Jun 15, 2014

Much Ado About Value

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I was recently honored when Greg Scandlen took time to consider and write about some of the work I shared with him that has been produced by Michael Porter on value-based healthcare delivery. Mr. Scandlen is a regular contributor for the National Center for Policy Analysis’s Health Policy Blog, and in his article,  Value Based Payments, he argues that attempting to use the concept of value to drive systemic improvements in the US healthcare delivery system is misguided because of the inherently subjective and multidimensional nature of patient outcomes (Porter has used the equation of Value = Outcomes/Cost as the basis of arguing for industry transformation).

Michael Porter, “is generally recognized as the father of the modern strategy field, and has been identified in rankings and surveys as the world’s most influential thinker on management and competitiveness.” He has extensively researched and written on healthcare, establishing a comprehensive body of work that supports the need for reorganization of our healthcare system framed around value-based delivery.

After collaborating with Elizabeth Teisberg on their seminal work, Redefining Healthcare, in 2006 Porter wrote an article in 2010 for the New England Journal of Medicine: What is Value in Health Care? This is the article Mr. Scandlen references in his article. There are several additional contributions from Porter that add meaning and understanding to the value paradigm discussion, and these include:

Measuring Health Outcomes: The Outcome Hierarchy, a supplementary appendix to the above-referenced NEJM article;
How to Solve the Cost Crisis in Health Care (with Robert Kaplan) in the September 2011 edition of Harvard Business Review; and
The Strategy That Will Fix Health Care (with Thomas Lee) in the October 2013 edition of Harvard Business Review

There are a couple of areas where my perception of value as a catalyst for delivery transformation differs from Scandlen’s.

First, while I agree it’s true individual value is a subjective reality, my understanding of Porter’s work does not advocate for creating objective measures of value on behalf of the patient. In the October 2013 article referenced above Porter writes, “in healthcare, the overarching goal for providers, as well as for every other stakeholder, must be improving value for patients, where value is defined as the health outcomes achieved that matter to patients relative to the cost of achieving those outcomes.”

Second, Scandlen takes issue with Porter’s claim that, “in any field, improving performance and accountability depends on having a shared goal that unites the interests and activities of all stakeholders,” arguing that is counterintuitive to how competitive markets function – which Porter himself advocates for and has written about extensively. But I think Scandlen has too narrowly applied this axiom. Using his own example of how difficult it would be to imagine IBM, Apple and Microsoft having a shared goal, I would argue the goal they shared was to develop and provide lower-cost personal computing capacity and technology to individual consumers.

This wasn’t a coordinated or collusive effort to limit competition or share profits – it was a market-driven opportunity that each corporation recognized independently to bring value to consumers and be rewarded accordingly. Porter recognizes that in healthcare, in order for providers and organizations to transform delivery models based on value they must all recognize – and act upon –  the perceived economic benefits of creating value for the patient.

The graphic accompanying this post provides the six steps outlined in the October 2013 HBR article that Porter argues healthcare organizational leadership, patients and health plans/employers must pursue to achieve a high-value care delivery system. The key concepts embodied include integrated care delivery, transparency, outcome-measurement, accountability and geographic expansion of specialized capabilities (e.g., what the Cleveland Clinic has been doing through affiliations such as their recent minority interest in Akron General Hospital).

Finally, I do not believe measuring outcomes (the ubiquitous challenge facing Porter’s value equation) is a long-term effort in futility. Porter’s outcome hierarchy was an attempt to recognize and address the multidimensional nature of outcomes that Scandlen identifies. Many other such similar efforts are ongoing across the world. With the continual advancement of Big Data, the ability to monitor, analyze and report on patient-related data and information across the full spectrum of an outcome will continue to become more and more useful: to providers, insurers – and most importantly, patients.

Where the concept of outcome measurement runs into its biggest theoretical challenge is when payment models such as ACOs and episodic payment bundling seek to use such data to objectify achievement of patient value as a measurable statistic (i.e, benchmarking) used as an incentive to influence provider behavior. But the old adage of not being able to manage what you cannot measure is a critical element of value-driven performance improvement that I believe Porter effectively argues is at the heart of transforming our delivery system.

