A History of Payment Models for Healthcare Jeff Cashman MS, DO - PowerPoint Presentation

A History of Payment Models for Healthcare Jeff Cashman MS, DO Associate Dean for 4 th Year Curriculum and Graduate Medical Education-Via College of Osteopathic Medicine Family Medicine Faculty at Spartanburg Regional Family Medicine Residency SCMA Bioethics Retreat

Objectives Understand the history of payment models in the United States healthcare system Determine ethical implications of the historical payment models Explore the pitfalls of previous payment models and how that can be applied to our current system/situation

Company/Person Customer Service or good

Hospital or Doctors Office Patient Service or Product Insurance Company

Hospital or Doctors Office Patient Service or Product Insurance Company Employer

Hospital or Doctors Office Patient Service or Product Insurance Company Other Payers/Patients

A Brief Introduction and Timelines

1800sFrom the Library of Congress ( Paying the Doctor in 18 th -Century Philadelphia ) Payments documented by William Shippen Jr. between 1775-1793 Many paid in cash, but was generally the wealthy and head of household (household at that time included family as well as apprentices, servants and slaves)If no cash to pay, documents show payment was made with: Coffee, Tea, Wine, BeerLengths of Muslin, Linen and calico; handkerchiefs, silk stockingsTablecloth, looking glasses, crockery and a tea tableAt times he was paid with items of uncertain value: a lottery ticket and a ‘bad painting’

Payments to Dr. ShippenOne patient paid £3.10 for his medical services and £350 for housing as he was not only a physician (a ‘Man-Midwifery’…OB-GYN) but also handled real estate transactions Some never paid and listed as ‘bankrupt’ or ‘gone’ These documents showed the different payments, but also how the poor were dependent on the goodwill of others Many times service was dependent on having someone being able to pay beforehand

Milestones of Hospitals in Healthcare (13)1820s: Almshouses/poorhouses developed to serve the poor. Provided food and shelter to treat the ill Pesthouses , operated by local governments, quarantined contagious people First hospitals were in big cities and were a refuge for the poor 1850s: A hospital system was developed, owned by physicians, but mostly unskilled workers 1890s: Patients went to hospitals when there was no other choiceBut referrals to doctors in hospitals start to create professional power1920s: Medical training improves and medical specialization startsAs well, increase in the economy

Milestones of Hospitals in Healthcare 1930s: physician owned hospitals are now owned by churches, government organizations or larger facilities 1970s: The first Patient Bill of Rights introduced to have patients represented in hospital care 1974: Certificate of Need (CON) introduced, states must have CON for federal funding 1980s: 85% of hospitals offer ambulatory surgery 1985: EMTALA enacted requiring hospitals to screen and stabilize all patients (regardless of ability to pay) 2002: the Joint Commission issued standards for consumer awareness

Definitions to Consider

Now we need to define some terms…Cost: this can be broken into 3 different areas: Provider cost: what it takes to deliver health care services Payer cost (and who is the payer?): the amount payed to providers for that service Patient cost: what is actually spent ‘out-of-pocket’ for the service May also have ‘Purchaser’: when a company pays for the insurance (payer) ‘Charge’ or ‘Price’: What the health care provider requests for a service or good (appears on the ‘medical bill’)Reimbursement: The payment made by a ‘payer’ to a ‘provider’Fee for service: paying the provider for a service deliveredPer Diem: payment for each day in the hospital Diagnosis-Related Groups (DRGs): paying for each episode of hospitalizationCapitation: paying a structured amount for each patient under the provider’s care*Adapted from AMA Journal of Ethics: Defining Costs, Charges and Reimbursement

Hospital or Doctors Office Patient Service or Product Insurance Company

ChargemasterHow do hospitals come up with costs Hard to determine costs such as ‘check-in cost’ as there are different amounts of labor for different processes (previously scheduled appendectomy v. emergency) Would need to track this over a long period of time due to variations in number of visits Most hospitals will develop a ‘ chargemaster ’ Itemized list of pricesOften these prices are set at levels well above the actual costWould be for negotiating power with insurance companyHowever, for ‘cash-pay’ patients, the charge will be what is listed on the chargemaster

