MANAGED CARE, PROSPECTIVE PAYMENT, AND REIMBURSEMENT TRENDS
Rapidly increasing costs of health care services, coupled with the lack of universal access, are prompting health care policymakers to consider serious structural reform of the U.S. health system. The federal government’s highest priority is to reduce the budget deficit without creating new taxes. State and local governments are responding to similar public pressures amid budget constraints. Since the 1980s, almost all government programs have refused to cover the increasing costs of health care. In the private sector, employers are increasingly concerned about the cost of purchasing health insurance and are demanding that insurers be more aggressive in their efforts to reduce the rate of premium increases. They are using managed care products at a growing rate and are passing some percentage of health insurance costs on to employees.
These trends mean that managers in the health care industry will face continued pressures from all parties to offer quality services at the lowest possible costs. It also means that the financial consequences of actions will become increasingly important in management and clinical decision processes, and managers and clinicians alike must adopt more sophisticated optimization, management, and planning skills.
In the last decade, economic pressures have created the momentum for change, much of it related to restructuring. Factors cited as primary motivation for restructuring have included rising costs, prospective payment (PPS), consumer expectations, the quality movement and regulatory avoidance (Christiansen & Bender, 1994; Kreuger Wilson & Porter-O’Grady, 1999; Sovie, 1995).
Health care service organizations have responded by eliminating excess capacity—improving economies of scale by integrating services or merging or consolidating—and by attempting to become more efficient (Buerhaus & Needleman, 2000). The focus of this chapter is twofold: to examine the evolution of managed care and the demographic, economic, and financial factors that have served as the motivation for changing the U.S. health system and to examine selected impacts that managed care and economic pressures have exerted oursing in recent years.
ECONOMIC TRENDS AND THE U.S. HEALTH SYSTEM
The U.S. health care system is a diverse collection of subindustries, which are involved directly or indirectly in the provision of health care services. The major players in the industry are health professionals who provide health care services, pharmaceutical and equipment suppliers, insurers (public/government and private), managed care plans (health maintenance organizations [HMOs] and preferred provider organizations [PPOs]), and other entities such as educational institutions, consulting and research firms, professional associations, and trade unions.
Today, the health care industry is large and pervasive, with characteristics and operational differences that vary widely between geographical and rural or urban areas. It is the second largest industry in the United States following the real estate industry.
In 1996 the United States spent $1,035 billion on health care, 13.6% of the nation’s gross national product (GNP). The United States spends more on health care than any nation in the world, averaging $3,659 per person. The infrastructure of the U.S. health system and current eco nomic conditions has evolved rapidly since the 1950s.
Growth in health expenditures has also increased during this time. The largest increases in health-related expenditures occurred between 1960 and 1990, attributable primarily to the advent of Medicare and Medicaid programs.
In 1950 U.S. health expenditures averaged $82 per person (per capita) and accounted for 4.4% of the GNP. By 1996, per capita expenditures increased to $3,759 and health services accounted for 13.6% of GNP. Table 52-1 depicts the growth of expenditures in the U.S. health system since 1950.
Analysis of health care expenditures by service category points to high-cost service areas that have recently attracted the interest of the public and our elected representatives. These services have been the focus of increasing and more rigorous regulatory oversight and more restrictive financial arrangements. To appreciate the nature of economic growth, further category-specific economic data are provided. Table 52-2 identifies selected categories of health-related expenditures and their actual and projected levels from 1970 through 2007.
Data through 1990 illustrate that the categories of services generating the most concerns about rising costs have been hospital and physician related. Expenditures follow the proliferation of hospital and physicians during this period. Since approximately 1998, prescription-related expenditures have replaced these categories as the most rapidly increasing spending category. Public discussion reflects emerging concerns about the pharmaceutical industry and policy change options for managing publicly funded pharmaceutical costs.
DEMOGRAPHICS AFFECTING HEALTH CARE COSTS
Demographic changes are underway in the United States, including the aging of the population and AIDS and chemical dependency epidemics. These changes have implications for providers’ health services and have an impact on the overall costs of health care. Because most of the aged and other special populations receive services though publicly funded programs, the impact of growing health needs among these populations has considerable impact on financing arrangements and providers associated with Medicaid and Medicare programs.
The aging population is, however, expected to have more of an impact on health services than any other demographic factor. In 1950, more than half of the U.S. population was less than 30 years of age; in 1994, half of the population was 34 years of age or older. In 1990, 65-year-olds comprised 12.5% of the population; by 2030 they are estimated to comprise up to 21% of the population. That is, one in eight Americans were 65+ in 1990; one in five are projected to be 65+ in
Although many elderly are independent and active, they are likely to experience multiple chronic conditions that may become disabling. The elderly are admitted to hospitals three times more often than the general population, and their average length of stay is more than 3 days longer than the average. The elderly visit physicians more often and constitute a larger percentage of nursing home residents. Table 52-4 illustrates the economic impact of funding health services for those older than age 65. Life expectancy and health status have been increasing in the United States. The elderly continue to consume a disproportionate share of financial resources, however. Health care providers are also concerned about the growth in the elderly population because public funding sources have not been increasing their reimbursement rates sufficiently to cover inflation, and thus, providers earn a smaller return on elderly patients each year. The aging of the population also spurs concerns about funding their health expenditures because of changes in the ratio of employed to retired persons; this as participants in the work force pay the most income taxes and all social security payroll taxes. The funding base for Medicare decreases as the population ages and as retirement rates increase.
Macrodemographic indicators termed dependency ratios inform policymakers about the need for economic and physical support of the elderly. The elderly support ratio is the number of persons 65 years and older, divided by the number of persons age 20 to 64 (primary age of the workforce), multiplied by 100. It is an indicator of requirements necessary for economic and physical support.
As Table 52-5 indicates, the elderly support ratio is projected to increase sharply over time. As a result, some policymakers believe that Medicare and system reforms are needed to ensure adequate financing and delivery of health care services to an aging population.
Policy-related reform options under consideration include increased age limits for Medicare eligibility, means testing for Medicare eligibility, increased availability and coverage for long-term care insurance, increased incentives for prevention, and less expensive and more efficient delivery arrangements and care settings (i.e., managed care arrangements). Meanwhile, the debate continues as to how to best handle the future funding of the growing Medicare program.
FUNDING
Since the 1960s, U.S. health care services have been funded by both private and public (federal, state, and local government) sources. Although total spending by all sources has increased, the percentage of total expenditures attributable to private sources has decreased in relation to public sources from 1950 to 1990. Among public sources, the percentage paid by the federal government is increasing the most rapidly. In fact, the percentage of expenditures covered by state and local sources has remained about the same during the 40-year period. Increased participation by the federal government in funding health services is attributable to Medicare and Medicaid programs. The rate of public expenditure increases slowed and was stabilized compared with prior decades. This stabilization is largely attributable to the impact of prospective payment system (PPS) and managed care policies.
An analysis of trends in funding sources identifies the increasing role of the federal government in financing U.S. health services. In 1980, private funding sources accounted for 57.6% of health-related expenditures; the federal government funded 29.1%; state and local government funded 13%. By 1997, public sources of expenditures increased. Private sources accounted for 53.7% of health care expenditures, federal government for 33.6%, and state and local government for 12.8%. Table 52-6 summarizes the funding sources for health-related services from 1970 projected through 2007.
FINANCING TRENDS IN THE U.S. HEALTH SYSTEM
National health expenditures are projected to total $2.2 trillion in 2008, growing at an average annual rate of 6.5% from 1997. This will represent an increase in health care’s share of the GNP to 16.2%. Three patterns of economic growth for the health sector were projected by the National Health Statistics Group, Office of the Actuary, Health Care Financing Administration (HCFA) (Smith, Heffler, & Freeland, 1999): (1) a rising share of GNP devoted to health care, but at a lower rate than was experienced from 1960 to 1992; (2) cyclical growth in private spending for health care, with accelerated growth expected from 1998 to 2001 and decelerated growth expected from 2002 to 2008; and (3) diverging patterns of growth in private and public spending from 1998 to 2002. These projections are based on implementation of the Balanced Budget Act (BBA) of 1997 and projected restraints on the growth in Medicare spending. If BBA rollbacks take place, public spending for Medicare is expected to increase significantly, and public spending will outpace private source spending.
In terms of funding sources, the United States has developed and maintained a dependence on private source funding for health services. Although public funding has been and continues to increase, it is useful to examine some of the factors that have accounted for the development and growth of all third-party payers; this, as the payer system sets the economic climate and determines the threats and opportunities health care organizations and providers must respond to.
Evolution of the Third-Party Payer System
Most nurses are familiar with the dramatic changes in health care that have occurred as a result of scientific and technical advances since the 1950s. Over this period, hospitals became the dominant locus for the diagnosis and treatment of disease. It is the 1930s, however, a period in which the United States experienced both increasing costs for health care and the Great Depression, that explains the motivation for our insurance dependence. During the depression, physicians and hospitals (through the American Hospital Association) encouraged the development of insurance plans, primarily Blue Cross and Blue Shield.
As a result, private health insurance developed and grew rapidly through the period after World War II. In 1966, Medicare and Medicaid programs were established as government-sponsored “insurance” programs for the elderly and the poor. The impact of these programs and the changing focus of their management have served as the primary locus for discussion and action concerning health care cost containment and health reform efforts in recent years.
Medicare and Medicaid. Medicare is a federal insurance program designed to cover health care services for persons 65 years and older. In 1990, almost 35 million persons were enrolled in Medicare. Future concerns about the solvency of the Medicare Trust Fund come from both projections about the growth of the aged in the U.S. population and the continued growth of health care costs (the rate of annual cost increases continues to outpace the rate of inflation). Some predictions call for bankruptcy of the Medicare system by 2015 unless substantial changes are made. Medicare has two parts, each with its own federal trust fund designed to ensure that adequate funds are available. The health insurance portion (Part A) pays for inpatient hospital care, posthospital skilled nursing care, home health services, and hospice care. Supplemental medical insurance (Part B) covers physician services, hospital outpatient services, and selected other services. Medicare is primarily funded through payroll taxes and by Part B charges to enrollees.
Federal and state governments jointly fund Medicaid. The federal government establishes the minimum requirements for Medicaid eligibility and defines essential services that must be provided. States design the scope of their own programs, using federal requirements as a minimum. States receive roughly one dollar from the federal government for each dollar of coverage. Some policy-makers believe that this has created incentives for states to expand Medicaid coverage because they bear only about half of the costs. In 1990, about 25 million persons received some type of Medicaid benefit, with most benefits directed toward the aged, blind, and disabled.
Prospective Payment Systems. The most significant change in Medicare has been associated with adoption of the prospective payment system. As part of the Tax Equity and Fiscal Responsibility Act (TEFRA) of 1982, Congress established the rationale for hospital payment based on cost per case. In 1983 amendments to the Social Security Act further defined the case payment system. These amendments created a revolutionary payment of reimbursement to hospitals for treating Medicare patients based on diagnosis-related groups (DRGs). The PPS applied to hospitals in fiscal years beginning on or after October 1, 1993. Under this system, hospitals are paid a preestablished amount per case treated with payment rates varying by type of case. Initially DRGs classified patients into 23 major diagnostic categories, with 490 subcategories.
