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January 2015
New ACO Rules Would Delay Penalties An Extra Three Years Health Care Predictions for 2015 Medicare Reveals Timetable to Base More Payments on Quality, Not Quantity
Published by Montdor Medical Media, LLC Co-Publisher and Managing Editors Iris and Michael Goldberg Contributing Writers
Joseph Conn Melanie Evans Beth Fitzgerald John E. Morrone, Esq. Jordan Rau Sabriya Rice Arielle R. Simkins, Esq. Layout and Design - B&L Printing, Co. Inc. New Jersey Physician is published monthly by Montdor Medical Media, LLC., PO Box 257 Livingston NJ 07039 Tel: 973.994.0068 Fax: 973.994.2063 For Information on Advertising in New Jersey Physician, please contact Iris Goldberg at 973.994.0068 or at igoldberg@NJPhysician.org Send Press Releases and all other information related to this publication to igoldberg@NJPhysician.org Although every precaution is taken to ensure accuracy of published materials, New Jersey Physician cannot be held responsible for opinions expressed or facts supplied by its authors. All rights reserved, Reproduction in whole or in part without written permission is prohibited. No part of this publication may be reproduced or transmitted in any form or by any means without the written permission from Montdor Medical Media. Copyright 2010. Subscription rates: $48.00 per year $6.95 per issue Advertising rates on request New Jersey Physician magazine is an independent publication for the medical community of our state and is
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C O N T E N T S
New ACO Rules Would Delay Penalties An Extra Three Years
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CONTENTS
8
Health Care Predictions for 2015
12
Medicare Reveals Timetable to Base More Payments on Quality, Not Quantity
14
Major Providers, Insurers Plan Aggressive Push to New Payment Models
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Medicare Penalties Begin Taking Toll
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Federal Health IT Coordinator Sets 2017 Deadline for Interoperability
18
Prime Wins Conditional Approval for Daughters Takeover
19
Year End Breach Notification
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Cover Story
New ACO Rules Would Delay Penalties An Extra Three Years By Jordan Rau
H
ealth care systems experimenting with a new way of being paid by Medicare would have three extra years before they could be punished for poor performance, the federal government proposed Monday.
The proposal is one of dozens of changes that the Centers for Medicare & Medicaid Services wants to make to rules governing accountable care organizations. ACOs are affiliations of doctors, hospitals and other providers that jointly care for Medicare patients with the goal of pocketing a portion of what they save the government. Those that spend above Medicare estimates stand to lose money. There are more than 330 such networks around the country caring for about 5 million people through the Medicare Shared Savings Program, which includes most of the ACOs. The revisions to the program are intended to entice providers to form new ACOs and to keep existing ones in the program, which is voluntary. In the first year of the program, 118 ACOs saved Medicare $705 million with about half earning bonuses, government records show. Another 102 ACOs spent more than Medicare’s benchmark, but only one had to repay Medicare because most ACOs have a three-year grace period when they can earn bonuses but are excused from penalties. The new rule would give ACOs, both new and existing ones, an extra three years before they faced penalties, for a total of six years. Sean Cavanaugh, Medicare’s director, said the change was one of many prompted by concerns raised by ACOs. “The notion that 36 months later you’re going to be at downside financial risk is pretty intimidating,” he said in an interview. However, the extra time would come at a price: ACOs that after their first three years decide to avoid penalties for the next three could keep no more than 40 percent of the money they save Medicare, rather than the 50 percent maximum they can keep during their first three years. This KHN story can be republished for free (details). The government also proposed creating a new type of ACO for providers that want a chance to earn the biggest savings while also being at risk for repaying the most money if they fell short. Many of those ACOs are now in the so-called Pioneer ACO Model, which ends after 2016. Medicare proposed that those ACOs could move over to the new program, which has similar rules. The new model, known as “Track Three,” would allow ACOs to keep up to 75 percent of the money they save Medicare. If they cost Medicare extra, those ACOs would be held responsible for up to 15 percent of the excess spending. Currently ACOs cannot be held responsible for more than 10 percent. The government is also soliciting views on alternative ways of deciding whether an ACO has saved Medicare money. Currently, Medicare estimates what the participants of the ACO spent in the past and uses that as a benchmark. Some ACOs have complained that providers that are already practicing efficiently are having a harder time producing savings than less efficient ones. Under one option, ACO spending would be compared to the average spent by other doctors and hospitals in the region that are not part of an ACO. The public has until Feb. 6 to comment on the proposed rule. 6 Affiliated Practice
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Health care predictions for 2015 By Beth Fitzgerald
T
hese are times of constant upheaval in health care: Hospitals are merging, the Affordable Care Act is expanding health coverage (and coverage issues) and employers are simply struggling to find health plans that they and their workers can afford. So what will the future hold? To find out, we asked a cross section of experts – from hospitals, physician groups, payers, think tanks, the law, business advocacy and academia – for their 2015 predictions. Here’s what they had to say:
Robert C. Garrett, chief executive, Hackensack University Health Network “The Affordable Care Act has led to a dramatic increase in health care coverage recipients, while at the same time the national unemployment rate continues to drop. The result will be an unprecedented number of people expecting – and for the first time being able to afford – quality health care. In addition, the health care industry continues to evolve with new and innovative practices as well as a host of new drugs coming into the market. “On a broader scale, cheaper gas prices, the continued housing recovery and more jobs will serve to put money back in people’s pockets, raise consumer confidence and contribute to an overall positive outlook for 2015.” Barry H. Ostrowsky, chief executive, Barnabas Health
Robert C. Garrett, CEO of Hackensack University Health Network
“I believe 2015 will find further consolidation on the provider side of the health care industry and greater alignment in more creative ways between payers and providers. There will be continued emphasis on outpatient and retail oriented care, as the industry moves closer to a population management model. Our organization will continue to pursue its well stated commitment to keeping people healthy through community initiatives.”
