Hospitals

Insurer Bargaining Power: Markets With High Insurer Concentration and High Provider Concentration Show Decreased Hospital, Physician Fees – Health Affairs Study

By M2|2017-12-14T02:47:07+00:00December 13th, 2017|Health care spending, Hospitals, Insurance, Out-of-pocket spending, Uncategorized|

**Insurer Bargaining Power: Markets With High Insurer Concentration and High Provider Concentration Show Decreased Hospital, Physician Fees – Health Affairs Study**

In a recently published study in Health Affairs, the authors set out to determine whether insurers had the bargaining power to reduce prices for hospital admissions and physician visits (among five types of physicians).

The results confirm what the authors, had anticipated – that insurer bargaining power is strongest in markets with both high provider concentration and high insurer concentration.

The authors found that in markets where both insurers and providers were highly concentrated, insurers were able to reduce hospital admissions prices by 5%, and were able to reduce physician visit prices as well – e.g., cardiologist, radiologist and hematologist/oncologist visit prices were reduced by 4%, 7%, and 19%, respectively.

However, the study did not find evidence of insurer bargaining power on prices of visits to primary care physicians or orthopedists. This lack of effect is “likely because prices for those specialties are not far out of line, so it’s very hard for payers to negotiate from a price that is not far out of competitive range,” according to comments made by study one of the study’s authors, Richard Scheffler, University of California, Berkeley, in a Medscape Medical News article (Scheffler co-authored the study with fellow UC-Berkeley health economist Daniel Arnold).

Conversely, the authors found that insurer bargaining power in markets with low provider concentration was not significant, because providers in those markets are already near the competitive level, thus leaving very little room for downward negotiation of prices.

The study examined the association between provider and insurer market concentration and provider prices, calculated from the Health Care Cost Institute’s medical claims database, from 2010 to 2014. Measures of market concentration were computed using the Herfindahl-Hirschman Index (HHI), a common measure of market competitiveness used in the Horizontal Merger Guidelines of the Department of Justice (DOJ) and Federal Trade Commission (FTC).

The authors note the rapid pace of consolidation of hospitals; from 1998 to 2015, there were over 1,400 hospital mergers in the U.S., 40% of which occurred between 2010 and 2015. Similarly, physician markets are also becoming concentrated “at an accelerated pace, with primary care physicians making the move from smaller to larger group practices faster than specialists.”

“The increased consolidation of provider (hospital and physician) markets and health insurance markets has garnered significant attention and led to calls for policy action to maintain and enhance the competitiveness of health care markets,” they note.

“Our results…suggest that insurers can bargain the prices down in highly concentrated provider markets,” the authors conclude.

However, “what is missing is a market mechanism that will pass these reduced prices on to consumers in the form of lower insurance premiums,” the authors note.

“Given the extreme concentration of the health insurer market, it is hard to imagine that many markets will be contestable and that competition will work to reduce premiums. Significant premium increases and the profits of the health insurance industry in recent years suggest that little if any of the benefits of insurer bargaining power are being passed along to consumers,” Scheffler and Arnold say. Nonetheless, “in the ACA Marketplaces, there is evidence that active-purchaser states are able to keep premiums down and stabilize their markets,” they note.

Overall, aside from insurers in some of the Affordable Care Act exchanges, insurers “are making a huge amount of money,” Scheffler says in the Medscape article. With market concentration, “medicine doesn’t improve, the quality doesn’t get any better, consumers don’t benefit, but the insurance companies’ stock prices go up.”

Thus, “it would seem to be only a matter of time before further intervention in and regulation of the health insurance market by state and federal legislatures, as well as private market innovation will accelerate.”

In the Medscape article, Scheffler proposes three potential avenues for change: First, the Federal Trade Commission should get more involved in investigating the pricing practices of highly concentrated markets. Second, states should more aggressively regulate premiums that insurance companies charge and ensure that savings are passed on to consumers. Third, large companies could bypass insurers and self-insure.

Hoping for increased competition in the insurance market is unlikely to be a fruitful option here, in light of increasing consolidation; as the authors rightly point out, other measures will be needed in order to bring relief to consumers. In particular, states should follow the lead of those that have moved to more aggressively regulate insurance premiums and ensure that savings resulting from increased bargaining power are passed on to consumers. Sky-high premiums continue to burden consumers; it’s time to hold insurers’ feet to the fire and make sure consumers aren’t the only ones still paying inflated prices.

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Anthem Steers Members Away from Hospitals for MRIs, CT Scans, in Favor of Freestanding Facilities

By M2|2017-11-12T22:41:42+00:00November 10th, 2017|Health care spending, Hospitals, Insurance, Uncategorized, What do we pay for and why|

Anthem Steers Members Away from Hospitals for MRIs, CT Scans, in Favor of Freestanding Facilities

Anthem is expanding its recently launched program that cuts hospital outpatient payments for MRIs and CT scans in order to steer patients toward freestanding facilities that provide these imaging services at lower cost. The program began in July with four states, and is now growing to include a total of nine states, including Colorado, New York, and Ohio.

