Supply of Medical Services

You are currently browsing the archive for the Supply of Medical Services category.

How much is rent in your area?

February 1, 2012 in Data, Medicare, Physician Compensation | No comments

The Department of Housing and Urban Development (HUD) is responsible for answering just that question.  To determine what level Section 8 vouchers should be set, HUD measures the rents for every county across the nation.  Specifically, they measure the 40th percentile and 50th percentile (i.e., median) rents in each area.  They choose to use the median so that high prices for luxury residences do not skew the measure of rent for a “typical” person in each area.  How does HUD calculate these Fair Market Rents (FMR)?  Today I will explain.

Read the rest of this entry »

Tags: , ,

Medicare Payments for Hospitals in Under-served Areas

January 23, 2012 in Hospitals, Medicare | No comments

One of the goals of Medicare is to provide its beneficiaries access to quality care regardless of where they live.  Thus, the Medicare program provides financial incentives to providers located in these remote areas.

Whereas most Medicare pays most hospitals through the inpatient prospective payment system (IPPS), it pays certain rural hospitals based on their reported costs.  Medicare pays Critical Access Hospitals (CAH), for instance, 101 percent of its report cost for inpatient, outpatient, laboratory, and therapy services.  It also pays this providers 101 percent of their cost for post-acute care for CAH beds are “swing beds” (which are beds that can be used for either acute or post-acute care).

However, how should Medicare define ‘critical’? The simplest definition is just whether a hospital is in a rural (i.e., non-metropolitan) area. However, there are various gradations of ‘rural’. A rural hospital on the outskirts of a big city would be far less ‘critical’ then one very far from distant areas. One could define ‘critical’ based on facility volume. If the low volume is due to poor quality, however, defining these hospitals as critical could just reward poor hospitals. Third, could define a hospital as isolated based on its distance from other facilities who could provide comparable care. Alternatively, one could identify critical hospitals based on demographic factors such as population density in the surrounding areas.

Below, I provide more information on other types of types of rural hospital designations in Medicare.
Read the rest of this entry »

Tags: , , , , ,

How Health Reform will affect Hospital’s Business Strategy

January 19, 2012 in Health Reform, Hospitals, P4P | No comments

For many years, fee for service payment was the status quo. FFS model encourages hospitals to adopt the following strategies to maximize market share and profits:

  • Centered on short-term acute care
  • Focused on specialist alignment
  • Driven by a volume-based service-line strategy
  • Using expensive medical equipment purchases to encourage physician referrals
  • Attracting patients with new construction in support of market share growth
  • Short-term acute hospitals focus on profitable service lines such as oncology, cardiology, neurology, and orthopedics.

Specific examples of this growth are abundant.  In Indianapolis, all four of their hospital systems built coronary surgery centers at a combined cost of $210 million.  A community hospital 15 miles north of the city opened a smaller, open-heart surgery program.  In Cincinnati, nine hospitals performed open heart surgery. Eight Boston Hospitals Have da Vinci System, which may indicate that robotic surgery may be used for marketing purposes.

However,  health reform has started to change these trends.  Medicare is instituting more bundled payment (e.g., dialysis payments)  rather than pure fee-for-service.  Further, Medicare’s Shared Savings Program (MSSP)  aims to use Accountable Care Organizations (ACOs) to coordinate patient care improve quality and reduce the rate of growth in health care spending.

How will hospitals respond to the changing market landscape?  One way hospitals can improve their margins is to only treat healthier patients to improve their performance in the case where risk adjustment methods are imprecise.  Also, provider mergers may be a trend. Access larger populations will lessen risk providers must bear under new payment models.  Larger size also means that hospitals can negotiate better rates with suppliers.  Hospitals will likely sell redundant or non-core assets.

Hospitals will also adopt new technology to better manage care. For instance, Henry Ford Health System in Detroit uses an embedded specialized software called RadPort in its electronic physician order entry system that prompts physicians to enter specific information when ordering radiology tests.  The pilot, funded with a CMS grant, will see whether these prompts will reduce utilization levels.

Tags: , , ,

Patient Centered Medical Home: Is your doctor ready?

January 17, 2012 in Medical Home, Quality, Supply of Medical Services | No comments

The answer is probably not.  The NCQA defines 149 factors which would make a practice a successful medical home.  These include physician access during and after office hours, electronic access to patients information, availability of clinical data and use of that data for population management, identification of high risk patients, ability to refer patients to available community resources, care coordinate, and quality measure tracking.

As recent Health Economics articles finds that almost half of physician practices fail to meet the NCQA’s medical home standards.  Specifically,

“Forty-six percent…of all practices lack sufficient medical home infrastructure. While 72.3 percent…of multi-specialty groups would achieve recognition, only 49.8 percent…of solo/partnership practices meet NCQA standards. Although better prepared than specialists, 40 percent of primary care practices would not qualify as a medical home under present criteria.”

