Health Reform Musings : Health Care Lawyer & Attorney : Epstein Becker Green Law Firm : Insurance & Costs : Health Reform Musings Blog

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Perhaps in recognition of its benefits to areas affected by shortfalls in specialists and primary care physicians or the need for remote monitoring, telemedicine received significant funding in the ARRA. For instance, the Rural Utilities Service was allocated $2.5 billion to fund “shovel-ready” distance learning, telemedicine, and broadband program; the Indian Health Services received $85 million to fund telemedicine; and a portion of the $2 billion allocated to the Office of the National Coordinator is to be used to support the “infrastructure and tools for the promotion of telemedicine.” However, in contrast to the ARRA, the current reform proposals publicly available are missing language facilitating telemedicine which otherwise could be a key component to one of the goals of health reform, bending the cost curve. 

The only attention telemedicine receives in the House Tri-Committee Bill – the America’s Affordable Health Choices Act of 2009 – is in the creation of the Telehealth Advisory Committee. This Committee will advise and make recommendations to the HHS Secretary regarding policies for payment of telemedicine services. However, the Senate HELP’s Bill – the Affordable Choices Act – does not even mention telemedicine. 

Should something be done regarding this missing health reform element? A group of experts have eloquently made the argument that the present infatuation with electronic health records (“EHRs”) should be expanded to focus on improving the quality of care and equities of care, while decreasing the cost and fragmentation of such care by encouraging the development of telemedicine (which includes, as a component, EHRs). 

Also, Intel CEO Paul Otellini provides a sensible guide for achieving comprehensive health reform – and two of his recommendations are reliant on telemedicine. First, he suggests paying providers for outcomes, not just face-to-face visits. If payment was outcome based – even if the correct outcome was achieved in part by utilizing email, the financial interests of the provider would be more closely aligned with the desired goal of the patient, i.e., better health. The other recommendation that involves telemedicine is the development of a nationally-licensed cadre of “virtual care clinicians” to provide care to patients in their home. In the case of an elderly individual with a chronic disease, this could be the difference between staying in their home and moving into a skilled nursing facility and, obviously, the cost between the two options is significant. 

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As the “Three Tenors” (Chairmen Waxman, Miller and Rangel) struggle to finance the access enhancements that are central to the President’s health reform aspirations, the need for meaningful payment reform continues to challenge. This week House Speaker Nancy Pelosi urged the Chairmen to sharpen their pencils in this regard. Moreover, in a letter to the Speaker and Majority Leader Steny Hoyer, the fiscally-conservative “Blue Dog” coalition of House Democrats has now said that the current drafts fail to include sufficient structural reforms likely to succeed in lowering costs and incenting “value” (in purchasing).

These House members would like to see strenuous efforts to capture the savings promised by the literature pointing out the significant disparities in regional health care practice/resource consumption patterns. To that end, the “Blue Dogs” and many analysts are placing a great deal of hope in the ability of payment incentives to trigger the ordering of only appropriate (cost effective) diagnostic tests and pharmaceuticals and the implementation of “evidence based” care paths. 

Intuitively there is great merit to the theme. However, testing of the concepts has been limited to date. Therefore, there is yet little science from which to judge the necessary “octane” of the incentives. Moreover, the amount of change to be engendered by Medicare payment reform is unknown—hence some of the enthusiasm for a public plan that might adopt payment methodologies that echo those of a reformed Medicare fee-for-service system thus putting more strength behind the effort the “bend the curve” of growth in health care expenditures. Finally, policy makers do not how much reinforcing discernment should or could be created among beneficiaries particularly during the statistically costly “last year of life.”

While some provider systems appropriately believe they are “ready, willing and able” to operate under new payment methodologies, most are not. Moreover, even provider systems that have a high degree of clinical integration, IT infrastructure and physician leadership, face significant challenges in operating during a transition stage where some payor customers will strongly reward utilization efficiencies and others will retain payment methodologies that continue to implicitly reward providing services without regard to clinical appropriateness. (These providers are likely to capture the empathy of lawyers like me who also are increasingly operated under mixed payment methodologies.)

Health care investors face concomitant uncertainties. How will the companies they are backing fare in an era where providers are incentivized to order fewer tests, labs and scans? Will the target’s product line continue to do well among providers who are scrutinizing costs to earn incentive payments? Similarly, are the company’s products on the short list for comparative effectiveness review and, if so, what are the likely results and how will such review affect provider system choices?  Therefore, as we watch the Congress adopt payment policy reform, we open up interesting new forecasting questions with regard to the nature of such reform, its pace and its impacts on market actors.

