Tag Archives: Capitation

Ten Ideas That Could Fix Healthcare

I’ve written a fair amount over the years about what is wrong with the American Health Care System from ethics to pricing, structure, incentives etc.  So, what needs to be done to fix it? In the end, is there a better way? Listed below are some of the ideas that I think would have a profound impact on lowering costs and improving quality.  None are new, but taken together they could be very powerful:

  1. Get rid of Fee For Service (FFS) medicine. Yes, its cliche but it needs to be gotten rid of and the best solutions are to move the risk to the providers, through global capitation or other bundled payments. Providers will need to put in the resources and expertise to manage this and work to drive the 30% of waste out of the system, thereby potentially making more profit than before.  This is one of the reasons why it is so important to continue the various bundled and capitated payment programs now being implemented by CMS and others.  Providers need to learn, and learn fast, no more sticking one’s toe in the water, take the dive. Another example of how bundled prices or capitation can save money.  If a hospital has a fixed bundled price for knee replacement, how hard is it to bill that?  You don’t need a bunch of billing clerks and others to be sure every item is on the bill the hospital submits, and on the payer side, they don’t need a bunch of people reviewing the hospital bill to re-price the $75 aspirin or remove the extra band aids that were not provided. Who cares whether the hospital used an additional band aid at that point if the service was appropriate and high quality.
  1. Revise the 80/85% Medical Loss Ratio (MLR) requirement.Let’s say you manufacture cars and sell each one for $10,000. Per the MLR rule, you would have to spend $8,500 (85% of your sale price) per car on all the parts and labor, excluding marketing and management. Your cost for marketing and management would come out of the remaining 15% and then whatever is left over is your profit. In this example assume marketing and administration are $1,000 (10%) leaving your profit at $500 (5%) per car. You as the manufacturer now negotiate lower prices on your supplies and it now costs you $8,000 to make the same car. According to the MLR rule, you can no longer charge $10,000 for your car, but can only charge $9,411.76 because the costs of parts and labor must make up 85% of your total charge; and unless your marketing and management fees were reduced, you now would only legally make $411.76 per car.

So why would you get more efficient?  In healthcare, the question is, why as a health plan would you want to improve the health of your members and seek to prevent illness, thereby reducing the 85% you paid for their medical care; ultimately reducing the 15% for other expenses and profit?  Current health plans want to get 15% of an ever-growing number, they want 15% of $10,500 the next year and on and on. This was a fundamental flaw in the ACA. I understand it was to ensure that health plans do not make money by denying services, but there is an upper and lower range to most quality measures not a fixed point and the same goes for healthcare services. Health Plans or those accepting the risk should have a range that their MLR must fall in and/or some way to benefit when they can show that their efforts improved the health of their members and thereby reduced costs.

  1. Target Medication Pricing and the Supply Chain.  We pay way too much and there are so many people in the middle of this that there are multiple opportunities. Here are two.  The first is to allow importation or other means to get access to cheaper medications.  Want to see prices drop fast, that’ll, do it.  We’ll reach a happy medium somewhere below what we pay now and what we allow developing countries to pay for the same medicines. At the same time, we need a new system of medication purchasing and distribution, an Amazon type system that gets rid of the many middlemen adding a piece of cost/profit at each touch point. Think also beyond the pharmacy:  Imagine a system where you go online and take the order direct from the manufacturer through Amazon with a drone delivering the medications to your door. In healthcare medications are one of the best “onion” examples, it just keeps adding layers to the service and each layer adds costs.  Just the fact that companies often hire consultants to review their PBMs who are supposedly getting them the best rate is all you need to know.  In fact, one major corporate chief medical officer told me verbatim “I’m sick of getting ripped off by my PBM.”
  1. Watch out for Aggregation to increase prices versus lower costs. Hospitals are rapidly embracing this philosophy, driven by the ACA, as they are buying up practices, opening free-standing ERs and the like.  It’s amazing to watch as these efforts more often than not increase admissions and costs.  I was at an American College of Healthcare Executives meeting where the panel topic was how hospitals would survive the move from inpatient to outpatient services. In a stunning show of honesty, two of the three senior hospital executives said they were not going to move to a more outpatient based approach and were in fact doing everything they could to increase admissions. They both claimed to have been so successful at pushing people into their hospitals that their inpatient census continued to rise and were at record levels.