Specialty hospitals, such as children’s long-term care, rehabilitation, and psychiatric hospitals were exempt from PPS. States with approved alternative payment systems (New Jersey and Maryland) were also exempt.
Medicare’s DRG payment system applies only to a portion of the cost of treating patients (inpatient operating costs). Payments for direct medical expenses, capital, and hospital outpatient expenses were not included in the DRG prospective payment system. Capital and related costs were paid for on a “reasonable cost” basis until October of 1991, when prospective payment for capital and related costs went into effect. PPS capital payment regulations use a standard federal rate for these costs based on the estimated fiscal year 1992 national average Medicare cost per discharge. Incremental payments are made under PPS for indirect medical education costs and for outlier cases (cases involving atypical costs).
Federal rates are updated annually. Actual rates for DRGs are calculated on the base year with an annual update factor. Specific urban and rural payment rates are established for each of the nine geographical regions, in addition to national, urban, and rural payment rates. The federal DRG payment rate is usually published in June and finalized in September. Congressional intervention related to deficit reduction has in recent years delayed the annual determination until November or December.
As of June 1, 1999, skilled nursing facilities (SNFs) providing subacute care for Medicaid patients were subject to yet a different PPS. Medicare’s skilled nursing facility PPS follows the intent of the Balanced Budget Act of 1997, which mandates that SNF PPS work on a per diem payment system modified by case adjustments. The PPS per diem reimbursement covers all routine, therapy, and capital-related costs except certain approved education activities. Separate adjustments exist for urban and rural areas and geographical differences in labor costs (Knapp, 1999).
The SNF PPS uses resource utilization groups (RUGs), which measure resident characteristics and staff care time for various categories of patients. RUGs have seven categories of patient severity. Caregivers derive classifications from assessments recorded in the Minimum Data Set (MDS) assessment instrument, required at specified intervals for days 5, 14, 30, 60, and 90 during a Part A stay. A 3-year phase-in of facility-specific, cost-based, and national per diem PPS rates applies to all facilities that were paid on or before October 1, 1995 (Knapp, 1999). The federal per diem rate is derived from 1995 cost reports and is adjusted for area wage differences and case mix, with no exception or exemption amounts. The federal per diem includes drugs and therapies covered under Part B, as well as necessary laboratory tests, x-ray examinations, and ambulance services provided during the skilled nursing care stay.
Managed Care
Managed care is an approach to managing the quality and cost of health care. In the current environment, there is no single definition of managed health care. Among the varieties of managed care arrangements there are two common characteristics: an authorization system and provider restrictions. From least to most restrictive the different models of managed care include:
• Indemnity insurance with precertification, mandatory second opinion, and large case management
• Service plan with precertification, mandatory second opinion, and large case management
• Preferred provider organization (PPO)
• Point-of-service (POS) plan
• “Open access” HMO
• Traditional HMO
– Open panel
• Individual practice association (IPA)
• Direct contract
– Network model
– Closed-panel HMO
• Group model
• Staff model
The two most prevalent types of managed care arrangements are HMOs and PPOs. The PPO evolved during the early 1980s. Typically, they are considered a hybrid of HMOs and traditional health care insurance.
They use many of the cost-saving strategies developed by HMOs, such as utilization review and reduced reimbursement by volume service contracting. However, PPOs do not require beneficiaries to use providers with which the PPO has discounted fee contracts. Unlike HMOs, PPOs do not require beneficiaries to use preselected gatekeeper physicians who serve as the initial contact and authorize all services. PPOs are less likely than HMOs to provide preventive services, and they do not assume any responsibility for quality assurance because the enrollees are not limited to using only PPO providers.
The HMO is organized on the premise that the current fee-for-service system creates perverse incentives that reward providers for treating patients’ illnesses while offering few or no incentives for providing prevention and rehabilitation services. Full-risk HMOs combine the financing and the delivery of comprehensive health care services into a single system and theoretically have an incentive to focus on the prevention of illness over treatment. In recent years, HMO incentives have come under attack amid allegations of withholding treatment to manage costs or increase operating margins.
There are many different types of HMO structures with varying arrangements for ownership and financial incentives (risk). HMOs use a variety of methods to control costs, including limiting patients to particular providers, gatekeeper physicians who must authorize specialized services, utilization review to ensure that services rendered are appropriate, discounted rate schedules from providers, and payment methods that transfer some risk to providers. In general, services are not covered if beneficiaries bypass their primary care (gatekeeper) physician or provider or use non-HMO providers. The cost of providing services and the quality of service provided also vary among HMOs nationwide. Managed care plans reflect the current movement to control health care spending by combining providers and insurers into a related entity.
Managed Care Trends. Managed care arrangements have proliferated, and enrollment in them has grown rapidly since the 1980s. Hybrids of HMOs and PPOs such as exclusive provider organizations and point-of-service (POS) plans have enjoyed considerable growth in public and private sectors. It is estimated that about one third of the insured population is currently enrolled in some form of a managed care plan. Among large firms, enrollment in managed care plans grew from 5% in 1984 to 50% by 1993 (Gabel, Ginsburg, & Hunt, 1997).
Between 1993 and 1997, HMOs and PPOs dominated employer plan offerings and enrollment in both small and large organizations. The percent enrollment by type of managed care offering and size of employer is presented in Table 52-7.
In an effort to achieve the potential cost savings of HMOs and PPOs, conventional insurance companies have started to apply HMO and PPO strategies to their own plans. Such plans, called managed fee-for-service plans, are using preadmission certification, utilization review, and second surgical opinions to control inappropriate utilization. Although the differences between HMOs, PPOs, and conventional plans were once distinct, considerable overlap now exists in the strategies and incentives they use. Thus the term managed care now describes a continuum of managed care organizations or arrangements, which vary significantly in their approaches to providing combined insurance and health care service programs.
SERVICE DELIVERY TRENDS IMPACTED BY MANAGED CARE
Before the 1980s, most health care organizations were freestanding and not formally linked with other organizations. Those that were linked tended to be part of horizontally integrated organizations that controlled a single type of health care facility, such as nursing homes. During the 1990s, many health care providers have diversified and become vertically integrated. The benefits of providing hospital care, ambulatory care, long-term care, and business and support services through a multi-institutional arrangement are the motivation for vertical integration. Some of the obvious benefits include keeping patients in the corporate network of services, acquiring access to managerial and functional specialists (i.e., marketing specialists), effective use of information systems, greater access to capital, and an enhanced ability to recruit and retain management and professional staff. Although delivery settings are discussed as separate entities, common corporate integration is recognized as key to organizational stability in establishing more powerful collectives, strengthening patient referrals, and increasing profitability.
Hospitals. Hospitals provide diagnostic and therapeutic services to persons who require more than several hours of care, although most hospitals also provide ambulatory services as well. Hospitals differ in function, length of patient stay, size, and ownership. These factors affect the type and quantity of fixed assets, programs, and management requirements and often determine the type and level of reimbursement available.
Recent environmental and operational changes have created significant challenges affecting the management of hospitals. From 1980 to 1990, hospitals experienced a decrease in admissions and reduced average lengths of stay. At the same time, hospitals were pressured to reduce annual growth in patient charges, as well as assume risk in their contracts with third-party payers. The impact on U.S. hospitals is that operating margins have been declining. Urban and rural hospitals find it particularly difficult to achieve retained earnings after paying for operating expenses. Current projections on U.S. hospital operating margins are illustrated in Table 52-8.
In addition to financing expensive new technology, staff payroll and benefit expenses are usually the largest recurring operating expense hospitals incur. Of these nursing service personnel (registered nurses [RNs] and others) usually comprise the largest cost object. Thus interest has evolved in recent years in reducing nursing service costs as one method of improving the short-term economic performance of hospitals.
Ambulatory and Outpatient Services. Ambulatory and outpatient care services encompass services including medical practices, hospital outpatient departments, and emergency departments. In the 1980s substantial growth iew ambulatory care settings, such as home health care, ambulatory surgical centers, urgent care centers, diagnostic imaging centers, rehabilitation and sports medicine centers, and clinical laboratories was observed. In general, these new settings offer patients increased convenience compared with hospital-based services, and in many situations the new centers provide services at lower costs than hospitals do.
Although many factors account for the expansion of ambulatory services, technology and cost containment are the leading contributors. Patients who once required hospitalizations because of the complexity, intensity, invasiveness, or risk associated with certain procedures caow be treated in outpatient settings. In addition, third-party payers have encouraged providers to expand their outpatient services through mandatory authorization for inpatient services and by payment mechanisms that provide incentives to perform services on an outpatient basis. Finally, fewer regulatory requirements are associated with building and managing outpatient services compared with establishing new programs and services in long-term care or hospital facilities.
Long-Term Care. Long-term care entails health care and personal services provided to individuals who lack some degree of functional capacity. Long-term care usually covers an extended period, and it includes both inpatient and outpatient services, many of which focus on mental health, rehabilitation, and nursing home care. Long-term care is concerned with levels of independent functioning with activities of daily living and mobility. Individuals become candidates for long-term care when they become too mentally or physically incapacitated to perform the tasks necessary to live independently and when their family members are unable to provide the services needed.
Long-term care is typically a hybrid of health and social services. Three levels of nursing home care exist: skilled nursing facilities, intermediate care, and residential care facilities. Medicaid dominates the list of payers for nursing home care, followed by private pay and then Medicare. As the percentage of elderly in the U.S. population grows, demand for long-term care is expected to grow.
The elderly are disproportionately high users of health services and major users of long-term care.
UTILIZATION MANAGEMENT STRATEGIES
Because health care costs are thought to vary as a function of price and volume, utilization management has become a particularly important goal that is directly or indirectly related to the expansion of managed care. The management of utilization in this regard is divided into three types of efforts: prospective, concurrent, and retrospective.
Prospective utilization management involves such efforts as health risk appraisals, demand management, referral services, and institutional services. Demand management involves managing the demand for medical services before use. The most common approaches involve providing home care manuals, increasing access to preventive services, and nurse advice lines. Prospective institutional service management involves authorization or approval before accessing services in inpatient or outpatient settings (e.g., preadmission authorization). Clinical criteria for authorizations are commercially available, or plans may develop their own. Nurses are often the vehicle for implementing institutional service management programs.
Efforts related to concurrent review are typically applied to inpatient care and large case management. Interventions include inpatient care and continued stay review, large case management, and disease management.
Large case management refers to the management of catastrophic or chronic cases that exceed routine costs and in which active intervention by nurses can make a significant difference. Cases such as AIDS, transplants, diabetes, and psychiatric disorders often benefit from nurses who are able to coordinate the many aspects of care in order to improve the quality of care and reduce costs.
Disease management is a special form of large case management. It typically involves selected clinical conditions and works proactively with the patient to control the course of the disease. Disease management differs from preventive care activities in that the diagnosis is clear, and cost savings occur by improving individual outcomes.
