New Demands and Initiatives for Providers under Healthcare Reform

Orlando—If healthcare costs rise as rapidly as projected, the United States will experience major financial ramifications, according to Gary Scott Davis, PA, partner in the health law department of McDermott Will & Emery, LLP. At the NAMCP meeting, Mr. Davis said the United States spends $2.4 trillion on healthcare, representing 17% of the country’s gross domestic product. By 2016, Mr. Davis estimated spending would increase to $4.1 trillion, even without factoring in the costs related to the Patient Protection and Affordable Care Act (ACA).

Mr. Davis mentioned several initiatives aimed at dealing with the fiscal issues, such as the adoption of accountable care organizations (ACOs), implementation of quality measures, clinical integration, and new compensation models that will directly affect physicians, hospitals, and other providers. However, he said the major cost concern is Medicare, which is anticipated to grow from insuring 43.3 million people in 2010 to 78 million in 2030. At the current reimbursement levels, only 1% to 2% of providers earn money from caring for Medicare patients, according to Mr. Davis. As the number of Medicare enrollees continues to rise, he predicts there will be less opportunity to cost-shift and that many providers may stop treating Medicare patients. “The starting point and likely ending point [of reforming healthcare] is Medicare,” said Mr. Davis, who spoke during a session titled Bending the Cost Curve, Raising the Quality Bar—The New Provider Realities. “If you can’t make [profit] margins in the future in Medicare, it’s not sustainable.” Still, the ACA calls for reduced Medicare reimbursement rates for hospitals and physicians and includes numerous provisions that will alter the industry. Mr. Davis said hospitals will treat more insured lives, become the centerpiece of new payment and delivery models, and be penalized for poor quality and inefficiency.

The ACA also affects physicians through reduced premiums, a shift of money from specialists to primary care physicians, a change in payment from fee-for-service to bundled payments and shared savings, and higher practice costs related to adoption of health information technology, quality data reporting, and increased regulation. Mr. Davis discussed a “triple aim” initiative from the Institute for Healthcare Improvement (IHI), a nonprofit organization based in Cambridge, Massachusetts. IHI is focused on organizing care to improve the population’s health; enhance patients’ experience when receiving care (including quality, access, and reliability); and reduce or control the per capita cost of care. Mr. Davis said an improved healthcare system that strives for the triple aim would focus on individuals and families, be integrated, emphasize population health management, and have a cost-control platform. Mr. Davis also discussed how providers could form an ACO, a payment and delivery model that was proposed as part of the ACA.

On March 31, the Centers for Medicare & Medicaid Services (CMS) announced proposed federal rules pertaining to ACOs, although Mr. Davis said consultants have been attempting to help providers form an ACO for more than a year. Mr. Davis said that providers should not trust consultants that are “selling ACOs in a box.” Rather than a one-size-fits-all solution, ACOs should be tailored toward individual providers and markets and based on the size and location of the ACO. “This is not something you can just snap your fingers [and an ACO will work],” Mr. Davis said. “It’s a sea change, a paradigm shift.” According to Mr. Davis, an effective ACO has a local focus, emphasizes multidisciplinary care coordination, is built on collaboration and shared responsibility, and measures the efficiency and quality of care rather than the volume of care. The patient-centered medical home is another delivery model proposed as part of the ACA. In a medical home, a personal physician coordinates, facilitates, and is responsible for a patient’s care. Unlike an ACO, which is responsible for the total cost of care and quality outcomes, the physician in a medical home advocates for the patient and provides guidance but is not held responsible for any cost or quality measures. Mr. Davis said a medical home is designed to minimize undertreatment or overtreatment, uses evidence-based medicine to make decisions, and provides patients with access to care in any setting at any time. With increasing costs and the passing of the ACA legislation, providers will be held responsible for providing quality care, according to Mr. Davis.

Although he admitted that quality was a vague term, Mr. Davis said the measurements should be based on clinical practice guidelines that take into account consensus and empirical evidence as well as on evidence-based medicine that relies on integrating clinical expertise with the best available evidence and a patient’s value system. Mr. Davis cited organizations that are good resources for quality initiatives, including the National Quality Forum, the Agency for Healthcare Research and Quality, and the National Guideline Clearinghouse. When designing a quality improvement program, Mr. Davis said organizations must include metrics that improve and enhance patients’ quality of care rather than adopting metrics that are physician- or hospital-centric. The measures should be based on patient safety, clinical effectiveness, utilization, cost management, and patient satisfaction, according to Mr. Davis, who added that organizations should have a uniform reporting and measurement system as well as a way to audit data on a regular basis. “Success in the future will not be measured by volume,” Mr. Davis said. “Integration is more than collaborating.…You need goals and benchmarks.”

To reach the quality measurements, Mr. Davis said hospitals and physicians must work together. He said that a structure based on an independent medical staff would not work under the new reform because peer review and quality management is retrospective and the model does not contain a mechanism to standardize care or require evidence-based medicine. Before passage of the ACA, hospitals and physicians had an incentive to increase the volume of profitable acute patient interventions and profitable ambulatory and outpatient services via a fee-for-service basis. There were limited incentives for hospitals to collaborate in reducing costs and improving their care quality, according to Mr. Davis. Since the ACA was passed in March 2010, Mr. Davis has seen physician practices merging or integrating, incentive compensation arrangements in which physicians comply with and benefit from value-based purchasing initiatives, and the development of ACOs and other coordinated care organizations that are created to benefit from the revised payment models. The change from volume-based to value-based payment alters the financial incentives and rewards hospitals and physicians that collaborate across the continuum of care, according to Mr. Davis. He said the clinical integration involves 4 components: collecting data, analyzing information, utilizing the data to gain knowledge, and changing behavior.

Under the ACA, fee-for-service payment models require hospitals to achieve quality and/or cost performance metrics, which Mr. Davis said will force hospitals to change the medical staff’s clinical behavior and care processes. Some of the models are pay-for-quality, shared savings, and bundled payments. According to Mr. Davis, in a pay-for-quality model, physicians create a legal entity owned by physicians who have been on staff for ≥1 year. The physicians contribute an equal amount of capital, contract with hospitals, and choose to comply with protocols that help hospitals meet quality performance metrics. Mr. Davis said the hospitals pay physicians based on the pay-for-performance dollars that hospitals earn. In a shared savings model, hospitals pay physicians based on the savings a hospital realizes from reducing costs and utilizing resources in a more efficient manner. Mr. Davis said CMS implemented 2 shared savings models in the mid-2000s, 1 of which has been extended to 2012. CMS is exploring more shared savings programs, according to Mr. Davis, and the organization is encouraged by the potential value of the programs. In a bundled payments model, providers receive a single payment for all services rendered during an “episode of care,” which Mr. Davis said includes the time a patient spends in the hospital, 3 days before he or she is hospitalized, and the 30 days after discharge. Mr. Davis said the Department of Health and Human Services will select the clinical conditions covered under bundled payments, but there have been no rulings as to how the bundled payments will be distributed to providers.