Saturday, March 23, marked the three-year anniversary of President Barack Obama's Patient Protection and Affordable Care Act. The legislation has undergone and continues to experience a bevy of challenges since its enaction, but it's recently gained broader acceptance as the law of the land.
Just minutes after President Obama signed the bill in 2010, officials from 14 states went to court and asked a judge to block enforcement of the law. They claimed the PPACA, especially the individual mandate, infringed upon sovereignty of the states. This event merely foreshadowed the longstanding political opposition PPACA would face. The challenges started day one and only persisted, from the Supreme Court's 5-4 decision in June 2012 that upheld the individual mandate, to House Speaker John Boehner (R-Ohio) saying the House would "continue working to scrap the law in its entirety" just last week.
It's been a long road, but most state lawmakers have recently come to accept healthcare reform as the "law of the land." Florida Gov. Rick Scott (R) took the industry by surprise this February when he accepted the Medicaid expansion under the PPACA. He's been one of the most vocal opponents of the PPACA, as evidenced by his state spearheading State of Florida, et al v. Department of Health and Human Services, which landed in the Supreme Court.
To mark the law's third year, Becker's Hospital Review compiled a list of the five largest changes for hospitals under the PPACA. Doing so is a little like identifying the largest wave in an ocean — there has been so much change in the past three years. But these specific events, provisions and programs have created ripple effects that will undoubtedly continue shaping healthcare delivery in the years to come.
1. Payment reform tied to quality measures. One of the biggest concepts inherent in President Obama's health law has been the "triple aim:" improving patient quality and experience, improving the health of populations and reducing the per capita cost of healthcare.
Within the PPACA is the Value-Based Purchasing program for Medicare — a program that encourages hospitals to move toward a quality-based business model. VBP started October 2012 and redistributed roughly $850 million in incentives to hospitals based on their overall performance on a set of quality measures, such as clinical processes of care and patient satisfaction from the Hospital Consumer Assessment of Healthcare Providers and Systems survey. Examples of the care processes included in the measures are how quickly heart attack patients receive potentially life-saving surgery on their arteries and how often patients with heart failure get proper discharge instructions.
CMS' Bundled Payments for Care Improvement program, in which hundreds of hospitals have signed up to try their hand at bundled payments for select DRGs, is another payment reform that has made its way to the forefront of the business office. BPCI is based on the idea that hospitals, physicians and other parties will collaborate to better coordinate care, improve health outcomes, reduce readmissions, diminish duplicative care and lower Medicare costs. CMS will dole out a discounted payment for an episode of care, and in return, everyone gets to share in the savings if the care is delivered efficiently and well.
These value-based payments have forced hospitals to rethink how they develop three- and five-year and long-term strategic plans, as the goal is no longer to have "heads in beds."
2. Accountable care organizations. In 2010, it wasn't unusual to hear ACOs referred to as "the unicorns of healthcare." Many hospital leaders said they had heard about ACOs, but had never seen one. Furthermore, many industry experts likened the concept of ACOs to managed care in the 1990s, or "HMO redux." A 2012 study from Health Affairs analyzed the differences between HMOs and ACOs, finding the roles of health information technology, data analytics and clinical decision support to be some of the largest distinctions.
Recent data has shown a proliferation of ACOs, with 428 of them throughout 49 states as of January 2013. At that time, Delaware was the only state without an ACO, while California led the way with 46, Florida followed with 42 and Texas trailed with 33. Private payors' interest in coordinated care management helped spur this growth. Cigna, for example, announced plans to have one million people enrolled in ACOs by 2014. CMS' unveiling of the 32 Pioneer ACOs in December 2011 and first 27 Medicare Shared Savings Program ACOs in April 2012 also helped make what was once called a "unicorn" into a reality.
Given their relative youth, few ACOs have yet released their quality outcomes or cost savings. Oak Brook, Ill.-based Advocate Health Care is one of the few systems that has reported some results, including reduced readmission rates, from its ACO. The system launched AdvocateCare in partnership with Blue Cross Blue Shield of Illinois in 2011. Year-one data showed a 26 percent decline in readmission rates for ACO patients with chronic illnesses. It also released data showing a 10.6 percent decrease in its hospital admissions per ACO member and a 5.4 percent drop in emergency department visits.
More recently, officials from CMS said results for Medicare ACOs could be expected sometime this summer.
Repercussions of ACOs have spread far and wide, as the model is one of the forces driving hospital-provider integration. ACOs also emphasize the role of preventive care and providing care delivery in low-cost settings. This has sparked an even more robust demand for primary care physicians, who are already in high demand due to a nationwide shortage.
