In part three of this three part series, John Dalton, Advisor Emeritus at BESLER Consulting, discusses the effects of the PPACA and the path towards achieving the triple aim.
Michael Passanante: Hi, this is Mike Passanante. Welcome back to the Hospital Finance Podcast. I’m glad you could be with us. Today, we’re going into part three of our series looking at a brief history of healthcare reform and to help us walk through that is John Dalton.
John is an Adviser Emeritus here at BESLER Consulting and a board member of St. Joseph’s Healthcare System in New Jersey. Welcome back, John.
John Dalton: It’s nice to be here, Mike.
Michael: So John, in part two of our series, you highlighted the pioneering rate-setting efforts here in New Jersey that lead to Medicare’s adoption of per case payment based on DRGs. And we ended that podcast with President Clinton’s failed attempt to move to universal health coverage.
So today, we’ll pick up the pieces and look at the often conflicting forces that lead to the passage of the Patient Protection and Affordable Care Act. So John, let’s dive right in. What did you see as the major forces affecting healthcare providers during the 1990s?
John: The real story of the 1990s was the rapid growth of Managed Care organizations both HMOs and PPOs. If you look at the data in 1993, about 100 million people are enrolled in Managed Care. In 1999, that had more than doubled.
Here in New Jersey, the rapid care of Managed Care began in Burlington County with the US Healthcare’s Primary Care Gatekeeper Model. A lot of us remember US Healthcare, which was subsequently acquired by Aetna. They used to run some of the funniest ads on TV and those of us who are knowledgeable, used to joke that the only happy US Healthcare subscriber is one who has never had access to benefits.
Be that as it may, it was the Managed Care tsunami that overwhelmed the country and New Jersey. I can clearly remember some of my CFO friends bragging about their wonderful per diem rates that they had negotiated from some of the Managed Care organizations.
And that only lasted a short period, the honeymoon was short. They soon realized that five days that they billed $1000 a day came back to them as three days paid in full, one day downgraded to the skilled nursing level of care and day five denied. So instead of 5000, you get 3500. But that was Managed Care’s introduction to New Jersey.
The other major event in the 1990s was the Institute of Medicine’s publication, To Err is Human: Building a Safer Healthcare System. That was published in 1999. It reported that as many as 98,000 preventable deaths per year were occurring in America’s hospitals. It was a much needed wakeup call to the industry. Prior to the publication of that report, getting hospitals to focus on quality and patient safety was fairly difficult. There were always conflicting priorities and this really got in focus.
Now all of a sudden, as board members were starting to see data on central line associated bloodstream infections, surgical site infections, catheter associated urinary tract infections as part of our Board of Trustee’s dashboard. And literally, since that report, we’ve seen significant progress made in quality and patient safety.
Michael: So that’s a double whammy. How did this all play out as we entered into the third millennium?
John: Okay. As we entered the third millennium, George W. Bush was elected President of the United States and took office in 2001. He came up with an idea of expanding coverage for seniors to prescription drugs. In 2003, he signed into law the Medicare Prescription Drug Improvement and Modernization Act, now known as Medicare Part D.
Those of us that know described it as the full employment act for insurers and big pharma because what that did was it all of a sudden handed the insurance industry millions of millions of claims to process and that’s where they make their money and for the pharmaceutical companies are guaranteed that they will be paid for the drugs that they supplied to seniors. But the act also prohibited the government from negotiating rates with the drug companies. So what basically stuck was what they want to charge for their drugs.
Michael: So we get to 2008, healthcare reform was a major issue during that presidential campaign. Can you talk about the options during that time? And how did US eventually wind up with something closer to universal coverage?
John: Back at the 2008 presidential campaign, there were two distinctively different platforms. John McCain’s proposals included tax credits of $2500 for individuals, $5000 for families who do not subscribe to or have access to healthcare coverage to their employer. So that would help out the small businesses, those who don’t have coverage through their employer.
