Contributor: Laura Beerman
Topic: Medicare

Medicare is the target of multiple federal healthcare reform efforts, all of which are designed to curb costs while improving quality. These efforts range from accountable care organizations to the meaningful use of electronic health records to reimbursement cuts for Medicare providers. Like those long-delayed cuts—(Congress to world: “This time we really mean it!”)—the United States is no longer putting off a central component of Medicare reimbursement reform: ICD-10 coding.

ICD stands for the International Statistical Classification of Diseases and Related Health Problems. ICD-10 was introduced in 1990 and fully adopted in the decade that followed by most WHO nations—except the United States. While the U.S. did adopt ICD-10 to report mortality, it delayed implementation for codifying disease statistics.

So what’s the big deal: three letters, two numbers with a dash thrown in for good measure? The big deal is that ICD-10 is the foundation of diagnosis-related groups (or DRGs), upon which the entire Medicare Inpatient Prospective Payment System is based. 

Explained further, DRGs allowed Medicare to develop systematic reimbursements based on how much it should cost a hospital to treat a specific condition or disease. Let’s say, for example, that you are a Medicare beneficiary and have a raging case of DRG385 (inflammatory bowel disease). Under the current ICD-9 system, one of four ICD codes would represent your official diagnosis and thus how your care would be reimbursed. If your DRG385 flares up in 2013, however—the deadline for full transition from ICD-9 to ICD-10—one of 28 codes could represent your diagnosis.

Yikes.

The transition could be a relatively smooth one. The ICD-9-CM Coordination and Maintenance Committee studied the transition’s impact on reimbursements and found it nominal—1 percent of 11 million discharges, according to one account.

That’s still 110,000 discharges, or roughly the entire population of Flint, Mich. And at least some of these discharges will involve complex, costly medical conditions. The previous “what-if” scenario demonstrates one of the primary concerns that hospitals  have with the transition: there will be thousands of new ICD-10 codes that won’t automatically “map” to the same DRGs as their ICD-9 counterparts.

While ICD-10 shows that there is clearly a special place in heaven for coders and programmers, other stakeholders have more trouble. The transition will take time, money and personnel—all of which may be in short supply as hospitals, health plans and physicians grapple with the other mandates of federal healthcare reform.

So will ICD be another Y2K? Should hospitals start stocking water bottles, taking their money out of the bank and stuffing it under the mattresses of their unoccupied beds? It depends on how you look at it. If you see the water bottle as half full, you’ll be comforted to know that 70 percent of providers report that they have either started or completed their ICD-10 impact assessments.  If your water bottle is half empty, that means roughly one in every three is behind.

In any case, readiness is the key. And we haven’t even touched on how ICD-10 will impact accountable care organizations, the meaningful use of EHRs and HIPPA privacy changes.

OMG.
 

Contributor: Jane DuBose
Topic: High-deductible health plans

I’ve had four MRIs over the past four years but, unlike with my last grocery bill or most recent shoe purchase, I have no idea what a 30-minute stint in the cylinder actually costs. That’s because I’m one of the lucky workers with full employer-provided health insurance – with copays, even.

That’s a contrast to the millions of workers who are now enrolled in high-deductible health plans. With the recession walloping businesses and consumers over the past two years, enrollment in these plans—which have lower monthly premiums, but also higher deductibles and out of pocket for services—has accelerated. Large carriers, including publicly held health plans and Blue Cross Blue Shield plans, are reporting double-digit increases in consumer-driven health plan enrollment in the soon-to-be-released health plan membership census conducted by HealthLeaders-InterStudy. High deductibles are a hallmark of the CDHPs.

Having a high-deductible insurance plan forces consumers into making choices. Prescription drugs or a full tank of expensive gasoline? College textbooks or elective knee surgery? According to some large insurers’ recent financial reports, their members may have chosen the gasoline and textbooks, and not necessarily the medical care.