Value-driven payment models are in their genesis. Any type of industry transformation at this juncture is going to endure understandable resistance and criticism.  The train has left the station. Industry transformation based upon value-driven performance is already well entrenched as represented by organizations such as St. Joseph Mercy Oakland Hospital (Pontiac, MI), Adirondack Medical Home Pilot (NY) and Dignity Health, Hill Physicians and CalPERS.

There is legitimate concern that data and analysis on outcomes will be used to supplant patient choice. I don’t believe that is what Porter and colleagues had in mind when writing about value-driven healthcare delivery. Of course that doesn’t mean their intentions won’t be bastardized in the interest of bureaucratic ignorance and expediency. This risk must be carefully guarded against, but it does not in and of itself change the important role value must play in transforming our healthcare delivery system.

Cheers,
  Sparky

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May 29, 2014

The Human Spirit as an Organ

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Brain-Lightbulb1-214x300May 23rd, 2014 – Santa Barbara, California: another day, another shooting rampage, a few more souls lost to mental illness. More calls for gun control. More calls for funding of public health programs. More wringing of our hands and gnashing of our teeth where as a society we wrestle with what we can do to prevent disturbed individuals like Elliot Rodger from senselessly taking the lives of others.

I’d like to take a pragmatic approach to what we might do, starting with gun control.

As we saw recently, opponents of gun control are very effective politically at making impassioned arguments that owning a gun is the manifestation of a God-given right to defend personal self and property against threats from others – and most particularly in the minds of some political activists  (i.e., the Tea Party), the government. And they have huge lobbying strength.

Now I feel I have to share, that even for those most zealous gun enthusiasts with huge caches of automatic weapons I truly don’t understand how they would expect to defend their neighborhood against an AH-64 Apache helicopter should there ever be a military-supported government coup. Can’t you see it? A long row of sixty-something Harley riders with ammo strips strapped over their shoulders, long grey hair flowing from under their skull n bones bandanas. Waving their AK-40’s wildly as they fall like dominoes. Sort of like us fifty-something’s having to get under our desks in grade school during the 60s to rehearse protecting ourselves against a nuclear attack. But I digress.

Humor aside,  I think it’s important in this discussion to understand that gun ownership is a culturally ingrained part of wide swaths of our society. Unless that changes gun control legislation and regulations will have about as much success in the 21st century that Prohibition had against controlling alcohol production and consumption in the early 20th century. And perhaps there is a measure of truth in recognizing that in both instances the policy focus is misplaced by not recognizing the ultimate responsibility of acts committed under the influence or with a weapon (or both) lies with the individual, not the bottle or the gun.

So ruling out much hope for gun control as a viable approach to prevent these types of tragedies we next turn to doubling down on promoting policies that will expand access to mental health services.  But what if rather than spending more money to treat mental illness and its symptoms as distinct and separate from physiological well being we instead doubled down on efforts to understand how critically important it is to treat mind and body together.

I realize there are earnest efforts all across the country to integrate physical and mental health and move toward holistic well being. But from what I have seen those efforts are mostly incremental in nature and not going to create the transformational shift in health practitioners’ approach that can ultimately have the type of impact on mental illness we seek.

I think what is required is a paradigm shift in thinking about where and how mental health integrates with the overall health and wellness of the individual. We need to begin recognizing that mental well-being is a spiritual reality that, while ultimately the manifestation of physiological attributes, exists independent of those attributes.

And in this way it is just as much a vital organ as is the heart, the brain and so on. And that leads me to believe we should be thinking of human mentality as an organ. Just as our physical organs are necessary to provide human cells with basic needs to sustain life, we are learning more every day how important our human mentality is to cellular health.

I believe if we can broadly achieve this vantage it would change the way we approach research, the way health practitioners integrate awareness of mental health into diagnoses and treatments, the way we approach and treat symptoms of mental illness – and it would change the way we view mental health policy.

Your thoughts?

