Medicaid/Medicare

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Measuring Hospital Efficiency

May 20, 2012 in Hospitals, Medicare, P4P, Quality | No comments

Medicare recently released the Medicare Spending per Beneficiary (MSPB) measure on Hospital Compare. This measure includes all payments to doctors, hospitals or other facilities for services provided to a patient during the three days before the hospital stay, during the stay, and during the 30 days after discharge from the hospital. Kaiser Health news provides an analysis of this measure and also provides an interactive graph of state level efficiency and a list of hospital MSPB scores.

The Kaiser Health News article notes that:

“Patients treated at most or all hospitals in Las Vegas, Fort Lauderdale, Newark, Miami, Los Angeles and Orange County, Calif., tended to cost more than the national median, which is $17,988. Patients treated at most or all hospitals in Anchorage, Des Moines, Honolulu, Minneapolis and Portland, Ore., tended to cost Medicare less.”

The article also recaps the opinions of a number of industry and policy thought leaders.

Jennifer Faerberg, director of health care affairs at the Association of American Medical Colleges stated that differences in the MSPB measure across hospitals is primary due to how well hospitals  can control post-acute costs.  This is generally true. The MSPB measure controls for the type of admission (i.e., MS-DRG) of the index admission.  Thus, differences in the MSPB measure are due principally to differences in post-acute spending and the frequency with which the patient is readmitted to the hospital within the 30 days after the initial hospitalization.

Some policy experts were critical of the MSPB measure:

Nancy Foster, a vice president at the American Hospital Association, said the data do not answer key questions: Did the patients that got more services fare better than others? Could the patients that cost Medicare less actually have benefitted from more care? ”What we don’t know is if those additional investments yield differences in outcomes,” Foster said.

Foster makes a good point; the MSPB measure should not be analyzed in isolation.  CMS does not only measures hospital efficiency, but also includes a number of hospital quality measures.

Elliott Fisher, one of the main researchers from the Dartmouth Atlas, questioned the practical usefulness of the new information.  “As a hospital administrator I would go, how does this help me?” he said. “We just don’t know whether a lot of specialists are running through the hospital doing everything they can to every patient who is horizontal, or whether they’re discharging every patient to a rehab facility. Those are two very different causes of high costs.”

However, CMS did distribute a “hospital specific report” that detailed where the average spending went (e.g., inpatient, skilled nursing facility, home health physician) in the periods before, during and after the index hospital admission.  Each of these quantities is compared to the state and national average spending levels for each type of service.

Disclaimer: The Healthcare Economist worked with CMS and a team at Acumen to develop the MSPB measure.

 

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Medicare Spending per Beneficiary

April 30, 2012 in Hospitals, Medicaid/Medicare, Medicare, My Papers, P4P, Quality | 1 comment

Medicare’s Hospital Compare website evaluates hospital quality.  One of the most recent measures to be added to Hospital Compare is a measure of efficiency.  The measure calculates a price-standardized, case-mix adjusted measure of spending during period before, during and after a hospital admission. The Healthcare Economist (Jason Shafrin) and a team at Acumen (including Tom MaCurdy, Sajid Zaidi, Elen Shrestha, and David Pham) worked closely with CMS to develop this measure.  Additional information on this measure is available here or see the results for San Francisco General Hospital here.

“The Spending per Hospital Patient with Medicare measure shows whether Medicare spends more, less, or about the same per Medicare patient treated in a specific hospital, compared to how much Medicare spends per patient nationally. This measure includes any Medicare Part A and Part B payments made for services provided to a patient during the 3 days prior to the hospital stay, during the stay, and during the 30 days after discharge from the hospital.

This result is a ratio calculated by dividing the amount Medicare spends per patient for an episode of care initiated at this hospital by the median (or middle) amount Medicare spent per patient nationally.

A result of 1 means that Medicare spends ABOUT THE SAME amount per patient for an episode of care initiated at this hospital as it does per hospital patient nationally.

A result that is more than 1 means that Medicare spends MORE per patient for an episode of care initiated at this hospital than it does per hospital patient nationally.

A result that is less than 1 means that Medicare spends LESS per patient for an episode of care initiated at this hospital than it does per hospital patient nationally.

Lower numbers are better.“

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Do safety net hospitals provide care strategically?

April 23, 2012 in Health Insurance, Hospitals, Medicaid | No comments

It is widely known that safety net hospitals provide less intensive care than hospitals whose patient base is mostly commercially-insured.  One question is whether safety net hospitals discriminate the care provided based on their patients insurance status.  In other words, do commerically insured individuals who visit safety net hospitals receive more care than patients treated at these same hospitals with no insurnce or who are covered by Medicaid?