Betsy Ryan, chief executive, New Jersey Hospital Association “I think 2015 will be marked by continued financial pressures on hospitals as they care for uninsured – and underinsured – patients. Some people may be surprised by that, given that 2014 was the start of the coverage provisions of the Affordable Care Act. But if you delver deeper into some of the enrollment numbers, we’re still a long way from declaring victory in the fight against New Jersey’s uninsured problem. “For example, at the end of last year’s open enrollment period, the U.S. Department of Health and Human Services reported that about 160,000 New Jersey residents enrolled through the online health insurance marketplace. But when you account for those who didn’t follow through and pay their premiums, or the “churn” of consumers leaving one plan and signing up for a new one, the number of new marketplace enrollees in New Jersey is only 41,000. That doesn’t include the approximately 500,000 undocumented immigrants in New Jersey who are not covered by any of the ACA’s provisions. Add in the fact that most of New Jersey’s newly insured individuals are in our state’s expanded Medicaid program – which only pays hospitals Betsy Ryan, CEO, about 70 percent of the costs of care – and I think we will continue to see serious New Jersey Hospital Association fiscal pressures on hospitals as they care for New Jersey’s neediest residents.” 8 Affiliated Practice
Dr. David Shulkin, president, Morristown Medical Center, and vice president, Atlantic Health System Shulkin offered these predictions for 2015: • Consolidations between (health care) systems will start to occur as the market begins to form into super regionals; • Payers and providers will begin to launch branded narrow network products. • Employers will put their toes in the water with providing incentives to move employees to private exchanges; • Consumer transparency will gain momentum, with greater ease to see hospital and physician pricing; • Technology advances will lead to disruptions in “business as usual,” particularly in the area of “tele-health”: • A major research breakthrough in cancer care will provide new hope for patients about novel therapies to come.
John V. Jacobi, Dorothea Dix Professor of Health Law & Policy, Seton Hall Law School
Dr. David Shulkin of Morristown Medical Center and Atlantic Health System.
Predictions are difficult, as Neils Bohr said, especially about the future. Here are my predictions. • Medicaid programs around the country will turn in 2015 from the somewhat silly privatization “reforms” (such as that in Arkansas) and turn to systemic reform (such as that in New York) that might actually improve care and contain cost. These genuine reforms will bring substance abuse treatment into the mainstream, and strive to prevent illness through improving access to healthy food, increasing recreational opportunities, and addressing homelessness and substandard housing. • The startlingly high cost of a very good drug (Solvadi, an $84,000 treatment for hepatitis C) will spark a review of the American drug development system. Genomic medicine and other developments will result in more and more expensive drugs with life-saving properties. The legal and public policy puzzle we’ll begin to grapple with in 2015 will be how to encourage the production of new treatments while establishing a method of distribution that will allow all to benefit without breaking the bank. • The expansion of individual and small group coverage will continue in 2015 no matter what the Supreme Court does in King v. Burwell, the case that threatens the subsidy system rendering coverage affordable for millions. Federal and state governments will find workarounds if the subsidies are invalidated – access to coverage is just too important. • But – 2015 will also see us grappling with the high patient cost-sharing in new insurance products. Insurers, pressured to keep premiums low, perhaps inevitably increased consumers’ copayments and deductibles. This cost-sharing has gone well beyond giving consumers “skin in the game,” and instead threatens to skin them alive, placing too much care out of reach. We’ll begin to face the task of designing insurance in a way that gives access to both coverage and care – a task we won’t finish in 2015, but the sooner begun the sooner finished.
