Category Archives: Policy and politics

Medicaid for all?

As More Join Medicaid, Health Systems Feel Strain.” That’s the striking and counterintuitive headline on the front page of the Wall Street Journal. The Affordable Care Act is injecting billions upon billions of dollars to provide Medicaid to previously uninsured people. More money should help healthcare providers’ finances, not hurt them. So what’s going on?

To summarize, Medicaid reimburses for services at only about half the rate of what commercial health plans pay. A doctor in the article receives just $80 to see a Medicaid patient compared to $160 for a commercial patient. That’s typical.

If all providers had the same mix of patients, this wouldn’t be such a problem. Well reimbursed commercial patients would make up for poorly paid Medicaid patients. But in today’s world, that’s not how it works. Some health systems concentrate their resources in wealthy communities with lots of commercial patients. Other providers end up with a much higher share of Medicaid patients and enter a vicious cycle that depresses their earnings, makes it hard for them to compete, and leads eventually to financial distress. To make matters worse, some of these “Medicaid” hospitals receive lower rates from commercial plans than fellow hospitals who avoid Medicaid. This is the scenario we face in Massachusetts (see Healthcare Inequality in Massachusetts: Breaking the Vicious Cycle) and elsewhere.

Still, I don’t accept the Journal’s implicit conclusion that the Medicaid expansion is bad for hospitals and physicians overall. For any given patient, a provider would much rather get reimbursed by Medicaid than try to collect from an uninsured patient. And since the US spends double per person what other rich countries spend on healthcare, even stingy Medicaid budgets should suffice.

It’s notable that the Journal article says next to nothing about solutions to the problem. All of the examples they cite assume a fee-for-service system. The very first example –Medicaid paying for robotic surgery for a patient– reminds me of the US system’s penchant for high-tech interventions that are expensive but not necessarily better.

Solutions are at hand, if we would be bold enough to embrace them:

  • Reduce disparities in reimbursement rates. Is there a defensible rationale for paying different rates for Medicare and Medicaid beneficiaries? For that matter, why should commercial plans pay a different rate?
  • Consider payer mix when setting reimbursement rates. If we’re stuck with differential rates between Medicaid and commercial –which we probably are– we should at least not penalize providers who take care of a lot of Medicaid patients. Their commercial and/or Medicaid rates should be adjusted so they don’t have to turn away Medicaid patients to survive.
  • Shift to risk-based payment models. Fee-for-service is wasteful and provides incentives for volume and high acuity care rather than value. Why not encourage the use of Medicaid Accountable Care Organizations and other risk-bearing approaches that give providers responsibility for costs and quality?

The sooner we have a serious discussion about Medicaid policy in this country the better.

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

Governor-elect Charlie Baker on healthcare policy

Charlie Baker (R), Governor-elect of Massachusetts

Charlie Baker (R), Governor-elect of Massachusetts

Early in 2014 I interviewed Massachusetts Governor-elect Charlie Baker (and all the other candidates) about healthcare policy. Now that he’s won the election I have re-posted the interview. I hope to interview him again in the coming months.

Baker has tremendous, relevant experience in healthcare. He was CEO of Harvard Pilgrim Health Care and Secretary of Health and Human Services before that. Healthcare is a huge issue for Massachusetts, so it’s great to have someone at the helm with that background.

Excerpts from the interview are below. The full transcript is available here.

Question 1: Does Chapter 224 represent the right approach to addressing rising health care costs? If not, where does it miss the mark and what would you do differently?

Baker expresses openness to this approach, but only if  the Commission and administrators can address three main issues he sees as “fundamental to dealing with the rising cost of healthcare”:

  1. Lack of transparency regarding price and performance.  Price variations are “known to many people who currently work in the system, but are not known to those actually receiving the service.”
  2. 224 must address the “…roughly 5% of the population who account for 50% of healthcare expenditures.”  These are people managing multiple chronic illnesses, who end up “pinballing all over the healthcare system”.
  3. 224 has the  potential:  “to move us in the opposite direction” due to the “enormous amount of administrivia in healthcare.”  The state should focus on working with the provider community to reduce the amount of “non value-added” paperwork and bureaucracy within the current system. “There’s a lot of money we’re chewing up that isn’t really adding very much to the patient experience.”

Question 2: Certain provider systems in Massachusetts are reimbursed significantly more than others for the same services even though there are virtually no differences in quality. Does the state have a part to play in addressing these disparities?

Baker believes the state already has the power  to “make the system more transparent.”  He thinks the state should be “a lot more aggressive” about making information publicly available.

He says providers that do a good job at offering a reasonable price for services should be “rewarded…and given the public recognition they deserve…”

Baker highlights disparities in reimbursements for the same services between Medicare, Medicaid, and private payers, which are known to those within the health care system, but not the general public.  “The more sunshine the better.  If everybody looks at [this issue] and says we’re fine with it, that’s one thing.  But that ought to be something the people are made aware of.”