Chargemaster Dept Code Charge Code Charge Description Price Rev CodeCPT 4C1.830830116252 Initial Assessment, 15min$44.590942 C1.830 830226254 Re-assessment, 15min $38.77 0942 C1.830 830581567 Group, 30min $21.24 0942 C1.830 830221684 Change in condition, 15min $30.33 0942 97803 C1.831 831654818 Chemo infusion, each additional hour $144.88 0300 C1.831 831481842 Chemotherapy inj , IV push , single unit $168.08 0333 95409 C1.831 831418278 Chemotherapy infusion, 1 hour $269.64 0335 96413 C2.042 042811825 Bilirubin, total, transcutaneous $17.56 0859 96415 C2.042 042251816 Pneumococcal vaccine admin $25.25 0771 96471 C2.042 042584349 Flu vaccine admin $23.13 0771 96471

Inpatient v. ObservationNow hospitalizations may be considered ‘observation’ if it does not meet a set of criteria to be considered an inpatient stay Easy to say if it is less than 2-midnights…certainly not that simple This causes many issues on the hospital side but also for the patient Patient will often pay a set deductible (around $1,200 for acute hospitalization) then Medicare will cover the rest, up to 60 days If patient goes to ER and has less than 2-midnight stay in hospital, may be considered ‘observation’ status This is good because costs can be less…right???? Well…copayment for this may be up to 20% of total charge

Diving in Deeper to the Factors Leading to Today’s Climate

Early Health Care Costs Healthcare was different in the early 1900s than today In the early 1900s care was mostly based on preventing illness by keeping clean, having a good diet and providing good nursing “The cost of health care treatment was considered a minor problem compared to the loss of wages due to sickness for most workers” (7) Things started to change in the 1920s Banting, Best, and Macleod discovered the active ingredient in insulin at the University of Toronto (8) Then Eli Lilly was able to produce large quantities of insulin

Medical Advances Change Healthcare CostsHospitals were a place for the people who could not pay for care or whose family could not care for them (just not much to be done) With the exception of smallpox, vaccines were mostly developed after WWII Hospitals were, generally, for chronically ill and indigent patients Often this was paid by charity Those who could afford the care, would receive it at home When aseptic procedures came into routine practice, surgical patients and acutely ill patients began to be treated in hospitals Hospitals started to charge patients for care

Growing Hospital CostsHospital costs rose from 7.6% of family medical bills in 1918 to 13% by 1929 Other healthcare costs were generally 2-3% of household income With continued increase in the use of hospitals (and increasing physician bills) the percentage, of household costs, also continued to increase Up to 40% of total family medical cost by 1934 Americans started to look for tax-supported, government run health care schemes Progressive Party had national health insurance on its party platform in 1912

The role of the AMA Founded in 1847, the American Medical Association has worked on behalf of physicians in many aspects Litigation protection Improving hospital privilege processing Organizing county medical societies Raising member incomeMembership drives increased membership from 10% of physicians to 50% from 1900-1925 Developed standards in medical education and licensing This increased costs of healthcareUnsure if it increased consumer welfare (or if it was desired by consumers)With these measures and the Flexner report, the number of medical schools decreased The surviving institutions were mostly associated with hospitals and universitiesPhysicians per capita dropped from 157/100k in 1900 to 125/100k in 1930

The role of the AMA AMA has played a strong role in many steps of the health care payment changes In 1927 paying for modern medicine was the top item on the agenda at the AMA convention Majority believed in group practices centered around hospitals However service delivery, in this model, was based on previous good results from a small number of practitioners AMA and Dr. William Mayo believed in moving away from group care Encouraged credentialing and licensing Thought to improve care and decrease cost, however these requirements (never proven to help care) has most certainly led to increased costs

Insurance starts to develop Estimated health payments in 1929: $3,649 million $2,930 million were direct payments (out-of-pocket) $495 million paid by public sources $217 million from philanthropy Most of the ‘sickness insurance’ groups were not related to work: Loyal order of Moose, Knights and Ladies of Security, etc… These organizations would contract with physiciansIn late 1800s, 1/3 to 1/2 of ethnic minorities in southern and eastern cities were membersIn 1888 in New Orleans, 88% of entire population was covered by prepaid ‘lodge medicine’Many adult males were members of fraternal societies that provided services including: Orphanages, hospitals, homes for the elderly and scholarship programsHowever, tied insurance to the working male of the family