Judith L. Roman, chief executive, AmeriHealth New Jersey “We’ll likely continue to see incentives between payers and providers become further aligned with the creation of more organized health care delivery systems in an effort to support accountable care models. “One example is the expansion of our co-branded Community Advantage Plans that we pioneered with Cooper University Health Care last year. Shore Medical Center and Cape Regional Medical Center are a part of that expanded offering in 2015. The co-branded plan design is unique because it further enables patients to have easier access to their physicians as well as enhanced communication with them. Created with tiered networks, the plans also provide more choice based on an individual’s or business’ budget.” — cont’d
January 2015 9
Joel Cantor, director, Rutgers Center for State Health Policy “The behavioral health system, (mental health and substance abuse treatment), will receive closer scrutiny. Our recent report, sponsored by the Nicholson Foundation, showed that three fourths of high-users of hospital inpatient services have behavioral health diagnoses. The behavioral health and medical care delivery systems have long been separate. In 2015, we will see a re-thinking of how best to increase behavioral health service capacity and better integrate it with medical care delivery. “We will see more large scale hospital system mergers and physician practice acquisitions, leading to growing concentration in New Jersey’s health care delivery markets. System integration can bring benefits in the form of greater investment in quality improvement, but there are huge downside risks to consolidation. A strong body of research clearly shows that hospital market concentration leads to higher prices charged to private insurers. There is less research on the effects of hospitalphysician group consolidation, but recent studies suggest that these are likely to be cost-increasing as well. Nationally, we have historically long run of zero or low health care cost increases: 2015 could be the year that costs rebound, largely due to hospital mergers and acquisitions of physician practices. “Another NJ hospital trend, the emergence of for-profit ownership of New Jersey hospital in the past couple of years, will continue to show fault lines between insurers and consumers on the one hand, and the hospital chains on the other. It has been easier for some of these hospital corporations to take advantage of loopholes in New Jersey law that requires insurers to pay out of network charges for emergency department treatment than to find ways to make care more efficient and higher quality. In 2015 this struggle will continue.”
Christine Stearns, vice president, health and legal affairs, New Jersey Business & Industry Association “From our perspective, the biggest health care concern continues to be affordability. Rising costs threaten many employer’s ability to offer coverage, particularly small businesses. The Affordable Care Act has been a challenge for employers to implement, and with more regulations expected, it will continue to be a primary concern in 2015. “Closer to home, there has been a major focus on out-of-network provider charges by Assemblyman Craig Coughlin (chair of the Assembly insurance committee). The challenge will be to find solutions that ensure access to quality care but also put an end to the enormous, and sometimes completely unexpected, charges. It is a thorny issue, but there is a real commitment in both houses of the legislature to find a solution so I expect action on the issue in 2015.”
Larry Downs, chief executive, Medical Society of New Jersey “The biggest trend in health care I will be watching in 2015 is the narrowing of patients’ choice in health care services. “In this environment of downward pressure on health care costs, patients will be squeezed as their insurance benefits get paper thin. Insurers continue to design low premium, narrow network health plans that result in less physician and facility options for consumers. Also, more patients will be self-financing big chunks of their healthcare as increasingly high deductible plans are offered through the exchange and employer-sponsored options. “In 2015, a dollar’s worth of health care will still cost a dollar. However, the patient will be paying more (and harshly more if they exercise “choice”), and the insurer will be paying less.
Larry Downs, CEO, Medical Society of New Jersey
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“MSNJ will be monitoring healthcare payers’ benefit designs and policies to make sure patients have reasonable access and choice in healthcare services. In 2015, MSNJ will be urging insurers and state regulators to increase both transparency and adequacy of benefits to the health care consumer.”
Raymond J. Saputelli, executive vice president, New Jersey Academy of Family Physicians “While providing the best care to patients remains the highest priority for family physicians, the practice environment for 2015 will continue to demand that we meet the challenges devolving from the ACA, including the implications of narrow insurance networks, patients with high deductible plans and reimbursement models moving from fee-for-service to value-based payments that put greater focus on patient outcomes and accountability. “Over the next year, family medicine practices will also face new, complicated government mandates that can significantly impact cash flow, including the switchover to (a new coding system), Medicare penalties for primary care practices that haven’t demonstrated meaningful use, the phasing out of the ACA’s Medicaid Primary Care Pay Parity incentive for primary care physicians, and required investments in technology and practice transformation to keep practices viable. “In 2015, family physicians must continue to manage their practices in a manner that satisfies our patients’ needs – and as insurance payments become increasingly tied to performance and patient outcomes, success will depend on family physician practices functioning as a team and transforming the structure of their practices to meet these demands. We expect to see continued practice consolidation, mergers, formulation of integrated networks, hospital acquisitions, new primary care models and direct contracting with employers who are trying to offer affordable health care benefits.”
Raymond J. Saputelli of the New Jersey Academy of Family Physicians.