Based on data from Virginia looking at surgery wait times and rates of breast re-construction surgery, the answer appears to be ‘no.’  A 2012 study by Bradley and co-authors finds the following:

“There is little evidence to suggest that safety net hospitals attenuate treatment differences between insurance and racial groups. The time between diagnosis and surgery was longer in safety net hospitals for all patients, regardless of insurance source or race. Perhaps safety net hospitals are operating at capacity and are unable to schedule surgeries in a timely manner. If this is the case, their resources may be further stretched following the passage of the PPACA. Alternatively, as these hospitals are teaching hospitals, they may perform additional diagnostic tests prior to scheduling surgery or physicians who treat low-income patients may have a slower referral process.”

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What’s Going on in Grand Junction?

April 19, 2012 in Health Insurance, Medicare, Optimal Ins (Theory) | 2 comments

Grand Junction has been lauded as one place that offers some of the best healthcare in the nation, at the lowest cost.

“Grand Junction ranks near the top in Medicare’s Composite Quality of Care index, with a score of 91. That’s 21 points higher than McAllen.

But costs in Grand Junction are among the lowest in the nation, sixth from the bottom among 307 cities.

Medicare spends just $5,873 per year on the average recipient here, compared to a national average of $8,304, according to the Atlas of Health Care published by Dartmouth University. Grand Junction’s costs are well under half the $14,946 average in McAllen, which is second most expensive.”

How does it do it?  One reason is its integrated model for caring for patients.

“The doctors told the insurer that they didn’t want to stratify their patients — favoring those with private health insurance, reluctantly treating those on Medicare and Medicaid, the government programs for the elderly and the poor, which pay doctors less than private insurers. In many parts of the country, Medicare and Medicaid patients have trouble finding physicians who will treat them.

So, RMHP [Rocky Mountain Health Plan] said the physicians of Grand Junction did not have to know which of their patients are on which plan. To do this, RMHP pooled the incoming fees for private, Medicare and Medicaid. Then it reimbursed the doctors the same for all their patients.”

Uninsured individuals can even get free care.  The local hospital donates a million dollars per year to support care for the uninsured at the Marillac Clinic.

Is this model replicable in other areas?  Unless there is structural change, I would say no.

Implementing this type of system requires a number of institutional attributes.

First, there is a near monopoly by insurers and providers.  Rocky Mountain Health Plan has over 60 percent of the market.  Mesa County Physicians Independent Practice Association represents about 85 percent of the region’s physicians.  Since there are two dominant forces in the market, cost-sharing agreements are feasible.  In the current system, Medicare and commercial patients are subsidizing those with Medicaid or no insurance.  If an insurer wanted to gain market share, it could offer more generous benefits to Medicare or commercially insured individuals.  That strategy may work in certain cases, but if there are significant economies of scale, it is possible that Medicare and commercially insured patients could still receive better care at lower cost than with a smaller, more tailored plan.

The near monopoly in Grand Junction, but implementing monopolies in other cities could mean that everyone receives poor care rather than excellent care.

Second, doctors have to be willing to accept lower incomes, particularly specialists.  Grand Junction saves money by performing fewer procedures, but it is these expensive procedures are what generates high physician incomes.  ”Dr. David West, a member of the physicians’ association, says specialists are generally paid two to four times as much per year as primary care doctors, and he thinks that’s too much. In Mesa County, specialists are hired to think, not to run up the procedure count, and that means they give up income to benefit their patients, their community and the family doctors.”

Can Grand Junction be replicated?  Maybe.

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Providers for Underserved Populations: RHC and FQHC

April 16, 2012 in Medicaid, Medicare, Supply of Medical Services | No comments

What is an RHC? An FQHC? Using a research from Health Resources and Services Administration (HRSA), this post provides the answer.

Rural Health Clinic (RHC)

The Rural Health Clinics Act (P.L. 95-210) was passed by Congress and signed into law by President Carter in 1977. The goal of this Act was twofold. First, it encouraged the utilization of PAs and NPs by providing reimbursement for services these health professionals provided to Medicare and Medicaid patients, even in the absence of a full- time physician. Second, it created a cost-based reimbursement mechanism for services when provided at clinics located in underserved rural areas.

