An Uncertain Future for ICD-10

On February 14, 2012, Marilyn Tavenner, the acting Administrator of CMS, told reporters that CMS will “re-examine the timeframe” of the planned conversion to the ICD-10 code standard.  Presently, covered entities under HIPAA must fully convert from the ICD-9 coding system to ICD-10 by October 1, 2013.

ICD-10, which stands for the International Classification of Diseases, 10^th Revision, is a coding system that providers use for billing purposes and medical researchers also use for statistical analysis.  ICD-10 consists of 68,000 codes that will expand upon the 13,000 codes currently being used with ICD-9. The codes, each representing a separate medical service or diagnosis, are used by providers and hospitals when they submit their bills to the insurer. The providers receive payment for their services based upon the codes and the terms of their reimbursement agreement. From these codes, medical researchers are able to evaluate kind and frequency of care; with more than five times as many descriptive codes in the new system, many researchers and evidence based medicine proponents are said to look forward to the far greater depth of analysis the new coding system will offer. The United States already lags behind many countries in ICD-10 implementation and it is said that this compliance extension will widen the gap even further.

Two days after Ms. Tavenner’s announcement, HHS issued a news release stating that “HHS will initiate a process to postpone the date by which certain health care entities have to comply with ICD-10.” Kathleen G.  Sebelius, the Secretary of HHS, states in the news release that “we have heard from many in the provider community who have concerns about the administrative burdens they face in the years ahead. We are committing to work with the provider community to reexamine the pace at which HHS and the nation implement these important improvements to our health care system.”

HHS’s news release leaves a lot of questions unanswered. There is no hint at which “certain health care entities” will be granted an extension for compliance and how far off the new deadline will be. HHS claims they will “initiate a process,” which leads many to believe a formal rule making process with public comments will occur. This process could possibly take years to complete, which undoubtedly has caused a giant sigh of relief for providers and institutions across the country that feel ill-prepared for the 2013 deadline. Analysts at Health Care IT News estimate that the deadline could be pushed off a year or two if there is a formal rule-making process.

As the news of Ms. Tavenner’s announcement spread, members of the industry sent out messages cautioning that a complete overhaul of the current plan is unlikely.  Ms. Tavenner’s announcement, which happened at the American Medical Association (AMA) Advocacy Conference in Washington, D.C., was fittingly met with applause by AMA members. The AMA has publicly and vehemently opposed the current October 1, 2013 deadline.  In a January 17, 2012 letter addressed to Speaker of the House John A. Boehner, the Executive Vice President and CEO of the AMA James L. Madara M.D. pleaded with Speaker Boehner to stop the implementation of ICD-10. In the letter, Dr. Madara argues that the conversion “will create significant burdens on the practice of medicine with no direct benefit to individual patient care, and will compete with other costly transitions associated with quality and health IT reporting programs.” Of course, Dr. Madara is referring to the task of implementing an electronic health records (EHR) system in accordance with CMS’s meaningful use criteria, which entitles a covered entity to receive incentive payments from CMS. Dr. Madara also cites to what he deems to be the competing tasks of dealing with financial penalties for non-participation in Medicare programs, including e-prescribing and the Physician Quality Reporting System.

ICD-10 opponents also cite to the industry’s recent failure to comply with the January 1, 2012 deadline to comply with the transition to Version 5010, a HIPAA electronic transactions upgrade that is necessary to support ICD-10, as evidence that the industry is not ready for the ICD-10 change. In November 2011, CMS gave in to industry pressures to extend the 5010 compliance deadline an additional ninety days. It is undeniable that providers are already subject to tremendous demands under HIPAA and the HITECH Act, on top of Medicare cuts, which are placing significant financial stress and compliance burdens on the industry. It is not surprising that ICD-10 has met a lot of resistance from providers. However, it is no secret that providers and institutions are consistently successful lobbyists for their concerns and beliefs and it remains to be seen how CMS will proceed with the scheduled ICD-10 implementation and what compromises will be made.

Proponents of the ICD-10 system argue that the new coding system will create significant positive changes in the industry because it will help collect important data that will improve the quality of patient care, decrease costs, and collect statistics for medical research.  CMS and the Center for Disease Control and Prevention believe that the new codes will create more accurate and exact descriptions of diagnoses and inpatient procedures, which will improve efforts to track care, detect emerging health issues and improve quality. A report from Deloitte, a consulting firm, reported that the increased size and scope of the ICD-10 codes is expected to provide potential benefits in cost and quality measurement, public health, research, and organizational monitoring and performance measurement.  Whether a provider supports the change or not, Deloitte echoes the sentiment of many that advance planning is essential. Providers and institutions that have already invested time and money into the ICD-10 implementation are frustrated and upset by CMS’s decision to “reexamine” the current compliance deadline.  After all, no provider wants to see its large investment in the ICD-10 system put to waste.

The fact is that no one, perhaps even CMS and HHS, is certain about the date of the future ICD-10 implementation plan so perhaps the smartest choice for providers is to proceed with steps to continue the ICD-10 implementation. Considering the prospect of the financial disincentives attached with non-compliance, it seems like a risky choice for any provider to sit around and wait and see what may happen, especially when the ICD-10 implementation cannot happen overnight.  There are providers that started the ICD-10 conversion process back in 2009 when it was first introduced and they still have not completed the task. Unfortunately for providers, the ICD-10 conversion requires time, manpower, training, testing with payers, and significant technological changes that will carry high administrative and financial costs.  The Medical Group Management Association (MGMA), which opposes the ICD-10 implementation, estimates that it will cost a ten doctor practice more than $285,000 to convert to ICD-10, with software upgrades accounting for only $15,000 of that amount. According to the MGMA, the bulk amount would be for increases in claims queries, reductions in cash flow, and increased documentation time.  What it comes down to is that if a provider wants to be paid for its services, noncompliance with ICD-10 is not an option. The risk for successful claims processing and receiving payments in a timely fashion is present, but adequate preparation and testing well before the compliance deadline is the best way to combat this significant risk.

One thing is certain – until HHS releases a new rule and schedule for ICD-10 implementation, opponents will continue to argue that the costs to adopt the new system are too high, the task too onerous, and the rewards too speculative to justify such an undertaking.  Unless the industry comes together to find a solution for an easy transition, this could be a bumpy road until the ICD-10 transition is complete.

Medicare Payment, a System in Need of Fixing

[Ed. Note: We are pleased to welcome Andy Braver, Esq. back to Health Reform Watch. Andy is a health care attorney who recently completed an LL.M in Health Law at Seton Hall Law. Prior to entering the LL.M. program, Andy spent five years as a healthcare provider, running a state of the art medical diagnostic imaging center.  During that time, he dealt with many important health law issues faces by providers today, including Fraud and Abuse, Medicare and Medicaid licensing and reimbursement, state and private accreditation organizations, private payers, electronic health records, and HIPAA and other privacy issues, to name just a few.]

Medicare’s fee for service payment system has many problems that need fixing.  While recent studies have predicted that Accountable Care Organizations (ACOs) may very well achieve better care and lower costs, any savings generated as a result of these new groups of providers will be just a drop in the bucket solution to a vast problem.

Medicare was projected to spend over $500 billion on patient care in 2010.  Notwithstanding the fact that the White House Office of Management and Budget believes $36 billion of the Medicare and Medicare Advantage payments made in 2009 were improper.

The problem is, there is no distinction made for the provision of quality medical care.  Conversely, there is no check in the system to make sure that the care provided is inadequate.  If you provide the service, you get paid.

I realize that in many areas of medicine, it is difficult or even impossible to create a system to accurately and impartially judge the adequacy of care provided.  How in fact do you measure the ‘quality’ of healthcare?  Do you look at the structure of an entity, its organization and ability to provide what is generally regarded as good care?  Or do you look at the actual process or provision care, measuring relative malpractice claims among other objective factors?  Many believe that better outcomes suggest better care.  While I do not believe that outcome or evidence based medicine is the answer to every problem, it certainly can be a solution to some of these challenges.

There are differences in the Medicare program based on geography, and local coverage determinations and reimbursement rates, whether using the PPS or RVU systems (Part A & B), vary greatly across the country.  That part of the system makes sense by taking into account cost of living, cost of employment, property costs, and local tax rates.

In my mind, however, these processes fail because they do not further take into account advances in technology, or reward investment in the future.  For example, Medicare pays the same amount of money for an MRI exam regardless of the type of machine that was used to take the picture, and without a thought given to the type of storage system employed by the medical provider.  Imagine a facility with a two decade old system, state licensed and able to take pictures, with a machine equivalent to the first generation digital camera I owned 15 years ago, and printed pictures that are stored in a file room.  Then imagine a state of the art facility with an HD camera taking high resolution digital pictures, stored in an electronic file system, in a format that is able to be sent electronically to specialists all around the country (or world), and accessed by the patient quickly and securely on the internet.  Are those two pictures worth the same to Medicare?  There certainly is increased value to the patient in the ‘new’ system.  Better picture quality undoubtedly leads to better diagnostic capability (better medicine), and fewer picture redos over time; long-term storage and record portability is certainly going to lower future treatment costs if the issue is a chronic one.  HITECH and the new EHR incentive programs recognize the importance of electronic medical records, but it remains to be seen how those requirements will affect licensing and reimbursement rates.  Will there be a license ranking and a tiered payment system based on perceived quality or outcome?

