HOSPITAL REIMBURSEMENT—THROUGH THE LOOKING GLASS



Deciphering hospitals bills can drive
people a bit bananas--even those who
understand how the healthcare
system works.



When we orient new hospital board members, all of whom are bright, capable individuals, often with lots of business experience, they are usually amazed at the complexity of hospital reimbursement or payment systems. They are accustomed to the way the majority of businesses operate:  goods or services are provided; a bill is generated reflecting certain fixed prices; the customer then pays as invoiced. That’s what most of us experience on a daily basis. I go to the grocery store to buy bananas, the checkout clerk weighs them and translates the price per pound into a price for the bunch, and I pay that amount. I should also mention that if I have forgotten my wallet, I can’t take home the bananas. The store has no obligation to meet my need for bananas, and even though I go to the same local grocery store all the time, they haven’t chosen to extend me credit.

Contrast the transaction that takes places for my purchase of bananas to what happens during a visit to the Emergency Department at South County Hospital or virtually any hospital in the country. The patient arrives and receives a medical assessment before there is any discussion of the ability to pay for services. Our obligation, consistent with our mission, is to address the patient’s chief complaint and ask questions about how he or she will pay for the service later. At some point during the stay there is a conversation about whether the patient has insurance. If so, we immediately extend “credit” even though we aren’t sure the insurer is obligated to pay and, in many cases, we don’t even know how much the hospital will be paid for the service. If we know the patient’s insurance requires a co-pay (a fixed amount the patient is obligated to pay for a given service), we attempt to collect it at the end of the visit. If the person has forgotten to bring cash, checkbook, or credit card, we agree to send a bill. (We hope they agree to pay us.)

At this point the process gets kind of complicated. The patient’s visit can involve a myriad of services in addition to the doctor’s assessment and treatment plan. Depending on the complexity of the presenting problem, a dozen laboratory tests, one or two imaging exams (X-ray, CT, MRI), and the administration of intravenous drugs. The charges (prices) for all those services is entered into the hospital’s billing system. The charges, however, have little or no bearing on what the hospital will eventually be paid for the emergency visit. In most cases, they don’t even relate to how much the service cost us to deliver. Nonetheless, the hospital is required to assign a unique code or identifier to each service, used by most insurers—the federal government for Medicare and the state government for Medicaid. (One of the challenges is meeting the specific requirements of each insurer or government payer. Sometimes it feels like they’ve made it complicated so they can find an excuse to delay payment…)

Once all the charges are assembled, the hospital submits a claim to the insurer or government payer. For people without insurance, a traditional bill is sent with each of the itemized charges, similar to your grocery receipt but usually more difficult to understand. The commercial insurers, assuming the claim is properly completed and the patient’s coverage is verified, then pays the “allowable amount” less whatever the patient is obligated to pay. The allowable amount can be anywhere from 10 to 70 percent of the charge and is based on what each hospital negotiates with each insurer. It is not unusual to have very different payment rates for the same service from different insurers. Also, rates of payment vary significantly from one hospital to another for the same service. A few years ago, the Boston Globe published a series of articles that showed some hospitals receiving 100 percent more than others from an insurance company for the exact same procedure or diagnostic imaging exam. Most insurers prohibit hospitals from disclosing what they are paid for a given service. The insurers have defended the lack of transparency whenever hospitals have protested; they do not want to be pressured to reimburse all hospitals at the highest rate for any given service. The government payers start with the same basic rate for all services, but adjust their payment to each hospital based on whether the hospital is involved in graduate medical education and the relative wages in a given geographic area. These adjustments have been under perpetual study ever since Medicare’s inception in 1965.

Does all of this sound confusing? It should. Hospitals employ reimbursement specialists to negotiate better rates and to maximize payment from insurers and government agencies. Insurers employ adjusters to find problems with claims, which often delays payment. The government employs contractors who audit hospital payments and are paid a percentage of the amount they are able to take back from hospitals because they didn’t comply with the ever-changing rules. The whole process is expensive and clearly does not add value to patient care. I often marvel that I can go anywhere in the world and pay for something with my American Express card, but a medical insurance card doesn’t even have a magnetic strip to provide our hospital system with demographic information. I’m hoping this system of payment for healthcare can be simplified during my lifetime.

