Payers & Providers Midwest Edition – Issue of April 26, 2011

8/7/2019 Payers & Providers Midwest Edition Issue of April 26, 2011

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Facing a potential budget decit of $7.7billion in the next two years, the newlyelected Republican governor of Ohio hasproposed a sweeping reform of Medicaid that

he hopes will improve quality of care andpatient satisfaction while saving large sumsfor taxpayers.

In so doing Gov. John Kasich has alienatedsome interest groups but also attractedattention from national observers for anapproach characterized as morecomprehensive and nuanced than whatshappening in many statehouses.

Kasich created the Governors Ofce ofHealth Transformation as soon as he tookofce in January. It coordinates policy for all

six state agencies that have a hand inMedicaid.The Medicaid reforms are arrayed around

ve basic goals:* Improve care coordination.* Integrate behavioral and physical healthcare.* Rebalance long-term care.* Modernize reimbursement.* Balance the budget.

The last item is driving all the rest. Thebudget proposal that Kasich prepared inMarch shaves $1.4 billion off the trendline for

Medicaid, according to Eric Poklar,

transformation ofce spokesman. It does soby insisting that Ohios 2.2 million Medicaidbeneciaries have a medical home thatcoordinates their care, and by asking that

providers assure more value for each dollarspent. It also addresses hot spots of highmedical resource consumption, such asnursing home care and chronic disease care.

Thats where the money is: Just 4% ofMedicaid recipients cost 52% of Medicaidspending, the transformation ofce says.

I like what theyre doing in Ohio, saidTricia Brooks, a senior fellow at theGeorgetown University Center for Childrenand Families. It is refreshing to nd aconservative administration choosing not to

have ideology guide their action but reallytake a hard look at how the state is deliveringhealthcare. They are looking at where costand quality can be improved, together,without relying on cutting coverage as amechanism to get the budget under control.

This week the governors proposed budgetwill go through its rst hurdle in thelegislature, as the House takes up the bill onApril 28. Everything we have proposed willbe modied a little bit, Poklar said in atelephone interview.

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In Brief

UnitedHealth GroupShares Rebound AfterStrong Earnings Report

UnitedHealth Group Inc. sharesjumped on April 21 after the company

said net income rose to $1.35 billionin the rst quarter, up from $1.19billion a year ago. Earnings per sharehit $1.22 a share, compared with$1.03 a share in the rst quarter 2009.

UnitedHealths earnings beatestimates by 33 cents a share,propelling the stock 8% higher by thedays close, to $47.81. Revenuesreached $25.4 billion, up from $23.3billion last year.

The Minnetonka, Minn.-basedinsurer, the largest in the country bysales, is the rst of the major managed-care companies to report earnings thisseason. It raised its estimate for full-

year prots at the same time, from$3.70 per share to $4.05.

The solid results lifted the entiregroup of health insurance stocks.WellPoint Inc. rose 4.2%, Aetna Inc.went up 5.5%, and Cigna Corp.increased 3.2%, signaling optimismamong investors about their quarterlyresults. A full year after passage of theAffordable Care Act, the insurancecompanies appear to be adaptingbetter than many observers hadexpected.

WellPoint is scheduled to report onApril 27, Aetna on April 28, and Cignaon May 5.

U Wisconsin GroupWont Take Moneyfrom Pharmacos

A small policy group at the Universityof Wisconsin School of Medicine andPublic Health has decided to stopaccepting donations from thepharmaceutical industry, after criticismthat it advocated for narcoticpainkillers.

Continued on Page 3

NEWS

Ohio Medicaid (Continued from Page One)

Over the past two years, Medicaidexpenses in Ohio rose by 16%. The Kasichbudget would trim that by $1.4 billion in the

next two years, mainly by addressing theneeds of the chronically ill and changing theway nursing home care is provided.