Because of subsequent changes in the Medicare law authorizing Medicare Part B coverage for PAs and NPs in all practice settings, not just RHCs, the original incentive for utilizing PAs and NPs was diminished. However, because an RHC gets reimbursed the same amount from Medicare and Medicaid regardless of whether the patient is seen by a mid-level provider (MLP) such as a PA, NP, CMN, or physician, the facility continues to have a strong incentive to utilize these practitioners whenever it is clinically appropriate.

There are significant differences between the way Medicare pays RHCs and how Medicaid does it.  Medicare reimburses RHCs for “core services” on the basis of an All Inclusive Reimbursement Rate (AIRR) reflecting the cost of the services.  Using cost report submissions from RHCs, Medicare calculates the AIRR as the total RHC allowable costs divided by the number of RHC visits.  In 2011, the reimbursement rate cap was $78.07 for RHCs.  Medicare pays 80 percent of the AIRR and the patient is responsible for 20 percent.

Although Medicaid paid RHCs on a cost-of-service basis before 2000, the Benefits Improvement and Protection Act of 2000 (BIPA) now permits Medicaid now pays RHCs using a prospective payment system (PPS).  The PPS methodology and payment rates vary by State.  For instance, some State Medicaid plans pay for other ambulatory and dental services in addition to RHC core services.

Federally-Qualified Health Center (FQHC)

The term “Federally Qualified Health Center,” or FQHC, refers to three different types of clinics:

  • Health Centers (HCs) including Community Health Centers (CHCs), Migrant Health Centers (MHCs), Health Care for the Homeless Health Centers (HCHs), and Public Housing Primary Care Centers (PHPCs) that are funded under Section 330 of the Public Health Service (PHS) Act,
  • FQHC “Look-Alikes,” or FQHCLAs, that have been identified by HRSA and certified by CMS as meeting the definition of “Health Center” under Section 330 of the PHS Act, although they do not receive grant funding under Section 330; and
  • Outpatient health programs/facilities operated by tribal organizations or urban Indian organizations.

CMS pays FQHCs similarly to the way it pays RHCs.  Medicare pays RHCs based on estimated cost (i.e., AIRR=Total Allowable Cost/FQHC Visits), and Medicaid pays FWHCs using a PPS methodology, based on the historical reasonable costs of the center.  The Medicare reimbursement rate cap for FQHCs is higher than for RHCs.  In 2011, urban FQHCs had a reimbursement rate cap of $126.22 and rural FQHCs had a reimbursement rate cap of $109.24.

It is possible for a practice to be certified as both an RHC and an FQHC, although only one payer status is available for either Medicare or Medicaid. The most likely option for dual certification will be RHC status for Medicare and FQHC status for Medicaid.

A summary of the differences between RHCs and FQHC can be found here.
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Free Market Medicare? Competitive Bidding for Durable Medical Equipment

March 29, 2012 in Medicare | 1 comment

Government spending on wasteful projects is legendary.  There is the Bridge to Nowhere, Star Wars, and many more.  In Medicare, the government also has a reputation of overpaying for durable medical equipment.  For instance, critics claim that Medicare is both paying too high a price for motorized wheelchairs and buying wheelchairs for people who do not actually need them (9 percent of wheelchair purchases were found to be unnecessary).

To solve the former problem, Medicare is using a novel solution: bring the market to Medicare durable medical equipment purchases.

“Beginning this month, the Centers for Medicare and Medicaid Services (CMS) is requiring suppliers to engage in competitive bidding to supply seniors with this equipment in 91 of the nation’s largest markets, including Washington. A two-year pilot project in nine cities, which included hotbeds of durable medical equipment fraud in south Florida and Texas, succeeded in lowering Medicare’s costs by nearly a third.”

The DME industry, however, was not supportive of these changes.

“The campaign to lower prices and rein in fraud has been in the works for more than a decade. The 2003 Medicare Modernization Act called for competitive bidding, but industry pressure stalled the rollout. The nine-city pilot project that began in 2010 took place only after a delay that led Medicare to impose an across-the-board 9.5 percent cut in prices.”

One question is whether a race to the bottom to drive down cost will lead to a decrease in DME quality which will hurt patient care.  Based on initial results, prices have dropped, but quality has remained constant.

“The agency’s monitoring detected no increase in the use of emergency rooms, longer hospital stays or use of skilled nursing facilities, which could be triggered by a failure to obtain needed equipment.“

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How to drop the individual mandate and avoid the collapse of the private health insurance market

March 28, 2012 in Health Insurance, Health Reform, Medicare Part D | 1 comment

Today, the Supreme Court is deciding  whether to let many of the provisions of the Affordable Care Act (a.k.a. ACA, a.k.a. Health Reform, a.k.a. Obamacare) stand.  One of the key provisions is the individual mandate.  The individual mandate requires all individuals to purchase health insurance.  If you don’t buy health insurance, you must pay a penalty or fine.