John Sarno, president, Employers Association of New Jersey “I think 2015 will be a very dynamic year for healthcare, both nationally and in New Jersey. The federally facilitated healthcare marketplace (HealthCare.gov) is doing reasonably well and is building good enrollment in the individual market. SHOP (the small employer marketplace at HealthCare.gov) will remain limited in 2015, but small group rates will remain moderate. “However, in yet another bizarre twist in the short history of the Affordable Care Act, the U.S. Supreme Court has once again imposed itself into the health care market and will decide whether the federally facilitated Marketplace will remain viable. If the court
eliminates the subsidies available to individuals in New Jersey, the state will need to decide whether to operate its own exchange, thus setting up a struggle between the legislature and the governor over healthcare policy.
I think 2015 will be a very dynamic year for healthcare, both nationally and in New Jersey.
“But regardless of how the court decides, 2015 will be a year of innovation. Hospitals, providers and insurance companies will partner to offer a range of insurance options, including narrow network and ACO plans. Additionally, employers will continue offering healthcare to employees because of more choice and relatively lower premiums.”
Raymond Castro, senior policy analyst, New Jersey Policy Perspective In 2105, Castro is looking for greater cost transparency for consumers: the health care system is still the only place you go to purchase a service and have no idea how much you are going to be charged until after you have received the service. The state needs to do much more to reign in health care costs at all levels of the health care industry. It can start by prohibiting inappropriate charges for consumers who are treated by medical providers who take advantage of the out-ofnetwork rules.
— cont’d
January 2015 11
Linda Schwimmer, vice president, New Jersey Health Care Quality Institute “The ACA is under tremendous threat if the Supreme Court decides that subsidies can only be used in state run marketplaces. New Jersey has a federally run marketplace and over 82 percent of the plans purchased on it are paid with a subsidy. If the subsidy goes away – the marketplace and the law will have to be revamped. “The continued expansion of Medicaid and making sure that there is enough access to care is an important issue for us. The expansion of Medicaid in New Jersey has meant that 400,000 more people are now insured – which is good for their long term health, but we need to make sure that there are enough willing providers to care for people with Medicaid coverage. This challenge requires taking a hard look at how we reimburse for Medicaid and why is it so much lower than Medicare and commercial rates. “The “out of network” issue continues to harm consumers and needlessly add cost to the health care system. We expect the legislature and executive branch to finally address this issue with serious reform which will create more transparency around actual costs to consumers, control costs for the state-funded health benefits plans, and resolve an issue that has been brewing for the last eight years. “Finally, we expect to see more public reporting of quality measures as we move away from a “fee for service” focused health care system. The Leapfrog Group will be reporting
c-section and episiotomy rates by hospital this year. There will be reporting on surgery quality as well to support new payment models called “reference-based pricing.”
Mark Manigan, attorney and member of the health law practice group at BrachEichler “Consolidation will continue apace. Health systems and physician practices will continue to merge both horizontally (system to system, medical practice to medical practice) and vertically (under health systems) as health care providers position themselves for population health management and risk based contracting with payers. M&A activity will continue to be robust in the outpatient service provider market as well (ASCs, anesthesia, pain management and urgicare) as cash continues to flow to the consolidators from private equity and Wall Street. “We will start to see material transactions between insurance companies and health care providers that are not fee-forservice driven. Look for commercial transactions with shared savings components and elements of risk shifting. “Insurance companies will become more aggressive in insurance benefit product design with the goal of incentivizing folks to stay in-network. We will see more plans with high out-of-network deductibles and flat out caps on out-of-network benefits. We may also see insurance plans organize provider networks into tiers based on the cost or efficiency of care and attempt to direct patient traffic within the plan through premium pricing and cost sharing incentives.”
Medicare reveals timetable to base more payments on quality, not quantity By Beth Fitzgerald
M
edicare on Monday unveiled a major step toward transforming the government’s huge health care program for the elderly into a system that pays providers for the quality, rather than the quantity, of care they deliver.
Health and Human Services Secretary Sylvia M. Burwell announced a goal of tying 30 percent of traditional, or fee-forservice, Medicare payments to quality or value through alternative payment models, such as Accountable Care Organizations or bundled payment arrangements, by the end of 2016, and tying 50 percent of payments to these models by the end of 2018. HHS also set a goal of tying 85 percent of all traditional Medicare payments to quality or value by 2016 and 90 percent by 2018 through programs such as the Hospital Value Based Purchasing and the Hospital Readmissions Reduction Programs.