The federal health reform law of 2010 willhave a dramatic impact on the states andtheir budgets, Poklar pointed out. TheAffordable Care Act will add 970,000 newMedicaid eligibles in Ohio and contribute$34 billion in costs from 2014, when it goesinto effect, to 2019, when the federalsubsidies to the states diminish.

In 2011 the state and federal governmentstogether will pay $18 billion to support

Medicaid in Ohio. By 2017 the state expectsto spend 30% more to cover half again asmany eligibles. State ofcials are worriedthat the requirements of the ACA are goingto completely bust the budget.

If federal health reform does stand, in2014 we need to be prepared for these newpeople coming in, Poklar said. While thegovernor doesnt like the reform law, thetransformation ofce has not been shyabout adopting the best-practices aspect ofthe law for Ohio. Those include the medicalhomes and incentives to achieve betteroutcomes.

Whats impressive about it is its a broadrange of interventions, not just one thing,said Alan Weil, executive director of theNational Academy for State Health Policy inWashington. Many states are trying to gureout how to rein in Medicaid spending.Ohios approach, focusing on how care isdelivered instead of on provider paymentrates, is distinctive, Weil said.

Kasich served in Congress as chair of theHouse Budget Committee in the late 1990s

when Newt Gingrich was speaker. He spent10 years in private industry, then ran forgovernor last year. He is regarded as one ofthe most aggressive reformers among thenew crop of Republican governors,according to Washington PostbloggerJennifer Rubin.

Well before he was elected, however,Kasich had convened a small group of policyexperts starting three years ago to begin toresearch overhauling the states Medicaidpolicies. After the election, that group,

chaired by Greg Moody, an experiencedMedicaid policy expert, went into high gear.They put the entire Medicaid package

together in 50 days.Part of the problem is specic to Ohio.

The state ranks 42nd in health outcomes forhealth systems overall, and it is 37th mostaffordable. That means 37 other states havean advantage over Ohio when it comes toworkforce productivity, Poklar said.

The transformation team is using the hotspots approach discussed by Atul GawandeM.D. in a New Yorkerarticle in January. Theessay documented how dogged physiciansare trying to control health spending onpeople with multiple illnesses who have no

medical home and rely on emergencydepartments and frequent hospitalizations focare.

Some of those people are expensivebecause the system is not well set up to dealwith them, Poklar said. You end up withbad outcomes for people and high cost tothe system and the taxpayer. The patients areseeing multiple doctors, who dont talk toeach other, and there is often an underlyingmental health diagnosis. The Ohio team willrequire such frequent yers to have a medica

home, with a care coordinator to see to it thatheir chronic conditions are managed as welas possible.

Another area of proposed savings isnursing home care, where Ohio spends 52%more than the national average. The reformplan will reallocate resources to allow elderlypatients to stay in their own homes as long aspossible. The budget proposal raises fundingfor home and community-based services forthe elderly by $31.6 million over two years,allowing 7,248 more people to be served thisway.

The nursing home lobby is the onlyadvocacy group that has heavily opposed thereform package. Gov. John Kasichs budgetproposal has the potential to devastate Ohioskilled nursing facility community, cuttingrates more than 7% for a total $472 million,says the Ohio Health Care Association on itswebsite.

The Ohio Hospital Association has largelysupported the reforms, agreeing to extend afranchise fee that taxes hospital revenuesbecause it draws down federal funds.


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NEWS

In Brief

The UW Pain & Policy StudiesGroup had taken about $2.5 millionover 10 years from companies thatmanufacture opioids. During thisperiod, the group supportedprescribing narcotic painkillers fornon-cancer chronic pain andpublished papers in scientic journals

advocating use of the opioids. Thosedrugs, such as OcyContin, are highlyaddictive and have led to an epidemicof abuse, sometimes leading to deaththrough overdose. The Food and Drug Administrationrecently unveiled a new program tocontrol prescription abuse byeducating physicians about painmanagement and patient selection.

