising health care costs. But it won’t be because of the health care law, says the study, which was funded by the Robert Wood Johnson Foundation.

The argument that it will go away “ignores the fact that employers have been offering coverage for decades, with no threat of a penalty for not doing so,” says the study. “They do it for good economic reasons—they are competing for labor—and these economic reasons will determine whether they continue to do so or change their behavior.”

Employers who drop coverage also will risk driving away highly skilled top earners who would prefer sticking with employer sponsored insurance than into the exchanges, they say.

The issue is a major one as full implementation of the law (PL 111-148, PL 111-152) looms in 2014, when almost all Americans will be required to have health insurance. Republicans and business groups have warned that employers faced with additional costs might choose to pay penalties rather than provide health insurance because the fines would cost them less.

If large numbers of workers move onto the exchanges, the government’s costs also would increase because lower-wage workers who go to the exchanges for their insurance would be eligible for subsidies.

A widely publicized study last summer by McKinsey & Co. consultants predicted a major drop in employer-sponsored insurance. But Democrats attacked it, saying the questions in the study were slanted and an original report made the study sound more scientific than it was.

The Urban Institute study by Linda Blumberg, Matthew Buettgens, Judy Feder, and John Holahan says that it is incorrect to conclude that an employer who drops health insurance coverage will save money overall. Employers who drop insurance but fail to raise wages “will inevitably lose these employees to competitors,” they say — so they will be forced to raise wages to offset the loss of benefits and might even wind up increasing their total compensation costs.

However, the authors do say there might be an exception—companies dominated by low-wage workers. For people at or below 250 percent of the federal poverty level, there’s probably better and cheaper coverage through the exchanges. So the study authors predict that firms with lots of low-paid workers are likely to drop their own coverage and substitute extra wages.

But “a leap from that fact to the conclusion that employers have a powerful incentive to drop coverage runs counter to standard economic theory,” they say. Employers who say they will drop insurance may be focused on an immediate cost advantage. But eventually, those employers will be competing in the labor market and will have to bring total compensation— both wages and benefits—into line to attract workers, they say.

Urban Institute Study

Jane Norman can be reached at [email protected].  

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