Original Insurance? Fraternal societies were a main source for ‘sickness insurance’ Had home visiting committees to uncover false claims Behavioral requirements: “members receiving benefits could not drink or gamble and in some cases were not allowed to be away from their residence after dark.” Medical societies started to pressure licensing authorities to deny physicians who had lodge contracts Baylor Hospital Insurance: developed at the end of the 1920s Dallas teachers arranged for Baylor Hospital to provide 21 days of hospitalization $6.00 yearly payment in return

The Baylor Hospital Plan of 1929Allowed 21 days of hospitalization Initially developed as a way to ensure people paid their bills The ‘Sickness insurance’ was set up for workers (teachers) so there was a healthier population Had to be well enough to work Next, Los Angeles Department of Water and Power provided health care to its employees and dependents (1929) By mid 1930s other associations joined and covered over 37,000 people Then…the Great Depression

The Great DepressionHospitals, among many others, were hit hard Sought ways to ensure bills were paid A year after the crash of 1929, hospital receipts per person fell from $236.12 to $59.26 89% of charity care beds were filled Private hospitals reduced to 62% capacity So pre-paid health plans allowed hospitals to pay support and staff American Hospital Association supported and marketed prepaid plans to ‘relieve hospitals from financial embarrassment and disaster’

Birth of Blue Cross Prepaid plans from each hospital generated a lot of competition Community hospitals started to organize together to offer network options, reducing competition These community hospital networks joined together with the American Hospital Association In 1939 the AHA adopted the ‘Blue Cross’ name and logo as a symbol to show the plans offered met certain standards Blue Cross was not seen as insurance because owned by hospitals Exempt from state insurance requirements and were non-profitSaved 2%-3% on taxes

Birth of Blue Shield Blue Cross was beneficial because of the legislation with tax relief Physicians feared the Blue Cross style would cause hospitals to expand to prepaid physician services In 1939 the first prepaid physician service plan started in California The AMA and state societies encouraged other similar plans In 1946 these organizations affiliated to form Blue Shield Net revenues (premiums minus benefit payments) were less than 5% of total premiums2-3% tax decrease is equal to about 50-60% of net revenuesMade it challenging for private insurance to offer similar style of plan to Blue Cross Blue ShieldNow, most all plans must be a hospital-favored plan Since all services are paid for by a third party (hospitals are able to negotiate costs)**Decreases patient incentives to monitor costs

The Impact of ‘The Blues’ 1939 only 6% of the population had a form of hospitalization insurance This increased to 12.4% by 1941 51% of this was through Blue Cross 33% had individual policies from insurance companies 12-14% still had plans such as the ‘lodge plans’ discussed earlierBy 1945, 23% of the population had insurance 59% through Blue Cross Blue Shield plansWith the growth of the economy in the 1950s, the percentage of Americans covered increased and the proportion of Blue Cross Blue Shield decreasedStabilized since the 1970s: About 86% of the population with insurance 46% being covered by Blue Cross Blue Shield

Payment for ‘Everything’Initially, when the concern for Blue Cross Blue Shield was to pay its members, the plans covered ALL costs Including routine and more-easily affordable services Free from direct financial responsibility, doctors and patients could command whatever medical service they wanted Payments were, mostly, from other people’s money People who used little medical care paid the same as those who used a lot

Payment Models of “The Blues”Per Diem Formula: (Total costs of the hospital/total patient days) X fraction of Blue Cross patients Department Model: Hospital Department cost X patients who were covered by Blue Cross and used the department Combination Method: Per Diem Cost of routine services of % patient days from Blue Cross patients ADDED to the Blue Cross % of ancillary services

A Major Problem!!! The three payment models do not create incentives All hospital costs should be paid whether or not they were efficient So a reduction in cost by the hospital (or increase in efficiency) reduced the amount of revenue collected by the hospital This allowed hospitals to manipulate prices so payments from private insurance would subsidize care to uninsured By 1980 Hospitals had no incentives to: Minimize costsDetermine actual costsControl capacity expansionsSpecialize in services in which the hospital may be the low cost providerMinimize patient stays

A Detour for a second….This is not a talk about the best plan or best option for insurance, but I want to take a minute to consider the payment models we have now An example from the Wisconsin Policy Research Institute HOMEOWNER INSURANCE

Homeowner Insurance ExampleThe Homeowner purchases insurance His or her house burns down….