Read the rest of this entry »

Tags: , , ,

Medicare reducing reimbursement for low-quality docs

January 16, 2012 in Medicare, P4P, Physician Compensation | 4 comments

In 2015, Medicare will begin implementing a value-based purchasing (VPB) program for physicians.  Initially the program will target only certain physicians and groups of physicians, but by 2017 all physicians is participate in this program.

The VBP program will evaluate physicians along two broad dimensions: quality and cost.  In the final rule:

Section 1848(p) of the Act requires the Secretary to ‘‘establish a payment modifier that provides for differential payment to a physician or a group of physicians’’ under the physician fee schedule ‘‘based upon the quality of care furnished compared to cost *** during a performance period.’’ The provision requires that ‘‘such payment modifier be separate from the geographic adjustment factors’’ established for the physician fee schedule. In addition, section 1848(p)(4)(C) of the Act requires that the value modifier be implemented in a budget-neutral manner.

 

Quality

The current quality measures to be used include:

  1. The measures in the core set of the Physician Quality Reporting System (PQRS);
  2. All measures in the Group Practice Reporting Option (GPRO) of the Physician Quality Reporting System; and
  3. the core measures, alternate core, and 38 additional measures in the Electronic Health Records (EHR) Incentive Program measures.

Cost

The current measures of cost CMS is using are total per capita cost measures and per capita cost measures for beneficiaries with four chronic conditions (COPD; heart failure; coronary artery disease; and diabetes).

By January 2012, however, CMS will choose an episode grouper which can evaluate physicians based on episodes of care. Specifically:

Section 1848(n)(9)(A) of the Act requires us to develop by January 1, 2012, an episode grouper that combines separate, but clinically related items and services into an episode of care for an
individual, as appropriate.

Other Issues

One of the main problems of the physician VBP is attribution of patients to doctors. In managed care organizations, patients are assigned a primary care doctor or gatekeeper who are responsible for the patient’s overall care. In Medicare, the patient can see any willing provider; because the primary care doctor cannot restrict the patient’s choice of care, it is more difficult to hold them responsible for the care. Specifically, Medicare beneficiaries never have to choose a primary care doctor, so identifying the doctor to be ultimately responsible for each patient’s overall care is difficult.

Physicians require additional information to understand why the received the VBP scores they did. For this purpose, CMS will create Physician Feedback Reports, confidential reports providing more detailed information of the underlying factors which produce these scores.

For the VBP modifier in 2015, CMS will use 2013 as the initial performance period 2013. This means that payment adjustments in 2015 will be on care provided 2 years ago. Although evaluating physician performance, allowing for appeals and adjusting payments takes time; two years is a long lead time.

Tags: , , , , , , ,

Will Caesareans Become the Default Delivery Option?

January 10, 2012 in Physician Compensation | No comments

This question may not be as far fetched as it seems.  According to a California Maternal Quality Care Collaborative (CMQCC) White Paper:

“Cesarean delivery rates in both California and the United States as a whole rose by 50 percent between 1998 and 2008, climbing from 22 percent to 33 percent of all births in just a decade. This upward trend, which is seen for every type of woman regardless of race/ethnicity, age, weight, or the gestational age of the pregnancy, shows no signs of reversing. The increasing rates are largely the result of two factors: a significant rise in first-birth cesareans done in labor, and a marked decline in vaginal births after a prior cesarean (VBAC).”

As any good economist would say, there are two factors affecting the change in Caesarean rates: demand and supply. On the demand side, women are more comfortable having a Caesarean than ever before. When a woman is pregnant, more of their peers will have had a Caesarean and the are thus their fear of this major surgery may decrease. Further and with the tremendous amount of faith most women place in modern medicine and their physicians specifically, Caesareans may seem like a more ‘advanced’ way to give birth.

On the supply side, there is a simple reason why Caesareans have risen: money. Physicians get paid more when they do Caesareans. Further, a vaginal birth takes a long time and involves a lot of watchful waiting and monitoring. The Caesarean procedure–although much more intensive and generally worse for the women–is much faster. According to the CMQCC report, “Many nurses talked about the timing of cesareans done during labor, citing the competing demands on physicians for clinic appointments and their desire for balance between work and the rest of life”Kaiser Permanente, where physicians are paid a salary and beneficiaries receive all services from KP docs, generally have among the lowest Ceasarean rates in the state of California.

Doctors do not find it profitable to supervise vaginal birth. And to be honest, I don’t blame them. A typical vaginal birth without complications may not require much direct supervision of a physician. Substituting more labor (i.e., time spent with the patient) by using a midwife in place of more capital (i.e., human capital that the physician accumulated) is more likely to produce better birth outcomes for the average women. Physicians could be brought in only for complicated cases which require additional expertise and surgical skills.