Well at least they were honest (in front of a friendly audience). Going back to number one, if they have a fixed price (capitation) for the person or population, they’ll figure out once and for all that the hospital is a cost center and reducing beds, not building more, while allowing services to occur through the lowest cost point in their network is the key to profitability. And yes, maybe constructing less gorgeous and elaborate facilities might lower costs as well. Here’s another classic hospital aggregation approach to increase costs, acquire the oncology doctors and then stop providing infusion services in the clinic. Why?  Because hospitals can charge 2-4 times as much when the infusion is completed in a hospital outpatient or inpatient facility versus the doctor’s office.

  1. Sell healthcare services on eBay or Amazon.I spoke with eBay years ago about this concept, but they were not interested.  Why they wouldn’t want a piece of the $3.2 trillion healthcare market is beyond me, but hey perhaps Amazon? My dream is to go online and schedule my MRI at 3 am for $150 or $200 because the radiologist has an open slot and I am paying out-of-pocket. Sure, I know, what about quality? Well vet the places, provide real outcomes and quality data and publish it.
  1. Narrow the networks based on quality and price.  Most people say they hate narrow networks, and of course when done based solely on price, I hate them too.  But I experienced a narrow network in action long before they came into the lexicon.  As a child, I was a frequent visitor to the ER, I broke a lot of bones and had a few other stitches and scrapes. My father was a Professor of Medicine.  I can’t tell you how many times he narrowed my network and told the physician who was walking in to see me that they would not be treating me. He knew all the doctors, the good and the bad.  I healed up well, thanks to him.  I also experienced issues with poor quality during his later years with Lewy Body Dementia and other ailments. There were more than a few times I wish I could have thrown the doctors out who were suddenly assigned to treat him because he was now covered by a Hospitalist and some specialist he had never seen. They nearly killed him a few times.  As in any field quality varies.
  1. Allow Medicare and Medicaid the flexibility to send patients outside of the United States.  As an add-on to number 2, why not save billions by flying surgical patients or those with Hepatitis C out of the country to get much cheaper services or drugs?  I’m sure after a few flights, the providers and manufacturers will come running back with lower rates. And while we’re at it, how about the prisons, there are a lot of Hepatitis C patients now incarcerated who should be getting treated.

We need to look at issues like Hep C from the patient side. Because of the high costs of the drugs in the United States, there are hundreds of thousands of people who are not getting access to the treatment. Is that good?

  1. Don’t let Congress be bought. Not sure how to do this except through an election, or changing the rules of lobbying while remaining within constitutional bounds, which is well out of my wheelhouse. The healthcare industry uses Congress to protect their interests at the expense of average Americans who are now burdened with excessive costs and poor outcomes compared to other developed countries.
  1. Send Crooks to JailHealthcare has a fair amount of fraud, and you know what, its perpetrated by people, people who hide behind corporations.  Typically, the corporation settles, without admitting guilt of course, pays a fine and moves on.  But what about the people who directed the corporation to do this stuff? If we sent more people to jail, we’d reduce the fraud. Recently, there have been more announcements by the DOJ holding  individuals personally accountable; so it seems this is moving in the right direction.
  1. Invest in our communities and social services. These phrases have become mantras now:
    1. healthcare only accounts for 20% of your health;
    2. your zip code is one of the best indicators of your health status;
    3. how you live determines how you die,

We must invest more in the areas that impact health like community, safety, schools, parks, access to housing and food, but, and it’s an important but, we have to hold the organizations that we fund accountable, too many of them exist to exist and offer limited value. Much of this funding could come from savings in healthcare costs. Together can create healthy communities for all our community members.

These ten ideas are but a start and I am certain that there are many other good and viable ideas for fixing our healthcare system. It’s time we got serious and began implementing more of them.

What are your thoughts and ideas?

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The Changing Role of Primary Care Providers – PopHealth Week’s Focus in July

Listen to the episode here:

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The role of Primary Care Providers is changing and much of this is for the better. With the Triple Aim of improving the patient experience, improving the health of populations and reducing per capita costs; along with new payment methodologies, quality measures, organizational structures, and the like, primary care providers are being asked to to play an expanded role in the healthcare system; but what is that role and how can they ensure success?