Homeowner Insurance ExampleHomeowner contacts insurance company, determines the amount owed by the insurance company, and is paid Homeowner hires who is needed to repair his or her home

Homeowner Insurance Example In this scenario, the insurance company does two things: Charges the homeowner a premium based on the likelihood that he or she will incur a loss Maintains assets and reserves sufficient to pay for expected losses

Comparing Homeowners to Healthcare Homeowner may have costs for years, but the insurance company does not need to have continued involvement (pays a lump sum) The ability to pay for repairs is not contingent on continued payment of premiums while rebuilding Lump sum payment gives the homeowner incentive to find contractors who will offer a good value Compare this to the medical insurance model (the Blues) The company reimburses those providing the service Instead of reimbursing the person/group paying for the policy or receiving the health careNo reserves are created from past premium income to pay lossesThe following year’s premiums remain, roughly, expected total costs of services divided by total number of membersAn insurer is only liable for continued payments if the insured continues to be covered (often by an employer) and pay premiums

How would it look if it were the other way? Each contractor would submit its bill to insurer as the house was being rebuilt All insured homeowners would have premiums increased to bear the additional costs Costs would be whatever the insured and his contractors determined they should be (limited by maximum amount in policy) Payments would be what the insurance company determines If homeowner becomes unemployed, stops paying premium, or changes jobs; the insurer would stop paying for reconstruction

Back to the development of health payment system

The Rise in Employer Provided Group Insurance Many consider the detachment of patients with cost of medicine the chief reason hospital costs skyrocketed after World War II Following the Blue Cross example, many other insurance companies realized working through employers was a good model with lower risk The 1942 Stabilization Act: Placed price controls on employers by limiting employee wage increases Allowed employers to offer health insurance as a pre-tax benefit This became a way for wealthy companies (many more after the war) to make tax-free packages that covered the most trivial medical expense1951: 100,000 employees (and dependents) covered by major medical plans1960: Major medical covered 32 million people1986: This number increased to 156 million

Social Security Act1935 Franklin Roosevelt signed the “Second New Deal” Groundwork for national welfare system Mostly providing for the elderly, unemployed and children Has been amended multiple times, most notably: Title XVIII: established Medicare In order to implement Medicare, social security administration changed to Bureau of Health Insurance Develops health insurance policyTitle XIX: established MedicaidSocial Security Administration becomes independent from Department of Health and Human Services

MedicareTeddy Roosevelt had national insurance on his platform in 1912 Unsuccessful in moving through congress Not much push until Harry Truman in 1945 Covering doctor visits, hospital visits, laboratory work, dental and nursing care Bills were not passed and the plan morphed into coverage for elderly, not all Kennedy was unsuccessful although, in 1960s, 56% of Americans over age 65 did not have insurance 1965 Lyndon Johnson signed Medicare into lawHarry Truman received the first Medicare cardBudget of $10 billion and 19 million Americans signed up1972 Richard Nixon signed first major changes Expanded Medicare for long-term disability and patients with End-Stage Renal Disease

MedicareHome health coverage and Hospice were added as benefits in the 1980s Also attempts to have caps on out-of-pocket costs which have been repealed 1988: Medicare Catastrophic Coverage Act Creates a limit to Medicare’s out-of-pocket expense (for Medicare Part A & B) However, this was appealed a year later after complaints from senior groups about higher premiums Still no cap on out-of-pocket expenses for Medicare Part A & Part B States must buy-in to Medicare system (using Medicaid funds) to offset costsQualified Medicare Beneficiaries (in 2015 there were 7.2 QMBs)Similar programs through the 1990s were developed to help beneficiaries cover costsMedicare Part C: Medicare Advantage Plans Gave the option of Private Medicare options (and Medicare HMOs)

MedicareIn the 2000s patients with ALS could have immediate coverage (regardless of age) If approved for Social Security Disability Income 2003: Medicare Prescription Drug Improvement and Modernization Act Added optional prescription drug benefits (Medicare Part D) Only provided by private insurers (prior to this 25% did not have drug coverage) 2015: Medicare and CHIP Reauthorization Act Established a way for CMS to change the way Medicare pays physiciansMoving towards “value and quality” rather than just the number of servicesACA also worked to decrease out-of-pocket costs for drugs (closing the ‘donut hole’)