Cheers,
  Sparky

Filed Under: Editorials & Opinions, Mental Health · Tagged: , , , ,
May 14, 2014

Mental Health in Crisis

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The cost of not caring: Nowhere to go ~ The financial and human toll for neglecting the mentally ill is the first in a new series of articles being produced by USA Today tackling this hugely critical issue (by Liz Szabo). Rep. Tim Murphy, R-Pa. (a child psychologist) declares that, "we have replaced the hospital bed with the jail cell, the homeless shelter and the coffin. How is that compassionate?"

Mental health services and programming has taken it on the financial chin as an unfortunate lesser of evils political choice among state programs that have traditionally provided funding. According to Robert Glover, executive director of the National Association of State Mental Health Program Directors, $5 billion was cut from 2009 to 2012, while 4,500 public psychiatric hospital beds were eliminated (a 10% reduction).

Mental illness is still not broadly well understood in a way that even starts to approximate its impact on society. The USA Today article estimates that approximately 10 million Americans with serious mental illness are not receiving care. While at the same time, individuals with serious mental illness have a probability of dying 23 years younger compared to others.

The costs to society are dramatic: in excess of $440 billion a year. And only about one-third of that total goes to medical care. Much of it reflects disability payments and lost productivity. And that amount does not include lost earnings or tax revenue spent on prisons.

The timing is not good. State budgets are already being stretched and the national focus is on how to take costs out of the system – not add more. Medicaid expansion is likely to help identify greater need for mental health services without any commensurate plan in place to address those needs.

Yet we simply cannot afford to continue down the care delivery path we have forged. Mental illness is often a root cause for various physical illness and chronic conditions. Tragic events like Sandy Hook Elementary, Virginia Tech and Fort Hood remind us of the potential incident costs of untreated mental illness – but a fitting analogy of those events to the broader problem might be comparing the tragedy of an airplane crash to the number of traffic fatalities across the country each year.

Recently in true Washington partisan fashion Republicans and Democrats illustrated their shared compassion for those suffering from mental illness by drafting legislation designed to promote political distinctiveness rather than policy progress (though it should be noted that in this instance the Democratic initiative has to be viewed as politically reactive). Here’s hoping maybe someday that will change and this country can start having the very serious and much needed conversation on how to address this terrible crisis.

Cheers,
  Sparky

Filed Under: In the News, Mental Health · Tagged: , , ,
May 14, 2014

Why Can’t Healthcare Innovate?

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Whether viewed as paradox or conundrum, the healthcare industry’s relative inability to innovate has long been a source of both fascination and frustration. In the May 8, 2014 edition of the New England Journal of Medicine,  David A. Asch, M.D., M.B.A., Christian Terwiesch, Ph.D., Kevin B. Mahoney, B.A., and Roy Rosin, M.B.A. write about this phenomenon in Insourcing Healthcare Innovation.

Describing the understandable resistance of healthcare professionals to embrace problem-solving techniques from unrelated industries because the complexity of healthcare delivery is most often not well understood, those professionals are by definition usually most interested in exploring new ideas, new approaches and the pursuit of new knowledge. This apparent irony, the authors believe, might be effectively synchronized if a different approach could be taken to reconciling innovation with contextual understanding.

The approach they share is a four-stage design process they believe can achieve this reconciliation. The four stages include: contextual inquiry (understanding the processes currently in place); problem definition (ensuring the right problem has been understood and defined); divergence (exploring alternative approaches) and rapid validation (ability to move from theory to implementation).

If these sound familiar, it is because the general direction of proceeding from understanding where you are to achieving where you would like to be in an orderly fashion is the foundation of many approaches to strategic planning. So from that vantage there isn’t anything particularly revolutionary about the process described.

But understanding the core resistance to such processes – that the way in which healthcare practitioners are educated, trained and practice is frequently counterintuitive to innovation techniques successfully utilized in other industries – is an important distinction. What this translates into is making the requisite investment to understand the unique attributes and complexity of healthcare delivery – its distinctive product offerings, its highly dependent reliance upon personal relationships, its unbelievably complicated regulatory environment – as a necessary component of any planning effort.

It takes time and effort to build the needed understanding of the unique challenges that healthcare practitioners face. You have to ask probing questions and not hesitate to admit your lack of understanding: a fair balance of humility and curiosity can go a long way to building key relationships and creating the requisite knowledgebase necessary to innovate.