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HHS said this is the first time in the history of the Medicare program that HHS has set explicit goals for alternative payment models and value-based payments. Burwell announced the program in a meeting with nearly two dozen leaders representing consumers, insurers, providers, and business leaders. “Whether you are a patient, a provider, a business, a health plan or a taxpayer, it is in our common interest to build a health care system that delivers better care, spends health care dollars more wisely and results in healthier people. Today’s announcement is about improving the quality of care we receive when we are sick, while at the same time spending our health care dollars more wisely,” Burwell said. “We believe these goals can drive transformative change, help us manage and track progress and create accountability for measurable improvement.” Linda Schwimmer, vice president of the New Jersey Health Care Quality Institute, said the decision is not a surprise: “It’s been clear for the past few years that this was the direction Medicare was headed. “ New Jersey in recent years has launched more than a dozen Medicare ACOs, in which doctors and hospitals collaborate to improve quality and control costs, as well as other programs that partner with the government toward similar goals. Schwimmer said ACOs and related programs “are the building block moving toward this; this is where health care is going.” She said health care stakeholders in New Jersey “knew that, at any moment, the secretary of HHS could change Medicare to being based on these new models that are more focused on outcomes and value, and the sooner providers started converting such a system, the better, knowing that this is where things were going.” To make these goals scalable beyond Medicare, Burwell also announced the creation of a Health Care Payment Learning and Action Network. Through the Learning and Action Network, HHS will work with private payers, employers, consumers, providers, states and state Medicaid programs, as well as other partners, to expand alternative payment models into their programs. HHS will intensify its work with states and private payers to support adoption of alternative payment models through their own aligned work, sometimes even exceeding the goals set for Medicare. The network will hold its first meeting in March 2015, and more details will be announced in the near future. “We’re all partners in this effort focused on a shared goal. Ultimately, this is about improving the health of each person by making the best use of our resources for patient good. We’re on board, and we’re committed to changing how we pay for and deliver care to achieve better health,” Dr. Douglas E. Henley, executive vice president and chief executive officer of the American Academy of Family Physicians, said.
“Advancing a patient-centered health system requires a fundamental transformation in how we pay for and deliver care. Today’s announcement by Secretary Burwell is a major step forward in achieving that goal,” America’s Health Insurance Plans Chief Executive Karen Ignagni said. “Health plans have been on the forefront of implementing payment reforms in Medicare Advantage, Medicaid Managed Care and in the commercial marketplace. We are excited to bring these experiences and innovations to this new collaboration.” “Employers are increasingly taking steps to support the transition from payment based on volume to models of delivery and payment that promote value,” said Janet Marchibroda, health innovation director and executive director of the CEO Council on Health and Innovation at the Bipartisan Policy Center. “There is considerable bipartisan support for moving away from fee for service toward alternative payment models that reward value, improve outcomes and reduce costs. This transition requires action not only by the private sector, but also the public sector, which is why today’s announcement is significant.” “Today’s announcement will be remembered as a pivotal and transformative moment in making our health care system more patient- and family-centered,” said Debra L. Ness, president of the National Partnership for Women & Families. “This kind of payment reform will drive fundamental changes in how care is delivered, making the health care system more responsive to those it serves and improving care coordination and communication among patients, families and providers. It will give patients and families the information, tools and supports they need to make better decisions, use their health care dollars wisely and improve health outcomes.” Joel Cantor, director of the Rutgers Center for State Health Policy, said: “Results from early adopters of ACOs and other value models have been good, but it will be much harder to improve performance from those that have not yet built health information systems or taken the other steps needed to succeed under the alternative payment models. HHS is trying to send the signal to providers that the future of health care reimbursement is in value-based payment systems, and that they should invest in the systems necessary to succeed.” In 2011, Medicare made almost no payments to providers through alternative payment models, but today such payments represent approximately 20 percent of Medicare payments. The goals announced today represent a 50 percent increase by 2016. In n 2014, Medicare fee-for-service payments were $362 billion. HHS has already seen promising results on cost savings with alternative payment models, with combined total program savings of $417 million to Medicare due to existing ACO programs. HHS said various programs have helped reduce hospital readmissions in Medicare nearly 8 percent, or 150,000 fewer readmissions between January 2012 and December 2013. Medicare estimates that quality improvements have resulted in saving 50,000 lives and $12 billion in health spending from 2010 to 2013.
January 2015 13
Major providers, insurers plan aggressive push to new payment models By Melanie Evans
S
everal of the nation’s largest health systems and insurers are joining together in a new task force with the goal of shifting 75% of their business to contracts with incentives for quality and lower-cost healthcare. The Health Care Transformation Task Force includes some of the largest U.S. health systems, including Ascension, St. Louis, and Trinity Health, Livionia, Mich., and insurance giants Aetna and Health Care Service Corp. Employer Caesars Entertainment and the Pacific Business Group on Health also are involved. The task force members said they would reach their target by January 2020. Also in the task force are regional giants Partners HealthCare, Boston, and Advocate Health Care, Chicago. “We want to align the way we provide care and pay for care in order to achieve the triple aim outcomes,” Dr. Tim Ferris, Partners’ senior vice president for population health, said in a statement, referring to three widely cited goals of healthpolicy makers and industry initiatives: improved health, lower cost and a better patient experience. The group will seek to develop policy proposals and privatesector initiatives. Initial efforts will focus on accountable care, bundled payments and management of the cost and quality of care for high-cost patients, including those with multiple chronic conditions and near the end of their lives, according to the task force website. Task force members will seek to enter contracts that “suc-
cessfully incentivize and hold providers accountable for the total cost, patient experience and quality of care for a population of patients, either across an entire population over the course of a year or during a defined episode that spans multiple sites of care.” The group’s announcement comes days after federal health officials unveiled a plan to shift half of their spending not devoted to managed care—roughly $362 billion last year—into accountable care, bundled payments and other contracts with the potential for rewards or penalties based on quality performance and better cost control. The announcement Monday by HHS Secretary Sylvia Mathews Burwell won praise for its commitment to an overhaul of Medicare’s fee-for-service program. That program covers 70% of Medicare enrollees and pays hospitals and doctors for each test, visit and procedure performed. The industry and policymakers fault such a payment arrangement for creating incentives to treat patients without any consideration of whether medical care is needed. But the federal push to expand its use of new incentives for quality and efficiency also raised questions about whether such efforts will succeed. The evidence for accountable care and bundled payments is limited, experts said, and more work is needed to develop useful quality measures and financial incentives. Burwell also announced a Health Care Payment Learning & Action Network of private- and public-sector healthcare players to share information about payment initiatives.