MedicaidPart of ‘Title XIX’ of the Social Security Act in 1965 Contrary to Medicare (federally funded), Medicaid is a joint state-federal program States receive federal assistance in funding care to federally recognized low-income individuals, and families Must care for a federally designated group, but also state-selected recipients Original focus was to provide acute care for public assistance recipients Has now become the primary funding for long-term services for disabled 1972: Addition of the Supplemental Security Income (SSI)Income assistance for people with disabilitiesMedicaid eligibility linked with SSI eligibility

Medicaid 1980s saw the addition of low-income pregnant females and children who do not receive public assistance payments Creation of Disproportionate Share Hospital (DSH) payments Additional funding for hospitals with large numbers of Medicaid and low-income patients 1990s: Personal Responsibility and Work Opportunities Act of 1996 Increased eligibility for legal immigrants Eligibility for Medicaid no longer tied to receipt of public assistance cash funds 1997: State Children’s Health Insurance Program developedOffered states more funding for children in low income householdsMajority of recipients using Managed Care programs This has significantly changed what services are offered by Medicaid programs

Children’s Health Insurance Program (CHIP)1967: Early and Periodic Screening, Diagnosis and Treatment (EPSDT) Comprehensive health benefit for all children Balanced Budget Act of 1997 created Children's Health Insurance Program Federally matched funds for states to provide care for children Qualify if family income is too high for Medicaid but not qualifying for private coverage All states have increased children’s coverage through CHIP Most all cover up to 200% federal poverty level

The Employee Retirement Income Security Act of 1974 (ERISA) Set a standard for pension plans (including health and life insurance) For any employer who provides benefits Only affects insurance plans offered by employers (not privately purchased plans) Does not require an employer to offer benefits, but regulates benefits if done However, this has prevented some states from implementing health care financing reform ERISA will preempt the changes proposed by states

Disproportionate Share Hospital PaymentsPrior to the Disproportionate Share , Medicaid used ‘reasonable costs’ standards and allowed states to set reimbursement standards within the Medicaid program (20) 1981 Disproportionate Share Hospital Program (DSH) was introduced To help hospitals who provided large amounts of uncompensated care (for uninsured or underinsured) Was not commonly used until 1990s when incentives were added (and loopholes were found) States now create eligibility criteria, however, a hospital must have a significantly higher than average Medicaid inpatients (compared in state) Must also have 2 OB-GYNs on service if offering obstetrics Covers acute care and psychiatric hospitals/facilitiesDSH allotments to South Carolina in 2014 was $349,269,075

Disproportionate Share Hospital Payments The Affordable Care Act was intended to reduce the uninsured and underinsured, therefore, reducing the need for DSH payments Reductions of up to $4 billion per year were scheduled for 2014-2020 (incremental increase in the reduction of payments) Delays in the reductions were put in place in 2012 Some problems have arisen with DSH payments Does not account for number of uninsured patients (looks at Medicaid) Does not account for the outpatient care providedMedicaid expansion (and lack thereof) has also created problemsJanuary of 2019: Medicaid and CHIP Payment Advisory Committee voted 16-1 to have funding cuts to hospitals with have a high number of uninsured patients but has not taken a position on DSH

Patient Protection and Affordable Care ActSigned by Barack Obama in 2010 Prohibits insurance companies from denying or charging more based on individual’s health status Expanded Medicaid Allowed subsidies for insurance purchased through state marketplaces Expanded Medicare drug benefits (estimated 3.6 million saved 2.1 billion) Health Insurance Marketplace opened for the first time in 2013 Estimated 8 million people signed up for insuranceIn 2014 allowed states to provide Medicaid to individuals under 65 who are under the 133% Federal Poverty Level

Another point to discuss…Adapted from the Wisconsin Policy Research Institute Medicare decreased out of pocket costs for medical care By taxpayers paying for the care of the elderly Medicare creates a shift in costs Patients who utilize the most services, or costs, (the top quartile) have an average of $1,2000 less in out of pocket costs These costs shift to the people paying into the system Therefore people are able to save less (not suggesting this happens across the board) Younger workforce has less money to save (therefore could become more reliant on Medicare later in life)

And another argument… Again, I am just bringing up points to discuss (also from Wisconsin Policy Research Institute) The US spends more on healthcare than other country (15% of GDP versus 11.1% for Germany and 9.9% for Canada for this example) However, the GDP is 23% higher than in Canada and 36% higher than Germany Wealthier spend more money on everything (travel, entertainment, etc…) US certainly spends more than needed on healthcare However, part is because there is more money to spend and people are willing to spend to live longer and healthierSimilarly, US spends much more on education vs. any other countrySo could the argument be made that we also spend too much on education?