In other words, individual egos often create barriers to innovation processes that are attempted to be imported from other industries. More so than representing a different way of approaching innovation in healthcare, what this article does is reinforce a tried and true means of any planning effort: listen and learn before you lead.

Cheers,
  Sparky

 

Filed Under: Innovation · Tagged: , , , ,
Apr 29, 2014

“A Very, Very Slippery Slope”

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The New York Times is reporting this afternoon that Donald Sterling, owner of the Los Angeles Clippers, has been barred from the NBA for life and fined $2.5 million in lieu of the secret taping of what he thought was a private conversation during which he expressed remarks that were both ignorant and extremely offensive.

The NBA understandably wants to protect its brand. And if in its collective discretion it believes that Mr. Sterling’s remarks damage that brand, everyone else who has a vested financial interest in the brand has the right to entirely and completely disassociate from Sterling in any legally manner permissible. I totally get that.  It’s the means to the end that I find disturbing in this situation.

According to a statement issued by NBA Commissioner Adam Silver under the NBA Constitution – whatever that is – it is apparently permissible to ban someone from attending future NBA games (and practices). I would like to understand how that squares with the other Constitution that I assume is still considered higher authority.

And speaking of that Constitution, there is the very first amendment, which as part of the Bill or Rights guarantees citizens living under it the right of free speech. What this incident will – or at least should – do is start a robust debate in this country about where publicly contrived penalties and sanctions stemming from offensive and/or hurtful speech cross the line into becoming de facto limiting of free speech.

Free Speech Means Tolerating Ignorance & Persecution

Now, nobody has told Mr. Sterling that he has to stop talking. But I question whether the penalties levied by the NBA border on the incredulous. They serve notice that offensive speech (even when said in private) is not only intolerable – but will be penalized in such a fashion as to act as a restriction of that speech. And there is also the issue of whether Sterling’s fifth amendment right to due process has been violated by being forced into forfeiting his personal ownership of the Clippers.

I’m sure someone like Sterling has many legal eagles at his disposal, and he doesn’t need me playing the role of constitutional counsel. And frankly, it makes me uncomfortable thinking that someone may interpret this post as being in any way supportive of Sterling’s remarks. I am not. But I am being supportive of his right to say whatever he wants within the historic understanding of what constitutes free speech.

We are losing that historical perspective. Free speech in this country is, always has been – and hopefully always will be – a double-edged sword. The video clip I inserted above does a fine job of expressing that. And if that doesn’t do it, then I think what Mark Cuban, owner of the Dallas Mavericks said hits the nail on the head:

“What Donald said was wrong. It was abhorrent. There’s no place for racism in the N.B.A., any business I’m associated with, and I don’t want to be associated with people who have that position. But at the same time that’s a decision I make. I think you’ve got to be very, very careful when you start making blanket statements about what people say and think, as opposed to what they do. It’s a very, very slippery slope.”

A slippery slope indeed. The media (as in what used to be the press) has historically been thought of as the fourth branch of government because one of its fundamental roles was to investigate and report factual evidence that stood apart from political discourse. We know that reality has been obfuscated nearly beyond recognition today, and we have sat back and enjoyed being entertained while it happened.

Those who have read my blog should know where I generally stand politically. So if this event alarms me, maybe it should you too. Maybe not – I’d love to hear your thoughts. I think it’s time we start rethinking what we’ve allowed to happen in this country before you or I are the next people whose liberties are threatened because we say the wrong thing.

Cheers,
  Sparky

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Apr 20, 2014

The Business of Medicine

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The primary reason I love what I do is that gaining competitive advantage (as in being able to stay in business and provide for a family) requires a commitment to continuous learning. If I could change one thing about myself after all these years it would be to increase my reading speed without sacrificing comprehension. I often get frustrated by not having enough time to learn everything I would like.

Sometimes learning isn’t so much about discovery as it is connecting the dots you’ve discovered previously. You are engendered to reconsider what once were disparate pieces of knowledge and see how they can be formed into new thinking. This was the case for me recently when I read a blog post of A Country Doctor MD contributing to the KevinMD.Com blog site.

