reformasparadismiuirgastosanitario

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The leading advocate for Northeast Ohio hospitals.

www.chanet.org

December 2010

Health Reforms Cost Impact:

Can More be Done to Bend the Cost Curve?

Issue Brief

e-mail [email protected] to receive these publications electronically


2/19

Issue Brief 1

All of these countries except the United States have a so-called universal healthcare

system and yet they all have lower public expenditures per capita than the United States.

Cost is a tricky issue when it comes to healthcare. All nations, including the Unit-

ed States, struggle to balance issues of cost with access and quality when it comes

to healthcare delivery. Though it would be ideal for a healthcare system to deliver

low cost care in conjunction with unfettered access and high quality, this is simply

not realistic. In other words, all nations must make compromises with cost, access

and quality to achieve a healthcare system that balances these elements.

That is not to say that this state of perfect balance is always achieved. In fact,

every nation falls a little bit short, including the United States. Though theres

no denying that the U.S. gets it right in a lot of ways, it simply cant be said that

the U.S. has gured out the cost side of the equation yet. In 2006, the United

States spent $2.1 trillion on healthcare, or 16 percent of its gross domestic product

(GDP).1 Spending per person per year now exceeds $7,500.2

The level of U.S. healthcare spending is even more startling when compared to

that of other wealthy nations. As of 2008, the United States spent $7,538 per

person on healthcare. The next highest-spending countries, Norway, Switzerland

and Canada, still have thousands of dollars per person to go before they reach the

spending equivalent of the United States. Perhaps even more remarkable is that all

of these countries except the United States have a so-called universal healthcare

system and yet they all have lower public expenditures per capita than the United

States (with the exception of Norway).3

Oftentimes th

terms cost an

spending are use

interchangeably b

there are importa

differences. Th

cost of a healthca

service typica

denotes its pric

Spending, on thother hand,

inuenced not ju

by changes in cos

but also the typ

and amount of ca

being provide

Health Reforms Cost Impact:

Can More be Done to Bend

the Cost Curve?


3/19

2 Issue Briefwww.chanet.org

The Center

for Health Affairs

The leading advocate

for Northeast Ohio

hospitals.

Earlier this year, as a result of the many challenges facing the U.S. healthcare

system, including its high cost, Congress passed the Patient Protection and Afford-

able Care Act (ACA). In an attempt to bring more balance to the cost, access and

quality of American healthcare delivery this legislation contains many provisions

intended to bend the cost curve. This issue brief considers some of those provi-

sions and asks the question: Does health reform go far enough to reduce healthcare

costs and if not, what else could be done?

The ACA and Cost: What is the Impact?

The ACA contains close to 165 provisions that affect the Medicare program

through cost reduction, increased revenues, improved benets, additional fraud

and abuse safeguards, development of new provider payment mechanisms, and

other changes intended to improve quality or reduce costs.4 These provisions are

important not only because they will expand access to 32 million people but also

because they are projected to make a signicant scal impact.

One indicator of the scal health of our nations healthcare delivery is the stateof the Medicare Hospital Insurance (HI) trust fund, or the money set aside to pay

for specic Medicare beneciary services such as hospital inpatient care, skilled

nursing care, home health care and hospice. Every year the Medicare Board of

Trustees provides a report to Congress that details the nancial and actuarial status

of the HI trust fund. According to the 2010 report, the health reform provisions

enacted through the Affordable Care Act substantially improved the state of the

Medicare Trust Fund. Under prior law, the HI trust fund assets were projected to

be exhausted by 2017; however, the provisions of the ACA have extended the life

of the fund until 2029.5

These provisions are important not only because they will expand access to 32 million

people but also because they are projected to make a signicant scal impact.

Per Capita Spending in Select Countries, 2008

$7,538

$5,003

$4,627

$4,079

$3,696

$3,737

$3,129

$3,507

$4,213

$2,736

$2,863

$2,875

$2,869

$2,585

$0

$1,000

$2,000

$3,000

$4,000

$5,000

$6,000

$7,000

$8,000

$9,000

U .S . Norw ay Switzerland Canada France Germany U nited

KingdomPer capita Public expenditure per capita

Compiled from: Organisation for Economic Co-operation and Development, OECD Health Data 2010.

http://www.oecd.org/document/16/0,3343,en_2649_34631_2085200_1_1_1_1,00.html


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Issue Brief 3

In addition to extending the solvency of the Medicare trust fund, the ACA is also

expected to have a positive impact on the federal decit. The Congressional Bud-

get Ofce (CBO), the organization that estimates the cost of virtually every bill

considered by Congress, projects that the ACA will create a net reduction of $143billion in the federal decit between 2010 and 2019. In the following decade,

the CBO estimates that cost savings from the ACA will result in reductions in the

federal decit of one-quarter to one-half of one percent.6

Clearly, the cost-savings impact of the ACA is signicant but just how are these

savings achieved? While there are numerous measures that contribute to the sav-

ings, most of them come from reduced payments to providers. For instance, hos-

pitals update factor, or the amount by which Medicare reimbursement increases

each year, is reduced, as are payments to Medicare Advantage plans.7 Other

savings accrue from reduction of fraud and abuse and healthcare delivery reform.8

Despite these cost-savings measures, many argue that the legislation does not gofar enough. Healthcare spending as a percentage of the gross domestic product

(GDP) is expected to continue growing and will account for 19.6 percent of the

total market value of all goods and services produced in the U.S. by 2019.9 It is

also important to remember that the CBOs estimates are merely projections and

not indisputable fact. Further, since the CBO is charged with estimating legisla-

tion as written, without consideration of the political environment or potential

future changes to the legislation, some people argue that the CBOs estimates do

not offer a realistic projection.