Question 3: More than a dozen state agencies have a role in health care. Is there an opportunity to consolidate or rationalize them?

Baker is critical of the state’s approach to addressing healthcare issues, saying: “…when we have a problem, we create a new agency.” He believes this approach has the effect of “fragmenting a lot of the decision-making, a lot of the data collection, and a lot of the regulatory activity across multiple agencies.”

Baker says that this leads to conflicting regulatory directions coming from multiple agencies.

He says “there is a big opportunity, to rationalize the way the state works with, and relates to, all the players in the system.”

Question 4: Government policy has encouraged adoption of electronic medical records. However many providers complain about the systems and the benefits have been slow to materialize. Should state government play a role in helping to realize the promise of health information technology?

Baker says the most important role the government can play in this area is requiring provider organizations to use interoperable technology for electronic medical records.

He says the trend has been to develop closed systems that work within providers, but “don’t connect and communicate with anybody else’s system.”

Baker states:  “Electronic medical records need to be able to share data with other provider organizations”, and he believes that patients should not be “responsible for owning and carrying around their medical records from…provider to provider.”

Question 5: Hepatitis C is 3 or 4 times more common than HIV. New drugs that can cure the infection are coming on the market this year but they are very expensive. What role should the state play in ensuring that residents are tested, linked to care, and have access to these new medications?

Baker says: “it depends on facts that I don’t believe are currently available to us.”  Once more information is collected the state can develop conclusions about best practices using models that have been proven to work in other areas.

He cites his experience in state government, especially the development of strong community-based networks to ensure universal access to vaccines for children.  For Hepatitis C, he would “develop a delivery strategy that builds on some of the successes we’ve had with joint efforts with the provider community and the plans before.”

Question 6:  There are multiple health care related ballot questions. What are your thoughts about them? 

[Note, these ballot questions were withdrawn this summer after the legislature took action.]

Baker says he believes the state “has capacity to create more transparency,” but indicates that he needs to spend more time to get a better understanding on what the state has the ability to accomplish, and whether a ballot question is the best route to address transparency in hospital financial reporting. 

On nurse staffing ratios, Baker says “there’s nobody who likes, admires, and appreciates nurses more than me.”  When he was in state government he pursued a number of initiatives to help nurses “significantly broaden their portfolio with respect to what they were able and capable of doing under existing and proposed state law and regulation.”

He states that before making a decision on the ballot question, he would seek input from the nursing community, so that his actions don’t “freeze in place the notion that we absolutely, positively, know and understand what it is we think nurses should be doing…”

Question 7: How did your experience as CEO of Harvard Pilgrim Health Care prepare you to be Governor?

Baker says his eight years working in state government and his ten years as CEO of Harvard Pilgrim Health Care give him unique qualifications.

He describes two major things he learned from his past work:

“You have to be able to create a culture of accountability.  Set the bar high, hire really good people, and work with the people you have.” But he states that the most important move is to “come up with metrics and ways to monitor performance, and then expect people to perform and achieve to that level.”

The second  thing is to create “a real culture of service.”  This, he says, is why “Harvard Pilgrim went from receivership to number one in the country for member satisfaction when I was there.”  Baker says: “I would like to bring that same maniacal approach to dramatically enhancing and improving the state’s ability to think about service and to deliver service on behalf of the people of the Commonwealth”.

Baker continues: “I would very much like to have the chance to turn Massachusetts into a national model around its ability to deliver a high quality service experience for everybody; people who are looking to get permits, people who are looking to get questions answered, people who are looking for guidance with respect to regulatory policy, and all the rest. “

Question 8:  Much of the emphasis in health care reform is on adult patients. Is there a need for a specific focus on children’s health?

Baker says:  “Massachusetts has done a good job of covering both its adults and its kids, but I worry about the impact these federal reform laws are going to have on the ability to continue the things that have worked here. And I have been disappointed by the inability of the Health Connector to get anything done, and to work for the people who need to rely on the Connector to get their coverage.”

He continues:  “I’m a huge believer in expanding the capacity and support for primary care. That includes pediatrics, which I think is an area that has been neglected by the healthcare system over the course of the past decade or so.”

Question 9: Is there anything you’d like to add?

“I bring a unique blend of public and private sector experience to this job.  I’ve been able to demonstrate my capacity to lead and to succeed as a manager and as a leader in healthcare over the course of the past 20 years. I think that’s a really important area for us as we go forward as a state, not just in terms of quality and cost, but also as a major employer and a major source of innovation and entrepreneurship in Massachusetts.”

”I’m a big believer in discipline and focus. I will bring an aggressive approach to making sure the state’s assets are well-managed, if people choose to give me the opportunity to serve as their Governor in 2015 and beyond.”

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

CVS: Drugs, tobacco… and guns?

Smoking gun pharmacy network anyone?

Smoking gun pharmacy network anyone?