Retrospective management typically involves managing utilization after services have been provided. Two categories of activity are common: case review and pattern analysis. In case review, individual cases are examined for appropriateness of care, billing errors, or other problems. Pattern analysis involves the review of large amounts of utilization data to determine whether patterns exist. Medical practice profiling is one such example.
Although none of these falls into the exclusive domain of managed care, all are potentially useful methods of reducing unnecessary variation in practice. As a result, managed care arrangements typically provide the environment that is most receptive to the oversight and accountability embedded in these efforts.
LEGISLATIVE INTERVENTIONS FOR HEALTH CARE COST CONTAINMENT: THE BALANCED BUDGET ACT OF 1997
Although most efforts at cost containment in recent years have been focused on changing delivery systems and financial incentives, some have been legislated. The most recent and far-reaching legislative intervention to focus on health care cost containment is the Balanced Budget Act of 1997. Implementation of the BBA began in 1998 amid initial estimates by the Congressional Budget Office (CBO) that Medicare spending could be cut by approximately $112 billion from 1998 through 2003. Some 300 provisions in the legislation were expected to provide a complex array of new preventive benefits and payment system reforms designed to promote Medicare service access and efficiency, many of which are achieved through payment reductions.
Significant reductions are targeted for the home health industry. Reimbursement for home health services has been severely curtailed by the BBA, as the HCFA adopts a PPS to replace the interim payment system (IPS). This provision is expected to produce an estimated savings of $40 billion in Medicare payments alone. Additional savings are expected to come from skilled nursing facilities’ (SNFs) prospective payment. As SNFs have received higher acuity patients from hospitals and have offered higher levels of care, they are now caught between new Medicare payment rules and a new SNF PPS with rates based on average industry costs for different types of care.
In addition to these features, the BBA closed loopholes that allowed nursing homes to clear 30% profit margins on respiratory, physical, and occupational therapy.
As a result of full BBA implementation, an increase iegative Medicare operating margins was projected by hospitals, with rural hospitals expected to be hurt the most. According to the American Hospital Association, negative operating margins for Medicare outpatient services was projected to range from -4.4% to -7.8% annually. Outpatient PPS rules were expected to reduce outpatient service margins under Medicare to between -20.3% and -28.8%.
BBA Impact: Nonphysician Practitioners. Among the diverse provisions of the BBA, many are associated with nonphysician practitioners. The BBA extends to nonphysician providers, including advanced practice nurses (APNs), new opportunities and responsibilities. A number of BBA provisions and implementation features are of particular significance to APNs. First, NPs, clinical nurse specialists (CNS), and physician assistants (PAs) were recognized as authorized Medicare providers, eligible for direct reimbursement. A HCFA ruling associated with this provision subsequently defined only APNs and CNSs with a master’s degree iursing to be qualified to receive payments from Medicare Part B services. The revision allows for a grace period before the minimum education rule is enforced in 2003 (Buppert, 1999).
The BBA standardized NP reimbursement at 85% of the physician’s Medicare fee schedule, regardless of where services are provided. This represents up to a 20% increase in reimbursement for providing services such as those rendered as a first surgical assistant. APN enrollment in the Medicare program carries with it increased personal responsibility. Medicare has the most aggressive fraud and abuse guidelines of any insurance plan. It is essential that APNs become familiar with billing for services (International Classification of Diseases [ICDJ-9 and Current Procedural Terminology [CPT] codes) and using evaluation and management codes (E and M codes).
These codes are the only method that the payer can use to substantiate that the level of service provided was equal to the severity and complexity of the presenting problem (Towers, 1999).
In addition, the BBA cedes supervision and legislative scope of practice back to the individual states. This provision effectively removes the requirement for a physician to see a Medicare patient first or be in the office when services are billed under the APN’s provider number. However, APNs must be familiar with state supervision requirements (Table 52-9).
The BBA also permits APNs to develop independent contractor arrangements with medical practices and provider entities (called 1099 arrangements). This provides considerable employment flexibility but shifts the income-tax responsibility from the practice or organization to the independent contractor (Mazzocco, 2000).
Here, APNs must be familiar with tax and employment contract responsibilities. Although these BBA provisions have done more to influence the course of advanced practice nursing than any other single piece of legislation in the 1990s, the ramifications are many and far reaching. In other aspects related to APN use and reimbursement, the BBA is limited.
The BBA has no effect on private insurance carriers; it only permits APNs to enroll as Medicare providers. Each private insurance plan has its own policies and authorized list of providers. When plans do not recognize APNs to be eligible for direct reimbursement, some practice situations may fall back on “incident to” billing techniques.
“Incident to” is an old billing method that permits practices to bill for APN services under the supervising physicians billing number at 100% of the physician’s fee schedule as long as the physician is present in the office at the time services are rendered.
Concerning regulation and interpretation, HCFA has little enforcement capability over its carriers. Individual medical directors have the ability to exercise a wide degree of flexibility in interpreting the regulations (including down coding of services provided by APNs).
Although much of the impact associated with the 1997 BBA is related to reducing Medicare costs though reductions in payment rates to hospitals, ambulatory clinics, and so forth, other features have introduced unprecedented opportunities for nonphysician providers such as APNs. Current reactions to implementation have been uniformly negative concerning the adverse impact on organizations. As a result, legislation is pending that alters implementation considerably.
Principles for Culturally Competent Care.
Throughout the centuries, nursing has been a dynamic, continuously evolving entity, changing and adapting in response to a wide range of stimuli. Changes in societal norms and expectations, discoveries of new medical treatments, developments in highly sophisticated technical systems, and breakthroughs in pharmaceutical treatments have helped shape contemporary nursing practice. Another recent trend that has influenced nursing considerably is the consumer mandate for culturally competent care in an increasingly diverse, multicultural society. The ability to provide culturally competent care is especially important for critical care nurses, who function in high-acuity, high-stress healthcare environments. Critical care nurses must develop cultural competency to be effective in establishing rapport with patients, and to accurately assess, develop, and implement nursing interventions designed to meet patients’ needs. As patients’ advocates, critical care nurses are required to support decisions made by patients or patients’ families that may reflect a cultural perspective that conflicts with mainstream healthcare practices. In today’s society, culturally competent care cannot be offered to all patients unless nurses have a clear understanding of diverse cultural backgrounds.
Changing Demographics
Demographic changes in many countries reflect an increasingly diverse population. For example, in Sweden, a society that once reflected only a single or perhaps a few ethnic
groups now comprises more than 100 different ethnic groups. On the basis of their society’s changing demographics, healthcare professionals in have begun to address the need for “establishing a commitment and a way of working to facilitate the development of cultural competence” in various healthcare situations. To this end, the executive committee of the Public Health and Medical Services in Sweden has begun to assess the need for culturally competent care and to develop training programs for healthcare workers that are designed to address this need. The United States also has experienced a change in demographics stimulated by an influx of persons from diverse ethnic and cultural groups. If current population trends continue, it is projected that by the year 2080, the white population will become a minority group, constituting 48.9% of the total population of the United States. Data from the censuses of 1980 and 2000 (Table 1) illustrate a marked change in ethnic population trends among 4 ethnic groups: white, African American, Hispanic, and Native American.
Model for Cultural Competence
Campinha-Bacote and Munoz offered a 5-component model for developing cultural competence (Table 2).
Five components of cultural competence were proposed:
1. cultural awareness,
2. cultural knowledge,
3. cultural skill,
4. cultural encounter, and
5. cultural desire.
The first component, cultural awareness, involves self-examination and in-depth exploration of one’s own cultural and professional background. Cultural awareness should begin with insight into one’s own cultural healthcare beliefs and values. Catalano states that “merely learning about another person’s culture does not guarantee the nurse will have cultural awareness; nurses must first understand their own cultural background and explore the origins of their own prejudiced and biased views of others.”
The Cultural Awareness Assessment Tool (Table 3) could be used to assess a person’s level of cultural awareness.
The questions in this tool should be answered honestly; the score obtained offers insight into understanding one’s own cultural healthcare beliefs and values. The second component, cultural knowledge, involves the process of seeking and obtaining an information base on different cultural and ethnic groups. Nurses can develop and expand their cultural knowledge base by accessing information offered though a variety of sources, including journal articles, textbooks, seminars, workshop presentations, Internet resources, and university courses.
Table 4 summarizes resources for obtaining information about various cultural and ethnic groups.
The third component, cultural skill, involves the ability of the nurse to collect relevant cultural data regarding the client’s presenting problem and accurately perform a culturally specific physical assessment.
The Giger and Davidhizar model10 described in Table 5 contains a framework for assessing cultural, racial, and ethnic differences between patients.
This model provides a systematic method for assessing culturally and ethnically diverse persons. The elements of this model are communication, space, social organization, time, environmental control, and biological variations. The fourth component, cultural encounter, is defined as the proces that encourages nurses to directly engage in cross-cultural interactions with patients from culturally diverse backgrounds. Directly interacting with patients from different cultural backgrounds helps nurses increase their cultural competence. Development of cultural competence is an ongoing process that continues throughout a nurse’s career and cannot be mastered. The last component, cultural desire, refers to the motivation to become culturally aware and to seek cultural encounters. Inherent in cultural desire is the willingness to be open to others, to accept and respect cultural differences, and to be willing to learn from others.
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Tension Between Groups An increase in tension between or among various groups of people within the workplace has been the subject of much interest in the media. Union–management conflicts regularly occur in some workplaces. Gender-based conflicts, including equal pay for women and sexual harassment issues, are other examples (Ehrlich, 1995).
Increased Workload
Emphasis on cost containment has resulted in increased pressure to get as much work as possible out of each employee, and sometimes more work than a person can reasonably do in a day (Trossman, 1999). This leaves many healthcare workers feeling that their employers are taking advantage of them (Ketter, 1994) and causes conflict if they believe others are not working as hard as they are.
Multiple Role Demands
Inappropriate task assignments (e.g., asking nurses to clean floors as well as care for their clients), often the result of cost-containment efforts, can lead to disagreements about who does what task and who is responsible for the outcome.
Threats to Professional Identity and Territory
When role boundaries are blurred (sometimes even erased), professional identities are threatened, and people may react in defense of them. Who, for example, is supposed to teach the discharged client about taking medication at home—the pharmacist, physician, nurse, or all three? If all three do this, who does what part of the teaching?
Threats to Safety and Security
When roles are blurred, cost constraints are emphasized, and staff members face layoffs, individuals’ economic security is threatened. This can be a source of considerable stress and tension (Qureshi, 1996).
Scarce Resources
Inadequate money for pay raises, equipment, supplies, or additional help can increase competition between or among departments and individuals as they scramble to get their share of the little there is to distribute.
Cultural Differences
Different beliefs about how hard a person should work, what constitutes work or productivity, and even what it means to arrive at work “on time’’ can lead to problems if they are not reconciled.
