by Kirk Norris on Wednesday, July 8, 2009
1As news events and announcements unfold today (7/8/09) concerning the American Hospital Association (AHA), Catholic Hospital Association and American Federation of Hospitals agreement with the White House and Senate leaders on the hospital community’s financial contribution toward health reform, the Iowa Hospital Association (IHA) is providing an update on the conversations this organization has been having with Iowa’s delegation and AHA on this subject over the past two weeks.
IHA’s public policy stance on payment reform for several years has been that Medicare should move to a payment system that recognizes value. IHA defines value as the combination of quality outcomes and resources utilized to achieve those outcomes. Although value-based payment has coalesced around the quality measures being reported by Prospective Payment System hospitals, until recently there has not been a methodology suggested for recognizing resource use, often referred to as efficiency.
New proposals for value based payments
In the past year, the Mayo Health System has proposed a value-based payment methodology for physician and hospital payment. To summarize, the Mayo hospital payment proposal includes the factors of mortality, patient satisfaction and spending per Medicare beneficiary.
More recently, a coalition of state hospital associations (including IHA) has devised another proposal. This value-based payment proposal includes evaluation of quality measures by hospital referral regions and Medicare spending per beneficiary. The Mayo proposal for physician payment has been incorporated in the House health reform proposal and is intended to be incorporated in the Senate Finance Committee’s proposal. To date, neither proposal includes recognition of spending per Medicare beneficiary in proposed changes for hospital payment.
IHA has been participating in an AHA board-appointed payment reform task force to evaluate various proposals. IHA has advocated for recognition of spending per Medicare beneficiary in this forum and believes that factoring in efficiency will be acknowledged in this work group’s final report.
However, acknowledgement in a report is not binding on AHA’s current advocacy and does not mean it will be recognized in legislation that is evolving daily. Toward this end, IHA has also advocated with key members of Iowa’s congressional delegation that their priorities include recognition of geographic variation in spending as defined by Medicare spending per beneficiary.
IHA is not arguing for redistribution of Medicare dollars; both of these proposals suggest a payment incentive for hospitals that perform above the norm in quality and below the norm in resource use. IHA has proposed that the total cost of doing this is less than $1.6 billion per year, reasonable given the fact that several hundred billion dollars over the next 10 years is being considered in current negotiations.
IHA has communicated to legislators that IHA’s commitment to any “deal” that national organizations are making concerning cuts in payment to hospitals is contingent upon recognition of Medicare spending per beneficiary within any value-based payment proposal. IHA has also repeatedly communicated this position to AHA. Unfortunately, to date this concept has not been recognized in any legislative proposal.
Hospitals need recognition of spending per Medicare beneficiary
The catalyst for AHA’s negotiation with policy makers to accept $155 billion in lower Medicare and Medicaid payments is the fundamental belief that with the coverage of 95 percent of America’s uninsured, hospitals will receive a financial windfall in the neighborhood of $170 billion over 10 years. AHA has done good work in negotiating down the overall hospital commitment to pay for health reform below this expected windfall.
However, the largest proportion of the negotiated cuts is to annual hospital payment updates, which again disproportionately impacts highly insured, low-cost states like Iowa. This is not meant to criticize AHA, as its overall strategy (like IHA’s at the state level) is always to keep more versus less money in the system. However, it does mean that IHA, as in the past, will continue to advocate the need for recognition of spending per Medicare beneficiary pending its “sign-off” on any proposal.
Please share your thoughts on the current state of health reform activities
There is still opportunity in at least the next two months to impact the question at hand. Please feel free to leave a comment on this post regarding your opinion of current health reform activities.
I was around the last time medicare implemented a value based payment methodology in 1983 called prospective payment. The idea was that hospitals that delivered quality care at a lower cost would be rewarded and those that had high cost would have to reduce costs. (sounded real good then) Instead, those with higher costs continue to be rewarded to this day and those beginning with lower costs continue to be paid at a lower rate. Efforts to fix these inequities have created new inequities every time they have been implemented, until we have a system today that pays providers arbitrarily based on their bed size, their location, their wage index (which is itself a function of how much they have been paid in the past), and other criteria that have nothing to do with the reasonableness of their cost or their quality.
The public is totally oblivious to the inequties of medicare reimbursement between providers nationally or to the fact that in many many cases medicare is paying their local hospitals less than it actually costs to provide the care.
The “fundamental belief” that hospitals are going to receive a $170 Billion windfall and the acceptance of this by the AHA to the point they are conceding $155 Billion in medicare payment cuts, clearly indicates to me that these discussions have become completely political rather than discussions aimed at examining facts and actually looking for ways to improve the healthcare delivery system, and this concession solidifies in the minds of consumers and our legislators that hospitals must be receiving too much reimbursement. Either that, or the AHA is not aware of the significant medicare inequities that exist between regions and states and individual hospitals.
IHA should not sign off on the reductions in medicare payment to Iowa hospitals or any reform plan that does not seek to reduce or eliminate geographic and other arbitrary reimbursement inequities, and should make substantial efforts to educate the public and legislators about these inequties. Implementing additional government plans and continuing to pay some providers less than their reasonable cost in no way represents reform. It is just more of the same.