In addition, the industry has taken big bites from the low-hanging fruit in trimming medical costs: Generic drug utilization rates are as high as 80 percent at some carriers; imaging costs are way down, thanks to the mother-may-I approach of radiology management vendors; and hospital re-admission is a bad two words – everybody’s working on that one.

All of that combines to have created a slowdown in medical spending increases over the past few quarters. While the growth rates still well exceed general inflation, the shifts have interesting implications for healthcare reform. If we really are developing discipline around healthcare consumption, perhaps the country will be in a better position to undertake the costs of insuring more Americans.

The trend could all collapse once the economy recovers, but the belt tightening (for everyone but health plan CEOs, of course) may be just the medicine healthcare reform needs.
 

Contributor: Sheri Sellmeyer
Topic: Massachusetts Healthcare reform

Shakespeare, Star Trek, and Disney have all used the device of identical twin characters who hoodwink – or just confuse – their adversaries before overcoming some obstacle, be it unrequited love, an alternate universe or uncooperative parents.

Mitt Romney – in the running for the Republican nomination in the 2012 presidential election -- may be wishing he had an identical twin these days to overcome his obstacle, which is having been the governor who oversaw Massachusetts’ healthcare reform. Republicans are deeply critical of national healthcare reform, which, well, looks a whole lot like Massachusetts’ healthcare reform. Massachusetts mandated that nearly every resident obtain a minimum level of healthcare insurance coverage, and provides free health insurance for people who earn less than 150 percent of the federal poverty level but make too much to qualify for Medicaid. ObamaCare mandates that nearly every U.S. citizen obtain a minimum level of coverage, and provides Medicaid expansion for those earning less than 133 percent of the FPL. Massachusetts set up an independent public authority to act as an insurance broker in offering private insurance plans to residents. ObamaCare calls for health insurance exchanges to be set up by each state to offer affordable options for the uninsured.

Romney’s take on this is, in part, is that while it’s o.k. for an individual state to mandate health insurance for its citizens, it’s another matter altogether for the federal government to do so. But here’s where it would be handy if Romney could blame Massachusetts’ program on an evil twin. Conservative columnist Charles Krauthammer called Romney’s defense of Massachusetts’ healthcare reform “extremely defensive” and “weak.” The Huffington Post posted a video clip labeled “Ob’omneycare! The Ultimate Mitt Romney ‘Obamacare’-vs.-‘Romneycare’ Double Talk Train Wreck.”

Barring a twin expose, Romney could take another tact and shoot for the 2016 presidential election, in the meantime becoming Obama’s healthcare reform implementation czar. Writer Daniel Gross argued in a recent Newsweek column that Romney is ideally suited to be the job, and could use his experience as a manager, executive and entrepreneur to do nationally what he did in his home state. Chances are pretty slim that a social moderate like Romney has a prayer for the 2012 Republican nomination. Better to take a cue from Captain Kirk in a famous episode of Star Trek, in which the captain and friends find themselves on an alternate Enterprise, where the brutal Terran Empire rules and mirror versions of the Enterprise crew exist. Captain Kirk ends up being aided by Mirror-Spock and is almost able to convince him that the Federation way of life is better than the Terran way. Unless he’s able to beam down an evil twin to take the flack for healthcare reform, maybe Romney is better off convincing the country that the Massachusetts way is better than the alternatives.

Contributor: Lyda Phillips
Topic: Accountable Care Organizations

Sometime last fall in the Motor City, the green flag dropped and physicians groups and health systems began racing to form accountable care organizations.

One source said there were groups knocking on every provider’s door eager to talk about consolidation, cooperation, loose affiliations, mergers, acquisitions, anything to get aligned for what was coming.

Interestingly, once the actual ACO regulations were released by the Centers for Medicaid & Medicare Services on March 30, 2011, the phrase accountable care organization disappeared to be replaced by organized system of care. “I was so, so disappointed with the CMS rules it gave me a bellyache,” one chief medical officer said. “Everyone looked at the regs and said, ’Never mind,’” said another.