The reason Obama claims the individual mandate is necessary is due to the prohibition of setting premiums based on pre-existing conditions.  Currently, if you don’t have insurance, you become ill and try to buy insurance, it is very expensive.  The ACA, however, would prohibit insurers from price discriminating based on your health status.  Although this may sound good in theory, there are problems in practice if the individual mandate is not in place.  Many individuals will have an incentive not to buy insurance when they are healthy.  When they become sick, they can purchase an insurance plan for the same price as someone who has had insurance for 10 years.  Because only sick people will be insured, the average cost of health insurance will rise for everyone.  Hence, the need for the individual mandate arises.

The individual mandate, however, may not be constitutional.  Can the government compel individuals to buy something?  Many states already require auto insurance.  This requirement is only applied to those who own a car whereas the only condition for the health insurance mandate is that you are alive.

Americans have already found a way around this problem, however.  Medicare’s prescription drug program (Medicare Part D) is an optional program.  No one has to buy prescription drug coverage.  Further, premiums do not vary based on health status (although insurers receive different subsidies based on individual’s health conditions).

To incentivize individuals to purchase prescription drug coverage while they are healthy, Medicare Part D relies on a late enrollment penalty.  Any individual who does not purchase prescription drug coverage when they are eligible has to pay an increased premium when they are eligible.  This increased premium depends not on your health status, but on the number of months you were not enrolled when eligible.  From the Medicare website:

The late enrollment penalty is calculated by multiplying 1% of the “national base beneficiary premium” ($31.08 in 2012) times the number of full, uncovered months you were eligible but didn’t join a Medicare drug plan and went without other creditable prescription drug coverage. The final amount is rounded to the nearest $.10 and added to your monthly premium.

This approach could solve both problems.  The one short-coming is determining how much the late-enrollment penalty should be for private plans.  Allowing the government to set prices is generally a poor idea.  One could allow private plans to set the late enrollment penalty, as long as this were regulated to prohibit price discrimination based on individual health status.  Although this approach certainly has a number of challenges, it may be more palatable to the American public (and the Supreme Court) than an individual mandate.

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The Start of Rationing in Medicare?

March 20, 2012 in Fraud, Health Insurance, Managed Care, Medicare | 2 comments

Prior authorization is a common tool that managed care organizations use to reduce patient utilization of medical services.  Some physicians believe that prior authorization creates barriers to effective care, but other commentators believe that prior authorizations can be implemented in a more efficient manner.  Either way, prior authorizations are a form of rationing care.

Although Medicare typically has not required patients to seek prior authorizations to use specific services, this may be changing with the start of the Prior Authorization for Power Mobility Devices Demonstration.

“This demonstration will implement a Prior Authorization process for scooters and power wheelchairs for all people with Medicare who reside in seven states with high populations of fraud- and error-prone providers (CA, IL, MI, NY, NC, FL and TX). This demonstration is designed to develop and demonstrate improved methods for the investigation and prosecution of fraud in the provision of care or services under the health programs established by the Social Security Act. This demonstration will also help ensure that a beneficiary’s medical condition warrants their medical equipment under existing coverage guidelines.”

Even though this prior authorization application seems reasonable, this could be the start of additional forms of rationing.  Rationing, however, may not necessarily be a bad thing.  Reducing unnecessary expenditures so that Medicare can become more fiscally solvent is a desirable outcome.  The key is how services are rationed.

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Where is the Quality Incentive Program for End-Stage Renal Disease Facilities heading in 2013 and 2014?

March 14, 2012 in Medicare, P4P | No comments

Medicare payments for End Stage Renal Disease rely on a value-based purchasing (VBP) system known as the Quality Incentive Program (QIP). Today I review proposed changes to the QIP that will effect the payments for dialysis centers in 2013 and 2014.

Payment Year 2013

Two measures have been adopted for the payment year (PY) 2013 ESRD QIP

  • Percentage of patients with hemoglobin levels greater than 12 g/dL (Hemoglobin Greater Than 12 g/dL) Lower percentage indicates better care
  • Percentage of patients with a Urea Reduction Ratio (URR) of 65% or greater (Hemodialysis Adequacy) Higher percentage indicates better care

To qualify for a score, facilities must have at least 11 patients eligible for each measure.

Each facility that meets or exceeds performance standard for a measure receives 10 points (for each measure).  For other facilities, the scoring is more complex.