According to an investigativereport in the Milwaukee Journal-Sentinel, the UW Pain Group receiveda total of $1.6 million over 10 yearsfrom Purdue Pharma, maker ofOxyContin. The company and threeof its executives pleaded guilty to

various charges and paid nes andrestitution of $635 million.

Physicians who WroteExcuses for WisconsinProtesters are Probed

Wisconsin officials areinvestigating eight physicians whowrote medical excuses so thatprotesters at the state Capitol couldexplain why they were not at work.

Many protesters were teacherswho had been warned by theirschool districts not to be absent

from class, unless they could showa doctors note or prior permission.

The investigations are under theauspices of the Wisconsin Dept. ofRegulation and Licensing and theMedical Examining Board. Onephysician from the University ofWisconsin Medical School offeredto help out protesters with doctorsnotes.

The demonstrators wereprotesting the bill pushed by Gov.Scott Walker, a Republican, to cutback collective bargaining rightsfor public employees in Wisconsin,which subsequently passed.

The rollback of one of the most unpopularprovisions of the 2010 Affordable Care Actalso contained a modication that may causetaxpayers some grief after the law goes fullyinto effect.

Two weeks ago President Obama signedinto law a bill repealing the 1099 reportingrequirement, which obligated any employerdoing more than $600 a year in business with

a vendor to

ll out an IRS form 1099. Theadditional $22 billion in revenues gleanedfrom this clause in the health reform act wereto cover some of the costs of the expansion ininsurance coverage.

The business community complained thatthe additional paper work was burdensomeand not worth the effort, so Congress, in a rareinstance of bipartisan unity, got rid of it.

But to make up for the lost revenues,Congress decided to make low-incomefamilies covered by the subsidized insurancepay back the subsidy if their income exceedstheir estimate for the year.

Timothy Jost, a professor at Washingtonand Lee University in Virginia, explained at healthcare journalists conference inPhiladelphia last week that to qualify for thereduced-cost insurance coverage, familiesmust project their income for the year.

But, he pointed out, income is oftenunstable and unpredictable, especially amonthe self-employed or those engaged in the

trades. If, at tax

ling time, a familys incomehas exceeded their estimate and takes themover the prescribed limit, or if the status of adependent child has changed, the familycould be liable to pay back the value of thesubsidy, up to $2,500.

What they thought was a grant turns outto be a loan, Jost said. Repayment demandmay be substantial and cause serioushardships.

Taxpayers, as a result, are likely to be angwhen they get the bill, which may over timeerode support for the expanded insurancecoverage, Jost said.

Two independent indices released last weekindicate that the rate of health care inationmay be slowing, albeit slightly.

The Standard & Poors Healthcare EconomicComposite Index rose 6.19% over the 12months ending February 2011, a drop from arate of 6.31% as of January.

Spending on prescription drugs increased by0.6% in 2010 on a real per capita basis,compared to 3.1% in 2009. Nominal spendingincreased 2.3%, reaching $307 billion last year,according to a study by IMS Health. Nominalspending went up 5.1% in 2009.

Even with the decline in the rate of cost

growth, health care spending still rose by threetimes the rate of the consumer price index,which was 2.1%. In May 2010 the S&P healthcare index showed 8.74% growth.

Costs paid by commercial insurance planswent up 7.97%, while Medicare claim costsrose 3.22%, the lowest rate of growth in sixyears. Physician wages rose by an annualized5.4% as of February, almost twice their rate of a

year earlier.IMS Health said the historically low grow

rate in pharmaceutical spending was causedby a variety of factors, including fewer patievisits to physicians ofces, patent expirationincreasing reliance on generics, and lessspending on new drugs.

The average prescription copaymentdeclined by 1.8%, from $10.93 in 2009 to$10.73 in 2010.