3. New provider-payor partnership models. Partly driven by the proliferation of ACOs, many more hospitals and health systems began striking value-based reimbursement agreements with commercial payors since the PPACA was signed into law. This has been a change from the traditional relationship between providers and payors, which was often tinged with mistrust.
Armed with sophisticated analytics, payors can provide clinicians with coded data that connects patients' and broader populations' health patterns. Providers can then incorporate this longitudinal information into their population health strategy and outcomes-based care. Many agreements are structured around the principles of preventive care, improved care coordination and chronic condition management. Both payors and providers also take on more risk. Generally, in most value-based deals, payors offer incentives or penalties tied to providers' ability to meet specific quality metrics while delivering care within a projected cost.
The payor-provider deals vary in breadth and scope. Some health systems and insurers have pursued these goals in full-on ACO agreements, while others scaled back their value-based reimbursement contracts to tackle a few specific conditions or metrics at a time. Some payors have designed pay-for-performance contracts for specific types of clinicians, as well. For instance, in January 2012, WellPoint agreed to boost reimbursement for primary care physicians and pay them up to 50 percent more if they maintained or improved care quality. The insurer said it would begin paying PCPs for "non-visit" services that were previously not reimbursed, and it would also enhance information sharing with clinicians.
Providers are also facing pressures to demonstrate payor-like efficiencies from businesses and employers, many of which seek a provider partner to trim costs and better manage employees' health outcomes. This has spurred some health systems to form direct contracting relationships with self-insured employers, such as bundled payments. Cleveland Clinic has been a pioneer in this regard, striking direct-to-employer deals with Lowe's, Wal-Mart and Boeing. Under those deals, the company's employees and their dependents can travel to Cleveland Clinic for certain procedures at a fixed price. The deals are driven by Cleveland Clinic's ability to link quality of care to outcomes and cost, which many large employers find attractive.
4. More robust fraud-fighting efforts. The PPACA included new tools that have made the Obama administration's fraud-fighting efforts much more robust. These defense mechanisms include tougher sentences for healthcare fraud. A crime involving more than $1 million in losses will earn the convicted party a 20 percent to 50 percent longer sentence than he or she would receive prior to the PPACA.
The law also introduced Medicare and Medicaid Recovery Auditor Contractors, or RACs. These auditors, which are divided among four regions across the U.S., scrutinize hospitals' expense records for any improper payments, including incorrect payment amounts, incorrectly coded services, non-covered services and duplicate services. In fourth quarter of 2012, 90 percent of hospitals participating in the American Hospital Association's RACTrac survey (approximately 2,335 hospitals) reported that they had experienced RAC activity through December 2012.
Federal agencies have also picked up steam in the fight against healthcare fraud through the False Claims Act. From January 2009 through the end of the 2012 fiscal year, the DOJ used the False Claims Act to recover more than $9.5 billion in federal healthcare dollars, mostly Medicare and Medicaid. That figure is a record for any four-year period. Actions against pharmaceutical companies represented some of the largest recoveries. For instance, GlaxoSmithKline paid $1.5 billion to resolve FCA allegations of off-label marketing for five of its medications.
5. Uncertainty around Medicare and Medicaid. Hospitals and health systems knew Medicare and Medicaid funds would be impacted with the implementation of the PPACA, but perhaps not to this degree. Medicare and Medicaid disproportionate share hospital payments, which subsidize hospitals that treat large numbers of elderly and poor patients, will be cut significantly by 2020 under the law, and Medicare DSH payments will be cut by roughly 75 percent this October. Hospitals also knew Medicare reimbursements would be on the line with VBP.
However, hospitals knew the individual mandate and the Medicaid expansion imbedded within the law would provide a flurry of new covered patients, which would help offset the loss of other federal funds and rising uncompensated care costs. The Supreme Court's decision on the individual mandate was the most highly watched aspect, but the decision on Medicaid may have had a bigger impact.
Chief Justice Roberts and the majority saved the Medicaid expansion, in general, but they gave states the option to reject the expansion. They ruled that "nothing in our opinion precludes Congress from offering funds under the ACA to expand the availability of healthcare…what Congress is not free to do is to penalize States that choose not to participate in that new program by taking away their existing Medicaid funding."
This has resulted in many states toying with the idea of passing on the Medicaid expansion, which will be fully funded by the federal government for the first three years and 90 percent after that. Several states, including Texas, the state with the nation's highest uninsured rate, have already said they would not expand the program for the poor, leaving hospitals in mostly Republican states with the potential for higher uncompensated care in addition to other Medicare cuts.
However, GOP governors from Arizona, Michigan, New Mexico, North Dakota, Ohio, Nevada and New Jersey accepted Medicaid expansions under the law, giving hope to some hospitals in red states.