During the month of July PopHealth Week will focus on Primary Care and Population Health, interviewing primary care providers and thought leaders who have developed innovative new ways to practice. We’ll explore patient centered medical homes, capitated contracts, team based care, meeting patients needs, are the incentives in ACOs large enough to change behavior, and where these trend setters believe primary care is headed.

Join PopHealth Week for the following shows:

Roy Hinman, MD, Island Doctors

July 1, 12 PM ET

Roy H. Hinman, II, M.D. is the founder of Island Doctors which employs more than 50 people within 14 offices in Florida stretching from Jacksonville to Interlachen and New Smyrna Beach. They also manage a network of 32 affiliate providers throughout these six counties and around the Orlando area. Their mission is to promote health improvement to each and every patient that walks through their doors.

The practice focuses on improving their patients’ health and participates in numerous community events and health fairs including holding Diabetes Awareness Seminars several times per year. Island Doctors want each patient to achieve optimal health status through education, meal planning, exercise, smoking cessation and cholesterol management.

Dr. Hinman opened his first family practice office in 1991 on Anastasia Island in St. Augustine, Florida.

Rushika Fernandopulle, MD, iorahealth

July 8,12 pm ET

Dr. Fernandopulle is the founder and CEO of iora health, an innovative primary care practice that offers Team-based care that puts the patient first, a payment system based on care, not billing codes and technology built around people, not process.

July 15, 3 pm ET – TBD

Paul Grundy, MD Global Director of Healthcare Transformation IBM, President PCPCC and Ambassador Healthcare Denmark

July 22, 3 pm ET

Dr. Grundy, known as the “Godfather” of the Patient Centered Medical Home is one of the leading thinkers in the transformation of Primary Care and is the Founding President of the Patient-Centered Primary Care Collaborative (PCPCC).

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PopHealth Week Explores Full Risk Medicare Advantage with Roy Hinman, MD, Founder of Island Doctors, a Pioneering Primary Care Physician

Island Doctors Capture_03B_CleanPopHealth Week’s guest on July 1 at 12 pm ET is Roy Hinman, MD the founder and CEO of Island Doctors which employs more than 50 people within 14 offices in Florida stretching from Jacksonville to Interlachen and New Smyrna Beach. He opened his first family practice office in 1991 on Anastasia Island in St. Augustine, Florida.

Dr. Hinman is a pioneer and began to take full risk Medicare Advantage in 1998. Since then, Dr. Hinman’s practice has grown to approximately 16,000 capitated Medicare Advantage patients in Florida. He anticipates having 20 offices by the end of 2015 to meet the demand. In addition to his owned offices, he also manages a network of 32 affiliated providers.

With innovative programs targeting diabetes, COPD, cholesterol, smoking and weight loss, he understands keeping patients healthy and how to manage capitated contracts. His comments may surprise you.

Here’s some of Dr. Hinman’s bio:

Dr. Hinman was raised in Tulsa, Oklahoma. He is a graduate of Oklahoma Military Academy, received his Bachelor’s Degree in Psychology from Tulsa University, and his Master’s Degree in Human Resource Management from Pepperdine University in Malibu, California. He completed medical school at Universidad Technologica de Santiago in Santo Domingo, The Dominican Republic. He served his family practice residency with the University of Florida Medical Program at the University Medical Center in Jacksonville, Florida and worked as an emergency room physician at Bradford County Hospital in Starke, Florida and at Ed Fraser Memorial Hospital in Macclenny, Florida.

Commissioned as a Second Lieutenant in the U.S. Armored Cavalry in 1975 at Oklahoma State University, Colonel Hinman ultimately retired from the U.S. Army Reserve in 2014 as a Medical Corps officer, after 37 years of military duty in the United States, Germany, Korea, Kuwait, Nicaragua, Panama, Saudi Arabia, Ecuador, the Dominican Republic, and Iraq where he served three combat tours. He recently served as the Territorial Surgeon of the U.S. Virgin Islands.

Dr. Hinman is Board-Certified in Family Practice and is a member of the Florida Medical Association, the American Association of Family Practitioners, the Florida Association of Family Practitioners, the St. Johns County Medical Society and the American Academy of Anti-Aging, and has full Family Practice admitting privileges at Flagler Hospital in St. Augustine, Florida where he has been an active staff member since 1991.

So join PopHealth Week’s guest, Dr. Roy Hinman and gain valuable insights into how he has been doing what many have, and or will be trying in the not to distant future, full risk capitation.