Some people think about problems and conflicts that occur at work in the same way as they think about a football game or tennis match: unless the score is tied at the end of the game, someone has to win and someone has to lose. There are some problems with this comparison to sports competition. First, our aim is to work together more effectively, not to defeat the other party. Second, the people who lose are likely to feel bad about losing (Gottlieb & Healy, 1990). As a result, they may spend their time and energy preparing to win the next round, rather than on their work. Third, a tie (neither side wins or loses) may be just a stalemate; no one has won or lost, but the problem is also still there.
So the answer to the question “Win, lose, or draw?” is “none of the above.” Instead, try to resolve the problem or conflict whenever possible. When differences and disagreements first arise, problem solving may be sufficient. If the situation has already developed into a full-blown conflict, however, negotiation of a settlement may be necessary.
Problem Resolution
The use of the problem-solving process in patient care should be familiar to you by now. The same approach can be used when staff problems occur. The goal in problem solving is to be as creative as possible in finding a solution to a given problem (Gottlieb & Healy, 1990). The process itself, illustrated in Fig. 1, includes identifying the issue or problem, generating possible solutions, evaluating the suggested solutions, choosing what appears to be the best solution, implementing that solution, evaluating the degree to which the problem has been resolved, and, finally, oncluding either that the problem is resolved or that it will be necessary to repeat the process to find a better solution.
Identify the Problem or Issue
Sometimes, it is easy to identify the real issue or problem. At other times, however, some discussion and exploration of the issues are necessary before the real problem emerges. “It would be nice,” say Browne and Kelley, “if what other people were really saying was always obvious, if all their essential thoughts were clearly labeled for us . . . and if all knowledgeable people agreed about answers to important questions’’ (1994, p. 5). Of course, this is not what usually happens. People are often vague about what their real concern is, and sometimes they are genuinely uncertain about what the real problem is. Emotional involvement may further cloud the issue. All of this needs to be sorted out so that the problem is clearly identified and a solution can be sought.
Generate Possible Solutions
Here creativity is especially important. If you are guiding people through this process, try to discourage them from using old solutions for new problems. It is natural for people to try to repeat something that worked well for them in the past, but solutions that were previously successful may not work in the future (Walsh, 1996).
Evaluate Suggested Solutions An open-minded, objective evaluation of each suggestion is needed, but accomplishing this is not always easy. When a group problem solves, it is sometimes difficult to separate the suggestion from its source. For example, on an interdisciplinary team, the status of the person who made the suggestion may influence whether the suggestion is judged to be useful. Whose solution is most likely to be the best one—the physician’s or the UAPs’ (unlicensed assistive personnel)? That depends. The suggestion should be judged on its merits, not its source.
Choose the Best Solution Which of the suggested solutions is most likely to work? A combination of suggestions is often the best solution.
Implement the Solution
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Is the Problem Resolved? Not every problem is resolved successfully on the first attempt. If the problem has not been resolved, the process needs to be resumed with even greater attention to what the real problem is and how it can be successfully resolved. |
The nurse manager asked Ms. Deloitte to meet with her to discuss the problem. The following is a summary of the problem solving they did:
Changes in Health Care Delivery
Spector (1996) pointed out that not only is the population changing but so is the way in which we deliver healthcare. More healthcare services today are provided in the home than in previous years. This practice calls for greater understanding of the cultural background of clients and their families. Meleis (1996) agrees that cultural competence is imperative wheurses provide care in the home since they become guests of their patients and must adhere to the patients’ rules about what behavior is proper. In hospital settings, patients are expected to abide by the rules of the agencies. However, care provided in the home must be within the context of the patients’ values and lifestyle. Thus, there is a need for health care professionals who are qualified to provide culturally competent health care, both in the home as well as in health care institutions for a population that is projected to be more culturally diverse than ever.
Cultural Competence in Nursing
According to the 1992 Department of Health and Human Services survey cited by the ANA, registered nurses comprise the largest segment of workers in the health care industry, with close to two million actively employed (ANA, n.d.). People requiring health care services are therefore very likely to interact with nurses. Most nurses are Caucasians (90%), with African Americans (4%), Asian and Pacific Islanders (3.4%), Hispanics (1.4%), American Indians/Alaskan Natives (0.4%), and others making up the other 10% (ANA, n.d.). This current ethnic composition of nurses does not reflect the growing ethnic diversity of the U. S. population. It is in fact, similar to that of the creators of the U. S. health care system. Salimbene (1999) believes that our health care system was created by a predominantly Caucasian population of Northern European descent and philosophy, and was tailored to suit the individualistic nature of American society. Thus, ideas held by the predominant number of nurses regarding how to care or demonstrate caring, and what is to be considered quality care
is also based on what the creators of our health care system held as true. Today, these beliefs and values may not be compatible with those of the increasingly non-European population in America. Caring for this increasingly multiethnic and multicultural clientele will inevitably pose challenges for health care providers and requires sensitivity to the diversity of clients and the provision of care that is culturally competent. The need for nurses to be sensitive to cultural variations in clients they care for is well established in the literature. Numerous works (Alpers & Zoucha, 1996; Andrews & Boyle, 1995; Giger & Davidhizar, 1995; Leininger, 1991; Salimbene, 1999; Spector, 1996) have been published on the importance of considering clients culture as an integral part of assessing their health care needs and planning culturally appropriate nursing care to meet these needs. For example, Leininger (1991), a leading transcultural nursing specialist, has long contended that “cultural beliefs, values, norms, and patterns of caring had a powerful influence on human survival, growth, illness states, health, and well being” (p. 36). She further stated that if professional nursing care was not compatible with the beliefs and values held by the recipients of care, “culture conflicts, noncompliance behaviors, cultural stresses, imposition practices…” (p.37), would result. In her book, Cultural Diversity in Health and Illness, now in its fourth edition, Spector (1996) explored health care providers’ understanding of their own perception of health and illness, issues affecting consumers’ acceptance of health care, and health beliefs and practices of selected populations. Giger and Davidhizar (1991) developed a model for assessing the health care needs of individuals, which includes factors that must be considered in planning culturally appropriate care. Andrews and Boyle (1995) are yet another example of nursing authors addressing the importance of cultural competence iursing. They developed a nursing assessment guide with categories of information that they consider essential for nurses to know in order to plan care that is appropriate. Cultural Competence and Nursing Care. In 1980, ANA published its Social Policy Statement in which nursing was defined as “…the diagnosis and treatment of human responses to actual or potential health problems.” (Carpenito, 1989, p.4). These human responses to health and illness are based on beliefs, values, and practices that are deeply rooted in the individual’s culture. Nurse’s ability to interpret these culturally based responses or to plan culturally acceptable interventions undoubtedly affect the care they provide. Alpers and Zoucka (1996) reported that there is evidence that without cultural competence, nurses tend to subject clients of cultures different from their own, to ethnocentric attitudes and practices and they tend to impose their beliefs. Salimbene (1999) gave the example of patients who avoid eye contact with their health care provider and as a result are suspected of not being truthful when in reality, they are adhering to their cultural practice of showing respect for persons in authority and therefore not looking them directly in the eye. Such a situation can result in inadequate nursing care with unintended adverse results. Andrews and Boyle (1999) stated that without culturally competent health care providers, patients are sometimes misdiagnosed, with unfavorable consequences. They cited the misunderstanding of child-rearing practices and subsequent arrests of parents following accusations of abuse as an example of an unfavorable outcome. Misunderstandings about cultural expressions of pain have also led to inadequate pain relief in many ailing patients. According to Giger and Davidhizar (1999), this is true of Japanese Americans who expect nurses to know best and therefore will not make requests (e.g., for pain medication) but instead will expect the nurses to meet their needs. Yet another example of the consequence of not providing care within the context of the patient’s culture is the Korean mother who blames her child’s illness on the nurse who affectionately patted her boy on the head. In Korean culture, (as in many other Asian cultures), touching someone’s head is interpreted as trying to “steal his or her soul” (Salimbene, 1999). Cultural Competence in Nursing Practice and Education Tanner (1996) maintains that in recent years, most policy statements oursing education indicate that nursing educators have recognized the need to increase the cultural competence of the nursing workforce. Nursing faculty across the country have over the past two decades, modified nursing curricula by either adding separate courses on cultural diversity or by integrating cultural diversity concepts into existing courses throughout the curricula (Chrisman, 1998). Several nursing organizations endorsed the need for cultural competence iursing: The Transcultural Nursing Society, The American Nurses Association Council on Diversity in Nursing Practice, and the American Academy of Nursing Expert Panel on Cultural Diversity (Baldonado et. al., 1998). Data on the recruitment and retention of faculty and students from ethnic backgrounds designated as minorities are required by organizations that accredit nursing educational programs (Andrews, 1995). However, several studies that examined the nursing care abilities of baccalaureate nursing students, as well as professional nurses, reported low cultural competence levels. (Alpers & Zoucha, 1996; Baldonado et al., 1998; Bernal & Froman, 1987; Kulwicki & Bolonik, 1996 & Napholz, 1999). Thus, despite the efforts to prepare a more culturally competent nursing workforce in the formal educational setting, there are reports that not all students iursing programs receive adequate content in transcultural nursing and that the content is inconsistent (Baldonado, et al, 1998). There have also been questions raised about nursing faculty readiness to prepare culturally competent graduates. “How culturally competent are we as faculty?” was one question posed by Tanner (1996) in an editorial in the Journal of Nursing Education. She believes that the developmentof cultural competence among nursing educators is essential. But she also stated that, “ Too often, faculty is presumed to be competent in the very skills they are attempting to develop in their students, and cultural competence is no exception” (p. 291). Leininger (1995) also discussed faculty qualifications to teach transcultural nursing as one of the critical issues in adapting nursing curricula to meet the challenges posed by the diversification of our society. She contends that many faculty who teach transcultural nursing have no graduate training in transcultural nursing, and teach from a common sense approach. Fewer than 20% are prepared in transcultural nursing. Some faculty report teaching transcultural nursing but teach no theory and do not provide appropriate clinical experiences to implement knowledge learned in the classroom. She stated that faculty need to educate themselves in the field of transcultural nursing, so that they can serve graduate as well as undergraduate students responsibly and “…be effective teachers, mentors and role models.” (Leininger, 1995, p.11)
There are several approaches cited in the literature, for increasing the diversity and cultural competence of nursing faculty. For example, Ryan, Twibell, Miller and Brigham (1996) reported on a project whereby faculty members sought to increase their skill in teaching transcultural nursing by regional networking. In another project, seminars, print media and videos were used to educate nursing instructors to “teach and model cultural competence”
Conflict Management Techniques
Conflict situations are an important aspect of the workplace. A conflict is a situation when the interests, needs, goals or values of involved parties interfere with one another. A conflict is a common phenomenon in the workplace. Different stakeholders may have different priorities; conflicts may involve team members, departments, projects, organization and client, boss and subordinate, organizatioeeds vs. personal needs. Often, a conflict is a result of perception. Is conflict a bad thing? Not necessarily. Often, a conflict presents opportunities for improvement. Therefore, it is important to understand (and apply) various conflict resolution techniques.
Forcing
Also known as competing. An individual firmly pursues his or her own concerns despite the resistance of the other person. This may involve pushing one viewpoint at the expense of another or maintaining firm resistance to another person’s actions.