CVS is placing healthcare at the core of its growth strategy, intentionally favoring healthcare over retail. That was evident recently, when CVS decided to dump cigarettes, which are incompatible with a healthy lifestlye. Analysts thought that move might hurt the company by knocking down front-store sales and profits.

But CVS (now officially “CVS Health“) is doubling down on the strategy. Caremark, the company’s pharmacy benefit management arm is offering a tobacco-free pharmacy network, which will penalize members who shop in stores that sell tobacco by dinging them with an extra co-pay. The commercial logic for Caremark is clear: find a legal way to discriminate against other drugstores in favor of CVS.

The health rationale is a little hazier. I suppose some smokers could end up smoking more if they pick up their prescription where it’s convenient to restock on cigarettes. And may some ex-smokers will go back to the habit if they’re tempted in the pharmacy. But it’s a bit of a stretch –and I can’t imagine CVS would have tried this if there weren’t a competitive edge.

So that got me thinking about what’s next for CVS. Here’s an idea: add an extra co-pay for stores that sell guns. If nothing else that should bring them some attention! The National Rifle Association and physicians organizations have been battling over what doctors say to their patients about guns. A new CVS policy might get the general public involved in this discussion. This strategy would also enable CVS to discriminate against Walmart, which sells guns and is a very formidable competitor.

From a neutral, objective public health standpoint, it should be at least as straightforward for CVS to demonstrate that a store selling guns is as dangerous to member health as a store selling cigarettes. But of course there’s absolutely no chance CVS will make this argument.

photo credit: Smoking Gun via photopin cc

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

Health Wonk Review is up at Wing of Zock

The health wonkers take their first cut at the election’s impact on ObamaCare at Wing of Zock. You’ll find the latest Health Wonk Review blog carnival hosted there.

This week’s edition includes Health Business Blog guest blogger Mikael Totterman’s post on ophthalmic investment opportunities.

Is Partners HealthCare charting a new course? I’m quoted

I’m quoted in today’s front page Boston Globe article (Partners HealthCare chief met a trail of resistance), which dissects the tenure of outgoing Partners CEO, Gary Gottlieb. It should be no surprise that the continued expansion of the biggest and strongest healthcare system in Massachusetts under Gottlieb has led to friction and controversy.

The reporter asked me about whether a new CEO would change the company’s strategy. Here’s what I said:

Partners executives have said bolstering their network of hospitals is critical to coordinating patient care and keeping costs in check through more efficient care. Gottlieb’s successor and Partners’ board will have to decide whether to stick with that approach.

“The broad expansion, it’s not obvious that they need to do that,” said David E. Williams, president of Health Business Group, a Boston consulting firm. “Partners doesn’t need to expand at all and it would still be the biggest and strongest in the state.”

I suggested that Partners could decide to go back to its roots as a world-renowned academic medical center with its Massachusetts General Hospital and Brigham and Women’s Hospital. There are other ways to coordinate care and control costs besides owning community hospitals and physician practices.

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

Trashing Charlie Baker on outsourcing –uncalled for

Charlie Baker (R), candidate for Governor of Massachusetts

Charlie Baker (R), candidate for Governor of Massachusetts

The mud-slinging continues in the campaign for Governor of Massachusetts. This time Democrat Martha Coakley is attacking Republican Charlie Baker for outsourcing jobs when he was CEO of Harvard Pilgrim Health Care back in 1999. This is on top of the previous accusations of “raising premiums, cutting coverage for seniors, and tripling his own salary to $1.7 million.”

It’s an unfair attack. Baker should be praised instead.

Harvard Pilgrim’s IT systems were a mess in the 90s. They couldn’t pay claims in an accurate or timely manner, and as a result the company couldn’t figure out if it was making or losing money. As it turned out they were losing, and on their way to bankruptcy. Baker stepped in and righted the ship.

Outsourcing to Perot was a good move. Perot hired the existing Harvard Pilgrim IT staff in Massachusetts. In 2006, Perot hired about 200 employees in India to serve the account. Apparently this is the basis for the Coakley attack, but it’s a pretty weak one.

It’s not Harvard Pilgrim’s job to boost employment in Massachusetts. Instead the primary goal should be to deliver excellent service and value to customers. They seem to have done a good job, since they consistently rate at or near the top of the best health plans in the US.

I assume the Coakley campaign knows that the allegations about raising premiums are not to be taken seriously. Health plans have been raising prices forever –there’s no reason to single Baker out for that. And Coakley would like us to believe that Baker cut benefits for the elderly, making him sound like Paul Ryan taking a knife to Medicare. The reality is much less exciting and newsworthy. And sure Baker got a big salary boost, which is a pretty modest reward for rescuing a major company. If it had been a for-profit company you can bet the rewards would have been a heck of a lot bigger.

Baker isn’t perfect. But attacks on his competence and wisdom as a healthcare leader deserve to backfire.

To read or listen to my interviews with all the candidates for Governor of Massachusetts, check out my coverage from earlier this year.

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