Medicare penalties begin taking toll By Sabriya Rice More than three dozen hospitals across the U.S. will be penalized more than 3% on most of their CMS reimbursements in 2015, the first year in which the agency’s three Medicare quality and safety incentive programs will be in effect. According to a Modern Healthcare analysis of CMS data on penalties for fiscal 2015, when readmission, hospital-acquired condition and value-based purchasing rates are combined, two hospitals will have much of their Medicare payments docked over 4%. This includes a 4.44% reduction for the 180-bed Palisades Medical Center in North Bergen, N.J., and a 4.21% reduction for the 455-bed Pennsylvania Hospital in Philadelphia, one of the oldest hospitals in the U.S. (See list.)
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Dr. Patrick Brennan, chief medical officer and senior vice president at the University of Pennsylvania Health System, said Pennsylvania Hospital is addressing specific problems and expects to see improvements next year. The readmission penalty increased from 0.35% in 2014 to 3% in 2015 because of additional measures for hip and knee surgery being added by the CMS for fiscal 2015, he said. Readmission practice patterns for those procedures have been re-evaluated. The hospital also is addressing coding concerns that led to poor performance on patient-safety indicators. Palisades officials, representing the most penalized hospital in the nation, did not provide comment. But noticeable on the hospital’s home page is a link to a Joint Commission public notice that offers patients information on how to complain to the national accrediting body. The combined penalties or rewards were derived by combining the percentages for the three quality programs included in the Patient Protection and Affordable Care Act. In 2015, hospitals can be penalized for excessive 30-day readmissions up to 3% of revenue from base operating diagnostic-related group payments by the CMS. The value-based purchasing program rewards or penalizes hospitals up to 1.5% of Medicare revenue based on a suite of quality indicators. New this year is a 1% penalty on all Medicare revenue if a hospital falls into the bottom quartile in performance on hospital acquired conditions, or HACs, such as urinary catheter infections. The escalating penalties are drawing fire from advocates for teaching hospitals and critical-access hospitals, which are disproportionately represented among the worst-performing hospitals. The CMS programs need to be refined to ensure they are not creating additional hardships, said Dr. Atul Grover, the chief public policy officer for the American Association of Medical Colleges, which represents the nation’s academic medical community.
SEE HOW HOSPITALS PERFORMED Modern Healthcare has uploaded the new HAC and value-based purchasing data into an online database that is searchable by hospital name and location. AAMC members take on more complex cases and are more likely to report bad outcomes. “You may not be comparing the same types of patients and the same types of procedures across institutions,” Grover said. “We need to refine the measures so they are not creating adverse comparisons.” Academic medical centers were among the more heavily penalized hospitals in the nation, according to the Modern Healthcare analysis. The University of Colorado Hospital in Aurora will be docked 2.18% on much of its Medicare reimbursements; St. Peter’s University Hospital in New Brunswick, N.J., faces a combined 2.50% penalty; and Thomas Jefferson University Hospital in Philadelphia had a 3.01% reduction. Overall, 42 hospitals will face a combined penalty of 3% or higher on much of their Medicare revenue for fiscal 2015. Despite perceived flaws with CMS quality and safety incentive programs, hundreds of facilities are getting it right. They improved their performance from year to year and face low penalty rates. Nearly 800 of the nation’s hospitals face either no penalties or will be earning rewards based on their performance in the value-based purchasing program. Bucks County Specialty Hospital in Bensalem, Pa., for example, will see a fiscal 2015 reimbursement boost of 2.09% after earning the nation’s highest reward in the value-based purchasing program. The acute-care hospital did not see a 30-day readmission fine in 2013, 2014 or 2015, increased its value-based purchasing reward significantly between 2013 and 2015 and has no HAC penalty this year. Some hospital leaders warn that the combined cuts across all Medicare penalty programs may have a cascading effect on services and may actually lead to reduced quality. This will have a “significant impact on hospitals’ bottom lines and can lead to some very tough choices,” said Beth Feldpush, senior vice president of policy and advocacy for America’s Essential Hospitals. The 250-member national association, which represents the nation’s safety net hospitals and health systems, says the organization’s members are operating at a 0.4% loss on average, and when additional cuts are added, services aiding the community that are not typically reimbursed such as free clinics, language translations and transitional housing may be the first on the chopping block. Unless Congress reverses the programs—an unlikely event—higher penalties are expected in coming years. The combined financial impact is expected to be sizeable. By 2017, the combined penalties for HAC 30-day readmissions and value-based purchasing will put as much as 5.5% of inpatient Medicare payments at risk. January 2015 15