He also proposed to help those denied for pre-existing conditions by working with states to create what he called Guaranteed Access Plan. The details were sketchy, but that was the McCain-Palin platform. On the Democratic side, Barrack Obama called for creating a national health insurance exchange that would include private insurance plans and Medicare-like government run option with coverage guaranteed regardless of health status, so away with pre-existing conditions.
It would require parents to cover their children, but his plan included no requirement for adults to buy insurance. So basically, Obama’s approach was somewhat pragmatic. “So let’s make sure that every kid born in this country has health insurance coverage at birth and then as they progress through life, you wind up with everybody covered.” So it was a very practical approach.
What we got was something quite different. Obama was elected in 2008, took office in 2009 and his healthcare reform was a major part of his platform and he spent a lot of his electoral credits in getting the Patient Protection and Affordable Care Act enacted.
Unlike the Democratic platform, this was modeled more on Massachusetts’ RomneyCare, which included a full insurance mandate. Importantly the patient protection provisions I think are as important as the affordable care act Provisions. Remember, he was calling it the Affordable Care Act. The patient protection provisions went into effect early in the game and they are having a positive and lasting effect on quality of patient safety throughout our hospitals. The Affordable Care Act Provisions are rolling out now with the insurance exchanges going online beginning in 2013 and more folks having healthcare coverage.
Michael: So John, the Republican majority in the House of Representatives has voted more than 50 times to repeal the Affordable Care Act and they have made it a major focus in the current presidential primary season. In your opinion, how likely is that to happen?
John: I think the Republican majority in the House of Representatives just proved Einstein’s theory of insanity. Whether you love it or hate it, what we call ObamaCare is here to stay. There are a number of reasons why. As I mentioned about the patient protection provisions, quality is up throughout the country and infection rates are down.
Between 2008 and 2013, central line infections are down by 46%. Those are the most deadly infections that a patient can get. They’re very expensive and they’re deadly. Surgical site infections are down 16%. So, post-op sepsis has been reduced materially.
In 2010, when we enacted the Affordable Care Act, 18.2% of Americans were uninsured. That number is now down to 10.4% at the end of 2014 and single digits now. Young adults are allowed to remain on their parents’ policies until age 26. So, more than two million young adults are getting coverage through that aspect of the act. I don’t see anybody doing away with that.
We are no longer subject to coverage denials due to pre-existing conditions and when you get into your 40s, more than half of all adults have pre-existing conditions. We now can only have coverage rescinded when we misrepresent or fraudulently misrepresent our condition when we apply for insurance.
The health insurance exchanges will not be going away. Accenture recently projected that by 2018, private exchanges will enroll more than 40 million Americans. And even with 22 states not participating in the Medicaid expansion, Medicaid and CHIP have grown by nearly 11 million people.
Michael: We have the ACA. It’s here to stay. In your opinion, where do we go from here?
John: The objective and this is to credit Institute for Healthcare Improvement, the organization founded by Dr. Donald Berwick, a Massachusetts pediatrician who had great foresight. He served as head of CMS during Obama’s first term. Berwick’s Institute for Healthcare Improvement looks at healthcare globally. Many of us are familiar with the triple aim.
The Affordable Care Act has bent the cost of care, but a lot remains to be done. We have the best equipped hospitals in the world and we have the most thoroughly trained physicians, but our outcomes trail other developed countries and that gap continues to grow. It’s a subject of probably another series of podcasts.
The triple aim is simply stated, “We will work to improve, to provide better care for our patients.” That’s something hospitals do quite well now and they’re getting better and better at it. That’s our core competence, our core expertise. We are now being called upon to improve the health of the populations in the communities we serve, which is a bit of a stretch, but it’s something that we have the leadership and competence to do.
In order to achieve the triple aim to provide better care to our patients, to find ways to improve the health of our populations, we can then finally lower the per capita cost of care. And that’s where we need to go as we move from fee for service to pay for value. It’s a stretch, but I think we have in many places the leadership and the competence to get there.
Michael: John, this was a great series. Your knowledge on the topic is so crystal clear and so in-depth. We really appreciate you bringing that to us and to all the listeners of Hospital Finance Podcast. Thanks for being on.
John: You’re welcome Mike. It’s a pleasure to be here.