Payers and physicians are becomingincreasingly adept at encouraging the switchto generic medications once branded drugsfall off patent. Within six months of patent

loss, patients got the generic form of the dru80% of the time last year. The value of thebranded products that went off patent andfaced generic competition in 2010 was $12.billion, compared to $19.5 billion the yearbefore.

Generics accounted for 78% of totalprescription market share, up from 63% in2006.

Healthcare Cost Inflation Is SlowingSpending Growth on Branded Drugs Declines

1099 Repeal Contains Hidden TaxLow-income Subsidies Might Have to be Paid Back


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Payers & Providers Page

This is a big year many physicians, includingmyself. There are big nancial incentives toinvest in an electronic health record (EHR)today, not tomorrow. If we digitize this year,we can qualify for an $18,000 payment underthe American Recovery and Reinvestment Act(ARRA) passed as part of the economic stimuluspackage of 2009. And we may be eligible forup to $44,000 over the next ve years if we canprove that our EHR improves and streamlinespatient care. If we wait till 2013,the payment will be less; and itwill disappear after 2016.

So why am I not more excited?Converting from paper todigital isnt as easy as it sounds.There are lots of obstacles, notleast, fear of change. After 27years of practice, Ive developed acharting system that works for me;switching to something new seemsdaunting.

Moreover, our chartingwhichmust respond to demands frommalpractice lawyers, insurers andgovernment regulators, who arealways searching for errors and deceitis

already a pain in the neck. Digitizing requires awhole new set of hand-eye coordinationtechniques.

In principle, I agree with the need fordigitizing. Most important, the record would belegible. Doctors handwriting is horrible. I stillcant read the notes of one of my partners. Theproblem is, he cant type. When asked how thiswas possible, he said his sister typed his paperswhen he was in college! We always knew hewas spoiled. For him, a signicant obstacle isan inability to type. No matter how manytemplates you have in the EHRand therecould be a huge number for a primary care

physicianyou still have to write a narrative ofyour encounter with a patient.One vendor assured us that there are now

good voice recognition programs available toget around this. But that same vendor told usthat we could also scan our written notes intothe computer. So wed be faux digital, yet stillable to demonstrate meaningful use of anelectronic medical record system and get our$18,000. This is absurd, and one more reasonwe wont be buying this vendors system.

Another obstacle is compatibility with ourhospital system. If we cant communicate with

our hospital electronically, whats the point ofgoing electronic? The above-mentioned vendosystem, as well as a whole host of others outthere, is not compatible with our hospital andnot likely to be for some time. All systems wohave to be compatible eventually, the vendorsaid. In the meantime, our system would be puseless, at least when it came to sharinginformation with our hospital network.

The system our hospital is in the process ofimplementing is expensive. Initwe were told that it would cost$7,000 per physician per year.

our practice, that would be awhopping $21,000, which canrecovered through patient charAfter protests by many physiciathe price has come down a littlbit, but its still too expensive.

I have the suspicion that quaof care is not the primary motivfor going electronic; rather, mo

is. Frankly, no one trusts us any moIn the eyes of the federal governmeand insurers, doctors are a bunch ocrooks who must be scrutinized at

every step. I say this because the nature of th

medical chart has changed over the last fewdecades. Instead of being a simple record of ainteraction between patient and doctor, it nowmust comply with a variety of cumbersomestandards. Every encounter has a code basedlevel of service; every diagnosis must matchwhats in the record. And now easily tracked bthe powers-that-be. Once again, its a good idin principle, but a mineeld if any errors are

made.Finally, will the electronic medical record

reduce costs? I doubt it. At least not for thedoctors and hospitals that are being compelleacquire it. Medicine is one of the few areas i

which innovation leads to greater expense, noless.

OPINION

EHR Wont Be Happening SoonThe Economics of Digitizing Are Still Punishing Office

By Ross A.

Slotten, M.D.

Ross A. Slotten, M.D., practices family

medicine in Chicago. He is

a member of the Payers & Providers editor

board.

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