Federal health IT coordinator sets 2017 deadline for interoperability By Joseph Conn The federal health IT coordinator released a wide-ranging report Friday morning on how to improve interoperability in electronic health record systems. The report, “Connecting Health and Care for the Nation, A Shared Nationwide Interoperability Roadmap,” calls for most providers to be able to use their systems to send, receive and use “a common set of electronic clinical information. . . at the nationwide level by the end of 2017.” The common data set consists of about 20 basic elements, such as patient demographics, lab test results and identifiers for a patient’s care team members. The plan is open for public comment through April 3. Accompanying the 10-year interoperability plan is a separate, 13-page “advisory” to the health IT community on what the feds see as the best available healthcare information exchange standards and implementation specifications to facilitate health data information exchange. The ONC intends to keep the list updated periodically. Some health information is being exchanged among these EHR users, in regions, and among customers of the same EHR vendors, and through state-wide health information exchanges, the report said. These success stories should provide “best practice models we can look to where data and information is flowing,” said Dr. Karen DeSalvo, coordinator of the HHS Office of the National Coordinator for Health IT. But the agency also has heard from both insurers and providers that the level of health information exchange is insufficient for their needs, she said. Healthcare organizations wanting to exchange information have been hampered by a lack of consensus on which information exchange standards to use, how to configure computer systems to use them, and which rules and business practices to follow. “What we don’t see yet is a complete coalescing around the rules of the road” for a nationwide exchange network, DeSalvo said. The ONC’s interoperability roadmap calls for a public-private partnership to create a “governance framework” for health information exchange. It also calls for more work to be done developing and harmonizing interoperability standards “that will allow us to facilitate the sharing without a whole lot of extra effort,” she said. The plan also calls for both government and private sector players to provide additional incentives for interoperability – beyond those in the EHR incentive payment program. And it sees a need to better educate providers and their health information exchange partners on federal privacy and security rules, which the report says should enable data sharing, rather than inhibit it as is often the case now. The 2009 economic stimulus legislation that created the EHR incentive payment program, specifically ordered the ONC to “establish a governance mechanism for the nationwide health information network.” Since then, the agency has been under increasing criticism from members of Congress and professional groups about the lack of interoperability of EHRs despite the substantial public investment in them. Improving interoperability of health information is a critical prerequisite for providers seeking to create patient-centered medical homes, population-based care management systems and accountable care organizations as both government and private sector payment reforms shift from fee-for-service to performance-based payment models. On Monday, HHS Secretary Sylvia Mathews Burwell announced that by 2016 the CMS wants 30% of Medicare payments to be linked to these payment reform models, and 50% by 2018.
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Wednesday, a coalition of providers, insurers and employers pledged to have 75% of their members’ business switched to performance-based contracts by 2020. In 2013, six Republican senators chastised the ONC for multiple health IT program failings, including a “lack of a clear path toward interoperability.” That month, the ONC issued a formal “request for information,” about possible governance models for health information exchange, a move that was viewed fearfully by some healthcare IT players as a possible first step toward federal regulation of health information exchange. The ONC backed off in September in the face of industry pleadings to allow interoperability to develop, unregulated, through market-based approaches. Earlier this month, in a letter to DeSalvo, the American Medical Association and nearly three dozen other medical societies and associations took the ONC to task on its health IT program problems, including a lack of interoperability. “Ensuring electronic health information follows patients during transitions of care is one of the most sought after, yet the least successful exchange paradigms in health care today,” the AMA letter said. DeSalvo insists the ONC roadmap isn’t an attempt by the agency to become a national network regulator. A heading on a section of the roadmap refers to “non-governmental governance.” “We are not specifically calling for a new entity for nationwide governance,” DeSalvo said, but, “We still want to give guidance and a timeline” for meeting plan objectives. Veteran physician informaticist Dr. William Bria applauded the inclusion of priority use cases targeting electronic sharing of patient data with public health authorities and enabling patients to access to their own healthcare information, particularly on mobile devices. “It strikes me that it’s way past time to give the American public access to their own information and in a way they can actually use (it),” said Bria, president of the Association of Medical Directors of Information Systems. “They are the key customer that’s really been left. It’s overdue.”