Additional Opportunities for Bending the Cost

Curve

To be sure, the ACA takes some signicant steps toward reining in healthcare

costs; however, there is still more that can be accomplished. Without additional

steps, healthcare costs are likely to consume an increasing portion of the nations

gross domestic product and may compromise the ability of our healthcare system

to provide high-quality care. In a system that spends $2.5 trillion on healthcare

each year, it stands to reason that there are ample opportunities to bend the cost

curve even post health reform. And its true. There are literally hundreds of

ways our healthcare system could spend less money and rein in costs.

In order to truly appreciate the many possible cost-curve bending strategies, it

is helpful to think about them in terms of the cost-access-quality triangle. Thisconcept considers the interrelated nature of cost, access and

quality and how they interact with one another to impact the

delivery of healthcare. For instance, reducing spending is

an obvious way to reign in cost, and likely the rst that

comes to mind; however, barriers to access may drive

up the cost of care. As a result, strategies that ensure

adequate access to care may actually also help control

cost. Likewise, poor quality care can lead to poor out-

comes, which in turn leads to the need for costly care

The Congressional Budget Ofce projects that the ACA will create a net

reduction of $143 billion in the federal decit between 2010 and 2019.

At the request

Congressman Pa

Ryan, the CBprovided an add

tional analysis of th

Affordable Care Ac

which considered th

impact on the feder

decit should certa

politically vulne

able aspects of th

legislation be mod

ed down the roa

This analysis did n

show a reduction

the federal decit

the decade beyon

2019 as the initi

analysis did and,

fact, showed that th

federal decit wou

increase by aroun

one-quarter perce

of GDP


5/19


The Center

for Health Affairs


for Northeast Ohio

hospitals.

down the road that might have otherwise been avoided. As such, strategies that

promote high-quality care also have the potential to mitigate cost growth. It fol-

lows then, that the best way to control cost is to nd the best way to balance the

elements of the healthcare triangle.

Needless to say, a full analysis of the hundreds of cost-controlling strategies that

remain after enactment of health reform is outside the scope of this white paper.

Instead, this publication examines one example from each side of the cost-access-

quality triangle to evaluate the types of cost-saving opportunities that still remain.

Further Reducing Administrative Waste

Cost

The administrative process associated with healthcare delivery in the UnitedStates is extremely complex. Payment for services is not paid or only partially

paid by the person receiving services. Providers must navigate a system in

which there are multiple payers, each with their own set of rules and require-

ments. Health plans are complex themselves, requiring administrative support for

underwriting, claims processing and negotiations with providers. It should come

as no surprise that administration of this complex system comes with a high price

tag. Some experts argue that unnecessary administrative expenses account for 15

percent of medical spending.11 In fact, some even argue that administrative sim-

plication could yield annual savings of up to $300 billion.12

Administrative Waste: the Role of the ACA

Several provisions within the Affordable Care Act will help to address some of

the excess costs associated with administrative waste. State-based insurance ex-

changes, which will begin in 2014, are one way the ACA will reduce administra-

tive waste, but to understand how, you must rst understand the current system.

In the past, people who attempted to buy insurance in the individual

market ended up paying a high price for the administrative portion of

their health plan. Unlike large employers who can purchase group

policies for a large number of people and spread risk across the group,

individuals buy policies one at a time. Not only does that eliminate the

ability to spread risk, it also means that the proportion of paperwork

and marketing and other administrative expenses per individual policy

is much greater. In addition, because there is no way to spread risk

when selling individual policies, insurance companies tend to spend a

great deal of administrative time and effort qualifying these individuals

for policies in a process known as underwriting.

Providers must navigate a system in which there are multiple payers,

each with their own set of rules and requirements.


6/19

Issue Brief 5

From 2014 through 2019, these savings may be even higher up to $7.2 billion

State-based exchanges created as part of the Affordable Care Act will provide a

lever for spreading risk across a group. In addition, the ACA created new rules for

health insurance plans that will also serve to reduce administrative costs such as

one which requires insurance exchanges to offer coverage at a uniform rate to allapplicants, regardless health status. This rule will eliminate the need for insurers

to engage in the burdensome practice of underwriting. The $1.3 billion in annual

savings expected from these measures are substantial and stand to make a real

difference in annual healthcare spending. From 2014 through 2019, these savings

may be even higher up to $7.2 billion as the 5 million individuals who

currently have insurance from the individual market move to the more efcient

state-based exchanges.13

In addition to the reduced administrative costs that are expected to arise from

state-based insurance exchanges, the Affordable Care Act also contained new

rules for the insurance industry specically aimed at reducing the administrative

complexity that results in excess healthcare costs. These rules are outlined in thetable below.