  • Facility does not meet the performance standard for a measure: 2 points subtracted from 10 points for every 1% below the performance standard
  • Total Performance Score = Sum of the Two Measure Scores x 1.5

The payment reduction for payment year 2013 depend on the total performance score (TPS) as follows:

  • 30 points: 0%
  • 26-29 points: 1.0%
  • 21-25 points: 1.5%
  • <21 points: 2.0%

 

Payment Year 2014

In PY 2014, the ESRD QIP will add one clinical measure (vascular access type (VAT)) and three reporting measures.  The reporting measures include:

  • Dialysis event data submission to the Centers for Disease Control and Prevention (CDC) National Healthcare Safety Network (NHSN) system
  • Patient Satisfaction (measured by In-center Hemodialysis Consumer Assessment of Healthcare Providers and Systems (ICH CAHPS) survey)
  • Monthly mineral metabolism monitoring (serum calcium and serum phosphorus)

For PY 2014, there is a significant lag between when the data are collected and when payments are adjusted.  PY 2014 is based off a performance period of CY2012 and a baseline period of July 1, 2010 to June 30, 2011.  The baseline data is used to measure an improvement score.

 

The payment reduction for payment year 2014 depend on the total performance score (TPS) as follows:

  • 53-100 points: 0%
  • 43-52 points: 0.5%
  • 33-42 points: 1.0%
  • 23-32 points: 1.5%
  • <23 points: 2.0%

The scoring system and performance standards are outlined in more detail here.

 

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Measuring Patient Case Mix in Medicare

March 5, 2012 in Medicaid/Medicare, Medicare Advantage | No comments

How does Medicare measure patient case mix?  For the most part, Medicare uses the Hierarchical Condition Category (HCC) model.  A recent CMS presentation describes the HCC model in more detail.  Today I review where CMS applies the HCC model, provide an overview of the HCC methodology, briefly describe its performance, and give some background on how the HCC model was developed.

 

Applications

Medicare uses the HCC model to risk adjust spending in the following applications:

  • Medicare Advantage Capitation Payment (Implemented in 2004, fully phased-in 2007)
  • Shared Savings Program Accountable Care Organizations (To be implemented in 2012)
  • Medicare Physician Quality and Resource Use Reports (Implemented in 2009)
  • Hospital Quality Measurement for the Medicare Spending per Beneficiary (MSPB) measure. –(Implemented in 2012).

HCC Methodology

CMS-HCC model classifies all conditions but not all conditions used in payment/other applications. Most disease groups are high cost medical condition (cancer, heart disease, hip fracture). Conditions can be excluded because they do not predict future cost (e.g., appendicitis) or there is a High degree of discretion or variability in diagnosis, diagnostic coding, or treatment (e.g., symptoms, osteoarthritis). These conditions are generated from diagnosis codes on claims. Diagnosis codes from lab, radiology and home health claims are not used because they are not reliable and may indicate rule-out diagnoses. The number of times a diagnosis is recorded does not affect the model’s assignment of beneficiaries to health states.

The HCC algorithm starts with over 14,000 ICD-9-CM codes which are grouped into 805 diagnostic groups and then aggregated to 189 condition categories (CCs). From the CC’s, CMS creates 70 hierarchical condition categories where hierarchies imposed. For instance, Angina pectoris/ old myocardial infarction is not included in the acute myocardial infarction HCC (#81) but the CC for AMI is included.

The HCC model also includes demographic factors:

  • 24 age-sex cells (e.g., male age 80-84);
  • Medicaid dual eligible status;
  • current disability status,
  • original Medicare entitlement status

There are three separate HCC models used for the Medicare Advantage program: community, institutional, and new enrollee.

The HCC model is also used to adjust payments for beneficiaries with end-stage renal disease (ESRD), all of whom are enrolled in Medicare FFS. There are three HCC models for the ESRD population: dialysis, transplant, and functioning graft.

Physician QRUR uses age-disabled, community, new enrollee and ESRD models.

HVBP uses a single model with indicators for whether the beneficiary has ESRD or is in long term care

Performance

The model can only moderately predict cost. The R-squared is about 12%. This should not be surprising as variation in health care cost over time can be highly variable.

Development and Maintenance

The model originally developed under contract to CMS by researchers at Boston University and Research Triangle Institute (RTI) with clinical input from Harvard Medical School physicians and is currently maintained by RTI.  The model is updated every year to incorporate new diagnosis codes and is recalibrated regularly on more recent diagnosis and expenditure data.

 

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