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For the last week or so, the health reform public policy debate has been keyed to the Senate HELP Committee’s draft and thus dominated by whether or not the “Exchange” to be employed in access reform should include a “public plan” and, if so, whether such a plan should have the power to access provider payment rates tied to Medicare and whether Medicare participating providers would be required to contract with it. With this week’s release of the Senate Finance Committee’s draft, it will be interesting to see whether payment reform can similarly capture the attention of the press. Frankly, we have low expectations in this regard insofar as the consequences that the prevalence of fee for service payment methodologies have on health care output are hard to grasp relative to the easier concept of “universal coverage”. Perhaps it is ultimately less important that payment reform capture the air waves than the degree to which payment reform is incorporated in whatever pieces of health reform make it through this session of Congress.

There are, of course, a few helpful signs. The New York Times gave front page treatment to the President’s public embrace of the payment reform issue and his distribution of the Gawande article on health care incentives in the New Yorker. The New America foundation released a report on delivery system change which White House Health leader Nancy Anne DeParle also applauded. These may, however, faint notes against a cacophony of sound around the easier to enunciate (though themselves ill understood) concepts around public plan and access.

Gawande, Len Nichols, Peter Orszag and others are of course right that changing the predominant fee for service incentives that power the health care delivery system is vital to improving both the cost and quality of American health care. Using “medical home”, “accountable care organization”, and episode payments will begin to inject new incentives into the planning and care paths chosen by providers. We expect that Senator Baucus’ Committee draft will begin to increase the content of these payment methodologies into the fuel that powers our enormous health care engine. They are the crucial elements to the much lauded quest to “bend the health care cost curve”. Therefore, even if they do not capture the attention of CNN and MSNBC, the strength of these reform elements in the Senate Finance Committee’s bill, and their survival, bears watching by all who invest in as well as receive health care.

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Earlier this week Senator Rockefeller introduced a bill (S.1110) that would limit Congress’ involvement in Medicare payment policy. The proposed Medicare Payment and Access Commission (MedPAC) would replace the current MedPAC in order to provide the federal “infrastructure for delivery system reform”. If the bill was passed as part of health reform legislation, a 3/5^th vote of the Members of the House of Representatives and the Senate would be needed to overrule the decisions of the new MedPAC. 

The new Commission would resemble the Federal Reserve’s Board of Governors in terms of the appointment process and policy making responsibilities, however, the actual operations of the Medicare program would continue to be managed by the Centers for Medicare and Medicaid Services (CMS). The new MedPAC’s 11 voting members would be full-time employees who are appointed by the President with the advice and consent of the Senate. The two non-voting members include the Secretary of Health and Human Services (HHS) and the CMS Administrator. 

The Commission would have ongoing responsibility for determining and evaluating payment rates as well as designing new payment systems. In addition, it would have sole authority to design and evaluate Medicare demonstration projects. To do their work, the Commission and its staff would have direct electronic access to Medicare claims data as well as access to reports from the Agency for Healthcare Research and Quality (AHRQ) and the National Institutes of Health (NIH), two agencies which received most of the recently approved $1.1 billion in federal funding for comparative effectiveness research. In addition, the work of the Commission would be informed by three advisory councils, including a Council of Health and Economic Advisors, a Consumer Advisory Council and a Federal Health Advisory Council. The HHS Secretary is charged with establishing ten regions from which the Comptroller General of the United States will choose a member to serve on each of two councils – the Consumer Advisory Council and the Federal Health Advisory Council. 

The Senate Finance Committee has discussed a series of wide ranging proposals to reform the Medicare payment system in order to “bend the curve” by reducing variations in medical practice which cannot be supported by medical evidence. The options include ideas such as creating new accountable care organizations (ACOs) and medical homes as well as the development of a new category of services designed to transition hospital patients to the appropriate post-acute provider. The hope is that better discharge planning and follow through will reduce the high rate (18%) of re-admissions within 30 days of discharge. 

The new MedPAC appears to address concerns that Senator Baucus raised at the confirmation hearing for William Corr, the deputy secretary of HHS. The Senator speculated whether CMS, despite good intentions, was up to the task of fundamental reforms for the Medicare program noting that “Some have suggested to me another outfit alongside (CMS) to do the design work… and that there are some very, very thoughtful people in health care who really, seriously, wonder if (CMS) is up to the job”. Rockefeller’s bill, which was introduced by Senate Majority Leader Harry Reid, indicates some support for the idea of focusing CMS’ role on operations while creating a new infrastructure to establish payment polices designed to reform how healthcare is delivered. 

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Although there are some big issues that remain unresolved, such as the "public plan" component, it appears that we will see reform legislation pass in 2009. Drafts of the legislation are being prepared now by various members of Congress and their staffs.

The focus on medical homes, physician hospital organizations and accountable care organizations is very real, as is the focus on payment reform, including bundled payments and other forms of capitation-like reimbursement. A key element of the debate relates to "how integrated" a provider organization will need to be to qualify for bundled payments. Can it be virtual? Can it be physician only or must a hospital be involved? What should be the role of private payors?