Finally, to ensure that insurance dollars are being spent on healthcare and not on

excessive insurance administration, the ACA included a provision requiring health

plans to report the proportion of premium dollars being spent on clinical services,

quality and other healthcare related costs. The proportion of premium dollars

spent on healthcare-related services as opposed to administrative costs is known

as the medical loss ratio a number that many experts believe has been much

too low in the past. The ACA attempted to put an end to these types of concerns

by requiring insurers to report their medical loss ratio to the Department of Health

and Human Services each year. Plans that report a medical loss ratio of less than

85 percent in the large group market or less than 80 percent in the small group

market, must distribute refunds to enrollees.14

The ACA Requires Health Insurers to Simplify

by Adopting a Single Set of Operating Rules for:Rule Takes Effect

Eligibility Verication January 1, 2011

Claims Status January 1, 2011

Electronic Funds Transfers January 1, 2014

Healthcare Payments and Remittance January 1, 2014

Healthcare Claims or Equivalent Encounter Information January 1, 2016

Enrollment or Disenrollment in Health Plan January 1, 2016Health Plan Premium Payments January 1, 2016

Referral Certication and Authorization January 1, 2016

Source: Kaiser Family Foundation, Focus on Health Reform: Summary of New Health Reform Law,

http://www.kff.org/healthreform/upload/8061.pdf (accessed November 1, 2010).


7/19


The Center

for Health Affairs


for Northeast Ohio

hospitals.

Administrative Waste: What More Could Still Be Done?

Despite these signicant improvements, the $1.3 billion in projected yearly sav-

ings resulting from state-based exchanges is a far cry from the estimated $300billion that some believe couldbe trimmed. One reason is that even in light of

the administrative simplication ushered in by health reform, the system is still

tremendously complex. Employers offer benet programs with a wide variety of

nonstandard, sometimes complicated, plans including formularies and cost-shar-

ing arrangements. Patients often visit a number of different providers for a single

episode of care, leaving payers with the tedious task of parsing out which provider

is paid how much. Payers negotiate different rates for the same service among a

group of providers while providers negotiate different rates for the same service

among payers.15 Considering even these few examples leaves no doubt that the

complexity of the system itself is still contributing to high administrative costs.

Clearly, opportunities to reduce administrative waste in healthcare delivery stillexist. A continued effort to standardize payment systems across payers is one way

to maximize the administrative cost savings, as is simplifying administrative co-

ordination among providers by reducing regulatory hurdles. Encouraging payers

to communicate administrative best practices to providers could also contribute

to improved administrative efciency.16 These kinds of changes are important

because over time, the gains that accrue from improved administrative efciency

could add up to signicant savings and ultimately impact how much of our health-

care dollars are actually spent on healthcare.

Increasing Access to Primary Care

Access

Primary care is the foundation upon which healthcare delivery is built. It repre-

sents the rst contact for care, provides continuity of care over time, considers

the patient as a whole and coordinates care among various elements of the health-

care system.17 The role that primary care plays in the provision of quality care

is undeniable; however, its signicant impact on cost containment is sometimes

overlooked.

There are a number of reasons for the correlation between primary care and lower

costs. First, primary care is simply less expensive than other healthcare alterna-

tives. Hospitalization and treatment in the emergency department are expensiveways to deliver routine healthcare and yet, all too often these are the venues where

care is sought. A recent retrospective review of emergency room cases revealed as

many as 50 percent of all visits could have been avoided if care had been received

in another setting.19 In addition, routine visits to a primary care physician (PCP)

may actually help patients remain healthy; preventing an expensive hospital stay

they would have otherwise needed. Specialists another healthcare alternative

also tend to be more expensive than primary care physicians. Whats more,

visits to specialists can sometimes lead to unnecessary and costly tests and proce-

dures that might have been avoided altogether in the PCPs ofce.

The role that primary care plays in the provision of quality care is undeniable;

however, its signicant impact on cost containment is sometimes overlooked.

Overall, countries

with more physi-

cians that practice

primary care havelower per capita

health expendi-

tures than those

with more special-

ists.18


8/19

Issue Brief 7

As a result, by 2025 a shortage of between 35,000 and 44,000

primary care practitioners is expected.

There is considerable research to back up the notion that a strong primary care

infrastructure plays an important role in overall healthcare cost reduction. One

study that examined this phenomenon found that areas where the ratio of PCPs

to patients was high experienced lower hospitalization rates for several diagnosesthan areas where the ratio was low. Particularly striking was the impact of the

PCP on the Medicare patient population. Areas with a shortage of PCPs saw hos-

pitalization rates 80 percent higher than areas where an adequate number of PCPs

practiced.20

Unfortunately, in the U.S., many of the advantages associated with a strong pri-

mary care system are not realized, partly because there is an insufcient number of

primary care physicians to meet the need. For years, the primary care workforce

has been in decline. The long hours and lower pay of primary care physicians

have deterred many new graduates who understandably prefer the more favor-

able schedule and higher pay of specialty medicine from entering the eld. In

a 2007 survey, only 7 percent of fourth-year medical students planned a career inprimary care. One result is that the adult primary care workforce is only expected

to grow by between 2 and 7 percent from 2005 to 2025.

At the same time, as the population grows and ages, the workload of adult pri-

mary care is estimated to increase by 29 percent. With health reform ushering 32

million more people into the ranks of the insured by 2014, pent-up demand for

healthcare services is also likely to increase demand for primary care providers.