Source:

Tags: ,

Will Nurses Steal Market Share from Physicians?

January 9, 2012 in Nurses | 2 comments

Currently, physicians are the dominant force in determining how health care is provided in the United States today.  Nurses, however, also play a vital role in the provision of health care services.  Although there are about 660,000 physicians in the U.S., there are 2.6 million registered nurses and another 750,000 LPNs.

Leveraging the skills of these nurses the utmost capacity is vital to maximizing the efficiency of the health care system.  In a recent report from the Institute of Medicine (IOM), the policy recommendations focused on four main issues:

  1. Nurses should practice to the full extent of their education and training.
  2. Nurses should achieve higher levels of education and training through an improved education system that promotes seamless academic progression.
  3. Nurses should be full partners, with physicians and other health professionals, in redesigning health care in the United States.
  4. Effective workforce planning and policy-making require better data collection and information infrastructure.

In general, although the recommendations are sensible, physicians may fear that nurses will begin taking some of their market share.  A more detailed explanation of my views of these recommendations is listed below.
Read the rest of this entry »

Tags: , , ,

Why Doctors Don’t Like Medicare

January 3, 2012 in Medicare, Physician Compensation | 7 comments

Being a doctor is difficult.  You need to graduate from medical school and learn a ton of difficult scientific concepts.  You need to stay up to date on the latest medical developments.  You need to cater to sick, needy patients (and their family).  Any you need to get paid.

Earning a living is not as simple for doctors as other professions.  Sure doctors make a lot of money.  But knowing how much they get paid for a particular service is complex.

I provide an overview of the physician reimbursement system here.  That overview does not take into account all the payment modifiers in the Medicare’s physician reimbursement system.  Consider the following payment modifiers:

  • For many procedures, Medicare pays providers for the professional and technical component.  The professional component is the physician’s work and expertise; the technical component provides reimbursement for equipment and supplemental staff needed to perform the procedure.  If the procedure is billed globally, then the physician receives both components.  If another entity performed the technical component, then the physician is only paid for the professional component.  For instance, for lab tests, the lab may run the test (technical component) but the physician would be the one interpreting the test (professional component).
  • If you assist in a surgery, you receive 16% of the fee the primary surgeon does.Under some circumstances, the individual skills of two surgeons are required to perform surgery on the same patient during the same operative session.  If you are a co-surgeon (rather than an assistant at surgery), you receive 62.5% of the typical reimbursement for that surgery.
  • If you perform a bilateral surgery–a surgery done on both sides of the body (e.g., right arm and left arm)–then you receive 150% of the payment you would have received from doing a unilateral surgery.
  • When multiple procedures are performed through the same endoscope, payment will be made for the highest valued endoscopy (100% of the allowance) plus the difference between the next highest and the base endoscopy.
  • If you perform multiple surgeries in the same day on the same patient, you do not get paid the same amount as if these were performed on multiple days.  The highest valued procedure is paid 100% of the allowance.  For the second through the fifth highest valued procedures, the physician receives 50% of the typical payment amount.
  • If you are a physician assistant, nurse practitioner, or a registered dietitian or nutritionists; you receive 85% of the payment an MD would receive for performing the same service.
  • If you are a clinical social worker, you receive 75% of the payment an MD would receive for performing the same service.
  • If you are a certified nurse midwife, you recieve 85% of the payment an MD would receive for performing the same service.  If you are a midwife, you only receive 65%.

If you don’t think Medicare is bureaucratic, just take a look at those rules.

Tags: ,

Doc Fix Fixed…for Two Months

January 2, 2012 in Medicare, Physician Compensation | No comments

Kaiser Health News reports:
The House GOP leadership’s agreement to a Senate proposal averts a 27 percent paycut to doctors scheduled to take effect in January. The deal delays the cut until March 1, and lawmakers hope to hammer out an agreement on a longer-term fix to the payment formula before then.

As I previously noted, this delaying the cut to physician payment is not a long term fix. Either Medicare should remove the sustainable growth rate (SGR) provision and acknowledge the fiscal impact of paying doctors more or they should impose the SGR or (more likely) a modified SGR.

The current two month delay makes it seem as if Congress will cut Medicare payments to physicians by 27 percent on March 1, 2012, even though this will of course not happen.

With respect to the ‘doc fix’ issue, more transparency is needed.

Tags: , , ,

Will the Doc Fix happen this year?

December 26, 2011 in Medicare, Physician Compensation | 1 comment

The Healthcare Economist is going on vacation for the next week.

In the meantime, I pose to you, my reader, a bet.  Do you think the ‘doc fix’ gets passed?  Before you read on, make your predictions in the comments section below.

Healthcare Economist’s Prediction

Read the rest of this entry »

Tags: , , , , ,

« Older entries