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Some Thoughts on Population Health, its Definition(s) and the Providers Role

As providers move rapidly into what they call population health, it is becoming clear that there are many definitions  of population health and many people who state they provide population health management. David Kindig, MD has pointed out, it’s time to provide more specificity to delineate what population health is, and what providers and others are doing within population health.

Dr. Kindig proposes that we use the term “Total Population Health” to define programs that seek to improve the health of all individuals while we re-name the services offered by providers which tend to be clinical in nature and focus more on the care of individuals as “Population Medicine.”  I think this delineation is a good way to define the difference.  In fact I have used a slide for years to illustrate this point,  When looking at the social determinants of health: community, transportation, safety, environment, access to foods, etc and considering the obesity epidemic and its precursor to Type 2 diabetes, heart disease and other chronic illnesses.  Here it is,

 

Is this the classic lazy American?

 

Can the Healthcare System Fix This?

Can the Healthcare System Fix This?

 

Or is this a lack of sidewalks, an unsafe neighborhood? And what role should/can providers play in this?

I believe the providers should focus on Population Medicine, better caring for chronic diseases and providing acute medical care and leave the social determinants, which are well outside the walls of the care system, to others with more expertise. An area of low hanging fruit is the inefficiencies, abuse and fraud in the healthcare system identified by IOM (see slide 3).  Now there’s a good place to start as one moves to Value Based Payments and capitation.

The thinking of Dr. Kindig is also similar to the Accountable Health Organization approach that David Nash and I wrote about last year.

What do you think?

 

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The Underlying Issue is Often the Same in Health Care – Ethics

So I opened my AIS Health Daily email and read two seemingly different stories that are actually related on an underlying level. The first discussed the 340B pharmacy pricing program that allows hospitals and other provider to buy drugs at a lower rate to when they  services to indigents and the uninsured.

 

340B Program Shirks Charitable Care, Undermines Formularies, Argue PBMs
Reprinted from Drug Benefit News

A new report from a coalition of stakeholders suggests that a considerable portion of the hospitals enrolled in the 340B Drug Pricing Program furnish a negligible amount of free or reduced-price care to indigent, uninsured patients …. Read Full Story

and the second pointed out the large amount of duplication of case management services found by ACOs , and that quote is here:

“The opportunity (for accountable care organizations) is so amazingly large when you get the systems to start talking to each other. One of the most amazing things to us is the duplication across systems — five [case] workers being assigned to one person was not unusual, and nobody knew anyone else was working with the individual.”

— Jennifer DeCubellis, Hennepin County (Minnesota) assistant county administrator for health, told AIS’s ACO Business News.

Click here to read the ACO BUSINESS NEWS article in which this quote appeared. (Free for ABN subscribers; $17 for non-subscribers).

Neither of these are a surprise to me nor probably to most professionals in health care and they relate to two fundamental problems with the system as structured today. Fee for Service as the payment mechanism of choice makes it too easy to set up shop and bill for services and, secondly, if there’s a way to make a buck or “stretch” the system someone will do it.

Obviously moving away from our current fee for service system will create the impetus to look at these issues, and maybe fix them (see the closing paragraph), but more importantly it get back to ethics.  In many if not most of the cases associated with the two instances above, these are non-profit organizations providing 340B drugs or case management services.

Lets look at the Case Management issue.

Case managers are supposed to be coordinating cases, yet don’t know that others are involved?

Come on, that’s their role.  More likely they know or have an inkling, but their organization recognize’s that in order to keep the funds flowing, they just don’t find out. When I worked with Medicaid programs around the country I saw this all the time; supposed case managers not truly coordinating services, closing the office too early, not knowing what was going on with their clients, tracking lots of contacts and other process measures, but having little to no tracking of outcomes. Other  providers servicing Medicaid had similar issues, home health aides providing little to no service, meals on wheels delivering inappropriate foods because they never knew the patient was a diabetic (in this case the patient had both a case manager and a 12 hour a day home health aide who accepted the meals), and the list goes on and on.

The health care system is a giant feeding mechanism for tens of thousands of companies and organizations. Its just too easy to ensure your own survival at a cost to the system because we have allowed it. As we change the payment method,  what do you think some of these organizations will do if they go full risk in a capitated model?  Might their current lack of ethics lead to under-serving their population to make sure they survive?

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