Examples of when forcing may be appropriate
Ø In certain situations when all other, less forceful methods, don’t work or are ineffective
Ø When you need to stand up for your own rights, resist aggression and pressure
Ø When a quick resolution is required and using force is justified (e.g. in a life-threatening situation, to stop an aggression)
Ø As a last resort to resolve a long-lasting conflict
Some caveats of forcing:
Ø ·May negatively affect your relationship with the opponent in the long run
Ø · May cause the opponent to react in the same way, even if the opponent did not intend to be forceful originally
Ø ·Cannot take advantage of the strong sides of the other side’s position
Ø Taking this approach may require a lot of energy and be exhausting to some individuals
Research on Cultural Competence in Nursing Practice
The results of research studies on levels of cultural competency of nursing students as well as professional nurses have not been encouraging. Several researchers used the Cultural
Self-efficacy Assessment Scale (CSES), developed by Bernal and Froman, to measure confidence in cultural competence. (Alpers & Zoucha, 1996; Bernal & Froman, 1987; Kulwicki & Bolonik, 1996; Napholz, 1999). As reported by Bernal and Froman, self-efficacy is as a way of connecting or predicting how people will actually perform a task as a result of how they feel about the task. (Bernal & Froman, 1987). Performance of the task, vicarious experiences, verbal persuasion or praise, and emotional or physiological factors such as pain are all sources of information that individuals use to form opinions about self-efficacy regarding specific tasks.
The researchers developed a Likert-type scale of 30 statements derived from anthropological and transcultural nursing literature and representing important aspects of transcultural nursing knowledge and skills. The statements on the scale are grouped into sections dealing with: knowledge of cultural concept, b) cultural patterns, and c) cultural assessment skills.
Bernal and Froman (1987) first used the CSES scale to examine the reported confidence of community health nurses caring for black, Southeast Asian and Puerto Rican clients.
Specifically, they looked at the degree of self-efficacy of the participating nurses in caring for the designated clients and they tried to determine if there were differences in self-efficacy for caring for any of the three groups. The highest confidence level was reported for caring for blacks then Puerto Ricans and then Southeast Asians. However, the highest rating did not even reach a moderate level of confidence. The authors concluded that regardless of years of study, age, specialty or educational preparation, the nurses in the study had little confidence in their transcultural nursing abilities.
More recently Kulwicki and Bolonik (1996) looked at 71 graduating baccalaureate nursing students and their degree of confidence in providing culturally appropriate care for African American, Hispanic, Arab American, Asians/ Pacific Islanders and Native American
maternal- child clients. The CSES was used to measure cultural competence/confidence.
Seventy-one students participated in the survey and very little confidence in caring for these
clients was expressed. Alpers and Zoucha (1996) compared cultural competence /confidence
among nursing students, at a private southern University, who had a course in transcultural
nursing and those who did not. Those students who had the course in transcultural nursing
reported having more confidence in understanding and providing care for African American and Hispanic clients, whereas the students who had not taken the course reported significantly more confidence in understanding and providing care for Asian clients. Upon further investigation this latter group was found to have difficulty understanding transcultural nursing concepts, were unable to apply the concepts in group activities and had very little experience with Asian clients.
Furthermore what was reported, as confidence may have been more arrogance on their part.
Napholz (1999) used the Ethnic Competency Skills Assessment Inventory (ECSA) to compare self-reported cultural competency skills of two groups of junior nursing students. The ECSA was administered before and after the instructional approaches were implemented. The first group received the traditional instructional approach to teaching cultural diversity. That is, their assignments included cultural self-assessment exercises, incorporating socio-cultural objectives into weekly anecdotal notes, and clinical papers and nursing care plans documenting understanding and incorporation of culturally sensitive nursing care. Treatment group two had the on-site assistance of an expert in transcultural nursing in addition to the traditional instructional approach. The consultant openly discussed ethnic and racial differences with the students and assisted them in formulating culturally relevant nursing care plans. Postest results were significantly higher than pretest results for both groups. However, prior to the treatments pretest results of treatment group one were significantly higher than treatment group 2. After the treatment there was no significant difference between the groups. These results suggest that non-traditional approach to teaching transcultural nursing was effective in removing the difference in cultural competency skills between the groups. The significant difference between the groups at the outset was however a threat to the internal validity of this study which the authors recognized.
IMPACT OF MANAGED CARE AND CURRENT COST CONTAINMENT EFFORTS
One of the main reasons for the growing popularity of managed care among health insurance purchasers (including employers and public sector programs) has been its emphasis on cost containment in an era of rising health care spending. Savings have been derived largely from decreased use of inpatient hospital services. Research on this topic has indicated that compared with fee-for-service plans, HMO enrollees have lower hospital admission rates and lengths of stay and less use of expensive tests and procedures (Weinick & Cohen, 2000). Many PPOs and POS plans use the same types of utilization controls as HMOs (i.e., requiring precertification for an approved length-of-stay and plan review for medical necessity) while increasing consumer choice.
Growth in managed care plan enrollment and increased managed care plan options have experienced changes in the types of persons enrolling in managed care plans over time. On average, managed care populations have become less healthy, and managed care’s advantage with respect to hospital use and expenses has been attenuated. Recent evidence from HMOs financial performance and premium increases suggest support for this notion.
In addition, local markets have been affected by managed care expansion. Competitive pressure to reduce expenses by decreasing hospital use and so on has been extended to fee-for-service plans. Weinick and Cohen examined existing national survey data for managed care enrollment and hospital use in 1987 and
The study also observed shifts in the characteristics of managed care-enrolled populations. Publicly insured populations were more likely to be enrolled in a managed care organization. The proportion of managed care enrollees who were in fair or poor health did not change over time. However, nonmanaged care enrollees were less likely to be in fair or poor health in 1996. These shifts may help explain decreased hospital use among those covered by nonmanaged care plans. Practice pattern changes adopted by providers and plans were also identified as a possible influencing factor (Weinick & Cohen, 2000).
Regardless of whether the changes observed are attributable to shifts in the composition of managed care populations or changes in plans’ or providers’ behavior, findings suggest that the competitive advantage of managed care organizations with respect to inpatient hospital use was eroded by 1996. Thus the ability to generate further cost savings in hospital care through increasing managed care enrollment may be limited as we approach convergence in utilization between managed care and nonmanaged care plans.
With or without full BBA implementation the U.S. health system continues to undergo considerable change. Whether these changes will be attributable to legislative initiatives designed to reduce costs or to managed care remains to be seen. There is, however, considerable consensus about cost-reduction strategies and interventions designed to respond to the competitive managed care environment. In general, two approaches are advocated: the shift of services away from hospital-based delivery systems to ambulatory, home health, and long-term care systems and sector-specific interventions related to improving cost-containment and the quality of health-related services (Buerhaus & Staiger, 1996; Shortell, 1993; Sovie, 1994; Weinick & Cohen, 2000).
Selective contracting and legislation mandating PPS have led to many changes in hospital care: fewer inpatient admissions, lower average lengths of hospital stay, more serious patient acuity (Dranove, Shanley, & White, 1993; Guterman, Eegers, Riley, Greene, & Terrell, 1988). In addition, because nurse wages are the largest single item in the hospitals operating budget, incentives exist for hospitals to adjust nurse staffing as a cost-reduction strategy.
Managed Care and Nurse Staffing. The effect of HMOs and PPOs on the staffing of nursing personnel and hospitals is a source of growing concern. Recent newspaper articles report that hospitals reduced their use of RNs by replacing them with unlicensed assistant personnel in response to cost-cutting pressures caused by the growth of HMOs (Kunen, 1996; Rosenthal, 1996; Shuit, 1996). Patient advocates, nursing unions, and other observers have argued that staffing changes are reducing the quality of care provided by hospitals. In response to these claims of reduced nurse staffing and reduced quality of care, some state legislatures are attempting to regulate hospital employment of nursing personnel. Legislation has been introduced in several states, including Massachusetts, Nevada, California, and Florida, to establish minimum staffing levels for the nurses and other staff.
Unions and hospitals have engaged in heated debate about whether nurse-staffing levels have in fact been reduced and whether such reductions adversely affect the quality of care. Union contract disputes have drawn additional public attention to nurse staffing changes and nurse’s assertion that the quality of care in hospitals is adversely affected (Hall, 1998; Hercher, 1997). Little research has been published to date on staffing and staffing ratios.
And the research that has been done to date presents contradictory findings. Some researchers have reported finding a reduction of full-time equivalent employment of hospital nurses per patient day (Aiken & Fagin, 1997); others report increased hours worked in hospitals (Anderson & Kohn, 1996; Spetz, 1998, 1999). Buerhaus and Staiger (1996) conducted a cross-state comparison of RN employment and HMO penetration, identifying slower rates of RN employment growth in states with higher HMO penetration. Spetz (1999) examined the effects of managed care and the PPS on hospital employment of RNs, licensed practical nurses (LPNs), and unlicensed assistive personnel (UAP) in California from 1994 to 1997. She reported that HMOs used fewer LPNs and UAPs and that HMOs did not reduce RN demand. Additional findings included managed care having a smaller affect on RN staffing in medical-surgical units than in daily hospital service units as a whole, and PPS was not found to have a statistically significant effect ourse staffing changes. The author noted that organizational changes created in response to PPS might have an impact on care delivery systems and affect the quality of care. This study reinforced the link between characteristics of HMO organizations and the quality of care (Spetz, 1999).
In considering skill mix staffing levels, the effect oursing personnel use and impact on quality of care is often questioned. The Institute of Medicine examined the adequacy of nursing personnel staffing and found little research that systematically examined the relationship between skill mix and quality of care (Wunderlich, Sloan, & Davis, 1996). Contradictory findings were reported in two other studies examining the association betweeurse staffing and patient outcomes (Aiken & Fagin, 1997; Mitchell & Shortell, 1997). Aiken and Fagin reported a possible effect between certain organizational characteristics and their impact on quality of care that may be more important than staffing levels alone (Aiken & Fagin, 1997). Buerhaus and Needleman (2000) conducted a review of federally funded nursing workforce studies and research efforts that investigated the relationship between hospital nurse staffing and patient outcomes sensitive to nursing. He identified that there remains an insufficient body of empirical evidence that links changes in hospital nurse staffing to adverse effects on the quality of patient care, particularly for purposes of mandating minimum staffing levels.
Managed Care and Nursing Roles. The direct and indirect impact of managed care and PPSs oursing roles is considerable. Although an extensive discussion about impact on advance practice roles (clinical and administrative) and changing RN roles in acute care and other settings is beyond the scope of this chapter, an overview of impact trends is provided. A summary of impact related to use and roles of clinicians and managers follows.
Nonphysician clinicians (NPCs) are becoming increasingly prominent as health care providers. A study conducted by Cooper, Henderson, and Dietrich (1998) and Cooper, Loud, and Dietrich (1998) examined NPCs including nurse practitioners (NPs), physician assistants (PAs), and certified nurse midwives (CNMs). The aggregate number of NPCs graduating annually in 10 NPC disciplines doubled between 1992 and 1997 and was expected to increase by 20% through 2001. The greatest growth in the 1990s was projected among those nonphysician providers who provided primary care services, such as PAs and APNs (nurse practitioners, certified nurse midwives, certified registered nurse anesthetists, and clinical nurse specialists).