We wrestled with many of these questions in the 1990s, but there are new aspects now, greater data and organizational capabilities in both the purchaser and provider sectors and much more urgency to move forward with payment and delivery system reform to accompany legislation aimed at increasing access. 

One fear is that the access component will get done without payment and delivery system reform, causing costs to skyrocket and leading, potentially, to future cost controls. It is important that health care providers add their voices, individually and collectively, to this national debate. The making of major legislation is always messy, but there is real momentum right now. Whatever passes will inevitably be incomplete, and there will be unintended consequences.

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Written by Paul Campbell and Maura Farrell

The Washington Post has reported that Congressional Democrats have reached a tentative agreement on President Obama’s $3.5 trillion budget, including reconciliation instructions which would allow health reform legislation to pass the Senate with only 51 votes. The agreement would charge each of the Committees with jurisdiction over authorization of healthcare legislation to find $1 billion in savings. If the agreement moves forward and is passed by the full House and the Senate (as expected), these “instructions” would allow for the Senate to bypass normal Senate parliamentary rules requiring 60 votes for approval. The tentative conference agreement would also extend for two years the Medicare physician payment “fix”. The extension reduces a budget savings needed for a complete repeal of the current payment methodology, which applies a sustainable growth rate (SGR) limit.  

Reconciliation represents a win for House Speaker Pelosi, who shepherded the inclusion of the reconciliation provision in the House Budget. Pelosi’s hope was that reconciliation be included in the conference committee agreement, despite the fact that the Senate Budget Committee did not include the measure. The win also increases the House’s leverage in negotiations of health reform legislation. This process will be unlike the House Leadership’s experience with negotiations on a compromise for the American Recovery and Reinvestment Act (ARRA), when Majority Leader Reid needed to get the help of three Republican Senators to ensure passage of the stimulus bill in the Senate. 

Unlike the Senate, which will move two health reform bills concurrently, the House has agreed to develop a unified plan. Notably, both Speaker Pelosi and Ways and Means Chairman Charles Rangel are strong supporters of a public plan. 

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Barack Obama signed an executive order on April 8, 2009 to formally lay infrastructure in the executive branch to facilitate health care reform activities. The executive order officially creates the White House Office of Reform (the “Health Reform Office”) and lays out its principle functions, including coordination across executive departments and agencies, outreach activities with state and local policymakers, and working with Congress for the purpose of enacting and implementing health care reform. As we reported on March 6, 2009, Nancy Ann DeParle was selected to be the Director of the Health Reform Office. The order grants DeParle the discretion to work with “established or ad hoc” committees, task forces, or interagency groups. It remains to be seen how DeParle will use this authority to promote the goal of the Obama Administration to have an open, inclusive and transparent process for health care reform.

The order also creates the HHS Office of Reform “to coordinate closely” with the White House office. InsideHealthPolicy reports that Jeanne Lambrew is the lead candidate to head the HHS office. Lambrew originally was tapped as the deputy director of the White House office when Tom Daschle was nominated for HHS Secretary and selected for the Health Reform Office in December 11, 2008. Prior to joining the Obama Administration, Lambrew was an associate professor of public affairs at the Lyndon B. Johnson School of Public Affairs at the University of Texas at Austin where she specialized in health care policy.

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The need to change the rate at which health care costs increase (“Bending the Curve”) is axiomatic in the health reform debate. According to the President, Orszag at OMB, Hackbarth at MedPAC, and others, primary tools for this change are payment system changes. While the testimony that has been given in this regard is useful directionally,  the organizations and systems thus far identified are largely at a gestational stage and we do not know whether they are far reaching enough to “move the needle” much less “bend the curve”.

Seemingly the most fully developed of these notions is the proposal to bundle payment for the majority of facility services occurring within 30 days of a discharge into the DRG. The need for such a proposal was recently revalidated in a New Journal of Medicine article identifying the frequency and high cost of hospital readmissions. Moreover, the CBO and the President’s budget have at least put savings estimates around this program. These estimates are substantial but do not, by themselves, bend the curve materially.

Other emerging notions of delivery system innovation to bend the curve include “bonus eligible organizations” and “accountable health organizations”. These innovations return us to familiar, but largely abandoned in practice, managed care territory -- incentivization of physicians outside a group practice setting. Of course the success of such programs will depend on the strength of the incentive and that strength (as we learned in IPA model managed care) will be affected by the size of bonus or withhold, the timing of its payment, whether the data is believable and whether the opportunity to collect it is perceived by the physician to be real. Also, the real savings these organizations might achieve will be in lowering the “preference sensitive” care that is subject to wide geographic variations.

Full fledged capitation had potentially the strongest (most effective?) incentives. However, “capitation” carries a lot of media and political baggage so the term is being studiously avoided.  That political reality is understandable.  However, before we count our budgetary savings, we need to be sure that the alternative methods of payment sufficiently change physician incentives before we can realistically expect to “bend the curve” and can fairly claim the budgetary savings such a change would bring.

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