Back to the Discussion….

Certificate of Need Laws In the 1970s, in an effort to control costs and decrease wasteful spending, the federal government passed legislation giving states the power to veto private hospital construction and the power to veto expensive medical equipment (CT and MRI) In order to protect patients who can not shop around for cost savings CON was not intended to block change, rather create evaluation for need Regulation to make sure the medical facilities and equipment are actually needed Idea that if you do not have enough utilization, costs have to increase, however: Advanced diagnostics could reduce need for exploratory surgeries that often lead to much higher costsCON may divert the advancement of medical equipment to larger hospitals who have more resources (for the paperwork and approval if nothing else)Created protected markets as well 1987 CON laws were repealed, but 35 states continue to have CON lawsIncluding South Carolina

The role of Diagnosis Related GroupsIn 1983, Medicare developed Diagnosis Related Groups (DRGs) Each patient case would fall into one of the 467 diagnosis-related groups Hospitals would be paid a flat fee for whichever DRG was claimed DRG was paid regardless of the actual amount of medical care consumed Positives would be that they would make hospitals more efficient Concern that hospitals would see sicker patients as ‘liabilities’ A move to discharge patients ‘quicker but sicker’ Often D/C to rehab or nursing homes who were not under the same payment systemAs well, physicians and hospitals learn how to ‘game the system’Mostly by documenting diagnoses with higher reimbursement

The role of Diagnosis Related GroupsNew England Journal of Medicine study in 1988 by Fitzgeral , Moore and Dittus studied the payment system in hip fracture cases (9) Study from 1981 to 1986 reviewed length of hospitalization for elderly patients after a hip fractureLength of hospitalization decreased from 21.9 days to 12.6 days Maximum distance walked before discharge fell from 93’ to 38’ Proportion of patients discharged to nursing homes increased from 38% to 60%Proportion of patients who remained in a nursing home one year later rose from 9% to 33%1990 study showed a rise in patients discharged who were deemed ‘unstable’ (10)Increase from 10% to 15% after implementation of prospective payment model Leading to a higher mortality rate 16% versus 10%

The role of Diagnosis Related GroupsProspective payment models decreased hospital use, but may have increased overall costs (11) Patients admitted were much sicker than prior to prospective payment system Odd since it would make sense that hospitals would take healthier patients Possibly due to higher readmission rates seen after the implementation Prospective payment systems were extended to physicians services in 1992-1996 Have since been extended to skilled nursing facilities, inpatient rehab and home health services Since those implementations, higher rates of patients discharged from in-patient therapy with ‘less than adequate functional skills’ (12) In 1996, Medicare adjusted its DRG to adjust for severity of illness All Patient Refined Diagnosis Related Groups (APR-DRGs)

The move to quality measures When consumers seek to purchase goods or services, they will seek expert opinion on who is the ‘best’ In medicine, this is often a physician suggesting another physician (referrals) Patients may move to a different physician (second opinions) Hospitals were the main ‘checks’ on the physician (denying privileges) Professional societies determined the ‘standard of clinical treatment’ Managed care started to change this processInsurers could control physician choice (backed by ‘clinical pathways’)Institute of Medicine published To Err Is Human in 2000“medical injuries account for between 48,000 and 98,000 deaths per year in the United States…ahead of breast cancer, AIDS or motor vehicle accidents” Those numbers have since been disputed (even the author states the incidence does not account for whether or not the deaths were medical error)Never the less, it was the impetus for the movement to ‘Quality Measures’

Quality MeasuresMuch concern has been brought about the use of quality measures For example: Medicare uses ‘resident falls’ as indicator of nursing home quality Nursing homes had an aggressive response, even to the point of not allowing residents to get up without supervision Due to the quality measure, ambulation is less, which leads to other risks Physicians have complained about the increase in computerized data entry A study was done in Pittsburgh after the implementation of computerized physician order entry system (CPOES) Increase in mortality (from 2.8% to 6.8%) among pediatric cases transferred to tertiary care hospital (15)As well, much literature shown in JAMA documenting the role of CPOES in medication errors (16)