As a result, by 2025 a shortage of between 35,000 and 44,000 primary care prac-

titioners is expected.21

Access to Primary Care: the Role of the ACA

Its potential for cost containment made strengthening primary care a key policy

initiative of the ACA. Included within the legislation are several provisions which

will bolster primary care throughout the United States. First, Medicaid reimburse-

ment rates for primary care services provided by PCPs are set to increase to the

higher rate paid for Medicare beneciaries in 2013 and 2014. Primary care physi-

cians who treat Medicare beneciaries will receive a 10 percent bonus payment in

2011 through 2015.23

In addition to reimbursement increases for those practicing primary

care, the ACA also authorized a number of initiatives to increase

the primary care workforce including the creation of a multi-

stakeholder Workforce Advisory Committee to develop a plan for

national workforce issues. The law also addressed unused Graduate

Medical Education (GME) training positions by redistributing open

slots, which in the past had typically just gone unlled. Under this

provision, priority is given to primary care and general surgery and to

states with the lowest physician-to-population ratio. In addition, the

ACA relaxed regulations to allow GME funding to promote training

in outpatient settings. Additional grants and funding for education

of the primary care workforce was another key strategy of the health

In 2000, 52 perceof doctors visi

were to primary ca

physicians yet on

35 percent of U.

physicians practice

primary care at th

time. Compoundin

this situation is th

fewer U.S. medic

school graduates a

choosing a career

primary care. Fro

1997 to 2005, th

number of residen

entering a fam

medicine residenc

dropped by half


9/19


The Center

for Health Affairs


for Northeast Ohio

hospitals.

reform law in this area. Support for the development of primary care models such

as the medical home and team management of chronic disease authorized by the

law are also expected to bolster primary care.24

Access to Primary Care: What More Could Still Be Done?

Promoting access to a strong primary care sector is a key piece of any strategy

aimed at reigning in healthcare costs. Yet, even with ACA policies intended to

strengthen this sector, questions about whether these efforts will go far enough,

still remain.

The most critical and obvious next step in shoring up primary care in the

U.S. is increasing the number of primary care physicians. Redistributing GME

slots and providing reimbursement incentives are good rst steps but if there are

simply not enough primary care physicians being trained, no amount of shufingis going to solve the problem. Ensuring adequate access to primary care (as well

as the cost savings that go with it) can only be accomplished by ensuring an ad-

equate supply of PCPs. Ensuring an adequate supply of PCPs, in turn, can only

be accomplished by training additional physicians. Despite this rather obvious

rst step, Congress did not include any provisions in the ACA to increase the

number of medical residencies, the three-year training period in a hospital or clinic

required of new medical graduates. Instead, funding for medical residencies re-

mained the same, severely limiting the ability of hospitals and clinics to pay for

additional training slots.25 This is clearly an area where the ACA could have done

more to address cost.

Advanced practice nurses (APNs) registered nurses (RNs) who have received

a Masters or Doctoral degree and provide advanced clinical care offer an al-

ternative strategy for addressing the shortage of primary care providers. These

highly trained care providers can provide primary care services and expand the

number of providers available to meet the growing demand; however, the scope of

care they are legally allowed to provide varies from state to state. In some states,

for instance, APNs are prohibited from prescribing controlled substances while

in others there are no restrictions on prescriptive authority. In some states physi-

cian supervision is required while in others this is not the case. Other states fall

somewhere in between.26

Expanding APN scope of practice would enable these competent medical profes-

sionals to play an even more important role in healthcare delivery and could go a

long way toward mitigating the primary care workforce shortage; however, scope

of practice issues, such as prescriptive authority, are governed not by the federal

government or the ACA but by state boards of nursing. As a result, any effort to

shore up the primary care workforce by expanding APN scope of practice would

need to be made at the state level through the legislature. In other words, while

expanding the scope of practice may very well contribute to efforts intended to

mitigate the primary care workforce shortage, thereby further reducing health-

cares cost curve, it was not within the scope of the ACA to do so. In this case, it is

not a question of whether the ACA went far enough but rather whether states will

pick up the baton and nish the race.

In this case, it is not a question of whether the ACA went far enough but

rather whether states will pick up the baton and nish the race.

Ohio is one of

the states that

puts restrictions

on APN scope of

practice. While

APNs are permit-

ted to prescribe

certain medica-

tions, there are

restrictions. In

Ohio, Schedule

II drugs, or thosethat have a high

potential for abuse

such as fentanyl

and oxycodone,

can only be pre-

scribed by an APN

for a 24-hour sup-

ply for terminally

ill patients after an

initial prescription

has been written

by a physician.

Thirty-three states

currently have

less restrictive

regulations on

APN prescriptive

authority than

Ohio.27

Cont.d on next page


10/19

Issue Brief 9

Each year, the U.S. spends $30 billion treating these infections, which could have

been avoided altogether with the right interventions including diligent hand hygiene.

Enhancing Quality

QualityFew would disagree that there is inherent value in delivering healthcare of the

highest possible quality. Dened by the Institute of Medicine as, the degree

to which health services for individuals and populations increase the likelihood

of desired health outcomes and are consistent with current professional knowl-

edge,29 high-quality healthcare is the standard to which American healthcare pro-

viders aspire. To be sure, the value of quality for qualitys sake is an easy concept

to understand; however, the value of enhancing quality because of its capacity to

drive down costs is also undeniable.