I certainly hope that payments are tiered when advanced technology is used, but not according to self-assessment rankings and quality benchmarks.  I would argue that medicine is the one area where any kind of ranking and result (or outcome) based assessment is virtually impossible.   People are not cars, and JD Power cannot provide meaningful answers when it comes to medicine; there is no way to objectively determine a specific course of treatment for a particular patient is better at one hospital versus another.  No two patients are the same, though it is entirely possible they might both drive the same car.  Determining quality in healthcare is exceedingly difficult.  Patient bases are different, whether because of socio-economic reasons, or geography.  So do you then look to the education of the physician to determine quality?  We don’t do the same for lawyers?  Or do we?  Do you look at healthcare structure (how an entity is organized, its equipment, etc…) to determine quality?  Or process (the # of lawsuits against it, for example)?  Better outcomes alone do not mean better healthcare, and none of these items taken alone should affect licensing of healthcare providers.  In the end, this highlights the fact that designing a system that is fair and without major flaws may never be possible with so much money in the system and with so many parties having opposed interests. But that doesn’t mean we shouldn’t try to fix the expensive and broken (the status quo is unsustainable), it just means that attainable reform could very well mean significantly less unfairness and less major flaws. Because ultimately, in this context, the perfect may be the enemy of the good.

The Normative Meets the Practical: Who Should Can Lead ACOs

One of the many $64,000 questions in the accountable care organization (ACO) debate has been who should lead these organizations.  In a policy adopted in November 2010, the American Medical Association (AMA) made clear its view that ACOs must be physician-led.  The American Hospital Association (AHA) refrained (at least in its public letter to CMS) from asserting its entitlement to the ACO helm, based, for example, on its management experience and pools of capital.  Instead, it simply urged CMS to “defer details of the organization, such as leadership and management structure, to each ACO.”

CMS seems to have heeded the AHA’s advice because its recently released proposed rule does not directly take on this normative debate.  (See Summary of CMS Proposed Rule on Accountable Care Organizations recently posted by Jordan T. Cohen for an overview of the proposed rule.)  While “ACO participants must have at least 75 percent control of the ACO’s governing body” to be eligible for participation in the Shared Savings Program (proposed Section 425.5(d)(8)), the definition of “ACO participant” in the proposed rule includes physicians and hospitals, among others (proposed Section 425.4).

Similarly, the proposed rule simply requires that the “ACO’s operations must be managed by an executive, officer, manager, or general partner whose appointment and removal are under the control of the organization’s governing body and whose leadership team has demonstrated the ability to influence or direct clinical practice to improve efficiency processes and outcomes” (proposed Section 425.5(9)(ii)). The proposed rule does not address who or what would make the best such leader.

The proposed rule, however, clearly preserves a role for physicians to form and lead ACOs. For example, it recognizes that ACOs may be comprised of professionals in group practice arrangements and networks of individual practices, independent of hospitals (proposed Section 425.5(b)).

In addition, “[c]linical management and oversight [of the ACO] must be managed by a full-time senior-level medical director . . . who is a board-certified physician . . .,” and “[a] physician-directed quality assurance and process improvement committee must oversee an ongoing action-oriented quality assurance and improvement program” (proposed Sections 425.5(9)(iii) and (iv)).

The proposed rule also builds in a preference for ACOs comprised of all physicians or physician groups with fewer than 10,000 assigned beneficiaries by proposing to exempt them from the 2 percent net savings threshold adjustment under the one-sided model (proposed Section 425.9(c)(4)(i)).  It also proposes to vary confidence intervals, which affect the minimum savings rate, by the size of the ACO in the one-sided model “to improve the opportunity for groups of solo and small practices to participate in the Shared Savings Program” (Preamble to proposed rule at Section II.F.10).

But on a practical level, the specifics of CMS’ proposal may — unintentionally, perhaps — give hospitals the greater chance to take the reins, at least initially.  An apparently leaked CMS internal discussion document reflects some level of concern that physicians may have a hard time taking the lead with ACOs.

The proposed rule’s regulatory impact analysis estimates that the average start-up investment and first year operating expenditures for an ACO in the Shared Savings Program will be $1,755,251.  In addition, the proposed rule uses a 6-months claims run-out (proposed Section 425.7(a)).  Presumably, that means ACOs — assuming they satisfy all program requirements — will not see a dime of shared savings for more than eighteen months.  CMS also proposes to withhold 25 percent of any earned shared savings accrued in a given year to ensure repayment of any losses to the Medicare program in subsequent years of the three-year ACO agreement (proposed Section 425.5(d)(6)(iii)).

Even if private physicians can amass the capital to make these upfront investments, there of course is no guarantee they will regain their outlays. A recent study published online by the New England Journal of Medicine, as reported by the American Medical Association, found that participants in CMS’ Physician Group Practice Demonstration did not recoup, at least in the initial years of the demonstration, all of the money they invested to establish ACOs.  As the AMA summarized:

Early adopters, for the most part, did not recoup their set-up costs in the first three years of operation.  The 10 integrated health systems that were studied spent an average of $1.7 million to take part in the demonstration project.  Eight received no shared savings payments in the first year of the project.  Six got a payment in the second year, and five received a bonus in the third year.

The Everett Clinic in Washington, for example, reportedly spent approximately $1 million on infrastructure for its ACO but recouped only $129,268 in shared savings during the first four years of the demonstration project.

According to a 2007 report from the National Center for Health Statistics (NCHS), in 2003-04, 80.6 percent of office-based medical practices in the United States consisted of one or two practitioners and 94.8 percent had five or fewer practitioners.  The risks associated with forming an ACO are considerable for these smaller practices to absorb, especially when, at best, the ACO will see 75 percent of its portion of any shared savings upwards of eighteen months down the road and could instead be responsible for its share of losses.  It is not clear how many small practices are willing and able to assume these risks without some substantial financial or management support.  Not surprisingly, the AMA’s statement on the proposed ACO rule specifically identifies “the large capital requirements to fund an ACO” as a significant barrier that must be addressed if physicians in all practice sizes and settings will be able to successfully lead and participate in ACOs.

Another aspect of the proposed rule that may present a particular challenge to independent physicians is proposed Section 425.11(b)’s requirement that “[a]t least 50 percent of an ACO’s primary care physicians must be meaningful [Electronic Health Records (EHR)] users, using certified EHR technology as defined in §495.4, in the [Health Information Technology for Economic and Clinical Health (HITECH)] Act and subsequent Medicare regulations by the start of the second performance year in order to continue participating in the Shared Savings Program.”

Physician practices indisputably have increased their use of EHR systems in recent years.  According to the National Ambulatory Medical Care Survey conducted by NCHS (reported here), only 17 percent of physicians in 2008 reported that they had a “basic” EHR system (which is defined as having electronic patient demographic information, patient problem lists, patient medication lists, clinical notes, orders for prescriptions, and laboratory and imaging results).  Recent NCHS data (reported here) show that that number has climbed nearly 50 percent to 24.9 percent of office-based physicians.

But basic use of EHRs is not sufficient under the proposed rule, which requires “meaningful use.”  Survey data from the Office of the National Coordinator for Health Information Technology, as reported here, show that only 41.1 percent of office-based physicians plan to apply for billions of federal dollars in EHR incentive payments that are available to Medicare and Medicaid providers under the HITECH Act, compared with 80.8 percent of acute care non-federal hospitals.  Additionally, as reported here, a recent survey from the Medical Group Management Association (MGMA) found that only 13.6 percent of medical practices that have adopted EHRs and plan to apply for the EHR Meaningful Use incentives currently are able to satisfy the fifteen core criteria necessary to establish that they are meaningful users.   Medical practices have a long row to hoe.

But the news is not all bad for physicians.  The MGMA survey also found something that suggests this issue is far from resolved on a theoretical or practical level.  As reported here, “almost 20 percent of responding independent medical practices that owned EHRs said that they had optimized their uses of EHRs” whereas “[o]nly 8.8 percent of responding hospitals — or [integrated delivery system (IDS)] — owned practices with EHRs said they had optimized their EHR use.”

Almost certainly, it is not just a coincidence that physicians are devoting their energy to becoming meaningful EHR users just as the first EHR Meaningful Use incentive payments are available. If CMS or private foundations develop additional incentive programs to help smaller practices cover the start-up costs associated with forming an ACO, the individual physician could still be in this game.  Notably, the AMA’s brief statement on the proposed ACO rule reiterates its recommendation to CMS to increase access to loans and grants for small practices as part of this puzzle.  It remains to be seen if any such programs are viable in this fiscal climate.

As promised, future posts will address the normative question of who should lead ACOs.

Balance Billing: The National Conference of Insurance Legislators’ Plan

This past week I found myself (once again) sitting across a big desk from the surgery scheduler who works for my son’s ear nose and throat doctor.  She had a stack of papers for me to sign and as she passed me each one she offered a brief explanation of what it was.  As required by the March 2009 revisions to New Jersey’s Codey Law, one informed me that the surgery center where my son’s ear tubes were to be inserted was “physician-owned,” another that it was “out-of-network.”  Regarding the latter, the scheduler reassured me that, while the center could “balance bill” me for the portion of the facility fee not covered by my insurance, it would not.  I was told the same thing the first time around and nevertheless received a bill from the center for nearly $5,000; after I got over the shock, I called to ask that it be reduced and breathed a sigh of relief when it was, to $100.