I look forward to your comments. --Lou Giancola

THE CRITICAL ROLE OF “CULTURE” IN QUALITY AND PATIENT SAFETY

Dr. Lucien Leape and his colleagues, in the July issue of Academic Medicine, decry the slow pace of improvements in patient safety in our healthcare system. After considering the various causes, they conclude “that the fundamental cause of our slow progress is not lack of know-how or resources but a dysfunctional culture that resists change.” The authors delve into the different forms of disrespect that negatively affect the culture of healthcare organizations, resulting in conditions that threaten patient safety. Although the article draws many of its examples from academic institutions, I believe the underlying theme of the importance of culture on patient safety and quality is relevant to all provider organizations, large or small, academic or community-based. I have spent more than 40 years in healthcare, mostly in leadership positions. I know how my own behavior has contributed to a positive environment that promotes teamwork and motivates individuals to focus on patient safety and how, more times than I care to admit, it has had the opposite effect.

.

Aretha Franklin singing her iconic hit,

"Respect," -- a sentiment that fosters a

culture of patient safety and quality care.

As I reflect on my experience, I know that many people in healthcare are suspicious of leadership and tend to think of us as primarily focused on financial outcomes. They think that we have a different value system. They see themselves as genuinely caring about the patients and perceive that leadership is focused on productivity and the bottom line. That disconnect can lead to a sense that people’s contributions to the care of patients are not respected or valued. This feeling can be exacerbated when those departments that make greater contributions to the financial well-being of the organization, often for historical reimbursement reasons, are held up as paradigms for everyone else and are perceived to have more influence with leadership. I call it the “you give them everything” syndrome. The point is that leadership has a big impact on culture and historically we have not provided the right emphasis. This point was driven home in a meeting with our hospital medicine group where one of the members complained that all they hear from me is how expensive their department is, not what they contribute to our 98 to 100 percent scores on best practice for heart attacks, congestive heart failure and stroke. Unfortunately, he was right.

My experiences have led me to take a different approach to my communication with hospital staff and physicians. Now when I present updates on how we are doing, I talk about quality and patient safety first, the patient experience second, and the finances last. I emphasize that we’re here for the patients, not to make money. The financial performance is the enabler for the first two. Obviously, I haven’t stopped being concerned about the dollars, but I recognize that most people in our organization relate first to quality and the patient experience. They want to know that leadership really is concerned about the care being provided. They also want to know that we listen when concerns are raised about impediments to providing the level of care and service patients deserve. When we’re genuinely aligned, it’s easier to have dialog around some of the other challenges faced by the organization.

Many factors go into in creating an organizational culture that focuses on patient safety and quality, but leadership can make a big difference by recognizing and communicating its importance.

I look forward to your comments. —Lou Giancola

THE GREAT STATE OF TEXAS

Texas Gov. Rick Perry on the campaign trail. Photo
courtesy PRWatch.com

Did any of you see the coverage of Governor Rick Perry of the great state of Texas announcing that Texas would not create a Healthcare Exchange and wouldn’t participate in the Medicaid Expansion Initiative created under the Affordable Care Act? I don’t have the exact quote, but I think he said that Texas wasn’t going to be forced by the federal government to spend money on the poor. I guess I’m not surprised by anything coming out of Texas. That’s the state that seems to encourage people to carry concealed weapons and leads the nation in administering the death penalty. The Governor’s statement prompted me to look at some statistics on the uninsured in Texas. I went to the Texas Medical Association, not exactly a left wing organization, to get some data about the uninsured in Texas. Surprise, Texas is number one in the nation in the percentage of the population that is uninsured, a whopping 25 percent. By the way, that’s about 6.2 million people without health insurance out of almost 50 million, or 16 percent of the U.S. population. Seventeen percent of children and 33 percent of adults ages 19-64 are uninsured in Texas. Texas leads the nation in the percent of children without health insurance. You’d think that at least the people of Texas would want to give children a chance at living a healthy life.