The nations healthcare system is renowned for its many achievements. It is

known for its technological innovation and cutting-edge medical care. Patients

travel from across the globe to the United States in order to receive care from someof the most skilled and highly trained medical practitioners in the world. Yet, there

is also a growing awareness that in many ways, the nations healthcare system

has fallen short of consistently providing care of the highest quality. The system

itself, in many ways, is not set up to promote quality, which has led to unfortunate,

unintended quality consequences. Some areas that may benet from quality im-

provement initiatives include those related to adverse events and medical errors,

unnecessary care that has little or no value for patients, and processes that lead to

the need for future care that may have otherwise been avoided. All of these qual-

ity shortcomings are troubling not only for what they imply in terms of patient

outcomes but also because they result in increased spending and higher costs.

Preventable hospital-acquired infections are only one type of quality concernand yet they provide a salient example of the interplay of cost and quality. Each

year, the U.S. spends $30 billion treating these infections, which could have been

avoided altogether with the right interventions including diligent hand hygiene.30

Considering that avoiding hospital-acquired infections is only one small piece of

the quality puzzle, it stands to reason that improving quality is a pivotal strategy

to reducing cost.

Enhancing Quality: The Role of the ACA

With the value of quality improvement efforts clear, it is not surprising that they

are a major component of the ACA. Though there are numerous quality initiatives

included in the law, perhaps some of the most important are those that use reim-

bursement as a lever to impact quality. For instance, starting in 2012, reimburse-

ment rates for hospitals that have a high rate of readmissions for certain conditions

will see reduced Medicare reimbursement rates a rst step in reducing the $15

billion spent each year on readmissions.31 The maximum reduction in payment

in 2013 will be 1 percent, but will grow to 2 percent in 2014 and to 3 percent in

2015 and beyond.32

To ease thes

restrictions, in th

most recent legisltive session the Oh

House of Repr

sentatives passe

House Bill 206,

bill that would allo

APNs to prescrib

Schedule II drug

The bill moved to th

Senate and was a

signed to the Healt

Human Services an

Aging Committee b

has not advance

since May 2010.28

it is not passed b

the end of the yea

it will die in com

mittee at the end

2010 and have to b

reintroduced durin

the next legislativ

sessio


11/19


The Center

for Health Affairs


for Northeast Ohio

hospitals.

Another reimbursement lever is the value-based purchasing initiative, which tran-

sitions the current CMS pay-for-reporting initiative to a pay-for-performance ini-

tiative. As it stands, hospitals that do not report on certain quality measures see a

reduction in their overall reimbursement rates through the pay-for-reporting ini-tiative. Value-based purchasing, which begins in 2013, goes one step further and

reduces payments to hospitals that have certain less-than-ideal outcome measures.

Conversely, hospitals that meet performance benchmarks will receive add-on

payments, thereby incentivizing high-quality care while penalizing low-quality

care.33

At the same time, another reimbursement reduction was put in place to reduce

the number of certain common, high-cost hospital-acquired conditions. Speci-

cally, hospitals with rates of these conditions in the top 25 th percentile will see a 1

percent reduction of total payments beginning in 2015.34 With these reductions

hospitals have a strong nancial incentive to improve quality in order to avoid

hospital-acquired conditions. Both of these payment reductions are expected toimprove quality while at the same time avoiding the high costs associated with the

additional treatment that might be needed in their absence.

Although both of the reimbursement changes mentioned above will have a notable

impact on cost and quality, the authors of the ACA realized that these two steps

were just a beginning. To ensure that Medicare and Medicaid payment strategiescontinued to evolve so as to support reduced cost and improved quality, the ACA

established the Innovation Center within the Centers for Medicare and Medicaid

Services. That means additional payment reforms could still be yet to come.35

In addition to these quality-focused payment reforms, the ACA also included sup-

port for comparative effectiveness research (CER) in its establishment of the non-

prot Patient-Centered Outcomes Research Institute. This organization is charged

with identifying research priorities and conducting research to compare the clini-

cal effectiveness of medical treatments.36 Even before the ACA established this

Ten Categories of Hospital-Acquired Conditions

1. Foreign Object Retained After Surgery

2. Air Embolism

3. Blood Incompatibility

4. Stage III and IV Pressure Ulcers

5. Falls and Trauma

6. Manifestations of Poor Glycemic Control7. Catheter-Associated Urinary Tract Infection

8. Vascular Catheter-Associated Infection

9. Surgical Site Infection

10. Deep Vein Thrombosis/ Pulmonary Embolism

Source: Centers for Medicare and Medicaid Services, Hospital-Acquired Conditions,

https://www.cms.gov/HospitalAcqCond/06_Hospital-Acquired_Conditions.asp (accessed November 24, 2010).


12/19

Issue Brief 11

A majority of the responsibility for quality improvement rests on their shoulders; however,

this equation leaves out one very crucial component of the equation: the patient.

organization, work on comparative effectiveness was already underway as a re-

sult of provisions within the American Reinvestment and Recovery Act, which

allocated $1.1 billion to pursue better evidence regarding health interventions.37

These efforts are important because understanding which medical interventionsare the most effective will improve the quality of care providers are able to offer

their patients. This portion of the legislation is likely to reduce the cost of care

simply because patients that receive the most effective treatment will have better

outcomes and need less costly care down the road.

Enhancing Quality: What More Could Still Be Done?