Under its Imaging Clinical Site of Care program, Anthem no longer pays hospitals in the affected states for outpatient imaging services for MRIs or CT scans. Imaging is a large part of hospital revenue, and Anthem said it costs more to have the service done in a hospital outpatient setting than at a freestanding facility, according to a recent article in Healthcare Finance.

According to Anthem, imaging services can be just as safely provided in a lower cost, free-standing center as in a hospital outpatient setting. The cost for MRIs and CT scans can vary from $350 to $2,000 as Anthem noted when it began educating members about their options related to imaging services in 2010.

Anthem is willing to share the cost-savings with its members. In cases where it is not medically necessary to receive services from a hospital, consumers who go to a freestanding facility can save close to $1,000 out-of-pocket for some imaging services for those who have not met their deductible, and up to $200 for those whose plans require only a copay, the article notes, based on Anthem data.

Helping patients understand cost differences and sharing savings from changing the site of care is important as a recent report in Health Affairs, notes many consumers do not make any attempt to compare prices for health care services. “Most survey respondents said they didn’t comparison shop or even ask how much they would owe in copayments or other cost-sharing expenses before they turned up for an appointment.”

With a large insurer such as Anthem leading the way, other private insurers may follow suit on reimbursement for imaging services. “Hospitals need to recognize they are competing in a market already delivering on convenience, quality and affordability,” Anthem spokesperson Lori McLaughlin said.

Similar moves have been made on the public payer side as well.

Under Medicare, procedures performed in the hospital outpatient department are paid at a higher rate under the hospital outpatient prospective payment system compared to freestanding clinics, which are paid on the Medicare physician fee schedule. In July 2017, the Centers for Medicare & Medicaid (CMS) said it plans to continue implementing reductions to the outpatient prospective payment system spending in CY 2018, as it had begun in CY 2017. CMS estimated it would save approximately $500 million in 2017 by reimbursing services provided at certain outpatient provider-based departments at 50% of the Outpatient Prospective Payment System; this percentage is proposed to change to 25% in CY 2018.

This is a great example of the kind of approach that’s needed to lower health care costs. As I’ve noted in prior blogs (for example, here), we get what we pay for. If we want to move the needle on costs, we need a lot more of this type of approach, incentivizing patients to take advantage of lower cost, high quality alternatives to the way things have traditionally been done.

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Employers sending patients to top-performing providers with bargain prices for routine surgeries

By M2|2017-11-01T19:11:22+00:00October 31st, 2017|Health care spending, Hospitals, Uncategorized, What do we pay for and why|

Employers sending patients to top-performing providers with bargain prices for routine surgeries

In the face of high hospital bills, lack of local competition, and wild variations in surgical costs among different providers, some employers are responding by steering patients toward high-quality, bargain-priced providers. While this is happening primarily among some large private employers, a “handful” of public employers are also taking these steps, according to a recent article in Kaiser Health News.

Employers are striking deals for bundled payments for routine surgeries, with one fixed price covering tests, physician fees, and hospital charges; in some cases, the best-quality, lowest-cost provider is out of town. In addition, the providers are on the hook financially if any complications arise, the article notes.

Cost is not the only factor; the company also makes its choices based on quality, including data on complications and readmissions. “Not all surgeons are equal,” Carrum CEO Sachin Jain says in the article.

As an example, the article notes that Santa Barbara County is among about 400 employers on the west coast working with Carrum Health, a company that negotiates the bundled prices.

While the Santa Barbara County bundled payment program is voluntary for covered employees, the county has saved “nearly 50 percent on four surgery cases” since starting its program last year, the article says.

The article profiles one patient who received an all-expenses-paid trip to a luxury resort, over a thousand dollars in spending money, and a personal concierge during her stay in San Diego. The county provides further incentives to covered employees to participate in the program by waiving copays and deductibles.

However, “it was money well spent,” the article notes. Sending the patient 250 miles away for knee replacement surgery saved Santa Barbara County $30,000.

“If that doesn’t speak to the inefficiencies in our health care system, I don’t know what does,” Andreas Pyper, assistant director of human resources for Santa Barbara County, says in the piece. “It’s almost like buying a Toyota Corolla for $50,000 and then going to San Diego to buy the same Corolla for $16,000. How long would the more expensive Toyota dealership last?”

Some companies have gone so far as to send patients overseas for cheaper care, but most employers favor a more regional approach, according to the article. Local physicians are still relied upon for follow-up care.