The Texas Medical Association says “The uninsured are up to four times less likely to have a regular source of health care and are more likely to die from health related problems.” In addition, we all know that someone is paying for the episodic care the uninsured do receive, often provided in emergency rooms. That someone are those of us who have insurance. The uninsured generally avoid seeking care until the problems are serious. As a result, we end up spending more for their care. Most importantly, the lack of insurance is a source of anxiety and suffering for millions of people.

I think that reducing the number of uninsured

would result in savings of at least the 10 percent

of costs the states are required to pick up.

If we could reduce suffering and probably save money by extending coverage to the 50 million uninsured, why is there such resistance? Let’s put aside the issue of presidential politics, which may play a role. There is the issue of states’ rights. Texas and Florida don’t want the federal government telling them how to solve their problems. I’m not into the states’ rights thing, but I can appreciate the sentiment. If that is the issue, what does Governor Perry want to do in Texas to address the problem? Governor Perry wants Medicaid to be a block grant to states. I get that. Healthcare is local. So what is the Governor’s plan? It doesn’t appear that he has one. Vermont also wants to shape its own destiny by creating a single payer system. The federal government can be flexible: witness Massachusetts. Another argument is that states cannot bear the additional 5 to 10 percent of the cost of the Medicaid expansion once the federal government’s commitment to 100 percent of the cost of the Medicaid expansion expires. This is also a credible argument. Having watched the RI Legislature struggle with balancing a budget for the last 12 years, the state share of Medicaid is usually the biggest issue. I think that reducing the number of uninsured would result in savings of at least the 10 percent of costs the states are required to pick up. However, if  being responsible for 10 percent of the cost is the issue, why don’t the states ask Congress to pick up 100 percent of the costs? The final argument against expansion of Medicaid is that it reinforces a fee-for-service system that rewards volume rather than outcomes. As far as I can tell, this is a red herring. The states have the right to change the reimbursement system to reward providers for better outcomes and reduced overall medical costs. The Right Care Program in RI seems to illustrate the ability of the states to experiment with different incentives.

So why am I fixated on Texas? After all, RI is committed to the Healthcare Exchange and the Medicaid Expansion Program. The answer is that the Affordable Care Act is under attack and could easily be undermined by the upcoming election. I would like those people who are on the fence to understand what’s at risk. I’d like them to think through the issues and decide what kind of society they want. Do we want a society in which a substantial number of children, due to no fault of their own, cannot access appropriate care? Do we want a society in which many adults put off routine preventive care and, because they become sick and disabled, become dependent on the state? I might be missing something, but it doesn’t make sense from a humane or economic perspective to delay extending coverage to all Americans.

I look forward to your comments. --Lou Giancola

THE CONTROVERSY OVER THE AFFORDABLE CARE ACT CONTINUES

Health Care Reform will give everyone
access to healthcare.
Photo courtesy Parent Guide News

For those of us responsible for stewarding resources to ensure high quality care for people with serious illness and to maintain the health of the population, the controversy over the Affordable Care Act is a huge distraction and an environment of uncertainty for management. The New York Times on Sunday (July 8, 2012)  ran a story about whether the Act authorizes subsidies to individuals who purchase services through the federal exchange in states that do not establish their own exchange. This is just one more example of using people’s access to healthcare as a political football. As most of you know, the Act provides support to states to establish “Health Insurance Exchanges.” Modeled after the system in Massachusetts, the Exchanges are designed to pool the purchasing power of individuals and small employers to make available affordable insurance. The Exchanges will also determine eligibility for subsidized premiums for individuals who are not eligible for Medicaid. In addition to making health insurance affordable, the Exchange is supposed to make selecting a plan more understandable for the average consumer, no small task in itself. Rhode Island is pretty far along in establishing an Exchange and recently hired a health policy expert, Christie Ferguson, to head it up. Sitting on one of the advisory committees for the RI Exchange, I can say there are some very smart people trying their best to implement it. I can also say that it is complicated stuff. The core of the Act is an effort to extend insurance coverage to the 40 million uninsured by expanding Medicaid and by using the Exchanges to create competition for the purchasers of insurance.