Prioritizing high-quality healthcare delivery as a part of the health reform legisla-

tion makes sense. The value of higher quality care in and of itself needs no further

explanation; however, higher quality care can also lower costs a benet that

is sometimes underappreciated. Considering this potential, it is natural to ques-

tion whether health reform goes far enough toward achieving the highest possible

quality in care delivery.

While the ACA does make signicant strides toward promoting high-quality care,

still more could be done. One method of multiplying the impact of quality im-

provement initiatives involves expanding the traditional understanding ofwho is

responsible for care delivery. Of course, healthcare providers play a central role in

healthcare delivery for their patients, and as a result, a majority of the responsibil-

ity for quality improvement rests on their shoulders; however, this equation leaves

out one very crucial component of the equation: the patient.

Though there are seemingly countless initiatives aimed at improving quality by

aligning incentives and payment penalties for caregivers, patients themselves have

remained largely uninvolved in this movement. Under health reform, patients

will most likely seek care in the same way that they always have and while they

may receive the highest caliber care during their hospital stay, they can still return

home to fall into the same poor health habits (e.g. smoking, poor diet, low medica-

tion adherence) that led them to the hospital in the rst place. Initiatives that pro-

vide ample education and support for patients who want to change these behaviors

could change this pattern and ultimately contribute to quality-related cost savings.

Comparative effectiveness research, though addressed to some degree in the legis-

lation as mentioned above, is another avenue to pursue in quality-related attempts

to bend the cost curve. The newly created Patient-Centered Outcomes Research

Institute is charged with identifying research priorities and conducting research

that compares the clinical effectiveness of medical treatments. This is a good

rst step; however, the legislation explicitly states that comparative effectiveness

research may not be construed as mandates, guidelines or recommendations for

payment, coverage, or treatment or used to deny coverage.39

This language is paradoxical at the same time rational and counterintuitive.

Even though it is expressly prohibited, one would think that the main purpose of

CER would be to create guidelines and recommendations for treatment. After all,

One large employ

became frustrate

with the high cost

treating employee

with diabetes that d

not adhere to the

prescribed medic

tions. To encou

age better adhe

ence, the employ

adjusted the desig

of its insurance pla

such that all drugfor treating diabete

asthma and hype

tension were move

to the same tier a

generic medic

tion, making the

less expensive, an

therefore, easier

maintai

Cont.d on next pag


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hospitals.

the intent of CER is to uncover the best, most effective treatments, or the ones that

allow providers to offer the highest quality medical alternatives. It follows then,

that policies that encourage the use of scientically validated medical interven-

tions would not only improve quality but would also ultimately save money. In-tuitively, one would think that policymakers would encourage providers to adopt

the more effective medical treatments found through CER using policy that aligns

payment with higher quality care. In this way, it seems counterintuitive that health

reform explicitly prohibits CER from being used as a means of determining which

treatments should serve as guidelines for payment or treatment.

The intent of this language; however, is not meant to deter caretakers from adopt-

ing the most effective treatment regimens for their patients. It is, instead, recog-

nition that scientic research rarely holds a denitive answer. While one study

may show that a certain treatment is more effective than another, there is often a

competing study suggesting the opposite. Or, the initial study may nd that one

treatment is better than another but only marginally so. The truth is that while onetreatment may work best in general, as determined by CER, some patients may

not tolerate the preferred treatment well. Making treatment decisions or payment

decisions solely on the basis of clinical research results means limiting providers

exibility in best meeting the needs of their patients.

For some, the concerns about linking cost effectiveness to CER even go beyond

limiting a caretakers treatment options. During the healthcare debate that pre-

ceded passage of the ACA, intense opposition arose to using cost as a part of

comparative effectiveness research for several reasons. Some argued that research

ndings could be used to ration care, or selectively provide a limited variety of

care to a select patient population. Others believed that allowing research ndings

to guide clinical practice would equate to the government dictating patient care.The charged political environment that ensued made it too difcult to include cost

in the comparative effectiveness equation and in the end, the exclusion of cost was

explicitly spelled out.40

That said these restrictions were not placed on all research, just that funded

through the Patient-Centered Outcomes Research Institute. In other words, op-

portunity still exists for researchers to conduct comparative effectiveness studies

that include cost-effectiveness analysis. From a cost-savings standpoint, it would

be ideal if policy could encourage CER research ndings to be used as guides to

the most effective andcost-effective care. Though it may not be something that

can be realistically pursued in the policy arena today, including cost-effectiveness

analysis as a part of CER does hold some potential for bending the cost curve.Since the types of treatments that researchers will study and the results of that

research are unknown, its hard to estimate the total cost impact CER may have. It

is generally accepted, however, that with the right incentives for the highest value

care, savings could be signicant.41

After three years

the number of

diabetes-related

ER visits had

decreased by 28

percent and the

number of asthma

readmissions had

decreased by 62

percent. Extrapo-

lating these results

to the rest of the

Unites States sug-

gest that programs

that support the

patients role in

medication adher-

ence can result

in annual savings

of $29 million for

diabetes ER visits

and $404 million

in asthma hospital

readmissions.38

In other words, opportunity still exists for researchers to conduct comparative

effectiveness studies that include cost-effectiveness analysis.


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Issue Brief 13

Conclusion

There is no arguing that the Affordable Care Act calls

for vast changes in the way the United States delivershealthcare. Provisions impacting every aspect of care

are included in the legislation. In fact, its arguable that

the changes brought about by the ACA are so vast that a

true understanding of the new healthcare landscape will

be years in the making.

