Friday, July 29, 2016

Smoking and the ACA

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The Affordable Care Act (ACA) has created a wonderful laboratory for studying the impact of changes in healthcare policy. One of the more interesting papers on the topic appears in the latest Health Affairs (Evidence suggests that the ACA’s tobacco surcharges reduce insurance take-up and did not increase smoking cessation). (You’ll need a subscription to read the full article.)

Health plans can’t charge higher prices to people who are sicker, but they can tack on surcharges of up to 50 percent for tobacco users. States can limit or ban the surcharges, and some do. Not surprisingly, people subjected to high surcharges are a lot less likely to purchase insurance, especially because the way the surcharges work has a very significant impact on their out of pocket costs.

Beyond the headlines, there were several additional findings:

  • When smokers faced no, moderate or high surcharges rates of smoking cessation were unaffected
  • Low surcharges significantly reduced the degree of smoking cessation
  • Young smokers were much more likely than older smokers to be deterred from health insurance coverage by the imposition of surcharges
  • Surcharges were typically higher than the extra medical costs incurred by smokers

These findings have some interesting implications:

  • If the goal of the surcharge policy is to get people to quit smoking, then it doesn’t seem to be working very well. The least effective approach of all is to impose low surcharges. The authors speculate that the low surcharge smokers may feel they are being fairly charged and therefore don’t have an incentive to change. This is like the parents who are more likely to pick up their kids late from day care when a small fine is imposed
  • Surcharges knock younger people out of coverage disproportionately, which may destabilize the risk pools since younger people are generally more profitable than older people
  • The rising penalties for not purchasing insurance may not have much effect on smokers who face surcharges. Many low or moderate income smokers will be exempt from the penalties because the premiums –with surcharges– are deemed unaffordable
  • Patients with mental health problems are being discriminated against because they have much higher smoking rates than the general population. (I have been making similar arguments since 2007)

The authors mention in passing that high surcharges may encourage people to quit in order to obtain affordable coverage. They also note that the smoking surcharge isn’t always apparent on the exchanges, so smokers may not understand that they are paying more or how much.

I’d like to see the law tweaked to make the financial consequences of smoking more apparent to smokers. Surcharges could be displayed more explicitly, and the bar for being exempt from the insurance coverage requirement could be raised. Exceptions could be made for those with a mental health diagnosis.

These changes won’t necessarily be easy to achieve. Congress so far shows no signs of being willing to improve the law –though that may change if the Democrats retake Congress. Another issue is that tobacco use is generally self-reported for exchange customers, so we don’t know how many people are classifying themselves as non-users when in fact they are not.

By healthcare business consultant David E. Williams, president of Health Business Group.



from Health Business Blog https://healthbusinessblog.com/2016/07/29/smoking-and-the-aca/
via A Health Business Blog

Friday, July 22, 2016

Health Wonk Review is up at Medicare Resources

The latest Health Wonk Review blog carnival is posted at Medicare Resources. There’s a Republican National Convention theme, so be prepared!



from Health Business Blog https://healthbusinessblog.com/2016/07/22/health-wonk-review-is-up-at-medicare-resources-4/
via A Health Business Blog

Wednesday, July 13, 2016

Drinking while grocery shopping. Is pot next?

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Where did my grocery cart disappear to?

Amazon.com seems to be unstoppable. It’s grabbed the lion’s share of the e-commerce market, turned other retailers into mere showrooms for shoppers who then purchase online, discarded list prices in favor of its own internal comparisons, and turned Prime Day into a new national shopping holiday. Little buttons around the house can be pressed to reorder staples, and voice commands to my Amazon Echo can summon goods to the home.

Supermarkets are now in Amazon’s sights. I’ve received come-ons lately for Amazon Fresh.

But instead of quaking in their boots, some supermarkets are taking a page from the casino playbook and offering inexpensive alcoholic beverages to customers. From the Wall Street Journal (Supermarkets Invite Shoppers to Drink While They Shop):

At nearly 350 Whole Foods locations nationwide, shoppers can carry open beverages out of the bar area and around the store as they shop around. Some stores have added cup holders to their shopping carts or placed racks around the store where shoppers can place empty stemless wine glasses. In some Texas locations, the $1 cans of beer rest in ice-filled buckets labeled “walkin’ around beer.” “When customers find out that they can sip and shop, a lot of times it’s a lightbulb moment,” Mr. Kopperud says.

Take that Jeff Bezos!

As just about everyone knows, alcohol lowers inhibitions and is more or less guaranteed to boost retail sales. Impulse purchase anyone?

But let’s fast forward this story just a bit. With the movement toward the legalization of marijuana for recreational purposes –which I oppose– it’s just a matter of time before these same stores start opening marijuana boutiques at their entrances, featuring a wide variety of tasty edibles. For Whole Foods they will likely be organic, gluten free and artisanal.