Until 1977 the reimbursement of APNs (NPs, CNMs, clinical nurse specialists [CNSs]), and PAs by Medicare and Medicaid was governed by the “incident to” provision. This allowed nonphysician clinicians who were employed by physicians to be reimbursed by means of payment to the employer. In 1977 the Rural Health Clinic Act permitted Medicare and Medicaid to directly reimburse PAs and NPs working in free-standing, physician-directed rural clinics located in health professions shortage areas.
This was subsequently expanded to cover care provided in other locations, and on-site physician supervision was waived unless it was a requirement of the state. The BBA of 1997 further expands direct Medicare reimbursement for PAs, NPs, and CNSs to include all nonhospital sites and removes the requirement for physician involvement.
Although nonphysician clinicians are authorized to provide a range of physician services, often in an independent manner, and can be reimbursed for that care, marked variation has been identified in their scope of practice, independence, and reimbursement (Schaffner, Ludwig-Beymer, & Wiggins, 1995).
The number of practicing nonphysician clinicians also varies substantially from state to state, and the number is expected to grow in anticipation of managed care demand. Provider organizations, such as clinics, physician group practices, and HMOs have reported increased use of nonphysician clinicians in their practices or offering independent practice agreements (Cooper, Henderson, & Dietrich, 1998).
Regardless, the use of advance practice nurses to support population-based health management interventions such as critical pathways (also called clinical pathways) are one method of planning, assessing, and evaluating the cost-effectiveness of patient care. Critical pathways are predetermined courses of progress that patients should be making while undergoing diagnosis and treatment for specific health-related problems, and patient progress is monitored against established critical pathways indicators. Analysis of clinician’s interventions and patient progress is conducted to identify cost-effectiveness and optimize clinical outcomes.
Among the most significant changes associated with managed care have been changes in the use of registered nurses in a wide variety of organizations and health sectors to manage and improve clinical outcomes. Numerous reports -of nursing contributions in the management of patient outcomes is found in the literature for nursing roles that are associated with both registered nurses and advance practice nurses (Madden & Reid Ponte, 1994; Maddox, 1999).
Impact of Managed Care and Nurse Manager Practice. A lengthy discussion of the impact of managed care ourse manager practice is beyond the scope of this chapter. However, the challenges managed care and PPOs payment systems pose to managers in acute and postacute care sectors are tremendous. Since the 1980s, nursing and other health system managers have been implored to learn how to prepare their facilities and staff for prospective payment and, more importantly, how to provide the leadership to carry out a strategic plan for survival.
Longfest (1998) and others have identified a variety of competencies required for senior managers in the rapidly changing health system. These competencies include conceptual, technical, managerial, clinical, interpersonal, collaborative, political, commercial, and governance skills that are different from those espoused before the 1970s.
Initially, the focus of efforts was motivated by a need to reduce operating expenses. More recently, efforts have focused on improving customer service and satisfaction, along with overall quality of care (while operating efficiently). New leadership sensitivities and skills associated with managing competing stakeholder relations, allocating scarce resources, and changing organizational culture have been called for (Maddox, 1999; Sovie, 1994; Stahl, 1998). The era of managed care has had considerable impact oursing and has demanded considerable change in the management and leadership that nurses provide to organizations and the direct provision of services in all sectors of the U.S. health system.
As outpatient care consumes an increasing portion of the health care dollar and efforts to control outpatient spending are enhanced, the traditional operations role of the ambulatory manager is changing. In the past, ambulatory care managers have typically met the needs of physician owners by ensuring adequate billing, collections, staffing, scheduling, and patient relations, whereas physicians have tended to make the long-term business decisions. Changes in reimbursement systems, including managed care contracts, however, now require a higher level of management expertise. In the future, increasing competition, as well as the increasing complexity of the health care environment, will force managers of ambulatory care facilities to become more sophisticated in making business decisions, including financial management decisions.
SUMMARY
The “graying of America” is resulting from increased longevity, coupled with the aging of post-World War II baby boomers. The trend is of major concern to policy-makers, because the elderly use a disproportionately high share of health care services, most of which is funded through public sources.
Managing the financial viability of the health care organization involves a collection of processes for subsystems to obtain funds for the organization and to make optimal use of those funds once obtained. Most hospitals receive a substantial amount of the revenue from regulated payers such as Medicare and state Medicaid programs.
Managed care continues to evolve, as does the U.S. health care system. Economic and regulatory forces as described in this chapter will also influence practice patterns among managed care and nonmanaged care providers.
Nevertheless the desire to provide access to high-quality, affordable health care will continue to motivate the use of cost-containment and cost-reduction strategies that have been the cornerstone of managed care.
Nurses have played a pivotal role in implementing care management strategies in particular, and nurse managers are a critical resource in health care organizations in balancing competing demands on limited resources.
Whether it be the use of APNs as nonphysician providers, the intervention of nurses in case management, or the intervention of nurse managers in resource allocation decisions, nurses must possess the knowledge, skills, and abilities to participate in a health system that demands greater accountability and the delivery of high-quality, efficient health services.
The 5 Mega-Trends That Are Changing the Face of Health Care
As the nation’s highest court weighs the fate of President Obama’s health care reform legislation, it’s important to keep one thing in mind: No matter what the nine justices ultimately decide, significant change is coming to health care — and the industry’s future is gaining clarity.
Indeed, we see five key trends that are solid, foundational, and unassailable:
(1) Strong headwinds will force change. The numbers say it all. Intense funding pressure on Medicare and Medicaid, decreasing commercial reimbursement, flat or declining volume trends, federal budget deficits, and growing uncompensated care–all of which are compelling the health care industry to adapt in a wholesale way.
(2) Employer-based commercial insurance will undergo a shift. Whether it’s an employer mandate or widespread exchanges, companies will have an entirely new relationship with employees when it comes to health care coverage.
(3) Commercial payers will alter how they do business. They may be more collaborative in the rapidly emerging new world of health care, but they will also pay less. Some are employing a vertical integration strategy by getting into or enhancing their position in the provider segment.
(4) Consumers will control more of their health care dollars. An increase in individual and high-deductible health plans will force consumers to be more active in their own health care and will lead to more consumer decision making. Providers will be required to adapt to increased demand for evidence-driven medicine and provide greater data and transparency.
(5) Providers will be financially challenged. Quality through coordination and evidence-based medicine, not gatekeeping, is the answer. Put another way, better care will lead to better health, which will lead to lower costs. This transition from fee-for-service medicine will be wrenching–evidenced by recent practice closings and the growing trend toward consolidation.
EMERGING MODELS
As the sweeping transformation in health care takes hold, several models appear to be taking shape. Each has its strengths and weaknesses and each presents opportunities and risks, but the following three deserve serious analysis and represent different points on the risk spectrum:
— Bundled payments model: calculates total historical payments for the various components of a bundle and then discounts or at least holds constant that amount, placing the responsibility for cost and quality control in the hands of the collective providers.
— Accountable Care Organization (ACO) model: seeks to tie provider reimbursements to quality metrics and reductions in the total cost of care for an assigned population of patients.
— Capitation model: sends a fixed per-patient prepayment of premium dollars to a provider in return for medical services.
Let’s take a closer look at each.
Bundled Payments. These are largely proven, but their track record in driving significant volumes has generally been marginal. Success is visible more clearly in terms of cost controls. Think of them as a middle ground between fee-for-service reimbursement and capitation. Nonetheless, bundled payments offer several important advantages:
(1) Providers can benefit from cost savings from any payers included in the program.
(2) Providers can derive enhanced volumes from private insurance and cash patients, who are drawn by the cost clarity and discounts. Medicare volume enhancement is driven by physician participation as well as patient desires.
(3) Physicians and hospitals can develop tighter relationships as they seek to collaborate in this new way.
(4) Silos get broken down–enhanced provider collaboration has beeoted among specialties that are required to come together.
(5) Greater coordination of care will likely lead to higher quality and more satisfied patients.
(6) All payers will benefit from contracted case savings.
The critical success factors to make bundled payments work, however, include appropriate episode selection, thorough and thoughtful bundle definitions, accurate cost analysis, willing and committed partners, and the infrastructure to manage the process.
ACOs. For their part, ACOs are hardly proven, but in theory they should achieve results. The overarching idea is to get patients who aren’t being treated in a coordinated manner into a system that can deliver care more effectively. The upsides to ACOs are:
(1) Physicians and other professionals have an opportunity to reap financial benefits of efficiency driven by quality.
(2) Hospitals that get involved can partially make up for declining volumes associated with higher quality and efficiency.
(3) Patients currently accessing services in a disjointed manner are likely to have a better overall health care experience in a coordinated system.
(4) Quality is likely to be enhanced because of coordination and aligned incentives.
(5) Providers will likely increase collaboration. Existing risk-bearing organizations can increase “membership,” and many have already developed at least a portion of the infrastructure and have experience managing risk.
The ACO model, if more broadly accepted, could have a major impact on hospitals, especially because the overall goals here are to reduce unnecessary services and provide better overall health care, which would mean less traditional business for them. A prime issue is that costs–for labor, devices, supplies, equipment, and construction–aren’t addressed. And the Affordable Care Act exacerbates this situation by creating additional taxes, such as those levied on device manufacturers and payers, that will be passed through to purchasers.
Indeed, we’re already seeing tax and fee pass-through language cropping up in standard language from some managed care health plans. Continued passing of the cost problem from one entity to another isn’t the answer, and this reality exhibits a major problem not addressed in the legislation.
For hospitals, the solution lies in changing their business model. That means forging enhanced relationships with physicians; owning outpatient ancillary services, perhaps in conjunction with physicians; employing physicians; creating joint ventures with physicians; and fostering more than a low-level interest in primary care.
To implement some of these changes, hospitals must take advantage of the positive business aspects of the current model while altering their strategic direction by being as efficient as possible now to retain valuable financial resources while they explore innovative options for the future. They should also identify the key physician organizations in their market and start talking about the potential collaboration needed for success. Those in particularly fragmented markets have a special opportunity to enhance their business model.
There are a host of factors critical to an ACO’s success, including adequate breadth of network; administrative, clinical, and IT infrastructure; a clinical staff versed in care management; experience managing risk; and strong data that helps with population health management.
Capitation. Deploying this approach requires deep expertise on a number of levels. But the capitation model could be part of the health care solution, because payments remain largely the same, regardless of how many services or what type of services each patient actually receives. Capitation offers a number of other positives as well:
(1) Provider organizations can gain greater sustainability, control over their own destiny, and enhanced business possibilities–all of which complement the accountability this model requires.
(2) Organizations find themselves centering their efforts around proactive long-term health management — rather than quick short-term bottom-line “wins” — to realize profitable gains.