The article, If a doctor isn’t face to face with a patient, is he still a doctor? explores the fundamentals of a physician’s business model in lieu of regulated fee for service payment methodology. It explores the often paradoxical relationship between between time and money in the practice of medicine. I found that the issues and challenges described resonated with me because I have to deal with the same business issues and challenges.

There are parallels between the practice of medicine and consulting. Both businesses’ core value proposition is individual knowledge, reasoning and the ability to collaborate with others to solve problems. The risks and consequences of getting the right solution in medicine are decidedly much greater – and this should be reflected in higher comparative compensation. But I don’t think that is universally true by a stretch, and here’s why.

As the leader of a small boutique consulting firm determining how to price and sell engagements is a constant challenge. You are always building on your knowledge, so that the next client gets the benefit of what you learned working with the client before (I don’t know this to be true, but I would imagine it’s a similar situation with physicians: it’s a practice). We are always wrestling with how to price services when the value proposition is a desired outcome while the measurement of cost is in units of time.

And you get more efficient as you practice, so that the relative work effort to produce solutions decreases as experience increases. But that doesn’t necessarily translate into higher income because you have to remain market competitive. Of course, ideally over time your hourly rate increases to reflect the increase in value provided: getting the right solutions faster. That is, in consulting at least.

I don’t want to belabor the nuances of professional services business models. I share these observations simply to make a point. In consulting, we have the luxury of pricing our work based upon what we think is in the best long-term financial interests of ourselves and our consulting practice. The physician who is forced to accept a payment schedule – whether from governmental agencies or private insurers – does not have that luxury.

With the recent release by CMS of the Provider Utilization and Payment data there have been reverberations in the media about physician income and the relative contribution of cost to our healthcare system. I am not advocating for less transparency even if, as I wrote last week, the data as it was released is quite misleading. All I am saying is that given the comparative amount of education required (time and cost), the stress level involved and the regulatory handcuffs applied, I wouldn’t want to trade. I think this is something that policymakers had better consider and understand very soon – because I can’t stand the site of blood, nor read fast enough.

Cheers,
  Sparky

Photograph: from thechart.blogs.cnn.com

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Apr 19, 2014

Readmission for Life

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Readmissions. A term that has become ingrained in the lexicon of governmental agencies, elected officials, healthcare policy analysts, healthcare provider institutions – and even care providers. The case is made simply enough: it is far less costly to care for someone at home or in a congregate setting than in a hospital. More nuanced, the logic follows that both efficiency and quality can be maximized by utilizing the setting that costs just enough to provide quality outcomes.

And so a lot of money is being spent – by the government in the form of research and testing grants, as well as both for profit and nonprofit healthcare providers, all wanting to better understand how to keep people out of the hospital without impacting their health. Of course, Medicare’s Hospital Readmissions Reduction Program is also providing an incentive as hospitals seek to avoid up to a 3% reduction in Medicare reimbursement.

The Internet is replete with articles and stories on the how and why of reducing readmissions. I have written about the topic extensively on this blog. It has captured my attention because that is where Artower Advisory Services, positions itself: at the intersection of acute and post-acute/long-term care.

I have a growing concern that the dialogue over readmissions is becoming increasingly academic and pedantic. The measures of programming success have not been clearly defined because of the simple reality that success needs to be defined differently for each patient.

People react to environmental stimuli in different ways. Two patients with the same condition and otherwise similar health may be better served in different settings. One patient might have great comfort in being at home – to the extent where their mental state promotes healing faster than in an institutional setting. Another patient may need the real or perceived sense of security from being at the hospital where immediate attention is just down the hall.

In more than a few ways the initiative to reduce hospital readmissions has been an effort to pick the low-hanging fruit. Anecdotally, I am convinced from spending years working with healthcare providers that patients needlessly end up in the hospital because of poor communications, silo operations and the practice of defensive medicine.

There are tremendous opportunities for performance improvement. Along with reducing costs and improving outcomes, however, we must be diligent in developing outcome measures that reflect the subjective reality that every patient is unique.

Cheers,
  Sparky

 

Filed Under: Editorials & Opinions, Hospital Readmissions · Tagged: , ,
Apr 13, 2014

I Made HOW Much ?!?!