HHS: PPACA Extended Free Preventive Care to 71M Americans
CMS Touts Lower Healthcare Spending, Readmissions Under PPACA
Just minutes after President Obama signed the bill in 2010, officials from 14 states went to court and asked a judge to block enforcement of the law. They claimed the PPACA, especially the individual mandate, infringed upon sovereignty of the states. This event merely foreshadowed the longstanding political opposition PPACA would face. The challenges started day one and only persisted, from the Supreme Court's 5-4 decision in June 2012 that upheld the individual mandate, to House Speaker John Boehner (R-Ohio) saying the House would "continue working to scrap the law in its entirety" just last week.
It's been a long road, but most state lawmakers have recently come to accept healthcare reform as the "law of the land." Florida Gov. Rick Scott (R) took the industry by surprise this February when he accepted the Medicaid expansion under the PPACA. He's been one of the most vocal opponents of the PPACA, as evidenced by his state spearheading State of Florida, et al v. Department of Health and Human Services, which landed in the Supreme Court.
To mark the law's third year, Becker's Hospital Review compiled a list of the five largest changes for hospitals under the PPACA. Doing so is a little like identifying the largest wave in an ocean — there has been so much change in the past three years. But these specific events, provisions and programs have created ripple effects that will undoubtedly continue shaping healthcare delivery in the years to come.
1. Payment reform tied to quality measures. One of the biggest concepts inherent in President Obama's health law has been the "triple aim:" improving patient quality and experience, improving the health of populations and reducing the per capita cost of healthcare.
Within the PPACA is the Value-Based Purchasing program for Medicare — a program that encourages hospitals to move toward a quality-based business model. VBP started October 2012 and redistributed roughly $850 million in incentives to hospitals based on their overall performance on a set of quality measures, such as clinical processes of care and patient satisfaction from the Hospital Consumer Assessment of Healthcare Providers and Systems survey. Examples of the care processes included in the measures are how quickly heart attack patients receive potentially life-saving surgery on their arteries and how often patients with heart failure get proper discharge instructions.
CMS' Bundled Payments for Care Improvement program, in which hundreds of hospitals have signed up to try their hand at bundled payments for select DRGs, is another payment reform that has made its way to the forefront of the business office. BPCI is based on the idea that hospitals, physicians and other parties will collaborate to better coordinate care, improve health outcomes, reduce readmissions, diminish duplicative care and lower Medicare costs. CMS will dole out a discounted payment for an episode of care, and in return, everyone gets to share in the savings if the care is delivered efficiently and well.
These value-based payments have forced hospitals to rethink how they develop three- and five-year and long-term strategic plans, as the goal is no longer to have "heads in beds."
2. Accountable care organizations. In 2010, it wasn't unusual to hear ACOs referred to as "the unicorns of healthcare." Many hospital leaders said they had heard about ACOs, but had never seen one. Furthermore, many industry experts likened the concept of ACOs to managed care in the 1990s, or "HMO redux." A 2012 study from Health Affairs analyzed the differences between HMOs and ACOs, finding the roles of health information technology, data analytics and clinical decision support to be some of the largest distinctions.
Recent data has shown a proliferation of ACOs, with 428 of them throughout 49 states as of January 2013. At that time, Delaware was the only state without an ACO, while California led the way with 46, Florida followed with 42 and Texas trailed with 33. Private payors' interest in coordinated care management helped spur this growth. Cigna, for example, announced plans to have one million people enrolled in ACOs by 2014. CMS' unveiling of the 32 Pioneer ACOs in December 2011 and first 27 Medicare Shared Savings Program ACOs in April 2012 also helped make what was once called a "unicorn" into a reality.
Given their relative youth, few ACOs have yet released their quality outcomes or cost savings. Oak Brook, Ill.-based Advocate Health Care is one of the few systems that has reported some results, including reduced readmission rates, from its ACO. The system launched AdvocateCare in partnership with Blue Cross Blue Shield of Illinois in 2011. Year-one data showed a 26 percent decline in readmission rates for ACO patients with chronic illnesses. It also released data showing a 10.6 percent decrease in its hospital admissions per ACO member and a 5.4 percent drop in emergency department visits.
More recently, officials from CMS said results for Medicare ACOs could be expected sometime this summer.
Repercussions of ACOs have spread far and wide, as the model is one of the forces driving hospital-provider integration. ACOs also emphasize the role of preventive care and providing care delivery in low-cost settings. This has sparked an even more robust demand for primary care physicians, who are already in high demand due to a nationwide shortage.
3. New provider-payor partnership models. Partly driven by the proliferation of ACOs, many more hospitals and health systems began striking value-based reimbursement agreements with commercial payors since the PPACA was signed into law. This has been a change from the traditional relationship between providers and payors, which was often tinged with mistrust.