(3) It aligns incentives for provider organizations. It fosters coordination, quality, and financial responsibility.
To reap these rewards, however, organizations must grapple with a series of critical success factors. Among the must-haves: a provider network with adequate breadth and depth, appropriate funding, a large enough membership complement, sophisticated care coordination systems, providers vested in the success of the entity or model, sufficient administrative support and physical infrastructure, a culture of high quality, and proper leadership. Not surprisingly, these are the same characteristics a successful ACO will have.
Good business discipline is also required: strategic planning; mentorship and succession planning; business modeling and forecasting based on actuarial projections; IT infrastructure; knowledgeable, experienced administrative staff; and effective contractual relationships and communication mechanisms with outside providers.
A decent measure of risk is associated with capitation too. Health care costs have been out of control for a long time, and as a result many organizations are reluctant to work with finite financial resources to achieve stated goals. That said, the time could be right for capitation.
DECISIONS
Health care’s future is being formed well beyond the Supreme Court’s jurisdiction. Sure, the industry is being forced to find new ways to cope with declining reimbursement and other challenges, but it’s also trying to deliver better care models, no matter what ends up being decided with regard to the Affordable Care Act.
The industry is clearly changing, and the process can’t–and won’t–be reversed. Provider organizations now must decide which model makes the most sense for them and take proactive steps to stay ahead of the health care curve.
This is important, because the key trends and emerging models show us that providers, payers, and patients–not judges–will be the players who determine the future of health care in America in the years and decades to come.
10 Trends in ASC Payor Reimbursement & Contracting for 2012
Reimbursement trends can impact surgery centers significantly, depending on their specialty mix and their dependence on particular payors. Eric Woollen, vice president of managed care for Practice Partners in Healthcare, discusses 10 trends that may impact payor reimbursement and contracting for surgery centers in 2012.
1. GI and pain may suffer under Medicare in 2012. Mr. Woollen says gastroenterology and pain management overall continue to take minor decreases on Medicare reimbursement this year, a trend that could signal trouble ahead for GI- and pain-driven surgery centers. When Medicare reduces reimbursement, commercial payors are likely to take notice and follow suit, meaning surgery centers that perform a high volume of low-reimbursed cases will have to be careful with costs and volume to stay profitable.
Luckily, Mr. Woollen says these two specialties may be safe because of the high volume they bring in. “GI and pain are typically still volume-driven from an operations standpoint,” he says. “The more efficient you are and the quicker you can turn a room over, the more likelihood for overall positive revenues.”
2. Medicare quality reporting will start in 4Q 2012. Mr. Woollen says Medicare quality reporting will begin for surgery centers in the fourth quarter of 2012. While the program does not come with financial incentives for proven quality, Mr. Woollen says the program gives ASCs “a chance to provide to Medicare that we have high-quality, cost-effective services.” Building this repository of data will give surgery centers leverage in the future in lobbying for increased reimbursement from the federal government. While surgery centers are nationally recognized as a provider of high-quality care, the industry desire is to submit the data to back up these claims.
For now, data reporting is the only requirement for surgery centers, and ASCs will not be penalized for what the data indicate. For example, in 2013, CMS will ask ASCs to report whether they used a safe surgical checklist during the 2012 calendar year. As long as your ASC informs CMS that you used a safe surgery checklist, you have fulfilled the obligation. Failure to report the required data to the Medicare program in 2012 will result in reductions of Medicare payments to that facility in 2014, and failures to report in subsequent years will affect future years’ payment to the same extent.
3. More commercial payors are giving the option of using an implant management service. Orthopedic-driven centers may see a trend of commercial payors offering the option of an implant management service, Mr. Woollen says. “It’s something I’m seeing in proposals as we move forward with contracting,” he says. “In the past, if we were able to get the implants paid, the reimbursements would come directly to the facility. Now we have these implant management services that take the risk somewhat off the facility.” He says this can be beneficial for orthopedic centers trying to get implants covered or paid in the facility contract.
4. Percentage of Medicare may not be the smartest option. Mr. Woollen says while many ASC administrators pursue “percent of Medicare” as a model for their payor contracts, he does not recommend the strategy. He says the model works well when Medicare reimbursement remains relatively predictable year over year, but in the current climate of “negative pricing reimbursement changes,” percent of Medicare can prove less profitable than other models. For example, if Medicare slashes reimbursement levels significantly, a contract that pays 150 percent of Medicare will suddenly become much less profitable.
5. Payors are increasingly using “homegrown” payment methodologies. Mr. Woollen says most commercial payors use their own payment methodologies that combine crosswalks from the old Medicare grouper-based methodology with more up-to-date payment determinations. He says the “homegrown” methodologies have become popular due to the number of procedures moving into the outpatient setting in recent years.
For example, procedures like spine surgery are not currently reimbursed in an outpatient ASC setting under Medicare but are reimbursed by many commercial payors. Because spine cases are unable to be performed in the ASC under Medicare, the old grouper methodology would not be helpful in setting reimbursement terms. Instead, the payors may use guidance from a myriad of different sources to determine how new procedures should be classified and reimbursed.
6. Out-of-network is shrinking, but probably won’t disappear completely. While other experts have predicted an end to out-of-network reimbursement, Mr. Woollen believes out-of-network will still work for some centers. “The ability to perform OON is shrinking, whether that’s the result of the types of products on the market or the ability of some commercial plans to use internal policies to not pay OON claims,” he says. “I’m of the professional opinion that OON will not completely go away.”
He says markets that still depend heavily on self-insured patients may be able to survive on OON reimbursement in the next few years. “When you have a fully-insured scenario, you have much more market control from the payor,” he says. “When more patients are self-insured, the payor isn’t taking on the risk. They’re simply providing a network and performing administrative functions.”
7. Dependence on a single payor is dangerous. Most ASCs should look for their case mix to come from a variety of payors, Mr. Woollen says. In certain states, a particular commercial payor may represent 90 percent of the commercial market, and surgery centers have little choice as to where their volume comes from. In general, however, surgery centers should look for a variety of payor sources, whether that means government payors or commercial insurers.
Depending heavily on Medicare or a single commercial payor can be treacherous because a unilateral rate decrease can drastically affect surgery center profitability. Medicare, which usually pays at a lower rate than commercial payors, should not make up the majority of a surgery center’s payor mix unless the ASC can provide significant volume to offset the low profit margin.
8. Data is still king iegotiations. Having formerly worked for United Healthcare, Mr. Woollen says the most common error he sees ASC leaders make in payor contract negotiations is failing to review and understand relevant data. He says ASC leaders should understand their case costs down to the procedure. “Every time you do an ACL repair, every time you do a meniscus repair, you need to understand what it costs,” he says. Make a spreadsheet that lists the average cost of every procedure your surgery center performs by physician, then cross-reference those costs with the terms of your payor contracts.
“At a minimum, you need to understand every time an ACL comes in, what does it mean from a particular payor?” he says. “If you can’t [cover the costs on a procedure], itmay be time to open up the contract and talk to that particular payor.” He says presenting this data to the payor at your contract negotiation can validate cost concerns in asking for higher reimbursement levels. Bring along data on quality, cost savings and patient satisfaction in your surgery center to tip the scale in your favor.
9. Physician re-syndication means a second look at payor contracts. If your surgery center is going through a growth phase, you might want to take another look at your payor contracts, Mr. Woollen says. “If you’re going to add a new specialty or a new physician group, you need to know what kind of cases that group is going to bring, what kind of capital equipment is necessary and what kind of supplies are necessary,” he says.
Take a look at the cases coming into your center, and make a note of the short- and long-term expenses your ASC will incur by adding a new group or specialty. Once you know how much you will have to spend on your new cases, you caegotiate with the payors and propose reimbursements that makes sense for each case.
10. Neck, spine and bariatrics are increasingly accepted by payors. Mr. Woollen says he sees three specialties — neck, spine and bariatrics —moving into the outpatient setting at an increasing rate due to payor acceptance. He says initially, ASC leaders could not always contract with commercial payors for neck and spine procedures because of concerns about risk. “If there’s an adverse event, it’s a high-acuity case, and you’re talking about potential transfers to the hospital,” he says. “That made payors kind of nervous. As time has evolved, we’ve been able to demonstrate that we screen these patients and we can provide the same high quality level of care at the ASC at a cost savings to both the plan and patient.”
He says bariatrics has followed a similar path. In the past, payors preferred physicians to direct patients toward other methods of weight loss — diet and exercise, namely — before recommending weight-loss surgery. While weight-loss surgery is still hit-or-miss with commercial payors, the development of quality standards and the designation of “Bariatric Centers of Excellence” have made insurance companies more comfortable. “Payors are starting to feel more comfortable with the quality, and they’re covering these procedures more often,” he says.
Tracking Reimbursement and Payment Trends
Most major functions of medical technology companies are inextricably linked to reimbursement. It directly affects capital funding, company valuations, and the commercialization of products. Because of reimbursement’s central role, the device company executive must carefully consider the impact that coding, coverage, payment, and policies have on target markets and corporate reimbursement functions. These activities support the future use of codes, sales projections, insurance coverage, regulatory filings, product labeling, and other key company business. Device firms that thoughtfully plan their reimbursement strategies are positioned to secure market share and sales they might otherwise have lost.
This article examines U.S. reimbursement trends, future coverage, coding, and payment mechanisms likely to affect medical technology companies, innovators, care providers, and patients. After a brief review of the recently passed healthcare bill, the article considers trends affecting coverage and coding, then looks at payment trends. Issues such as comparative effectiveness research, financial risk, and evidence development for product commercialization are also addressed. Finally, the article considers whether medical devices and biologics technologies will fall prey to formulary limitations or selective contracting by payors in the future.
Healthcare Policy
In 2009, five major reform bills were proposed between the U.S. House of Representatives and the Senate. On February 22, 2010, President Obama announced his healthcare reform proposal, and held a political forum with members of the Executive branch, House, and Senate in order to discuss policy differences. Partisan efforts continued, and the Patient Protection and Affordable Care Act (PPACA) passed into law on March 23, 2010 (Pub.L 111U148). These regulations were further amended through passage of the Health Care and Education Reconciliation Act of 2010 that was signed into law by the president on March 30, 2010 (Pub.L 111U152).
Despite passage of the PPACA, there appears to be little consensus among Democrats and Republicans, as issues presented during the healthcare reform debate continue to linger. Judicial, political, and financial challenges are expected to continue, and medical technology companies are encouraged to pay close attention to regulatory activities in Washington and in states that also intend to pursue their own reform initiatives.
Policy and politics aside, stakeholders within the healthcare reform debate seem to agree that fundamental changes are required. Healthcare spending now exceeds 16% of the U.S. gross domestic product. At its current pace, projected spending on healthcare is expected to exceed $4.3 trillion, or 19.3% of GDP, by 2019. Medicare beneficiaries are expected to increase from 46 to 60 million during this same period, while hospitals, physicians, allied, and ancillary care providers continue to see declining payment levels, without relief from increased business-related expenses.