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This past week CMS released Provider Utilization and Payment Data: information on services and procedures provided to Medicare beneficiaries by physicians and other healthcare professionals. In case you weren’t following along, there has been quite a bit of controversy over the data release, including from both the American Medical Association and the Medical Group Practice Association.

Donald W. Fisher, Ph.D, MGMA President & CEO:
MGMA is troubled about the potential for unintended consequences as a result of the release of this type of data and the effect it may have on Medicare beneficiaries. This release could result in patients making decisions about their care based on faulty assumptions about physicians. Claims data are not a proxy for quality, especially when provided in isolation, from a single payer. MGMA is also concerned about the impact on physician privacy, as releasing physician’s personal financial data and National Provider Identifier (NPI) information could make providers susceptible to fraud. Physicians should have had the opportunity to review the data before it was made publicly available in order to modify or appeal any inaccuracies.

Ardis Dee Hoven, MD, President of the AMA:
Thoughtful observers concluded long ago that payments or costs were not the only metric to evaluate medical care. Quality, value and outcomes are critical yardsticks for patients. The information released by CMS will not allow patients or payers to draw meaningful conclusions about the value or quality of care.The AMA is disappointed that CMS did not include reasonable safeguards that would help the public understand the limitations of this data.

Back in February of 2013 I wrote, Pick a Price – Any Price, describing how and why healthcare provider pricing is typically both misleading while at the same time meaningless. But the focus then and there was on hospitals. People in general are a lot more envious of other people than they are buildings and groups of people working in those buildings. Thus you can easily understand why there is concern over public perceptions – particularly when those perceptions are likely to be different than reality in most instances because of not understanding how to interpret the data.

Theoretically, I weigh this concern against a belief that in most cases more information is better than less.  Obvious exceptions include issues of personal privacy and national security. Transparency and accountability should be hallmark pursuits of the Medicare system. And I think most physicians are in favor of sharing data that helps empower the patient to make more informed healthcare decisions.

It is not at all clear the data released last week will be able to do that any time soon. In fact, the arguments positing the data’s release will do more damage than good are persuasive. These include a lack of any data on quality; inability to track actual service levels to individuals providing those services; misunderstanding of charges versus payment; inability to risk adjust for patients treated; no adjustments for site of service differences; discrepancies caused by changes in billing codes; and – most importantly – no way of knowing how much reimbursement the physician uses to cover overhead costs, which is required in order to determine real income.

So on balance I have to side with the physician groups on this one. CMS made a very poor decision to release the data, as-is, without any real thought about releasing it with all of the disclaimers addressing the issues and concerns described above. I hesitate to say it – but I say what I think – this sure feels like another backdoor attempt to promote victimization at the expense of disinformation.

Cheers,
  Sparky

Filed Under: Editorials & Opinions, Provider Utilization and Payment Data · Tagged: , , ,
Apr 7, 2014

Pressure Mounts on SNF Performance

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As a follow up to my post this past Friday, some additional political pressure aimed at assessing and improving safety and quality of care in America’s nursing homes has come in the form of a letter from Senators Bill Nelson (D-FL) and Charles Grassley (R-IA) to CMS chief Marilyn Tavenner. In that letter, dated April 2, the senators reference the now much discussed OIG report – Adverse Events in Skilled Nursing Facilities: National Incidence Among Medicare Beneficiaries – and challenge the CMS Administrator to reconcile the reported performance weaknesses with the current certification and survey process for nursing homes.

They went on to request an understanding of what steps CMS is taking to address the identified weaknesses in the survey and approval process. As has already been discussed, a primary means of response that CMS is counting upon is implementation of the long-awaited QAPI initiative, which will require SNFs to self-assess and critique their existing operational and clinical performance while developing a comprehensive plan to address and remedy identified performance gaps. And the resulting QAPI program of those facilities will then become subject to the state survey process.

The letter also referenced an IG report from November of 2013, Medicare Nursing Home Resident Hospitalization Rates Merit Additional Monitoring. The key finding of that report on which the senators focused was the noted variation in readmission rates across geographic areas (i.e., the associated hypothesis being that following existing best practices of better performing facilities could yield overall lower rates of readmissions – and thus lower costs to Medicare and Medicaid).