Can’t we just get on with it already? I guess not. People on the right have criticized the Act as big government interference in the private marketplace and a drain on the federal budget. I heard a spokesperson for Mr. Romney criticize the Act because it doesn’t give the states the freedom to experiment with different options to meet the needs of the uninsured. I assume she believes the Massachusetts’ program that Mr. Romney supported reflects the creativity of that state’s leaders. The left has always been suspicious of the Act’s reliance on private insurers, who they feel have bloated administrative costs (compared to Medicare) and have failed to get costs under control. The left, and some people on the right, also criticize the Act as not promoting necessary changes in the delivery system (the way care is actually provided) and not promoting a movement away from the fee-for-service payment system. The latter two changes are considered essential if we are going to bend the healthcare cost curve.

As the CEO of the local health system, people frequently ask me what I think of the Affordable Care Act. I always say the same thing—it’s a step in the right direction. If nothing else, it has focused our attention on a system that doesn’t work. We spend too much and don’t get the same results as most western countries that have universal coverage. The Act is flawed and will need changing, but it is a beginning. It gives states a fair amount of freedom to experiment through the Exchanges, including using their purchasing power to alter the reimbursement system and the way care is delivered. I say let’s get on with tackling the problem and stop using healthcare as a political football.

Thanks for visiting. —Lou Giancola

The Times They Are A-Changin'




Health Care Reform supporters and protesters gather
outside the U.S. Supreme Court. 
Courtesy of the Christian Science Monitor

 

I decided to start this blog on healthcare to share the perspective of a small community hospital’s Chief Executive Officer. This seems especially relevant now because of the unprecedented rate of change in healthcare. Each day brings a new revelation. The Affordable Care Act is dead one day and alive the next; virtually every hospital in our small state has either joined a larger hospital system or is considering it; two out of eleven hospitals in Rhode Island are in receivership and others teeter on the edge; and doctors are being hired by hospitals in ever larger numbers. Here, in the smallest state, six hospitals and system CEOs have turned over in the last four years; one only lasted six months in his position. In our state, we also have a new CEO of the dominant commercial health insurer (Blue Cross) and he is aggressively trying to alter the relationship with providers in ways that encourage less utilization of hospital services. It isn’t so much the direction of change that is staggering, but the pace of change. In fact, I embrace the direction of change because I believe it will result in a healthier population and reduce healthcare costs, making it more affordable for individuals and businesses. Along with others watching these changes, I’m hopeful they will improve the business climate in RI and free up dollars that could be better spent on early childhood education and the underlying causes of poverty.

There are already some signs of positive change. For one, more than 40 percent of RI’s primary care practices are now designated as Patient Centered Medical Homes (PCMH) by the National Committee on Quality Assurance.  PCMH-designated practices must demonstrate that they have organized their resources around trying to achieve the best health outcomes for their patients. You might ask, isn’t that the goal of all primary care doctors? It is, but they haven’t necessarily organized their practice around that goal. PCMH practices take a team approach to care, meaning everyone, from receptionists to doctors, knows the patients and is expected to contribute to improving their health. For example, PCMH practices track the results attained by their patients with chronic diseases such as diabetes. They review these results with the team and try to figure out what they can do to help patients who aren’t controlling their blood sugar or blood pressure. These practices share results with colleagues from other PCMH practices to learn which techniques have been successful in improving outcomes.

The jury is still out on whether the PCMH movement has reduced the utilization of expensive services such as emergency room visits and avoidable hospitalizations, but the preliminary evidence is promising. In other countries, there is a well-documented direct correlation between the number of primary care physicians per capita and the overall cost of care, as well as healthier populations and better quality of life.  Let’s hope we see the same results here, and more young doctors choose primary care over historically better paying specialties. This is healthcare reform at the local level where it counts the most.

Each week I’ll try to focus on a different aspect of change in the healthcare delivery and financing system. In the meantime, I’d appreciate your feedback. --Lou Giancola