So, balance billing was already on my mind when I received an email from Interim Vice Provost & Professor of Law Kathleen M. Boozang, calling my attention to a recent St. Louis Post-Dispatch article reporting that Steven Powell “has sued Washington University in St. Louis, accusing the university’s doctors and other Missouri health care providers of routinely and illegally over-billing for medical services.”  After Mr. Powell was hospitalized in 2008 at Barnes-Jewish Hospital, the hospital’s owner and Washington University, whose doctors staff Barnes-Jewish, sued Mr. Powell to recover fees not covered by his insurance carrier that he would not or could not pay.  Mr. Powell’s prospects for success are not clear, since Missouri, like most states, does not, at least not explicitly, forbid out-of-network health care providers from billing their patients for the portion of the provider’s fee not covered by insurance.

In 2009, two states, Louisiana and Texas, enacted laws that tackle the problems associated with balance billing not by banning the practice but, among other things, by requiring that the practice be made transparent.  The National Conference of Insurance Legislators, the self-described “voice of state legislators in Washington in the face of mounting federal initiatives to preempt state insurance regulation,” has promulgated a draft Balance Billing Disclosure Model Act modeled on the Louisiana and Texas statutes.  NCOIL will consider adoption of the Model Act at its next meeting, to be held in March of this year.

Under NCOIL’s draft Model Act, healthcare facilities would be required to provide “conspicuous written disclosure to a consumer at the time the consumer is first treated on a non-emergency basis at the facility, at pre-admission, or first receives non-emergency or post-stabilization services at the facility,” informing the consumer that the facility is either in- or out-of-network and, if the latter, that “the consumer may be billed for medical services for the amount unpaid by the consumer’s health benefit plan.”  Health benefit plans would also be required to make disclosures about the potential for balance billing, “in conjunction with issuance or renewal of the plan’s insurance policy or evidence of coverage.”  Finally, facility-based healthcare providers  would be required to (1) take steps to include sufficient information in their bills to enable patients to understand why they are being balance billed, (2) provide patients with over-the-phone assistance understanding such bills, and (3) work with patients to implement payment plans.

NCOIL received comments on the draft Model Act from a number of stakeholders.  The American Hospital Assocation wrote that “[a]n approach focused on disclosure sidesteps the key issue here: the adequacy of the insurer’s network with respect to contracts with facility-based physicians.”  Families USA suggested that “[a]s part of requirements that health plans maintain adequate provider networks, health plans should contract with an adequate number of anesthesiologists, emergency room providers, and other facility-based providers to see their members at each in-network facility and should establish reasonable procedures to help both patients and families to identify and locate those participating providers.”

Predictably America’s Health Insurance Plans have a different take, arguing that the most pressing concern is “[p]rotecting consumers from runaway charges billed by some out-of-network providers[.]“  AHIP points out that “[w]hen an individual receives services from a facility and accompanying facility-based practitioners, the consumer rarely has the opportunity to select the radiologist, anesthesiologist or pathologist.  Therefore, the proposed disclosure of charges and participating status of the practitioner would have a very limited practical impact because the consumer generally cannot act on this information.”

Tellingly, everyone agrees that disclosure will not be a magic bullet.

Spinal Fusion Controversy Underscores Extent of Conflicts of Interest

The Wall Street Journal recently published a report that outlines the extensive financial benefits that surgeons are receiving for spinal fusion surgeries. The “bounty” — a term used by the WSJ — comes from Medicare reimbursement as well as royalties for the intellectual property contributed by the surgeons to the spinal fusion procedures. Presumably the surgeons also receive money from speaking and training fees.

In short, spinal fusion is a surgical procedure whereby two or more vertebrae are fused together. The fusion is accomplished by creating a bridge between the vertebrae that is usually constructed out of bone taken from other parts of the body. The bone is inserted between the vertebrae, and is secured by rods, screws, and plates. This reduces the movement of each vertebrae that is connected to the bridge, thereby relieving stress on the injured vertebrae, disks, and nerves. Spinal fusion may be a necessary treatment in the face of trauma or debilitating diseases affecting the spine, such as scoliosis. However, the application of spinal fusion to treat certain types of back pain has been questioned.

In light of the dearth of comparative effectiveness research regarding nearly all surgical procedures, why then is spinal fusion so controversial? There appear to be two factors: the high price of the surgery, and  the strong ties between the surgeons performing the spinal fusions and the medical device manufacturers that produce the hardware used in the procedure.

In particular, the royalty payments are staggering. In the first three quarters of 2010, the WSJ reports that each of five spinal surgeons at Norton Hospital in Louisville Kentucky received more than $1.3 million from Medtronic — the leading manufacturer of spinal fusion devices. Norton Hospital — and its surgeons — are certainly not alone in profiting from the procedures.

Though the device manufacturers like Medtronic pay out large sums to physicians that develop, utilize, and promote spinal fusion treatments, the manufacturers clearly come out ahead after taking into account the price they charge hospitals for the spinal fusion devices. Not surprisingly, this money often comes from Medicare reimbursement.  According to the WSJ’s analysis of Medicare claims, spinal fusion went from costing Medicare $343 million in 1997 to $2.24 billion in 2008.  And as the Journal points out, the screws used in spinal fusion implants can cost between $1,000 to $2,000 a piece for reimbursement but actually turn out to cost less than $100 to make. Spinal surgeon Charles Rosen is quoted as stating that “You can easily put in $30,000 worth of hardware in a person during a fusion surgery.” A Los Angeles Times report in 2010 found that complex spinal fusion surgeries can end up costing $80,888 in hospital charges as compared to $23,724 for spinal decompression surgery — the latter referring to a group of procedures that can relieve painful pressure on the spine, but without the extensive implantation required by spinal fusion.

Nevertheless, it is true that there there are many expensive surgical procedures wherein the value to the patient justifies the high price. But it is more than the wise allocation of resources that is at issue. In the Journal of the American Medical Association’s April 2010 issue, Dr. Eugene Carragee M.D., professor of spinal disease and orthopaedic surgery at Stanford University School of Medicine summarized the clinical difficulties facing complex spinal fusion surgery, especially in older individuals:

…the complex reconstruction of spinal deformity in older patients remains a difficult and dangerous enterprise. Complication rates have declined but remain concerning (30%-40%) and the reoperation rates, in a population for whom there is a high risk of both medical and anesthetic complications with additional surgery, remains at 10% to 20% in the most optimistic reports. Moreover, despite these major interventions, this approach is still not effective in 30% to 40% of patients.

When asked about the need for spinal fusion surgeries, Dr. Steven Glassman — one of the Norton Hospital surgeons that has received millions to implant spinal fusion devices — stated that he and his colleagues were “leaders among spine surgeons nationally in comparative effectiveness research.” This is a troubling statement, precisely because of the significant royalty agreements between Dr. Glassman and Medtronic that are described in the WSJ report. Dr. Glassman is therefore incentivized — at least economically speaking — to interpret research findings in such a way that maximizes the contexts in which spinal fusion surgery can be recommended.

To combat these conflict of interest claims, Medtronic claims that it refrains from paying out royalties to the collaborating surgeons on the devices they personally use in their patients. This would appear to reduce the incentive for Dr. Glassman to personally churn out spinal fusion operations in the hope that he will get royalties for those instances where he implants hardware in which he holds a royalty agreement with Medtronic. This certainly helps to combat violations of the Federal Anti-Kickback Statute, which prohibits Medtronic from inducing surgeons to purchase their devices. But this policy does little to curb the general conflicts of interest of the general spinal surgery community when determining whether to recommend complex spinal fusion surgery. Even if a contributing surgeon does not receive royalty payments for the specific surgeries where his manual contributions are utilized, they still have an incentive to keep Medtronic “happy” by increasing demand for the spinal fusion hardware. And certainly one can envision a scenario in which a surgeon so situated might suggest such a surgery but then refer the procedure itself to a colleague, thereby allowing the royalty payments to flow unencumbered by the guise of propriety.  What does appear certain is that demand for complex spinal fusion operations has increased. Citing a study by Deyo and colleagues in the same JAMA issue, Dr. Carragee points out that:

…the rate of spinal stenosis surgery in the Medicare population has remained more or less stable, but the rate of complex surgery for this disease has increased from negligible levels in 2002 to nearly 15% of all spinal stenosis surgeries in 2007. These more complex surgeries are also reported to be independently associated with increased perioperative mortality, major complications, rehospitalization, and cost.

The findings do not provide explanations for the increase in complex surgery that has occurred during the past 6 years. Ideally, because the complex surgical techniques are used to treat complex deformities, the data should show that patients undergoing these procedures usually have these complex deformities. The diagnoses reported, however, do not support this “ideal” explanation; 50% of these new complex fusion operations were performed in patients with spinal stenosis alone and no deformity. Spinal stenosis with scoliosis by coding, accounted for only 6% of the complex fusions performed.

In other words, there has been an increase in the rate of a complex surgical procedures prone to severe complications, but with no concomitant increase in the rate of the severe conditions that would ostensibly warrant such surgery. Regardless, this demand pays dividends in the royalty agreements that the surgeons receive when the U.S. spinal surgery community implant the hardware that the contributing surgeons developed– and dividends to the manufacturer.