Armed with sophisticated analytics, payors can provide clinicians with coded data that connects patients' and broader populations' health patterns. Providers can then incorporate this longitudinal information into their population health strategy and outcomes-based care. Many agreements are structured around the principles of preventive care, improved care coordination and chronic condition management. Both payors and providers also take on more risk. Generally, in most value-based deals, payors offer incentives or penalties tied to providers' ability to meet specific quality metrics while delivering care within a projected cost.
The payor-provider deals vary in breadth and scope. Some health systems and insurers have pursued these goals in full-on ACO agreements, while others scaled back their value-based reimbursement contracts to tackle a few specific conditions or metrics at a time. Some payors have designed pay-for-performance contracts for specific types of clinicians, as well. For instance, in January 2012, WellPoint agreed to boost reimbursement for primary care physicians and pay them up to 50 percent more if they maintained or improved care quality. The insurer said it would begin paying PCPs for "non-visit" services that were previously not reimbursed, and it would also enhance information sharing with clinicians.
Providers are also facing pressures to demonstrate payor-like efficiencies from businesses and employers, many of which seek a provider partner to trim costs and better manage employees' health outcomes. This has spurred some health systems to form direct contracting relationships with self-insured employers, such as bundled payments. Cleveland Clinic has been a pioneer in this regard, striking direct-to-employer deals with Lowe's, Wal-Mart and Boeing. Under those deals, the company's employees and their dependents can travel to Cleveland Clinic for certain procedures at a fixed price. The deals are driven by Cleveland Clinic's ability to link quality of care to outcomes and cost, which many large employers find attractive.
4. More robust fraud-fighting efforts. The PPACA included new tools that have made the Obama administration's fraud-fighting efforts much more robust. These defense mechanisms include tougher sentences for healthcare fraud. A crime involving more than $1 million in losses will earn the convicted party a 20 percent to 50 percent longer sentence than he or she would receive prior to the PPACA.
The law also introduced Medicare and Medicaid Recovery Auditor Contractors, or RACs. These auditors, which are divided among four regions across the U.S., scrutinize hospitals' expense records for any improper payments, including incorrect payment amounts, incorrectly coded services, non-covered services and duplicate services. In fourth quarter of 2012, 90 percent of hospitals participating in the American Hospital Association's RACTrac survey (approximately 2,335 hospitals) reported that they had experienced RAC activity through December 2012.
Federal agencies have also picked up steam in the fight against healthcare fraud through the False Claims Act. From January 2009 through the end of the 2012 fiscal year, the DOJ used the False Claims Act to recover more than $9.5 billion in federal healthcare dollars, mostly Medicare and Medicaid. That figure is a record for any four-year period. Actions against pharmaceutical companies represented some of the largest recoveries. For instance, GlaxoSmithKline paid $1.5 billion to resolve FCA allegations of off-label marketing for five of its medications.
5. Uncertainty around Medicare and Medicaid. Hospitals and health systems knew Medicare and Medicaid funds would be impacted with the implementation of the PPACA, but perhaps not to this degree. Medicare and Medicaid disproportionate share hospital payments, which subsidize hospitals that treat large numbers of elderly and poor patients, will be cut significantly by 2020 under the law, and Medicare DSH payments will be cut by roughly 75 percent this October. Hospitals also knew Medicare reimbursements would be on the line with VBP.
However, hospitals knew the individual mandate and the Medicaid expansion imbedded within the law would provide a flurry of new covered patients, which would help offset the loss of other federal funds and rising uncompensated care costs. The Supreme Court's decision on the individual mandate was the most highly watched aspect, but the decision on Medicaid may have had a bigger impact.
Chief Justice Roberts and the majority saved the Medicaid expansion, in general, but they gave states the option to reject the expansion. They ruled that "nothing in our opinion precludes Congress from offering funds under the ACA to expand the availability of healthcare…what Congress is not free to do is to penalize States that choose not to participate in that new program by taking away their existing Medicaid funding."
This has resulted in many states toying with the idea of passing on the Medicaid expansion, which will be fully funded by the federal government for the first three years and 90 percent after that. Several states, including Texas, the state with the nation's highest uninsured rate, have already said they would not expand the program for the poor, leaving hospitals in mostly Republican states with the potential for higher uncompensated care in addition to other Medicare cuts.
However, GOP governors from Arizona, Michigan, New Mexico, North Dakota, Ohio, Nevada and New Jersey accepted Medicaid expansions under the law, giving hope to some hospitals in red states.
More Articles on the Patient Protection and Affordable Care Act:
Value Over Volume — Healthcare's New MindsetHHS: PPACA Extended Free Preventive Care to 71M Americans
CMS Touts Lower Healthcare Spending, Readmissions Under PPACA