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Prime wins conditional approval for Daughters takeover By Beth Kutscher
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alifornia Attorney General Kamala Harris gave the green light to Prime Healthcare Services’ $843 million takeover of six-hospital Daughters of Charity Health System but added what she described as “strong conditions” to preserve access to community health services. The conditions require Prime to continue operating four Daughters’ facilities as acute-care hospitals with emergency services over the next 10 years. Prime also would have to continue to participate in the state’s Medi-Cal program and maintain charity-care benefits at their historical levels. And the hospitals must provide “essential health services,” including reproductive healthcare services. The conditions also hold Prime to some of the promises it included in the deal terms, such as making $150 million in capital improvements over the next three years and maintaining pension obligations. Harris had been under pressure to block the deal from numerous elected officials in local and federal office. The influential Service Employees International Union-United Healthcare Workers West also turned up the heat with an advertising blitz. The SEIU in a statement called Harris’ conditions a “victory for protecting community health,” noting for instance that the condition requiring Prime to keep the hospitals open for 10 years is twice what Prime had originally committed to. “If Prime lives up to both the letter and spirit of the conditions placed on this sale, community healthcare and services for low-income families will be protected, but given our history with Prime, that’s a big if,” Dave Regan, president of SEIU-UHW, said in the statement. But in Santa Clara, County Executive Jeff Smith said the sale will be to the detriment of patients, even with the conditions imposed. He pointed to a San Bernardino court ruling this week that held one of Prime’s hospitals, Chino Valley Medical Center, in contempt for needlessly admitting patients through the emergency room. “The conditions don’t address the right people getting the right care at the right time,” Smith said. “I don’t think the attorney general could have put conditions to stop Prime from playing games.” The county is now looking at a number of options, including buying land currently owned by Daughters and setting up a competing hospital in the southern part of the county adjacent to where St. Louise Regional Hospital is located. The transaction is the largest ever reviewed by the California attorney general’s office, a news release noted. The deal, if completed, also will be the largest acquisition to date for Ontario, Calif.-based Prime, a system that has historically grown by adding one or two hospitals at a time. “Its size is challenging—and I do these things for challenges,” Prime’s CEO Dr. Prem Reddy said in an interview last November . “It best fits my mission of saving the hospital, saving lives and saving jobs.” In addition to approval from the attorney general, the deal requires approval from the Federal Trade Commission, the California Department of Public Health and the Vatican. The parties had been targeting a first quarter closing date. Daughters chose Prime in October from a field of four undisclosed suitors, one of which was a private equity firm. Daughters’ financial advisers understood the public relations and regulatory risks the deal could face, but no other bidder had Prime’s financial and operational wherewithal. 18 Affiliated Practice
The $843 million deal consists of a $394 million cash consideration and $449 million for the assumption of Daughters’ debt. Daughters disclosed in an earnings report this month that it is running low on cash and has been warning bondholders since last year that it might not be able to continue operating without becoming insolvent. It is down to just 12.4 days of cash on hand, according to the earnings report. During the November interview at Prime’s headquarters in Ontario, Calif., Reddy detailed the challenges Daughters is facing. The system is shouldering high salary and benefit costs of the Bay Area, many of its commercial contracts pay less than Medicare and its hospitals treat a high number of low-income patients with even lower paying Medi-Cal, he said. These factors have affected hospitals throughout the state to various degrees, which may have contributed to a narrow array of options for the struggling Catholic system. “None of the major health systems want to come to California,” Reddy said. “They believe the California market is challenging.”
Year-End Breach Notification By John E. Morrone, Esq. (a partner of the firm) and Arielle R. Simkins, Esq. (an associate of the firm)
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he Health Insurance Portability and Accountability Act of 1996 (“HIPAA”) requires every Covered Entity that knows or should know of a breach of Protected Health Information (“PHI”) to notify the individuals affected by the breach as well as report the incident to the Federal government. If 500 or more individuals are affected by a particular breach, HIPAA requires that the Secretary of the U.S. Department of Health and Human Services be notified as soon as possible, but in no case later than 60 days after discovery of the breach. In circumstances in which a breach affects less than 500 individuals, while the individual notification requirements remain the same, the Covered Entity is not immediately required to notify the Secretary. Instead, the Covered Entity must keep a detailed accounting of the breach and subsequently provide an annual report to the Secretary no later than 60 days after the end of the calendar year. Therefore, Covered Entities that have experienced a breach in 2014 are required to report to the Secretary by March 2, 2015. Failure to comply with HIPAA regulations may result in as much as $1,500,000.00 in civil penalties as well as exclusion from participation in Medicare. Frier Levitt assists clients with all aspects of HIPAA compliance, including breach notification and reporting to the Federal government
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