Currently, there appears to be little, if any, countervailing force that militates against the doctors recommending this complex and expensive procedure. By conducting the complex fusion operation, the surgeon and the hospital both make money through the handsome reimbursement from Medicare and private insurance, while Medtronic is handsomely paid by selling more devices. Those hurt, financially speaking, are the taxpayers in terms of Medicare, and those insureds in private plans whose premiums have risen because of the increased costs of this procedure. Private insurance plans are unable to combat this, as any limit on spinal fusion surgery will be framed as corporate greed coming at the expense of treatment. This is precisely what has occurred after Blue Cross and Blue Shield of North Carolina announced that it would place tighter restrictions on spinal fusion surgery. In response to the restrictions, Dr. John Wilson, a neurosurgeon at Wake Forest University Baptist Medical Center and president of the North Carolina Neurological Society stated that “If this intrusion into the physician-patient relationship goes unchallenged, other insurers will follow suit…It will be a progression of ever-more restrictive policies that will handcuff us as we try to treat patients.” Dr. Wilson was one of nine physicians to write a letter to Blue Cross urging the insurer to alter the new rules. Interestingly, the letter repeatedly supports its position by citing the studies of Dr. Daniel Resnick, a spine surgeon who is listed by the Congress of Neurological Surgeons as receiving grant money from Medtronic.

Accountable Care Organizations: Landmark Report from California

Earlier this week the Integrated Healthcare Association (IHA) released an important whitepaper entitled “Accountable Care Organizations in California — Lessons for the National Debate on Delivery System Reform.” (Click here for a pdf of the whitepaper). The IHA describes itself as: “a statewide multi-stakeholder leadership group that promotes quality improvement, accountability and affordability of health care in California. “

ACOs have been discussed before at HRW in the context of reforming the health care delivery system. Unfortunately, ACOs are relatively new and untested. This is what makes California — a tried-and-true state policy laboratory — a valuable laboratory for health reform, particularly for models like the ACO that the reform law attempts to leverage. The tables provided in the whitepaper make it easy to appreciate California’s experience with ACOs:

The upshot of IHA’s report are the ten lessons that they have distilled from the 285+ physician organizations that together display many of the characteristics of ACOs. These lessons are as follows:

Lesson One: A variety of organizational structures are effective at delivering high quality coordinated care; at least as important to success as structure are an organization’s capabilities, culture and infrastructure, as well as the alignment of goals between the organization and its individual physicians.

Lesson Two: In California, a range of relationships exist between physician organizations and hospitals. Alignment of incentives between physician organizations and hospitals offer important opportunities for performance improvements across the entire continuum of care.

Lesson Three: As a method of payment, capitation can be effective at encouraging coordinated care, but payment methods should vary across ACOs depending on an organization’s ability to assume risk.

Lesson Four: Health plans acting in concert on payment methods and performance measurement helped facilitate the growth of California’s provider organizations, and should also play an integral part in fostering ACO development nationally.

Lesson Five: ACOs are not a panacea for healthcare spending control.

Lesson Six: ACOs must be agnostic to insurance type; most provider organizations in California have focused on commercial, Medicare and Medicaid HMO plans for their patients, but for ACOs to be viable across the country, mechanisms must be found to encourage PPO and traditional Medicare and Medicaid patients to use their services.

Lesson Seven: Balancing patient choice with the desire to decrease costs and effectively coordinate care is difficult. California’s experience underscores the challenge of promoting care coordination in an environment of unrestricted provider choice.

Lesson Eight: Regulation of the financial solvency of provider organizations is important to ensure market stability.

Lesson Nine: Consumer protections from capitated provider organizations need to be balanced, not overburdening.

Lesson Ten: Special attention must be given to establishing ACOs in areas with social and economic challenges.

There is a common thread that runs through many of these lessons: the tension between new organizational models and the payment models that currently exist:

In California, provider organizations have developed hand-in-hand with HMO products, and have been largely unsuccessful in their attempts to diversify into serving PPO patients. This has been driven in part by regulatory restrictions at both the State and  Federal  level  surrounding  providers  accepting capitation  and  FFS  payments. Downward trends in HMO enrollment in California have meant that this failure to diversify has limited the impact of the state’s physician organizations. In order for ACOs to flourish, laws and policies must allow for innovative provider payment arrangements, regardless of insurance type, and internal organizational changes will be needed to adapt to different payment methods.

As the report goes on to describe:

The greatest challenge and greatest opportunity facing ACOs in California and elsewhere is the potential for integrating the coordinated care programs developed originally for HMO and other narrow network insurance products into PPO and other broad network products.

The managed-care backlash of the 1990s is a reminder that past is prologue.  Increased consumer choice through products like PPOs is likely here to stay for quite some time. What remains to be seen is how the future regulations governing ACOs will promote greater collaboration in the delivery of care while embracing the payment models that consumers have come to appreciate and expect.

Petitioners Ask OSHA to Regulate Resident Physician Work Hours

On September 2, Assistant Secretary David Michaels for Occupational Safety and Health received a petition requesting that OSHA regulate resident physician and subspecialty resident physicians.  “Depending on the type of residency, physicians-in-training can work anywhere from 60 to 100 or more hours a week, sometimes without a day off for two weeks or more.”  The petition requests that OSHA exercise the authority granted under §3(8) of the Occupational Safety and Health Act to implement the following federal work-hour standard:

(1)   A limit of 80 hours of work in each and every week, without averaging;

(2)   A limit of 16 consecutive hours worked in one shift for all resident physicians and subspecialty resident physicians;

(3)   At least one 24-hour period of time off work per week and one 48-hour period of time off work per month for a total of five days off work per month, without averaging;

(4)   In-hospital on-call frequency no more than once every three nights, no averaging;

(5)   A minimum of at least 10 hours off work after a day shift, and a minimum of 12 hours off after a night shift;

(6)   A maximum of four consecutive night shifts with a minimum of 48 hours off after a sequence of three or four night shifts.

More information about the petition can be found at the Public Citizen-run website, WakeUpDoctor.org.

Present Accreditation Standards

The Accreditation Council for Graduate Medical Education (ACGME), “[a]s the accrediting body for more than 8,800 medical residency programs,… is charged with setting and enforcing standards for supervision and resident duty hours for graduate medical education.”  In 2002, OSHA denied a petition by Public Citizen, the Committee of Internists and Residents (CIR), and American Medical Student Association, citing the voluntary adoption of standards by ACGME.  In 2003, the ACGME set standards that restricted resident work hours to 80 hours per week when averaged over four weeks and no more than 30 consecutive hours of work.  (A breakdown of the differences between the OSHA petition and ACGME 2003 standards can be found here.)

In 2007, the Institute of Medicine (IOM) evaluated resident work standards pursuant to a request from Congress. The resulting report, “Resident Duty Hours: Enhancing Sleep, Supervision, and Safety” found, among other things, that considerable scientific evidence demonstrates that “30 hours of continuous time awake, as is permitted and common in current resident work schedules, can result in fatigue, and that adjustments to the 2003 rules are needed.”  In response, the ACGME proposed revised standards for resident work hours and supervision.  The comment period ended on August 9 and the changes will be implemented after July 2011.

The Substance of the Petition

According to petitioners, the ACGME revised standards are not sufficient.  A study by Landrigan et al. found that even after implementation of the ACGME’s 2003 standards:

• The average work week was 66.6 hours (95% confidence interval [CI] 66.3-66.9);
• The mean length of an extended shift was 29.9 hours (95% CI, 29.8-30);
• 29% of all work weeks were more than 80 hours in duration, 12.1% were 90 or more, and 3.9% were 100 hours or more;
• 83.6% of all interns reported hours of work in violation of the professional self-regulations that were established and are being monitored by the ACGME. This number far exceeds the rates of violations reported by resident physicians and residency programs to the ACGME, indicating both that widespread under-reporting exists, and that the ACGME’s enforcement has been ineffective.

According to the petition, these numbers of hours are among the highest in the professional world and negatively affect personal health and safety.  Despite the previous rejection of a similar petition in 2002, the petitioners have changed their strategy in appealing to OSHA:  “Whereas previous appeals to limit resident physicians’ work hours have focused on the well-documented risks patients face due to tired physicians, this petition concentrates on the often-overlooked health risks faced by the resident physicians who endure those long hours.”  These risks include:

• Motor Vehicle Accidents — In addition to anecdotal evidence that resident fatigue after long work hours has resulted in physical injury and death, the petition offered the following research:
  • A Journal of the American Medical Association (JAMA) informal survey found that “[o]f seven surgical residents in our hospitals who we interviewed, six fell asleep while driving to or from work during their internships and three were involved in motor vehicle accidents.”
  • A New England Journal of Medicine (NEJM) study found that “risk of a motor vehicle crash was increased significantly following a work shift of 24 hours or greater,” as well as the risk of a near miss.
  • Sleep deprivation researchers at John Hopkins Hospital found that “[f]orty-nine percent of resident physicians [questioned] reported falling asleep at the wheel (not necessarily at a stop light), and 90% of these events occurred after the resident physicians had worked an extended duration (> 24-hour) shift.”
  • An Anesthesiology abstract reported that 17% of survey respondents reported post-call automobile accidents and 72% reported near misses.
• Mental Health
  • 

    Capricho No 43, "The sleep of reason produces monsters." Francisco de Goya (1746–1828)

    One study described “house officer stress syndrome.” Caused in large part by sleep-deprivation and excessive work load, physicians-in-training may suffer from (1) episodic cognitive impairment, (2) chronic low-grade anger with outbursts, (3) pervasive cynicism, (4) family discord, (5) depression, (6) suicidal ideation and suicide, and (7) substance abuse.