Quality MeasuresMajor concerns about quality measures Do they have any relation to health outcomes that matter to an individual Studies in multiple journals question the ability to apply quality measures to patient care One JAMA article (17) tried to apply clinical practice guidelines to a 75 year old female with 5 chronic conditions Found that existing quality recommendations were not possible in real patients Fear that physicians will not treat patients with multiple comorbidities Or dismissing patients who are not compliant (or do not improve)Study in NY showed more referrals of sicker patients after quality measures implemented (good or bad?)More referred out from NY, but more procedures done on comparable hospital in Michigan (In study completed after implementation of quality measures in NY) Can conclude Michigan has sicker patients, but more die of heart attack in NY (18)

A brief history of managed care Can be tracked back to 1929 with a health cooperative for farmers (19) Same year, two California physicians set up similar plan with employees of a water company Many plans developed from 1930-1960 Met with some opposition from medical establishment, but overall attracted a lot of enrollees Now thought of as Health Maintenance Organizations (there are other models)Health Maintenance Organization Act of 1973Established to restrain costs (and to oppose universal health care)Overrode state laws restricting HMOsRequired employers with more than 25 employees to offer an HMO (if giving insurance)

A brief history of managed care1972 Medicare allowed payments for ambulatory care Increased the number of outpatient clinics (200 in 1983 to 1,500 in 1991) Medicare then implemented prospective payments as discussed earlier By 1993, majority of Americans with health care were in HMOs Then denials and disallowances became an issue States imposed laws to make managed care standards (over 900 state laws governing managed care practices) Continues to evolve and expand, but overall, appears to decrease costs But does it create quality care and is it the best way to contain costs?

EMTALA1986 Emergency Medical Treatment and Active Labor Act Created as part of the Consolidated Omnibus Budget Reconciliation Act Any hospital receiving Medicare must offer a Medical Screening Exam to anyone seeking treatment Regardless of insurance, citizenship status, ability to pay or any other factor Must stabilize any patient needing emergency services The cost of emergency care, when required by EMTALA, is not funded by the federal government CMS suggests 55% of emergency care goes uncompensatedHas improved access to services for individuals without insuranceUnfunded care continues to increase (38.3 billion in 2016, up from 35.7 billion in 2017)

So…What can be done?

What can be done?Many options, focus on other talks this weekend.Electronic Health Record can show prices for various services Many feel this just becomes more ‘white noise’ and is ignored Recent studies, however, suggest it may help Johns Hopkins study shows displaying prices led to significant decrease in cost (3) Displaying $-$$$ for antibiotics led to a decrease in prescriptions for high cost antibiotics (4) Asking a patient if he or she can pay! (Communication!!!!) Has been shown to help identify patients who are at risk for non-adherence (5) and more likely switch patients to a less-expensive alternative (6)

Health Savings AccountsAnother option proposed by the Wisconsin Policy Research Institute Widespread use of Health Savings Accounts and High Deductible Health Plans A very small proportion of population has substantial medical expenses Assumption most can cover smaller medical bills Physicians often offer discounts to cash paying patients and “cash-pay primary care” practices This also will lower cost for physicians (not paying for staffing to handle insurance) Insurers will have less claims (likely lowering claims expense)If a family saves money in HSA, the amount of cash on-hand can increaseEx: family with $5,200 deductible for all care and health expenses of $2,100 per yearPlaces $5,200 in HSA; spends $2,100 on care and saves $2,100 Would have balance of $100,000 after 30 years (using 3% interest) to fund long-term care and buy insurance to handle medical emergenciesEven if family spent $5,200 per year, would be better off because of lower premium of high deductible insurance