For some hospitals, the advantages of offering deep discounts include that “they get patients they otherwise would never see and are paid in full right after the patient is discharged, avoiding the onerous billing and collections process,” the article says.

Some hospitals also have the financial capacity to offer such sharply reduced prices; “most hospitals significantly mark up their commercial rates for orthopedic procedures and cardiac surgeries to compensate for lower government reimbursements,” Michael Bark, assistant vice president of payer relations at Scripps Health, an integrated health system, says.

This is another great example of how it is possible to drive lower-cost, higher-quality care. We need more leaders, whether payers or employers, to take these kinds of steps to reimburse for increased value in health care services. As I’ve said in previous blogs such as , we get what we pay for; the more we direct our reimbursement dollars toward high-value care, the more we’ll get. The interesting thing in this case is that it’s employers who are demanding high value; with 50% of Americans receiving their insurance through their employers, if employers start demanding this type of approach, we might see change.

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Balance Billing: California Latest State to Protect Patients Against Surprise Bills From Out-of-Network Providers

By M2|2017-10-08T11:21:23+00:00September 19th, 2017|Hospitals, Insurance, Uncategorized|

Balance Billing: California Latest State to Protect Patients Against Surprise Bills From Out-of-Network Providers

As of this summer, California is joining other states that have consumer protection laws prohibiting balance billing. Balance billing – also known as surprise medical bills – refers to the practice of billing patients for out-of-network providers even when the care was given in an in-network facility.

“Here’s a common scenario: A patient takes pains to ensure her hospital and surgeon are in-network, only to get billed by the out-of-network anesthesiologist who appears at her bedside to put her under,” according to a recent article by Kaiser Health News published in Healthcare Finance.

“This situation could arise in an emergency when the patient has no ability to select the emergency room, treating physicians, or ambulance providers,” the Kaiser Family Foundation says. “Surprise medical bills might also arise when a patient receives planned care from an in-network provider (often, a hospital or ambulatory care facility), but other treating providers brought in to participate in the patient’s care are not in the same network.”

“These can include anesthesiologists, radiologists, pathologists, surgical assistants, and others. In some cases, entire departments within an in-network facility may be operated by subcontractors who don’t participate in the same network,” the foundation notes.

A total of 21 states now have laws protecting consumers against balance billing. A brief by The Commonwealth Fund classify the laws as partial or comprehensive protections (see map below). Six states are considered to have a comprehensive approach: California, Connecticut, Florida, Illinois, Maryland, and New York. Fifteen states’ approaches are considered “limited”: Colorado, Delaware, Indian, Iowa, Massachusetts, Mississippi, New Hampshire, New Jersey, New Mexico, North Carolina, Pennsylvania, Rhode Island, Texas, Vermont, and West Virginia. The comprehensive approach includes some sort of provider prohibition on the practice.

California’s new law covers residents who have private health insurance plans that are regulated by the state Department of Managed Health Care (DMHC) and the state Department of Insurance, which includes about 70% of the state’s private insurance market, the California Health Care Foundation says.

However, it does not cover the roughly 5.7 million people whose employer-sponsored insurance plans are regulated by the U.S. Department of Labor.

Balance billing is a great example of what is still wrong with health care despite the repeal and replace rhetoric. It affects actual patients and families, not theoretical interests. For patients undergoing major medical procedures, such as surgery, it is often extremely difficult or impossible to gain a complete and accurate picture ahead of time as to what the cost will be to the patient. California’s new law and others like it are a move in the right direction to protect patients.

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Health Information Technology: Visioning vs. Planning

By M2|2017-10-08T11:51:55+00:00May 30th, 2017|EHRs, Health Care Trends, Health Information Technology, Hospitals, Uncategorized|

Health Information Technology: Visioning vs. Planning

A recent study in Health Affairs confirmed what health providers and their patients already know: During a typical patient, the health care professional spends more than half of his or her time staring at the computer, not talking face-to-face to the patient. As of 2015, about 96% of health care organizations have a certified electronic health records (EHRs), and by the end of 2013, 66% of physicians were using electronic prescribing. Just ten years ago, those numbers were much lower, with only 9.4% of hospitals using a basic EHR and only 7% of physicians e-prescribing. Behind the push to get hospitals and physicians using health information technology was the promise of using big data.

While there have been volumes written about this has worked well in some ways, and not so well in others, what is undeniable is that health care organizations, and the patients they serve are now digitally intertwined. It is unlikely the system will be going back to paper-only records any time soon, so are there ways to make health information technology (HIT) work better?

One point of view was recently published by Family Medicine for America’s Health (FMAHealth) which focused on what primary care physicians want from HIT. They argue, “in addition to putting up barriers to achieving the Triple Aim, the poor usability and utility is resulting in health IT contributing to the growing problem of physician burnout.”