You can bet the munchies will contribute to a healthy boost to the average sale!

Come to think of it, these two ideas aren’t mutually exclusive. A walkin’ around beer and a marijuana edible sounds pretty darn attractive.

Ok, Amazon. What’s your reply?

Image courtesy of iosphere at FreeDigitalPhotos.net

By healthcare business consultant David E. Williams, president of Health Business Group.



from Health Business Blog https://healthbusinessblog.com/2016/07/13/drinking-while-grocery-shopping-is-pot-next/
via A Health Business Blog

Friday, July 8, 2016

Dialysis and its discontents

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For the good of the patient, of course!

If you want to understand what ails the US healthcare system, look no farther than the dialysis industry. A recent New York Times article (UnitedHealthcare Sues Dialysis Chain Over Billing) provides a pre-made case study.

In brief, a chain of dialysis clinics (American Renal Associates), pushed poor people out of government coverage and into private insurance with UnitedHealthcare so that the clinics could bill $4000 per treatment rather than $200. A patient advocacy group (American Kidney Fund), paid the patients’ insurance premiums using funds donated by American Renal. United is suing American Renal for overbilling.

So who are the good guys and who are the bad guys here?

From what I can see in the article (and there’s always more to the story) it looks like both American Renal and American Kidney are to blame. But to understand the motivation for their behavior, we have to look at the politics and economics of dialysis.

Dialysis is a life-saving treatment for people with impaired kidney function, but it’s expensive. Medicare is mainly a program for the elderly, but it also covers the disabled and people with end stage renal disease (i.e., dialysis patients) regardless of age. That entitlement was added way back in 1972 to make sure patients didn’t drop dead for lack of funds for dialysis. Medicare coverage kicks in over time, so people with commercial insurance use their plans first before shifting over to Medicare. Once on Medicare they are still responsible for a portion of their costs unless they are poor enough to qualify for Medicaid.

So officially the government pays for dialysis, but does it really do so in practice? In fact what happens is that government reimbursements from Medicare and Medicaid are so low that clinics would go out of business if they had to rely solely on those payments. The clinics make up for the losses by charging high –or even extortionate– rates to private insurers, hence the 20x difference in reimbursement cited in the article. As a result, the clinics make more than 100 percent of their profits on their few commercial patients. From a financial standpoint, the commercial patients are the only patients the clinics cares about.

Meanwhile, the clinic business is essentially a duopoly between Fresenius and DaVita, which is why commercial rates can be so high. Interestingly, the few remaining independent players like American Renal are sometimes even more aggressive than the big boys. (There is an interesting analogy here with Martin Shkreli, who got into trouble for taking big pharma pricing tactics to their logical extreme.) Interestingly if you look at the American Renal website you can see that their real customer is the nephrologist; patient-centric they are not.

What about the American Kidney Fund? It seems like a good guy for paying the insurance premiums for ESRD patients. But its funding overwhelmingly comes from the two big dialysis companies who get a fantastic return on investment, since insurance premiums are much much lower than the reimbursement the companies get back for dialysis treatments. The two big boys basically split the market, so they are certain to benefit from their own contributions. More ESRD patients with commercial insurance means a lot more profit. In fact, if you want to understand just how closely American Kidney is tied to the dialysis business, it’s instructive to learn that patients who get kidney transplants and hence no longer need dialysis are not eligible for American Kidney subsidies!

For a small player like American Renal it’s a different story. They can’t just donate to American Kidney and expect to get a benefit, since most of the value will flow to their big competitors. American Renal’s strategy appears to have been to target specific patients for insurance coverage who would then become American Renal patients. That’s an obvious no no. But hey, they probably figured their own intent wasn’t really any different from what their big competitors were doing and they thought they could get away with it.

Incidentally, analogues to American Kidney operate in other disease areas, particularly for diseases where there are just one or two expensive drugs available. The drug companies pay the premiums and more than recoup their investments via reimbursed drug sales.

So I say good for United for taking on American Renal and American Kidney. But I also note that they –and the other health plans– are still too scared of retaliation to go after the industry heavyweights.

Image courtesy of Sira Anamwong at FreeDigitalPhotos.net

By healthcare business consultant David E. Williams, president of Health Business Group.

 



from Health Business Blog https://healthbusinessblog.com/2016/07/08/dialysis-and-its-discontents/
via A Health Business Blog

Wednesday, July 6, 2016

Scaling up bundled payments: Interview with Loopback Analytics CEO Neil Smiley

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Neil Smiley, Loopback Analytics CEO and Founder

Neil Smiley is CEO and Founder of Loopback Analytics, which supplies tools to providers to manage bundled payments. I asked him to comment on the growth of bundled payments and the role of analytics.

Why are hospitals hesitant to adopt bundled payment options?  What strategies can long-term care providers take to encourage bundled payment adoption on a large scale?