  • Four studies demonstrated that residents are unhappy, face high levels of stress, and suffer “major problems” in their personal relationships with others.
  • Three studies demonstrated that on-call residents reported greater mood disturbance and increased negative mood than those who were rested.
  • One study found that as many as 30% of residents experience depression during their residencies.
  • A study published in the Archives of Internal Medicine found that 21% of residents reported depressed scores on the Center for Epidemiological Studies-Depression (CES-D) scale and that depressed responses increased with longer work weeks. Two other studies also found increased rates of depression among residents that correlated with high work hours.
• Pregnancy
  • A NEJM study reported that premature labor and preeclampsia or eclampsia was twice as common among pregnant residents as the wives of male residents and that residents working more than 100 hours per week in the third trimester were twice as much at risk for preterm delivery than those that worked fewer than 100 hours.
  • The pre-term labor and preeclampsia risk was validated by a study published in Obstetrics and Gynecology.
  • One study found that infants born during residency significantly more likely to be born with intrauterine growth restriction.
• Percutaneous Injuries (such as needlestick injuries)
  • 

    Saint Sebastian, Carlo Crivelli (1490-91)

    A JAMA study of self-reported percutaneous injuries in residents found that substantially increased risk during day shifts after overnight call as compared with day shifts not preceded by overnight call.

  • “An Annals of Surgery study from 2005 found that 20 to 38% of all procedures in one urban academic teaching hospital involved exposure to HIV, HBV or HCV.”
  • A NEJM study found that 99% of all residents had suffered a needlestick injury by their final year of study. Fatigue was the second most common reason given for the injury.

Additionally, this petition has more public support than the one submitted in 2002.  Petitioners include:

• Public Citizen, a consumer and health advocacy group with 150,000 members and supporters;
• the Committee of Interns and Residents/SEIU Healthcare (CIR/SEIU), a housestaff union, part of SEIU, representing over 13,000 resident physicians;
• the American Medical Student Association (AMSA), a national organization representing over 33,000 physicians-in-training;
• Bertrand Bell, M.D., Professor of Medicine at Albert Einstein College of Medicine and author of New York State Health Code 405 restricting resident physician work hours;
• Charles A. Czeisler, Ph.D., M.D., Baldino Professor of Sleep Medicine, Harvard Medical School;
• Christopher P. Landrigan, M.D., M.P.H., Assistant Professor of Pediatrics and Medicine, Harvard Medical School;
• Plus forty-five health-related organization and over 1,000 individuals.

Response to the Petition

In order to fulfill OSHA’s mission “to send every worker home whole and healthy every day,” the petition argues that OSHA must “act now to address the dangers that extreme work hours pose for resident physicians and subspecialty resident physicians.”

In a statement released the same day, Assistant Secretary Dr. David Michaels recognized the concerns raised by the petition:

We are very concerned about medical residents working extremely long hours, and we know of evidence linking sleep deprivation with an increased risk of needle sticks, puncture wounds, lacerations, medical errors and motor vehicle accidents. We will review and consider the petition on this subject submitted by Public Citizen and others.

The relationship of long hours, worker fatigue and safety is a concern beyond medical residents, since there is extensive evidence linking fatigue with operator error… All employers must recognize and prevent workplace hazards. That is the law. Hospitals and medical training programs are not exempt from ensuring that their employees’ health and safety are protected.

However, ACGME believes that the revised rules under development are adequate.  According to medpagetoday.com, the ACGME said the following in a prepared statement:

As the Occupational Safety and Health Administration reviews a petition from three special interest groups requesting federal regulation of resident duty hours, the Accreditation Council for Graduate Medical Education stands ready to share with OSHA the many studies, evidence, and documentation that substantiate the standards proposed by the ACGME Task Force on Quality Care and Professionalism.

PPACA and the Growing Shortage of Pediatric Subspecialists

Over the course of this year, a spate of articles and op eds have highlighted a growing shortage of pediatric subspecialists.  Earlier his month, Amy Mansue, CEO of Children’s Specialized Hospital here in New Jersey, addressed the problem in a very interesting post on the National Association of Children’s Hospitals’ With All Our Might blog.  Ms. Mansue describes a recent visit to Capitol Hill during which she discussed the implementation of the Patient Protection and Affordable Care Act, explaining to the staffers that:

[t]he differences between strategies to address the needs of the newly insured children versus strategies to address the needs of adults couldn’t be more different.  Start with the basic fact that there is a critical shortage of specialists in pediatrics, where the biggest issue facing adults is how to access primary care. There can be a utilization of physician extenders in the short run until more primary care physicians are trained; there is no similar ‘quick fix’ in pediatrics.

Pediatric neurologists and developmental-behavioral pediatricians are in especially short supply.  A survey of children’s hospitals conducted by the National Association of Children’s Hospitals and Related Institutions in December 2009 revealed average wait times of 9 weeks for an appointment with a pediatric neurologist and 13 weeks for an appointment with a developmental-behavioral pediatrician.  An earlier study published in Pediatrics found that, in addition to enduring long waits, parents and children also travel long distances to see these specialists–on average 73 miles to see a subspecialist in neurodevelopmental disabilities and 44 miles to see a developmental pediatrician.

This is concerning for a host of reasons, including the importance of early, appropriate intervention to the future success of children with developmental delays.  As I discussed previously here and here, the “right” medical diagnosis can be key to accessing needed services, as can a thorough written evaluation and a doctor willing to advocate on a child’s behalf.  This is true whether a family is fighting for publicly-provided disability benefits or special education services or to get a private insurance plan to pay for medically necessary therapies.

What explains the subspecialist shortage?  As Ms. Mansue puts it, “it is all about math.  There is no incentive to go through an additional decade of training to get paid less than what a pediatric nurse practitioner is now demanding in my home state of New Jersey.”  Congress has tried to change the equation.  PPACA provides for loan forgiveness of up to $35,000 per year for up to three years for pediatric subspecialists who “work for a provider serving in a [Health Professional Shortage Area] or medically underserved area, or among a medically underserved population that has a shortage of the specified pediatric specialty and a sufficient pediatric population, as determined by [HHS], to support the specified pediatric specialty.”  But funding for this measure has not yet been appropriated.  The federal government has also attacked the problem through its Children’s Hospitals Graduate Medical Education Payment Program, which provides funding for specialty training for pediatricians.  According to a recent New York Times op ed, however, this program’s funding is also uncertain, suggesting that an end to the shortage of pediatric subspecialists may not be in sight.

Physician Income Relative to Hospital Revenue by Specialty

Wandering through the pages of Health Law Prof Blog, I found this post from a few months ago which looked at a WSJ Health Blog article which examined net hospital revenue derived per physician and compared such revenue generation among various specialties. The average revenue generation per physician amounted to “about $1.54 million based on 114 U.S. hospitals responding to a survey by physician recruiters Merrit Hawkins…. (Revenue here means net inpatient and outpatient dollars derived from referrals, tests and procedures done in the hospital.)”

We’ve looked at physician compensation in relation to physician shortages here at HRW before, noting that “over the course of ten career years, if calculated at a constant rate without regard to future increases in compensation, the median paid “Family Doctor, Branch” will have earned $1,900,182. During those same static 10 years….If that same Family Doctor were to then consult with someone from the lowest paid of the three categories of Radiologist, Not neural, Non-Interventionist, she would be doing so with someone who had made $4,208,580 during that time–which would be $2,308,398 more than she–or more than twice as much.

But this chart below offers a slightly different perspective, showing relative hospital income to specialty and raises some interesting questions regarding hospital finances and chosen areas of focus in relation to return on investment. A focus on kidneys, for instance, would not, it seems, be favored. The ratio of hospital income to physician salary in Nephrology is 2.91 to 1. For Psychiatry it’s 6.45 to 1. For Hematology/Oncology it’s 4.33 to 1. Additionally, in actual income generated, Psychiatry brings in almost 2x as much as Nephrology; Hematology brings in over 2x as much.

One hears often about shortages in dialysis facilities, but mental health clinics and cancer centers barrage the airwaves with their advertisements. Perhaps it is not a coincidence.

Hospital Annual Revenue per Doctor by Specialty Specialty Avg. Revenue Avg. Salary Neurosurgery $2,815,650 $571,000 Cardiology/Invasive $2,240,366 $475,000 Orthopedic Surgery $2,117,764 $481,000 General Surgery $2,112,492 $321,000 Internal Medicine $1,678,341 $186,000 Family Practice $1,622,832 $173,000 Hematology/Oncology $1,485,627 $335,000 Gastroenterology $1,450,540 $393,000 Urology $1,382,704 $401,000 OB/GYN $1,364,131 $266,000 Cardiology/Non-Invasive $1,319,658 $419,000 Psychiatry $1,290,104 $200,000 Pulmonology $1,204,919 $293,000 Neurology $907,317 $258,000 Pediatrics $856,154 $171,000 Ophthalmology $842,711 $282,000 Nephrology $696,888 $240,000

Study Demonstrates Link Between Physician Surgicenter Ownership and Volume of Surgeries

There has long been a concern — reflected in the federal Stark Law and its state law analogues — that a conflict of interest arises when a physician refers patients to an ambulatory surgery center he or she owns.  Prior research established that a doctor’s rate of referrals of patients for surgery and other hospital-based services is positively correlated with an ownership stake in a specialty hospital; now there is similarly concrete, empirical evidence of the deleterious effect of the conflict created when doctors own surgicenters.