Though there were many reasons the 111th Congress

undertook health reform, one of the most important

was to address soaring healthcare costs. Toward

that end, the Affordable Care Act contains more than

150 provisions aimed at lowering healthcare costs

or reducing spending. The impact of these policy changes are estimated to besubstantial, extending the solvency of the Medicare Hospital Insurance Trust Fund

by 12 years and reducing the federal decit by $143 billion from 2010 to 2019.42,43

Yet, even with these changes, additional work remains. As comprehensive a law

as the ACA is, no one piece of legislation can address every potential cost-saving

measure. Clearly, a country that is projected to spend nearly 20 percent of its

gross domestic product on healthcare by 2019 (even after health reform)44 still has

ample opportunities for bending the cost curve.

Some of those opportunities take the form of simply spending less money while

others are related to increased access and higher quality. Though the U.S.

healthcare system is in the process of better balancing the three sides of the cost-access-quality triangle under the ACA, achieving a system that affords equal

access and high-quality care without burdensome costs will still require concerted

effort. The ACA, while most assuredly a landmark piece of legislation, must be

considered only a beginning. Otherwise, the growing cost of healthcare is likely

to further distort the healthcare triangle, threatening the success of the American

healthcare system.

The ACA, while most assuredly a landmark piece of legislation,

must be considered only a beginning.


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hospitals.

Suggestions for

StakeholdersContinued efforts to slow the growth of costs in healthcare are crucial. Many of

the provisions within the ACA were directed toward cost control. While these

measures are certainly a good start, included below are some opportunities to

further the goal of cost reduction.

Support efforts to increase administrative efciency in healthcare

such as encouraging payers to work together to achieve

more standardized payment systems across payers.

Urge policymakers to do more to increase the number of primary

care physicians such as allocating additional money for graduate

medical education.

Ask your state of Ohio representative or senator to bolster Ohios

primary care workforce by reintroducing legislation to remove

restrictions on Advanced Practice Nurse prescriptive authority.

Include patients as part of the quality equation. Patients who have

the right educational resources and support for managing their

health after a hospitalization will be more active participants in their

care, leading to better outcomes and reduced spending on follow-upcare.

Understand that exclusion of cost-effective analysis in comparative

effectiveness research through the Patient-Centered Outcomes

Research Institute does not negate the value of these types of

studies. Studies that evaluate not just the effectiveness of care but

its value can add to our knowledge about which treatment to choose

when all else is equal.


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Issue Brief 15

The Center for Health Affairs is the leading advocate for Northeast Ohio

hospitals, serving those organizations and others through a variety of

advocacy and business management services. The Center also works to

inform the public about issues that affect the delivery of healthcare. Formed

by a visionary group of hospital leaders 94 years ago, The Center continues

to operate on the principle that by working together hospitals can ensure the

availability and accessibility of healthcare services. For more on The Center

and to download additional copies of this brief, go to www.chanet.org.

Acknowledgements

This issue brief was written by Deanna Moore, Manager,

Public Policy Development, and Michele Egan Fancher, Vice

President, Corporate Communications. Bill Ryan, President

and CEO provided invaluable insight and comments.

Special thanks are also extended to the staff of The Center for

Health Affairs: Julie Cox, Administrator, Marketing; Jordana

Revella, Director, Marketing; Earnest Law, Assistant Manager,Facilities; Chris Nortz, Director, Facilities; and

Bernie Paschal, Receptionist.


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hospitals.

Endnotes

1. Paul B. Ginsburg, High and Rising Health Care Costs: Demystifying U.S. Health Care Spending,Robert Wood Johnson Foundation, Research Synthesis Report No. 16, October 2008 http://www.rwjf.org/les/research/101508.policysynthesis.costdrivers.rpt.pdf(accessed October 1, 2010).

2. Organisation for Economic Co-operation and Development, OECD Health Data 2010 http://www.oecd.org/document/16/0,3343,en_2649_34631_2085200_1_1_1_1,00.html (accessed October 1,2010).

3. Ibid.

4. 2010 Annual Report of the Boards of Trustees of the Federal Hospital Insurance and FederalSupplementary Medical Insurance Trust Funds, Letter of Transmittal, https://www.cms.gov/ReportsTrustFunds/downloads/tr2010.pdf (accessed October 15, 2010).


6. U.S. Congressional Budget Ofce, letter to Nancy Pelosi regarding estimated budgetary impact of

H.R. 3590 in conjunction with the Reconciliation Act (H.R. 4872), March 20 ,2010, http://www.cbo.gov/ftpdocs/113xx/doc11379/AmendReconProp.pdf (accessed October 14, 2010).

7. David Cutler, How Health Care Reform Must Bend the Cost Curve, Health Affairs29, no. 6(2010): 1131-1135.

8. Ibid.

9. Andrea Sisko, et. al., National Health Spending Projections: The Estimated Impact of ReformThrough 2019,Health Affairs29, no. 10 (2010): 1-9.

10. Congressional Budget Ofce, The Effects of Health Reform on the Federal Budget, Presentationto the World Health Care Congress, April 12, 2010, http://www.cbo.gov/ftpdocs/114xx/doc11439/WHCC_Presentation-4-12-10.pdf.