The upshot here is that SNFs now have giant targets on their backs. Provider advocates and trade associations now probably wish even more so that the QAPI regulations had not been so long delayed, as there might now be at least some political cover from being able to report work was already underway to assess these issues and challenges. Now when then QAPI regulations are released there will be heightened attention, focus and expectations of organizational compliance.

Bottom line for SNF organizations: if you haven’t started to familiarize yourself with QAPI, yesterday would be a really good time to start.

Cheers,
  Sparky

Filed Under: In the News, SNF Quality & Performance Improvement · Tagged: , , , , ,
Apr 4, 2014

SNF Value-Based Purchasing Under SGR Extension

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Earlier this week President Obama signed into law H.R. 4302, the Protecting Access to Medicare Act of 2014. The sole impetus of this legislation was to once again avert – by one year – the nearly 24% cut to the Medicare physician fee schedule that was initiated as part of the Balanced Budget Act of 1997 under the Medicare Sustainable Growth Rate (SGR) methodology. This marks the 17th time in 11 years now that the automatic cut has been averted by legislative action. Congress knows how to kick a can.

Just a few weeks back there was a fair amount of optimism the SGR might be fully repealed and replaced with a “permanent” payment methodology. There was bipartisan support in both the House and Senate, but as you might expect, wide differences in how to pay for the repeal. While Republicans sought repeal of the individual mandate, Democrats wanted to tap into unused military spending. And there you have it then.

In about 11 months from now Congress will be back to the same spot of having to deal with a pending fee cut, but it will be a different Congress.  Just how different of course should make for a fascinating late summer/fall entertainment for political wonks. In the interim, however, there are a number of non-physician related items included in this Act that are worth noting, including a delay in the implementation of ICD-10; acceleration of LTCH moratorium; changes to Medicaid disproportionate share hospital (DSH) payment reductions; limitation on the two-midnight rule enforcement; as well as other provisions.

SNF Value-Based Purchasing
In addition, the Act calls for the establishment of two hospital readmission-related measures for skilled nursing facilities (i.e., value-based purchasing for SNFs). The first measure is an, “all-cause all-condition” hospital readmission measure; and the second is to encompass, “all-condition risk-adjusted potentially preventable hospital readmission rate.”

The implementation of this program is a few years off: actual reductions in Medicare reimbursement based upon comparative readmission performance won’t take effect until FY 2019 (i.e., SNFs with fiscal years beginning on or after October 1, 2018). But when it does take effect, those organizations with relatively lower hospital readmission performance will be penalized two-percent of their otherwise Medicare reimbursement. In turn, up to 70% of the savings achieved from this penalty will be redistributed to those organizations achieving relatively better readmission performance.

No doubt the process for developing these measures will be contentious despite assertive measures to avoid bias and/or misrepresentation of care indicators included in the Act. And with penalties not starting until four-plus years from now who knows just how (or even whether) the program will be implemented.

Implications
Clearly the sentiment in Washington – at least today – is to shift reimbursement from post-acute/long-term care to acute care. And the preferred means of accomplishing this will be to focus on perceived opportunities for cost savings while improving, or at least without impacting, quality care. The value paradigm: quality divided by cost.

In advance of the value-based purchasing program will be the QAPI initiative, regulations for which are anticipated later this summer. SNF organizations will have to be able to develop quality assessment and performance improvement programs that support being able to predictively monitor and model hospital readmissions given a variety of qualitative and quantitative indicators requiring real-time operational and clinical adjustments.

For many smaller SNF organizations this is going to be a daunting task because of the investment requirements. They will be caught in the unenviable spot of having to make substantial capital investments to maintain cash flow levels that already cannot support capital accumulation. As such, within the next few years they will be faced with closing, merging or selling.

So although the revenue impact of value-based purchasing is still several years away, all SNFs would do well to begin understanding and assessing their short and long-term financial viability in lieu of these forthcoming requirements – while there are still choices available.

Cheers,
  Sparky

Filed Under: SNF Value-Based Purchasing · Tagged: , , , ,
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