In an article in the April issue of Health Affairs, John M. Hollingsworth and his co-authors present the results of a study comparing “the practice patterns of physician-owners of surgicenters, before and after they acquired ownership, to those of physician-nonowners over the same time period.”  Using data from Florida for the years 2003-2005, the authors identified all patients who underwent one of five ambulatory procedures — carpal tunnel release, cataract excision, colonoscopy, knee arthroscopy, and ear tube surgery.  The procedures were chosen because “substantial variation exists … in their use,” making them “susceptible to the influences of financial incentives associated with surgicenter ownership.”  After accounting for differences in the populations served by physician-owners and physician-nonowners, the authors found that “the mean annual caseloads for owners … were at least twofold greater than those for nonowners.”  Even more telling, using earlier data, from 1998-2000, the authors found that, even after accounting for the fact that some of the eventual owners had higher-volume practices before they invested in a surgicenter, for four of the five procedures studied, “acquisition of ownership status kicked owners’ already high volumes even higher.”

In an earlier post, I noted that a 2009 New Jersey law conditions physicians’ ability to refer patients to surgicenters on the following: (1) for patients they refer, they personally perform the surgery; (2) they be paid in proportion to their ownership interests, not the number of patients they refer; (3) they and their physician partners make all healthcare decisions, leaving non-physician partners without a say; and (4) they inform their patients in writing of their ownership interest at the time they make the referral.

The work done by Hollingsworth and his co-authors suggests that while the first and second conditions might eliminate certain especially troubling payment arrangements, a “relationship between surgicenter ownership and surgical volume” can persist even when physician-owners personally perform the surgeries.  Similarly, while the third condition would require that physicians make healthcare decisions, it would do nothing to ensure that those decisions are uninfluenced by conflicts of interest.  The fourth condition — which puts the burden on patients to suss out which referrals are medically necessary and which result from a physician-owner inappropriately lowering his or her threshold for intervention due to a financial conflict of interest — is also unlikely to reduce “physician-induced demand.”  There is no evidence that patients are able to perform such a sifting function.  To the contrary, existing evidence suggests that they are not.

Ultimately, as Hollingsworth and his co-authors suggest, the government may need to “intervene through physician reimbursement.”  “[P]artial capitation or global payment schemes, or both, implemented in the context of proposed delivery system reforms (such as accountable care organizations) may be needed to discourage the over-use that fee-for-service payment rewards.”

Health Care Reform Law: Help for Hospitals?

Last week, Samuel Maizel, a bankruptcy lawyer specializing in representing health care businesses in distress, gave a great talk here at Seton Hall Law on “Hospitals in Crisis: Debt Restructuring Options & Issues for Financial Survival.”  Mr. Maizel painted a grim picture of the financial pressures facing hospitals and said he does not believe the situation is going to improve in the near term despite the overall economic recovery.

Near the end of his talk, Mr. Maizel told us that hospitals across the country are combing through the health reform legislation looking for anything that could improve their bottom lines.  This piqued my interest and made me wonder what they will find.  Using the House Committees’ summary of the provisions in the bill relating to delivery system reform as a guide, I came up with the following.

Sec. 3001.  Rewarding High-Quality and Efficient Care.

This provision, which applies to patients discharged on or after October 1, 2012, establishes “value-based purchasing,” meaning that the government will make “value-based incentive payments” to hospitals that provide care to Medicare patients that meets or exceeds certain performance standards to be established by the Secretary of Health and Human Services.  Initially the standards must relate to at least the following five conditions: heart attack, heart failure, pneumonia, surgery, and healthcare-associated infections.  Eventually (by fiscal year 2014) the standards are to incorporate “efficiency measures,” that is Medicare spending per beneficiary must be a factor.

Sec. 3022.  Medicare Shared Savings Program.

This provision, which Jordan Cohen analyzed at length here, directs the Secretary of Health and Human Services to establish a program by January 1, 2012 through which accountable care organizations that save Medicare money would be entitled to a cut of the savings they achieve.  Hospitals are eligible to participate in the program through a partnership or joint venture arrangement with physicians or as employers of physicians.

Sec. 3023.  National Pilot Program on Payment Bundling.

Under this 5-year long pilot program, which the Secretary must establish by January 1, 2013, the government will make one bundled payment “for integrated care during an episode of care provided to an applicable beneficiary around a hospitalization in order to improve the coordination, quality, and efficiency of health care services.”  Episodes of care begin 3 days prior to hospitalization and end 30 days after discharge.  Hospitals can apply to participate in the program (and/or submit a bid) as part of “[a]n entity comprised of … a hospital, a physician group, a skilled nursing facility, and a home health agency.”

While the above three provisions hold out hope of improvement to hospitals’ bottom lines, the House Committees’ summary also highlights two provisions which establish negative incentives.  Section 3008 on Hospital Acquired Conditions provides that, beginning in fiscal year 2015, the government will cut by 1% the payments it makes to hospitals in the top quartile for hospital acquired conditions.  Similarly, Section 3025, the Hospital Readmissions Reduction Program, provides that, after October 1, 2012, the government will begin reducing the amount it pays to hospitals with “excess readmissions.”

A Guide to Accountable Care Organizations, and Their Role in the Senate’s Health Reform Bill

[Ed. Note, April 24, 2011: This article by Jordan Cohen was written in March, 2010. It has been cited and linked by everyone from the New York Times to the Texas Tribune and all points in between-- for good reason, it is both thorough and informative. But since the Accountable Care Organization (ACO) model  has continued to gain coverage and currency, we believe it worthwhile to point out recent HRW pieces that will help you get caught up on ACO implementation and impact after you finish the overview of ACOs discussed below. These include:

• It’s Not the ‘Shared Savings’, Stupid: Why ACOs Under the Proposed Rule Will Change Medicine As We Know It - 4/17/2011
• The Normative Meets the Practical: Who Should Can Lead ACOs - 4/12/2011
• ACOs: OIG Guidance, CMS regulations, and Interpretive Tasks - 4/5/2011
• Summary of CMS Proposed Rule on Accountable Care Organizations - 4/4/2011
• Accountable Care Organizations and Antitrust: A New PSA Test - 4/1/2011]

The accountable care organization has been a model for health care reform, yet its modest success has been limited to a handful of health care systems across the country. However, the accountable care organization model has recently taken on far greater significance since being introduced as one of Medicare’s pilot programs in the Senate’s health reform bill.

The phrase is attributed to Dr. Elliot Fisher of Dartmouth Medical School.  Dr. Fisher has led the Dartmouth Atlas Project — a project that has, for the last 30 years, painstakingly documented the variation in care across the United States. (Click here for an interactive map of some of the Dartmouth Atlas results). The Dartmouth Atlas has focused on both the quality of health care as well as its cost. More importantly, they have reported on the relationship between the two, and their findings are nothing short of an indictment of our current paradigm.

Specifically, their findings illustrate that there exists wide variations in the cost of care across the country, and profoundly, that the regions that spend more per patient do not necessarily obtain better outcomes. So what to do? Dr. Fisher believes he has found at least part of the answer: the Accountable Care Organization, known as an “ACO”.

What is an ACO, and How Does it Differ from Other Payment Reforms?

In his paper “Creating Accountable Care Organizations: The Extended Hospital Medical Staff,” Dr. Fisher acknowledges that the term ACO “grew out of an exchange between he and Dr. Glenn Hackbarth at a MedPAC meeting in November of 2006″. (Fisher, 2006 n. 7). Dr. Fisher’s purpose in writing the aforementioned paper was to help identify the proper “locus for shared accountability” for a patient’s health care. HMO’s and other health insurers are obvious candidates, but as Dr. Fisher notes, HMOs only comprise a small percentage of the current market, and health plans in general have focused on negotiating favorable prices within relatively open networks of providers. (Fisher, 2006, p. 45).  The “medical home” (also referred to as a Patient Centered Medical Home or PCMH) is another candidate, but is taken out of the running by Dr. Fisher because of the untested nature of medical homes, and their requirement of new payment mechanisms. (Id.).

Dr. Fisher notes that a better option already exists: “virtual” organizations consisting of the various physicians that are associated with local acute care hospitals. As Dr. Fisher notes, these physicians are either directly affiliated with such hospitals through their inpatient work, or through the care patterns of the patients they serve.  Dr. Fisher refers to these multi-speciality group practices that are bunched around local hospitals as an “extended hospital medical staff.” He argues that improving quality and lowering cost should be realized by fostering greater accountability on the part of this “extended medical staff.”

In a recent Urban Institute paper on ACOs by Kelly Devers and Robert Berenson (pdf summary here, full pdf here), the authors point to three essential characteristics of ACOs:

1. The ability to provide, and manage with patients, the continuum of care across different institutional settings, including at least ambulatory and inpatient hospital care and possibly post acute care;
2. The capability of prospectively planning budgets and resource needs; and
3. Sufficient size to support comprehensive, valid, and reliable performance measurement. (Berenson, p. 2.).

In exchange for investing in this reformed health care provider structure, the ACO members will  share in the savings that results from their cooperation and coordination. Thus, ACOs can–theoretically–act as a reform tool by incentivizing more efficient and effective care. This would help to combat the current perverse incentives of overutilization and overbuilding of health care facilities and technology.