Notwithstanding passage of the PPACA, as amended, healthcare reform has been occurring for many years. Led principally by the Centers for Medicare & Medicaid (CMS), commercial insurance companies, professional societies, and other stakeholders have been successfully modifying U.S. reimbursement systems for many years. Reforms already in motion are attempting to transform U.S. healthcare from a volume-based system to one that rewards quality outcomes and evidence-based medicine. These include coverage policy changes that require published evidence supporting access to medical technologies, the evolution of severity adjusted diagnosis related group (MSUDRG) payment systems, and CPTU4 code development and society guideline development now based more upon outcomes presented within the literature. The emergence of hospital value analysis assessments prior to facility adoption as well as demonstration projects promoting risk-sharing relationships between facility and physician are among the changes as well. In addition, there has been a shift in financial risk relating to hospital-acquired conditions.
Coverage Analysis
Insurance coverage is directly related to published clinical evidence that clearly communicates outcomes and makes comparisons to alternative treatments and technologies. Payors consider whether there are biases that may influence outcomes, consider statistical methods used, and study designs. Major insurers have initiated more formal review processes of technologies, and make public some of their coverage decisions. Absent a randomized, controlled trial, many carriers reject case series data that help to explain outcomes, define patient populations, or provide meaningful insight into the technology’s use or limitations. Payors frequently dismiss regulatory approval of technologies that have undergone the rigorous review process required by FDA. Some may delay or deny coverage requiring long term outcomes of more than two years, despite published data to the contrary. However, comparisons between different policies suggests consistent review methods are not used by these organizations, and the full body of published literature is frequently not considered when making benefit decisions that affect patient access to care. This is true as well for technology assessment organizations that claim to evaluate technologies using a rigorous review process, which has not proven to be true in many instances.
Regardless of pay or bias, technology companies must be mindful of the need to support development of high-quality, published outcomes that continue to demonstrate quality, safety, and direct impact on economic outcomes as compared with competing technologies and alternative treatment options. Thorough review of these issues, literature and pay or education strategies are required to overcome these barriers.
Absent a randomized, controlled trial, many carriers reject case series data that help to explain outcomes, define patient populations, or provide meaningful insight into the technology’s use or limitations. Payers frequently dismiss regulatory approval of technologies that have undergone the rigorous review process required by FDA.
Some may delay or deny coverage requiring outcomes longer than two years despite published data to the contrary. Thorough review of these issues, literature and payer education strategies are required to overcome these barriers.
Payment Trends
Figure 1. Payment trends (average charges and reimbursement
Depending upon the procedure, facility payments continue to show some favorable trends, while physician payments from Medicare remain suppressed. According to the data management company Pearl Diver Technologies (Ft. Wayne, IN), from January 1, 2005, to December 31, 2007 the average facility charges for total knee replacements (see Figures 1 and 2) increased from $35,262 to $41,998 (19.1%). For total hip replacement (see Figures 3 and 4) the average facility charges increased from $38,521 to $45,621 (18.4%).
Figure 2. Knee replacement trends involving facility and phys
Actual Medicare payments for these same services increased from $10,411 to $11,108 (6.7%) and $10,216 to $10,850 (6.2%), respectively. For Medicare fiscal year 2010, the national average payment for total hip and total knee replacement is $10,766 (MSUDRG 470) when the procedure has no complications or associated comorbidities.
Given that Medicare payments are based upon historical claims data and cost reporting, one would expect near-term payment trends for these procedures to continue. On average, the Centers for Medicare & Medicaid (CMS) announced an overall increase for in-patient facility payments of 1.9% for FY2010.
Conversely, physician payments have remained stagnant for the past several years. In part, physician payment rates have been suppressed because of congressional mandates based upon a flawed calculus that requires payment reductions to meet budget expectations.
Using total hip and total knee procedures for illustration, average billed charges for total hip procedures (see Figure 3) decreased from $972 to $942 (–3.1%), while actual payments decreased from $771 to $753 (–2.3%) from January 1, 2005, to December 31, 2007. Total knee replacement procedures (Figure 4) showed similar decreases in billed charges from $1,053 to $1,023 (–2.9%), while payments decreased from $837 to $818 (–2.3%) during this same period.
The national average of allowed payment amounts for total hip (CPTU4 Code: 27130) and total knee replacement (CPTU4 Code: 27446) is reported to be $1,375 and $1,055, respectively.
Figure 3. Hip replacement average charges and reimbursement
Congress must once again act and provide supplemental appropriations in support of physician payments, or the Medicare sustainable growth rate will decrease payments to physicians. On February 26, 2010, the House of Representatives passed a supplemental bill that would avoid a 21% automatic payment reduction to physicians until the end of March 2010. On March 15, the President signed legislation to extend current Medicare payment rates through May 31, 2010. However, Senators must once again act to avoid significant payment reductions on June 1, as this issue was not addressed through passage of the PPACA. Given recurring payment concerns and pricing/reimbursement pressures, technology innovators must develop products that directly reduce the overall cost of care, increase efficiency, and demonstrate actual value to the healthcare community.
Ongoing Payment Reforms
Payment reforms have been continuing for some time. A few examples include quality-based purchasing (also called pay-for-performance), shifting financial risk through policies that exclude payment for hospital-acquired infections, and composite payments for episodes of care.
Figure 4. Hip replacements trends regarding facility and physician
The Medicare Prescription Drug, Improvement, and Modernization Act of 2003 (MMA, Pub.L. 108-173) included provisions that would attempt to transition from payments based on service volume to one based on quality outcomes. This set the stage for quality based purchasing initiatives, including pay-for-performance demonstration projects encouraging sustainable patient outcomes through various methods of clinical delivery and management.
Beginning October 1, 2008, the 2005 Deficit Reduction Act (DRA) requires CMS to identify hospital-acquired conditions and preclude assignment of a hospital stay to a higher paying diagnosis-related group unless it can be demonstrated by the hospital that the condition was not present upon admission. The list of hospital-acquired conditions grows each year, as allowed under Section 5001(c) of the DRA. Medicare, as well as many commercial insurance carriers, has also published noncoverage policies for “never events” in which certain activities (for example, amputation of the wrong appendage) should never occur.
Using its authority under Section
Financial Burden Shifting
While none of these initiatives represents new payment methodologies, they do represent a continuing trend towards delegated risk relationships that shift the financial burden to care providers. Physicians and hospitals will pay even closer attention to clinical outcomes associated with technologies, impact on cost, and price. Quality training, monitoring patient outcomes, post-approval studies, and support of long-term registries are some of the areas where technology companies may support outcomes associated with alternative products, procedures, and techniques. It is now clear that innovators have a stake in quality clinical outcomes to ensure future viability of the product offered to medical prescribers.
Foreseeable trends in U.S. healthcare finance include the continuing consolidation of the insurance community, making it more difficult for providers to negotiate favorable payment rates. Demand for quality published outcomes will continue, resulting in a substantial increase in comparative effectiveness studies between different procedures, technologies, diagnostic tools, and techniques. Selective contracting may become more prominent among healthcare providers and payors, including delegated authority granted to the Secretary of Health and Human
Services. While at some point in the future, implantable medical devices, biologics, and other supplies may find competition for placement on formularies similar to experiences found within pharmaceuticals.
To remain competitive or introduce new technology into the U.S. marketplace, innovators must first consider each of these trends. Then they need to understand the mechanics associated with coverage, coding, and payment, and execute thoughtful strategies that support not only market entry but also sustainable success within this marketplace.
Medicare Prospective Payment Systems (PPS)
Prospective payment systems are intended to motivate providers to deliver patient care effectively, efficiently and without over utilization of services. The concept has its roots in the 1960s with the birth of health maintenance organizations (HMOs). The HMO receives a flat dollar amount (i.e., monthly premiums) and is responsible for providing whatever services are needed by the patient. Thus, there is a built-in incentive for providers to create management patterns that will allow diagnosis and treatment of the patient as efficiently as possible. In contrast, conventional fee-for-service payment systems may create an incentive to add unnecessary treatment sessions for which the need can be easily justified in the medical record.
There are only a few changes to make in the HMO model to describe the Medicare PPS systems for hospitals, skilled nursing facilities, and home health agencies. Instead of receiving a monthly premium to cover the whole family, the health care facility receives a single payment for a single Medicare beneficiary to cover a defined period of time or the entire inpatient stay. The payment amount is based on diagnoses and standardized functional assessments, but the payment concept is the same as in an HMO; the recipient of the payments is responsible for rendering whatever health care services are needed by the patient (with some exceptions).
Except for acute care hospital settings, Medicare inpatient PPS systems are in their infancy and will be experiencing gradual revisions.
Some common characteristics of Medicare PPS are:
§ Prepayment amounts cover defined periods (per diem, per stay, or 60-day episodes).
§ The payment amount is based on a unique assessment classification of each patient.
§ Applies only to Part A inpatients (except for HMOs and home health agencies).
§ A patient who remains an inpatient can exhaust the Part A benefit and become a Part B case. Such cases are no longer paid under PPS. (Part B payments for evaluation and treatment visits are determined by the Medicare Physician Fee Schedule.)
Medicare Hospital Outpatient PPS (OPPS) is not a “pure” PPS methodology consistent within the characteristics listed above because payment is made for individual evaluation and treatment visits.
Following are summaries of Medicare Part A prospective payment systems for six provider settings.
|
Provider Setting |
Classification System |
Summary Description |
|
Inpatient acute care hospital |
Diagnosis-Related Groups (DRGs) |
§ Primary diagnosis determines assignment to one of 535 DRGs § The DRG payment rate is adjusted based on age, sex, secondary diagnosis and major procedures performed. DRG payment is per stay. § Additional payment (outlier) made only if length of stay far exceeds the norm |
|
Inpatient rehabilitation hospital or distinct unit |
Case-Mix Groups (CMGs) |
§ Patient Assessment Instrument (PAI) determines assignment of patient to one of 95 Case-Mix Groups (CMGs). CMG determines payment rate per stay § Rehabilitation Impairment Categories (RICs) are based on diagnosis; CMGs are based on RIC, patient’s motor and cognition scores and age. Discharge assessment incorporates comorbidities § PAI includes comprehension, expression, and swallowing |
|
Skilled Nursing Facility |
Resource Utilization Groups, Third Version (RUG-III) |
§ Fifty-eight groups § Each beneficiary assigned a per diem payment based on Minimum Data Set (MDS) comprehensive assessment § A specified minimum number of minutes per week is established for each rehabilitation RUG based on MDS score and rehabilitation team estimates |
|
Home Health Agency |
Home Health Resource Groups (HHRGs) |
§ Eighty HHRGs § The Outcome & Assessment Information Set (OASIS) determines the HHRG and is completed for each 60-period § A predetermined base payment for each 60-day episode of care is adjusted according to patient’s HHRG § No limit to number of 60-day episodes § Payment is adjusted if patient’s condition significantly changes |
|
Hospice |
Each day of care is classified into one of four levels of care |
§ Per diem rate for each of four levels of care: § Routine home care § Continuous home care § Inpatient respite care § General inpatient care § Geographic wage adjustments determine the only variation in payment rates within each level |