After a one day Visioning Summit, FMAHealth put forth a vision based on the following design principles: HIT should:

“(1) foster connections among health care professionals, including the individuals and communities they serve, and the environment in which people live;

(2) accumulate and analyze data that can support these connections and address the needs of population health; and

(3) promote appropriate payment for health care.”

The vision is set forth in 1, 3, 5 and 10 year increments. For example, in one year, the group would like to see “Data visualization technologies, which make it easy for the clinician to see patterns and make insight, will emerge to support health-related decisions and actions.” In three years, technology will “provide easy ways to natively support healthy behaviors, such as improved diet and exercise…”. In seven years, the group hopes “We will effectively use technology to deliver meaningful and relevant health-related information at the right time in a way that is “frictionless” and supports bringing the joy back to the practice of medicine.”

In my opinion, HIT is capable of all kinds of things, many of which I am sure we only starting to understand. Bringing joy back to the practice of medicine might be really difficult, but FMAHealth is putting forth a vision, not necessarily a plan.

Leave the plan to the Chief Information Officers (CIOs)!

Considering all of the money, time and human resources invested in HIT, some CIOs argue that hospitals, health systems or large provider groups are essentially health care shops AND software shops. David Chou, CIO at Children’s Mercy Hospital in Kansas City, MO [check it is MO] explained, “the day you made that investment you became a software vendor.”

What are some of the ways to make this technology work better, according to these experts?

· Think like a software vendor (hint: clinicians are your customers!)

· Have a strong focus on the end user

· Use an iterative model to develop, test and get feedback from users

· If you can’t buy it, build it (don’t hesitate create a capability that works for your organization)

No matter our daily work – as policy makers, business owners, health care professionals, or patient advocates, we should all be focused on the end user, and on iterating. As the health care system continues to change, looking to some of the lessons of the fast moving and customer-focused industry of software development could be a great playbook to follow to improve HIT.

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Hospital Consolidation as One Potential Solution to Financial Impact of ACA

By M2|2017-10-09T01:50:11+00:00May 19th, 2017|Hospitals, Insurance, Uncategorized|

Hospital Consolidation as One Potential Solution to Financial Impact of ACA

While some have looked at financial issues related to the ACA and called for its repeal, others are taking a different tack. One example is Toby Cosgrove, President and CEO of the Cleveland Clinic, one of the largest and most respected medical centers in the world.

While Dr. Cosgrove will be stepping down later this year from CEO to an advisory role at Cleveland Clinic, Cosgrove has a big idea for how to address rising health care costs in the U.S., and it is not to repeal Obamacare.

His idea? Hospital consolidation.

“We have to realize that not all hospitals can be all things to all people,” he said at an event in Washington, DC in April.

He would know; the Cleveland Clinic has been experiencing financial strain, along with many other hospitals across the country. The struggles have been attributed in part to some of the new regulations resulting from the ACA. The Cleveland Clinic recently reported a steep 70% drop in operating income, from $480.2 million in 2015 to $139.3 million in 2016.

Cosgrove said consolidation would not only improve financials, but would also increase efficiency and help decrease the burden of disease.

Looking further at ACA-related financial impacts, every sector of the health care industry is concerned about the stability of the ACA-related insurance exchanges. In mid-April, several organizations wrote a letter to the Trump administration asking for a commitment to fund cost sharing reduction (CSRs) for 2018. CSRs provide assistance to low- and modest-income consumers earning less than 250 percent of the poverty level to help reduce deductibles, co-pays and/or out-of-pocket limits.

“A critical priority is to stabilize the individual health insurance market,” the letters read. “The window is quickly closing to properly price individual insurance products for 2018.”

Signatories to the letter include not only the two main hospital associations – the American Hospital Association and the Federation of American Hospitals – but also several of the large physician, insurance, and employer groups: the American Medical Association, the American Academy of Family Physicians, America’s Health Insurance Plans, BlueCross BlueShield Association, the American Benefits Council and the U.S. Chamber of Commerce.

Without funding of the CSRs, U.S. consumers will be “dramatically impacted,” the groups say; for example, they predict there will be more limited choices for consumers; premiums will be higher for 2018 and beyond; if more people are uninsured, providers will give more uncompensated care, which will raise costs across the system; and taxpayers will pay more than they would otherwise, as premiums grow and tax credits for low-income families increase.

Regardless of the ultimate fate of Obamacare, and whether changes are made at the federal or state level, some truths about the U.S. health care delivery system remain. Technology is improving, as we explored in a recent blog post on telemedicine and knee pain treatment, for example, and the care that works best for patients is less likely to be hospital based, as we noted in this recent blog post highlighting that sometimes “less is more” when it comes to breast cancer treatment.

At this point, if one of the largest health care systems in the U.S. is arguing that fewer hospitals are needed, it is certainly time to pay attention to what true change in health care will look like.

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