In 2007, Dartmouth’s Institute for Health Policy and Clinical Practice headed by Dr. Fisher and Dr. James Weinstein, teamed up with the Brookings Institution’s Mark McClellan to create The Brookings-Dartmouth ACO Learning Network. The ACO Learning Network will serve as a support tool for providers looking to transition to the ACO framework. In the “Overview” section of their site (available as a pdf here), the Brookings-Dartmouth team provide a useful chart comparing the ACO model to other payment reform models such as “bundled payments,” “medical homes” and capitation. Click the image below to enlarge.

Various Extant Structures Utilized

Since Dr. Fisher’s introduction of the ACO concept, the idea has continued to be refined. In their 2007 paper “Accountable Care Systems For Comprehensive Health,” Dr. Stephen Shortell and Dr. Lawrence Casalino envision a broad range of ACOs in addition to the “extended medical staff” originally described by Dr. Fisher. Drs. Shortell and Casalino identify extant organizational structures that could be leveraged to create ACOs, including the Multi-speciality Group Practice (MSGP), the Hospital Medical Staff Organization (HMSO), the Physician-Hospital Organization (PHO), the Interdependent Physician Organization (IPO), and the Health Plan Provider Organization or Network (HPPO/HPPN). (Shortell et al., 2007, p. 10). Below is a table from their paper that organizes the different ACO models while comparing their capabilities. Click the image below to Enlarge.

ACOs In Practice

Building on the Physician Group Practice (PGP) demonstration project that rewarded the provision of quality care with a share of the savings, the Brookings-Dartmouth group propose a “voluntary and incremental” ACO program. (Fisher et al., 2009, p. 2).  The ACO would have to be a legal organization that can receive shared savings, and would have to incorporate primary care physicians who solely practice under the ACO. (Id.). Furthermore, the Brookings-Dartmouth group believes there would have to be at least 5,000 beneficiaries in the ACO for it to be viable. The ACO would provide CMS with a list of their providers willing to participate in the ACO. As discussed above, the beneficiaries would be determined by, among other things, the patterns of patient referrals in the region. However, beneficiaries would not be “locked in” to a given provider. (Fisher et al., 2009, p. 4). The ACO would receive savings if their risk-adjusted, per beneficiary spending levels were below their benchmark. Id.

An Ultra-Simplified Example

A hypothetical independent practice association (IPA) teams up with a community hospital to create an ACO. Medicare determines a benchmark, that is, what it will cost to treat the average beneficiary in that geographic area per year–let’s say $10,000. The physicians submit their traditional claims to Medicare under the RBRVS system while the hospital submits its typical DRG-base claim. Thus, the traditional fee-for-service system remains in place. At the end of the year, Medicare determines if the ACO has provided care for less than $10,000. If they have, the ACO is entitled to share in the cost savings, and the savings are divided among the providers and hospital. Though simple in theory, ACOs become more difficult when attempting to construct payment models that will distribute the savings of the ACO to the individual providers. Shortell provides another helpful chart that lays out some of the options; Click on the image to enlarge.

Criticism of the ACO Model

The strongest criticism that I am aware of is from Dr. Jeff Goldsmith PhD, president of Public Health Services at the University of Virginia. In his Health Affairs article entitled “The Accountable Care Organization: Not Ready for Prime Time,” Dr. Goldsmith recalls previous attempts to at implementing payment reform models based on shared risk:

The problem with this movie is that we’ve actually seen it before, and it was a colossal and expensive failure. During the 1990s, many hospitals and physicians believed that the Clinton health reforms would force them into capitated contracts with health plans. . . . Risk-bearing physician/hospital organizations and hospital-sponsored preferred provider organizations (PPOs) sprang up all over the country. . . . Some of these hospital/physician efforts actually succeeded and survive today. . . . However, these were outliers in an expensive failure.  Employers and patients preferred open panels managed by health insurers to closed panels managed by providers. Billions of dollars were lost.. . . Many of the practice acquisitions were reversed, as hospital systems sought to rein in their expenses and adjust to an open-panel world dominated by point-of-service style health plans

However, the 1990s left behind an expensive legacy:  highly concentrated local provider markets….There were numerous reasons for the 1990s collapse of at-risk hospital/physician partnerships, besides the failure to find willing buyers of their services. These efforts lacked infrastructure, experienced management, as well as reliable and timely cost information to support cost management. They assumed global risk but paid for care on a fee basis, just as Fisher and colleagues propose.  But these hospital-sponsored organizations could neither redistribute income nor exclude their high-cost providers (who inconveniently generate most hospital profits).

Some things have clearly changed in the ensuing decade. . . . A rapidly increasing percentage of physicians, particularly primary care physicians, are now hospital employees.  A larger percentage of the physician community receives hospital subsidies for call coverage. Many of these subsidies are, in fact, extorted from the hospital by specialists in scarce supply, destined to become scarcer.  An entire generation of 80-hour-a-week baby-boomer physicians are retiring and being replaced by younger physicians who want to work 30 hours a week.  You are not going to see a lot of these younger physicians in utilization review committee meetings after hours; they are going to be at their kids’ soccer practices.

What hasn’t changed is the fragmentation of care, the huge disparities in income and political power inside physician communities, and also the level of suspicion that physicians have of their now much more powerful local hospitals.  There is also, sadly, a thundering absence of collegiality – in my view, the central precondition of assuming risk and managing care. This absence is palpable in suburbs and even more pronounced in many “lifestyle dominated” resort communities in the sunbelt.. . .They are “collections” of physicians, not communities.

The hospitals in these areas appear formidable:  they have beautiful campuses,  prestigious boards, and deep financial reserves. . . . But these hospitals have been picked clean of vital outpatient services by their medical “communities.”

….Entire disciplines have disappeared from hospitals: ophthalmology, cosmetic surgery, gastroenterology, urology. Even community-based internists and family practitioners have stopped coming to the hospital; their patients are cared for by hospitalists who work full time inside the hospital.

The result of our previous attempts at ACO-like integrated care, Dr. Goldsmith points out, is that…

. . . .while the hospital has become more involved in subsidizing physician practice, physician communities have drawn away from the hospital and function increasingly independently on a day-to-day basis. Wennberg’s own data show that something like 40% of physicians no longer have any Medicare hospital-related fee income. So squashing hospitals and physicians back together into economic interdependence in a joint hospital/physician economic pool makes no real-world sense.

Dr. Goldsmith goes on to note that there have been some successful ACOs, but that they haven’t been “virtual” in the sense that Dr. Fisher points out, rather, they are

. . . real organizations with P+Ls, medical directors, and management infrastructure. Prominent examples in my home region include Carilion Health System in Roanoke and the Bon Secours Health System in Richmond. Voluntary ACO arrangements, with Medicare and with private insurers, may find enthusiastic partnerships with many of these hospital-sponsored physician groups. . . .

The Senate Bill

In defense of the Brookings-Dartmouth model, the group has gone on record in favor of voluntary ACOs. To Dr. Goldsmith’s relief, the Senate’s health reform plan incorporates ACOs on a voluntary pilot program basis. You can read their rebuttal to Dr. Goldsmith here.  Section 3022 of the Senate bill — which amends Title XVIII of the Social Security Act (42 U.S.C. 1395) — introduces ACOs under the name “Medicare Shared Savings Program. (View a pdf of the extracted ACO part of Senate bill here).

The Senate’s plan is remarkably similar to the Brookings-Dartmouth model. Under the Senate’s plan, ACOs will be eligible to receive a percentage of the cost savings that they have realized under the traditional fee-for-service Medicare system. The requirements are set forth in section (B)(2). Furthermore, the ACO shall enter into a 3 year agreement with HHS whereby the ACO must agree to contain at least 5,000 Medicare beneficiaries, while being prevented from engaging in risk selection. The ACO must define processes to promote evidence-based medicine and patient engagement, report on quality and cost measures, and coordinate care, such as through the use of telehealth or other remote patient monitoring tools. The ACO must also demonstrate to HHS that it meets the yet-to-be defined criteria for “patient-centeredness”.

Whether ACOs will succeed is impossible to determine with certainty. The panopticon that would be ACO management looking over the shoulders of physicians may be enough to turn off many physicians. Nevertheless, as even Dr. Goldsmith acknowledges, some ACOs have thrived. Moreover, the voluntary ACOs in the Senate’s bill represent a measured approach towards reforming our system without a wholesale transformation. As Dr. Atul Gawande describes in a lesser-cited pre-”Cost Conundrum” article, the most sound approach is often “path-dependent,”  that is, it builds on what already exists. As Dr. Gawande notes:

. . .accepting the path-dependent nature of our health-care system—recognizing that we had better build on what we’ve got—doesn’t mean that we have to curtail our ambitions. The overarching goal of health-care reform is to establish a system that has three basic attributes. It should leave no one uncovered—medical debt must disappear as a cause of personal bankruptcy in America. It should no longer be an economic catastrophe for employers. And it should hold doctors, nurses, hospitals, drug and device companies, and insurers collectively responsible for making care better, safer, and less costly. . .

Whether the shared savings will entice physicians on a large scale is uncertain.  What is certain is that our current fragmented system incentivizes providers to offer neither cost-effective nor coordinated care. Though it is unlikely that physicians and hospitals will flock to ACOs from the start, the vision of ACOs conceived of by the Dartmouth-Group and described in the Senate bill may nevertheless prove itself a useful tool in a larger arsenal of approaches meant to salvage our unsustainable health care system. In other words, the Senate’s approach could provide a path-dependent solution toward the collective responsibility and better outcomes that Dr. Gawande mentions. And as described in the Senate bill, physicians and hospitals will not be offered a new path, but rather a resurfaced path that would retain fee-for-service, while providing a safer and smoother ride for the patient.