11. David Cutler, How Health Care Reform Must Bend the Cost Curve, Health Affairs29, no. 6(2010): 1131-1135.

12. Thomson Reuters, Where Can $700 Billion in Waste Be Cut Annually from the U.S. HealthcareSystem? October 2009, http://www.ncrponline.org/PDFs/2009/Thomson_Reuters_White_Paper_

on_Healthcare_Waste.pdf.

13. Sonia Sekhar, Repealing Health Reform Would Mean Billions More in Administrative Costs,Center for American Progress, August 2010, www.americanprogress.org/issues/2010/08/admincosts.

pdf.

14. The Kaiser Family Foundation, Focus on Health Reform: Summary of the New Health ReformLaw, http://www.kff.org/healthreform/upload/8061.pdf (accessed October 5, 2010).

15. Thomson Reuters, A Path to Eliminating $3.6 Trillion in Wasteful Healthcare Spending, June2010, http://img.en25.com/Web/ThomsonReuters/TR-8173%20Full%20Length%20PhaseII%20WP_6_15_10.pdf.

16. Ibid.

17. Thomas Bodenheimer and Hoangmai H. Pham, Primary Care: Current Problems and ProposedSolutions,Health Affairs29, no. 5 (2010): 799-805.

18. Martin-J. Sepulveda, Thomas Bodenheimer and Paul Grundy, Primary Care: Can it Solve

Employers Health Care Dilemma?Health Affairs27, no. 1 (2008): 151-158.19. Thomson Reuters, A Path to Eliminating $3.6 Trillion in Wasteful Healthcare Spending, June

2010, http://img.en25.com/Web/ThomsonReuters/TR-8173%20Full%20Length%20PhaseII%20WP_6_15_10.pdf.

20. Martin-J. Sepulveda, Thomas Bodenheimer and Paul Grundy, Primary Care: Can it SolveEmployers Health Care Dilemma?Health Affairs 27, no. 1 (2008): 151-158.

21. Thomas Bodenheimer and Hoangmai H. Pham, Primary Care: Current Problems and ProposedSolutions,Health Affairs 29, no. 5 (2010): 799-805.


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Issue Brief 17

22. Martin-J. Sepulveda, Thomas Bodenheimer and Paul Grundy, Primary Care: Can it SolveEmployers Health Care Dilemma? Health Affairs 27, no. 1 (2008): 151-158.


24. Ibid.

25. Suzanne Sataline and Shirley S. Wang, Medical Schools Cant Keep Up, The Wall Street Journal,April 12, 2010, http://online.wsj.com/article/SB10001424052702304506904575180331528424238.html.

26. Carla K. Johnson, The Associated Press, Facing Doctor Shortage, 28 States May Expand NursesRole, USA Today, April 16, 2010, http://www.usatoday.com/news/health/2010-04-16-nurse-doctors_N.htm.

27. Ohio Association of Advanced Practice Nursing, Examining House Bill 206, www.oaapn.org(accessed November 16, 2010).

28. Legislative Service Commission, HB 206, http://lsc.state.oh.us/coderev/hou128.nsf/House+Bill+Number/0206?OpenDocument (accessed November 19, 2010).

29. Institute of Medicine, Crossing the Quality Chasm: A New Health System for the 21st Century,March 2001.

30. David Cutler, How Health Care Reform Must Bend the Cost Curve,Health Affairs 29, no. 6(2010): 1131-1135.

31. HealthLeaders FACTFILE, Healthcare Reform: Readmissions http://www.healthleadersmedia.com/content/258722.pdf (accessed November 19, 2010).

32. Larry Goldberg and Larry Oday, An Update from Washington on Medicare & Affordable HealthCare Act, Presentation Materials, October 6, 2010.

33. Ibid.

34. Ibid.

35. Kaiser Family Foundation, Focus on Health Reform: Summary of the New Health Reform Law,http://www.kff.org/healthreform/upload/8061.pdf (accessed October 5, 2010).


37. Joshua S. Benner, et. al., An Evaluation of Recent Federal Spending on Comparative EffectivenessResearch: Priorities, Gaps & Next Steps,Health Affairs 29, no. 10 (2010): 1768-1776.

38. Thomson Reuters, A Path to Eliminating $3.6 Trillion in Wasteful Healthcare Spending, June2010, http://img.en25.com/Web/ThomsonReuters/TR-8173%20Full%20Length%20PhaseII%20WP_6_15_10.pdf.


40. Alan M. Garbar and Harold C. Sox, The Role of Costs in Comparative Effectiveness Research,Health Affairs 29, no. 10 (2010): 1805-1811.

41. Congressional Budget Ofce, Research on the Comparative Effectiveness of MedicalTreatments, A CBO Paper, December 2007, http://www.cbo.gov/ftpdocs/88xx/doc8891/12-18-ComparativeEffectiveness.pdf (accessed November 30, 2010.)


43. U.S. Congressional Budget Ofce, letter to Nancy Pelosi regarding estimated budgetary impact ofH.R. 3590 in conjunction with the Reconciliation Act (H.R. 4872), March 20 ,2010, http://www.cbo.gov/ftpdocs/113xx/doc11379/AmendReconProp.pdf (accessed October 14, 2010).

44. Andrea Sisko, et. al., National Health Spending Projections: The Estimated Impact of ReformThrough 2019,Health Affairs 29, no. 10 (2010): 1-9.


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