The providers contacted by HealthLeaders-InterStudy in the Detroit market to a person dissed the ACO rules. They have problems with the way patients are allocated, problems with beneficiary engagement, problems everywhere. And the biggest complaint of all is about federal regulations on meaningful use, which Paul Harkaway, president of the Huron Valley Physicians Association, called, “The most misguided federal initiative since the Bay of Pigs.”

Nevertheless, here at the beginning of May 2011, at least seven groups of providers in the Detroit region have begun forming groups that can be designated OSCs by Blue Cross Blue Shield of Michigan. They are chasing the 20 percent increase in payment for office visits (evaluation & management) with no downside risk that the Michigan Blue plan is dangling as an incentive for designated OSCs that meet clinical and cost goals. Most of the major hospital systems are in the game through their physician groups: St. John Providence, Henry Ford Health System, Saint Joseph Mercy, the Detroit Medical Center, University of Michigan Medical School and Oakwood Health System. A couple of others are forming with physician groups alone, such as the 2,000-physician Wayne State University Faculty Group combined with Medical Network One, and the 1,600-physician United Physicians group.

“We joke about having a little bit of schizophrenia operating the old while developing the new,” Bob Hoban, chief strategy officer for St. John Providence Health System, said. “But change is clearly coming, and we’ve got to shift with it.”
 
 

Contributor: Paula Wade
Topic: Medicaid

State Medicaid officials have seen the future and can sum it up in two words: managed care.

The Florida legislature’s vote this past week to move 1.5 million Medicaid recipients into managed care programs is the latest and most dramatic indication of where these programs are headed. Like every other state, Florida is desperate to get control of spiraling Medicaid costs, a problem that will only accelerate as healthcare reform goes into effect and the federal/state program begins adding 16 million more members.

Already, just over half of the 57 million Medicaid recipients in this country are in MCOs. HealthLeaders-InterStudy research indicates that 11 states are in the process of expanding their Medicaid managed care programs to cover larger territories and new categories of enrollees. Illinois, for example, hopes to enroll at least 50 percent of its Medicaid members into MCOs, estimating it will save $774 million over five years. Florida has among the largest and fastest-growing Medicaid populations, and it already has about 60 percent of its Medicaid recipients in managed care.

Currently, 39 states and the District of Columbia have contracted with a private MCO to manage at least a portion of the Medicaid program. In general, MCOs have been most widely used in highly populated states and regions, and are rarest in the states with low populations, where it’s hard to design and maintain a managed care provider network.

Pharma should take note of the Medicaid expansion for two important reasons – this will create larger Medicaid MCOs with more negotiating power, and it will offer a preview of the state health insurance exchanges scheduled to begin in 2014. The federal health reform law calls for these newly eligible adult Medicaid members to have a Medicaid benefit package that is also available as a “benchmark plan” within the state’s Insurance Exchange, so that those who transition into or out of Medicaid eligibility will have less disruption in their healthcare coverage.

There are more than 150 Medicaid MCOs operating in the 50 states and the District of Columbia, ranging from MCO giants UnitedHealthCare and WellPoint to pure-play Medicaid plans such as Amerigroup, Centene and Molina, to independent Blue Cross plans and small provider-owned plans. As of mid-April 2011, the stock price of the three major Medicaid-focused public companies (Centene, Amerigroup and Molina) has outpaced the rest of the managed care sector. Each one has seen its stock rise by more than 44 percent since the first of the year, whereas the average for publicly traded plans was an increase of 26 percent. The larger players will look to acquire small plans as they consolidate their hold on the growing Medicaid managed care market.

But Medicaid is not for the faint of heart. Although states are required to pay actuarially sound rates to MCOs, fluctuations in state revenues, political or policy shifts and the unpredictability of costs such as flu outbreaks make the Medicaid segment more risky than the commercial market in many ways. MCOs have had to become expert at learning when to walk away, and when to run, from unprofitable state contracts.