Financial Remuneration of Clinical Study Investigators

In November 2009, the Center for Health & Pharmaceutical Law & Policy, in its White Paper, Conflicts of Interest in Clinical Trial Recruitment & Enrollment: A Call for Increased Oversight, explored payments to investigators — and other potential motivators — to conduct research.  A study in this month’s IRB: Ethics & Human Research explores the impact payments may have on researchers to conduct and complete studies.  In Motivated by Money? The Impact of Financial Incentive for the Research Team on Study Recruitment, Sharon Unger and her colleagues examine the effect financial remuneration has on researchers in a neonatal intensive care unit (NICU).

Taking advantage of a “fortuitous set of circumstances” in which two separate clinical trials with nearly identical inclusion criteria were conducted simultaneously in an NICU in Canada, the authors looked at two issues: 1) whether financial remuneration impacted the rate at which the research team approached parents about research participation, and 2) whether financial remuneration impacted the rate at which parents provided consent to participate.

In the first study (Study A), a placebo-controlled trial involving a medication that was the standard of care for treatment of newborns nearing extubation to prevent apnea of prematurity, members of the research team were financially compensated for their time if they were successful in obtaining parental consent (parents were unaware of this arrangement).  In the second study (Study B), which involved two different forms of noninvasive respiratory support following extubation, there was no financial compensation of the research team.  Both studies had the same recruiting team.  Study A was federally funded, multicentered and high-profile, while Study B was a single-center, unfunded trial.

The payments in Study A were per capita, which, while creating a direct incentive to recruit individual enrollees, is usually not problematic as long as the payment is not excessive.  The Center recommends “that the benchmark for compensation for physician services for research should be comparable payment for time and services for treatment. This will compensate physicians fairly for their time and services, and will assure that there are no hidden bonuses or incentives for physicians to recruit patients into research or to refer them to research rather than treatment.”  As noted in the study, finder’s fees are increasingly considered “ethically problematic;” the Center recommends a wholesale bar on finder’s fees because they can create conflicts of interest that can incentivize investigators to recruit and retain individuals who do not meet the study’s inclusion and exclusion criteria.

As the authors noted, and as acknowledged in the Center’s White Paper, potential enrollees are increasingly vulnerable as increasing numbers of individuals seek to participate in research either as a primary means of access to treatment or as a form of income.  The results of this study indicate a much higher likelihood of approach when there was a prospect of financial remuneration.  These results are concerning, and were anticipated by the Center’s White Paper, which noted the potential for poor compliance with inclusion and exclusion criteria and pressure to enter or remain in a clinical trial.

However, surprisingly, the authors found that, despite the much higher likelihood of approach for Study A than Study B, parents were much more likely to actually agree to enroll their newborn in Study B — for which there was no financial remuneration of the research team.  The authors explored various explanations for this result, including that the research team was overly cautious about giving the appearance that their approach for consent was motivated by financial compensation, or that parents chose to withhold consent  due to the research team’s  increased pressure.

The authors do acknowledge other potential factors — beyond financial remuneration –  that could have affected the study’s results.  For example, parents’ hesitancy to enroll their newborn in a placebo-controlled drug trial could explain the discrepancy between enrollment in the studies.  Likewise, the authors consider that parents may not have been able to differentiate between the two modes of support being investigated in Study B.  In addition, the recruiting team, when presented with the results of the study, did not recall feeling influenced by the financial arrangement of Study A, but did “recall being highly motivated to ensure the success of Study A as it was part of a high-profile, multicentered trial.”

The authors concluded by noting concerns that “there may be a point at which the amount of the financial remuneration or the manner in which it is assigned could negatively impact the ethical conduct of the researcher,” but cautions that these concerns should be balanced with the value of conducting research in patients’ best interests.  This balancing act is considerably important.  As the Center notes,

Research is critical to the advancement of medical treatment and health. It must be structured to produce high quality data that facilitates the assessment of safety and efficacy in the population for whom the treatment will be used. The good of the enterprise requires that the clinical trial system sufficiently balance the costs and benefits to physicians and prospec­tive trial participants to ensure the continued sufficient supply of researchers and subjects. The system must also be imbued with actual and perceived integrity — so that it produces scientifi­cally reliable results, participants are safe, and people trust the system sufficiently to be willing to participate.

Developments in the Law Governing Physician-Owned Ambulatory Surgery Centers in New Jersey

Over the past year, one or the other of my sons has had minor surgery in no less than three of New Jersey’s many ambulatory surgery centers (“ASCs”).  So, I noted with interest the Appellate Division’s recent decision in Garcia v. Health Net in which it affirmed a lower court holding that physicians who make referrals to ASCs in which they have an ownership interest violate the Codey Law, New Jersey’s version of the Stark Law.  The Appellate Division also affirmed the lower court’s decision that, despite the illegal referrals, the physician-owners in the case committed no fraud.  They (along with other physicians-owners across the state) acted in reliance on the New Jersey Board of Medical Examiners’ conclusion that the Codey Law’s exception to the self-referral ban for services provided at the referring physician’s medical office applied to ASCs.

In response to the lower court’s holding and heavy lobbying from physicians, the New Jersey State Legislature enacted revisions to the Codey Law which were signed into law in March 2009.  Physicians are now expressly permitted to refer patients to ASCs in which they have a financial interest if they meet a list of conditions, including that: (1) for patients they refer, they personally perform the surgery; (2) they be paid in proportion to their ownership interests, not the number of patients they refer; (3) they and their physician partners make all healthcare decisions, leaving non-physician partners without a say; and (4) they inform their patients in writing of their ownership interest at the time they make the referral.

On the other hand, the Legislature acted to all but put a stop to the establishment of new physician-owned ASCs, with the exception of those which are jointly owned by a general hospital.  Development of hospital– and medical school–owned centers may proceed apace.  Fox Rothschild’s Elizabeth Litten notes  that this “resonates more of long-forgotten certificate of need and health planning policy than it does of the original law’s concern with physician profit motives and overutilization.”  Clearly, the Legislature hopes that the new limits will be good for general hospitals’ financial health.  Professor Frank Pasquale has written here and elsewhere about the concern that ASCs and other niche facilities harm general hospitals by “cherry-picking” lucrative patients and “lemon dropping” those that are more costly.

What about patients?  Should we care whether ASCs are physician-owned or not?  Unsurprisingly, the American Medical Association believes that “physician ownership interests in health facilities, products or equipment can benefit patient care.” Peer-reviewed research suggests that physician-ownership makes no difference in health outcomes, however.  And, as Dean Kathleen Boozang states here, there is evidence that “physicians who hold an equity interest in an entity that provides ancillary health care services, such as a clinical laboratory or MRI, more frequently order those services for their patients, referring them, unsurprisingly, to the entity they own,” although there is no evidence that “this higher use equated to over-utilization.”  I would suggest, admittedly based on a small (and potentially unrepresentative) sample, that, if nothing else, physician-owned surgery centers have better amenities than those that are hospital-owned.  Some of these amenities could easily be done without (orchids in the lobby, souvenir teddy bear); others (popsicles and DVDs in the recovery room) are potentially more significant.

Further Calls for Increased Oversight on Medical Research & Physician Conflitcs of Interest

The Center for Health & Pharmaceutical Law & Policy has continued to focus on the implications of research funding in patients’ decisions to participate in clinical research, as well as the effects such funding can have on researcher behavior and research results.  In January 2009, the Center recommended that all financial relationships between industry and physicians be publicly disclosed by industry.  And just this month, the Center released its most recent White Paper, “Conflicts of Interest in Clinical Trial Recruitment & Enrollment: A Call for Increased Oversight.”

Similarly, in a November 17 letter to Francis Collins, 100 researchers, academics, and public policy analysts asked the NIH to “fund studies on medical ethics, conflicts of interest in medicine and research, and prescribing behavior” in order to determine the effects of industry-academic relationships on human health.  The letter implores the director of NIH to focus on “the research gap on the effect of conflicts of interest and commercial influence on medical decisionmaking” and to establish a mechanism for funding relevant research.

One of the primary concerns in the researchers’ letter is an issue also identified in a November OIG report, “How Grantees Manage Financial Conflicts of Interest in Research Funded by the National Institutes of Health,” which found that a majority of academic researchers’ conflicts of interest are unreported.   The report flags the potential for extensive conflicts between faculty members and their government-financed research.  In response, the US Senate Finance Committee recently sent letters to several universities requesting such information.  Just yesterday, Northwestern University’s Feinberg School of Medicine, reacting to national concern about physicians’ and researchers’ financial conflicts of interest, began posting external professional and industry relationships for approximately 2000 faculty members — including service on boards of directors, consulting and related activities, ownership or investment interests, royalties and inventor shares, and additional activities such as lectures and participation in scientific advisory boards and professional societies.

Further research is obviously necessary to determine how financial relationships influence — as the authors of the letter to NIH call it — “the beliefs and behaviors of researchers and clinicians, and the effects of industry-academic relationships on the generation and dissemination of medical knowledge.”  In the meantime, increased oversight of physician-industry relationships by the federal government to evaluate and oversee investigator or institutional conflicts of interest, both for research within and without academic medical centers, is necessary.

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