In most cases, a hospital’s financial responsibility ends upon patient discharge.  Bundled payments significantly lengthen the care episode, making hospitals responsible for the costs of downstream care partners.  The shift to value-based reimbursement from our current environment of fee-for-service represents a sea-change for the industry.  Decades of business practices, clinical relationships, payment structures and core competencies are being reevaluated in light of this new payment model.  Such evaluation and reflection takes time, and we are starting to see leading organizations embrace this challenge as an opportunity to develop differentiating capabilities.

Long-term care providers can help accelerate this process through proactive engagement with their hospital colleagues.  Hospitals will need better data from their post-acute care partners to have confidence that they can consistently deliver efficient care and strong clinical outcomes.  The long-term care providers that can demonstrate these capabilities pave the way for hospitals to better understand, trust and rely on the broader care delivery pathway they must manage with bundled payments.

What are the main benefits patients will reap from bundled payments?  

Bundled payments have the potential to significantly improve patient outcomes through better care coordination across providers and care settings.

Under a fee-for-service payment model, there is little financial incentive to help ensure a patient makes a successful transition to skilled nursing after an acute care stay, or ensuring that patient successfully transitions home after leaving a skilled nursing facility.

Under bundled payments, there is now an aligned incentive with providers across care settings to ensure transitions are clinically successful and financially efficient.  Patients are likely to get more help in navigating multiple silos of care, when participating providers are financially responsible for the cost of poor outcomes.

What factors are holding back scalability of bundled payments options?

Broader scalability of bundled payment options will be paced by the availability of accurate and timely data from network participants and workable frameworks for sharing risks and rewards among bundled payment partners.

At the national level, CMS has relayed its intention to aggressively advance pay-for-value reimbursement models, with bundles being a prominent example.  Ready or not, the expectation is that bundles will quickly expand to include additional conditions and broader mandated participation.

At a health system level, first movers that have invested in the tools, competencies and partnerships needed to succeed in bundle configurations will be courting more bundle opportunities to take advantage of their lead in the market.

What is the role of analytics in bundled payment? Can you provide an example?

Advanced analytics are absolutely essential to success in bundled payments.

Bundled payments require that different providers across the care continuum come together to consistently deliver a clinically successful and financially efficient episode of care.  Without deep knowledge of potential partners’ strengths and weaknesses, a bundled payment manager stands a poor chance in creating a winning network.

CMS provides data to healthcare systems, ranging from high-level quality ratings to detailed, individual claims records.  With effective application of data analytics, these sources of information, combined with data from network partners can be used to create the most effective care delivery network possible.

How will analytics advance over the next 5 years? 10 years? How do you measure progress?

Looking towards the future, we expect a pronounced shift from retrospective, historical analytics to prospective, predictive analytics.  The former allows healthcare systems to accurately assess their current and historical states, and is an essential component for improving operations.  The latter allows healthcare systems to avoid costs and adverse clinical events before they even occur.  The availability of real-time health data will continue to grow with the proliferation of digital monitoring devices. Machine learning and predictive algorithms are already establishing themselves in matching patients with appropriate resources based on a diverse set of data markers.  We foresee significant expansion on this front in the coming years.

With so many analytics solutions vendors out there how do you distinguish yourself?

Loopback Analytics puts analytics into action.  Loopback has an integrated technology platform that allows our clients to move from investigatory analytics to data-driven interventions, through a platform  that provides a closed loop feedback system to ensure executed actions achieve the expected impact.

It is only through such an integrated solution that healthcare organizations can be assured that the problem is understood, the appropriate actions executed and impact quantified.

By healthcare business consultant David E. Williams, president of Health Business Group.



from Health Business Blog https://healthbusinessblog.com/2016/07/06/scaling-up-bundled-payments-interview-with-loopback-analytics-ceo-neil-smiley/
via A Health Business Blog

Friday, July 1, 2016

Hallmark and Tufts combine: I’m quoted

From the Boston Globe:

The parent company of Tufts Medical Center plans to expand its hospital network with the addition of Hallmark Health System, a merger that will help both sides compete in a market dominated by bigger institutions…

“Both of these systems were undersized to be able to compete effectively, so it’s a good matchup from that standpoint,” said David E. Williams, president of the Boston-based consultancy Health Business Group. “It’s unlikely that there will be any serious regulatory opposition to this. If anything, I think the regulators will look favorably on this. I think it will help create more competition with Partners than if these companies just stayed on their own.”

This seems like a pretty good outcome for the institutions involved and for the healthcare market in Eastern Massachusetts.

I’m just back from vacation and look forwarding to jumping back into the blog!

By healthcare business consultant David E. Williams, president of Health Business Group.



from Health Business Blog https://healthbusinessblog.com/2016/07/01/hallmark-and-tufts-combine-im-quoted/
via A Health Business Blog