Consumer-Directed Care 2002 study in Colorado to evaluate consumer-directed care 146 severely disabled Medicaid patients Agencies bill directly to Medicaid Patients never saw the bill (or checked for errors) nor had control of who gave care in home Patients participating in the pilot were given a budget for home health care Also given power to hire their own aidesAverage monthly spending dropped by 21% ($3,925 to $3,131)Care was deemed better, instances of abandonment dropped and less number of thefts by caregivers Patients split the savings 50/50 with the state (allowing for more resources)Humana and Aetna have had similar studies with many improvements Humana (4,800 employees) saw a 2.1 million in savings from decreased claimsAdmissions fell by 14.4% (while Louisville admissions increased by 2%)Outpatient services were unchanged (greater Louisville market saw an 8.2% increase)Employees actually had more physician office visits and more prescriptions than overall marketEmployee out of pocket costs, during this time, rose from 20.2% to 21.9% Aetna saw a 16% reduction in ER visits with no change in health status for the group of 49,000 employees

One Article to Point Out (great resource)Originally published in 2006 by the Wisconsin Policy Research Institute The History of Health Care Costs and Health Insurance Written by Linda Gorman, Ph.D. I used this for a stepping off point for many discussions and slides

Questions?

Works Cited https://journalofethics.ama-assn.org/article/challenge-understanding-health-care-costs-and-charges/2015-11 Hsia RY, Akosa Antwi Y, Nath JP. Variation in charges for 10 common blood tests in California hospitals: a cross-sectional analysis. BMJ Open. 2014;4:e005482Feldman LS, Shihab HM, Thiemann D, et al. Impact of providing fee data on laboratory test ordering: a controlled clinical trial.  JAMA Intern Med. 2013;173(10):903-908.Newman KL, Varkey J, Rykowski J, Mohan AV. Yelp for prescribers: a quasi-experimental study of providing antibiotic cost data and prescription of high-cost antibiotics in an academic and tertiary care hospital.  J Gen Intern Med. 2015;30(8):1140-1146Kumar R, Farnan JN, Levy A, Shah N, Arora V. GOTMeDS? Designing and piloting an interactive module for trainees on reducing drug costs. Poster presented at: 36th Annual Meeting of the Society of General Internal Medicine; April 25-27, 2013; Denver, CO Wilson IB, Schoen C, Neuman P, et al. Physician-patient communication about prescription medication nonadherence : a 50-state study of America’s seniors.  J Gen Intern Med . 2007;22(1):6-12 Paul Starr. 1982. The Social Transformation of American Medicine . New York: Basic Books, P. 258. Quoted in Gred Scandlen, 2003. 100 Years of Market Distortions , p. 3Gorman, Linda. The History of Health Care Costs and Health Insurance. Wisconsin Policy Research Institute, Inc. October 2006J.F. Fitzgerald, P.S. Moore, and R. S. Dittus. November 24, 1988. “The Care of Elderly Patients with Hip Fracture. Changes Since Implementation of the Prospective Payment System.” New England Journal of Medicine , 320, 13, pp. 871-2 J. Kosecoff et al. October 17, 1990. “Prospective Payment System and Impairment at Discharge The ‘quicker-and-sicker’ Story Revisited.” JAMA , 264, 15, 1995-6 Emmett B. Keeler et al. October 17, 1990. “Changes in Sickness at Admission Following the Introduction of the Prospective Payment System,” JAMA , 264, 15, P. 1962 T.B. Frymark and R.C. Mullen. January 2005. “Influence fo the Prospective Payment System on Speech-Language Pathology Services,” American Journal of Physical Medicine and Rehabilitation, 84, 1, 12-21History of the US Healthcare System, Chapter 1. http://samples.jbpub.com/9781284043761/Chapter1.pdf https://www.cms.gov/About-CMS/Agency-Information/History/Downloads/Medicare-and-Medicaid-Milestones-1937-2015.pdf Y. Y. Han et al. February 2006. “Unexpected increased mortality after implementation of a commercially sold computerized physician ordering system,” Pediatrics , 11,2,594 Ross Koppel et al. March 9, 2005. “Role of Computerized Physician Order Entry Systems in Facilitation Medication Errors,” JAMA , 293, 10, 1197-1203 Boyd et al. 2005. “Clinical Practice Guidelines and Quality of Care for Older Patients with Multiple Comorbid Diseases,” JAMA , 294, 716-724 N.A. Omoigui et al. 1996. “Outmigration for coronary bypass surgery in an era of public dissemination of clinical outcomes,” Circulation , 93, 27-33 https://www.ncd.gov/policy/appendix-b-brief-history-managed-care https://www.americanactionforum.org/research/primer-the-disproportionate-share-hospital-dsh-program/