Brian Klepper, PhD,, Author at �鶹Ů�� Health News

Why It’s Okay That EHR Adoption Will Fall Behind 2011 Goals (Guest Opinion)

Brian Klepper, PhD, — Thu, 07 Jul 2011 06:12:00 +0000

2011 will be a disappointing year for the Centers for Medicare and Medicaid Services and the Office of the National Coordinator’s electronic health record incentive programs. We predict that few doctors and hospitals will meet the objectives set for the “meaningful use” of certified EHR technology.��Meaningful use is, of course, the term that describes the objectives and measures providers and hospitals must meet in order to receive financial bonuses authorized by Congress in the HITECH portions of the economic stimulus bill of 2009. David Blumenthal, the former national coordinator, had hoped large numbers of doctors and hospitals would adopt EHRs starting in 2011, the first year bonuses are available.��But, in reality, by the end of the year the percentage of physicians using EHRs won’t likely rise much above the current 20 to 25 percent rate.

This isn’t necessarily a bad thing. This year and, to a lesser extent, 2012, could be for “cleaning house.” Many older, costly and difficult-to-implement legacy EHRs will be replaced by less expensive, more agile systems that have been developed specifically for meaningful use and are deliverable in the cloud as Software-as-a-Service. Transitions like these take time, but the dynamics are foreseeable.

Consider this example: We know a seven-physician family medicine practice that has used an EHR since 2005. Though their current system includes many features and functions that are outside the scope of the meaningful use objectives and measures, it also is missing some key attributes. These include the ability to collect, analyze and report clinical quality measures; as well as engage patients and facilitate interoperable data exchange. Also, because the product is hosted in the practice’s own data center, it is staffed by a full time IT professional, which makes it expensive to maintain.

And this brings to light one of the main dynamics in play: money. The cost of updating the software licenses to meet the first round of meaningful use objectives will knock the practice back $104,000. This price tag doesn’t include the expense of the related hardware upgrades that will be necessary for the updated system nor training costs. In addition, the practice may need to add the vendor’s “patient site” for another $25,000 per year. Taken together, these upgrade costs wipe out the entire $18,000-per-physician EHR incentive bonus possible should all seven of the physicians achieve meaningful use certification by the end of 2011.

But it gets worse. The practice will find that the delivery and installation of the new software cannot be guaranteed before the effective cut-off date of October 1. If that deadline is missed, the physicians can’t complete a 90-day period of continuous meaningful use before the year’s end. So, the practice will likely need to postpone this part of the process until 2012. But at that point, the physicians will already have spent nearly 40 percent of their Medicare EHR bonus.

Contrast this with another small group practice that plans to adopt a Web-based, already certified EHR that works with tablets. They will indeed face the expense of digitizing records and other start up costs, but they will not face the degree of complexity. Here’s how their transition could play out: The doctors will purchase the system and start using it in late 2011, but will not attempt the 90-day meaningful use period until the first or second quarter of 2012. The EHR will cost about $250 per doctor per month. Add to this the cost of the laptops and/or tablets, as well as additional training, which should be minimal because the product is relatively simple, designed around the meaningful use objectives and measures. Upgrades are included in the subscription price. The practice calculates that the total cost of the new EHR technology per physician will be approximately $6,000, which will leave them a “profit” of $12,000 per doctor should they qualify for meaningful use in 2012, and a net boost of approximately $25,000 per physician during the five years of the Medicare EHR incentive program.

Why doesn’t the first practice simply start over with a newer generation of EHR technology? It almost certainly will, eventually. But for now the “switching costs” seem overwhelmingly high. The biggest one involves moving data from the older system to the new one. This task is often complicated because the databases aren’t interoperable. The only recourse is to begin from scratch and type the old data into the new EHR. Painful and costly, this discourages many doctors from even considering a switch to newer products.

Both early and recent EHR adopters have reason to delay completing meaningful use until 2012 or 2013. The common themes are the time the process will take and the costs that will result. For example, the early adopters’ feature-rich legacy systems were not designed for meaningful use, and will need significant upgrades. Meanwhile, the later adopters won’t be able to just buy a system that allows them to achieve meaningful use. They’ll need to convert from paper to electronic records, and that will take a little time.

Breaking out of this situation is going to take time.��We have described how actions taken by the Office of the National Coordinator, CMS, the National Institute of Standards and Technology�� and the White House “unfroze” the EHR technology market, primarily by redefining its features and functions with this new set of objectives and measures. Because it opened up the market to hundreds of innovative new EHR products, it will eventually make EHR adoption and ownership by providers easier and more affordable.

So 2011 isn’t big in the way some thought it would be. But it is creating real, lasting, positive change, and we think that’s just fine.

David C. Kibbe, MD, MBA

, is senior advisor to and an industry advisor on Health IT.

Brian Klepper, PhD

, is a health care analyst, editor of

and chief development officer of onsite clinic firm, ��

WeCare TLC, LLC

.

�鶹Ů�� Health News is a national newsroom that produces in-depth journalism about health issues and is one of the core operating programs at �鶹Ů��—an independent source of health policy research, polling, and journalism. Learn more about .

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The Politics Of Scarcity

Larry Arrington — Fri, 11 Feb 2011 17:06:23 +0000

Medicaid, along with debt and shortfalls in public pension funds, is driving state and local governments toward budgetary disasters. The ways we cope with this fiscal crisis will test our political system and our national character. Political expediencies could further compromise the lives of the sick and the disadvantaged, and risk unnecessary human suffering and social turmoil.

The politics of scarcity demand leaders with a long term vision of a sustainable society who are able to sort through complex issues, competing interests and ideologies. In a poorly managed economic crisis, the vulnerable, with no strong political voice that can influence funding or public policy, are hit hardest. By contrast, successful solutions will shore up the safety net, protecting the weak while maintaining as much political and social stability as possible.

A $360 billion annual federal and state Medicaid expenditure pays for the health care of more than 60 million low-income Americans. But the recession has generated millions of new enrollees, placing Medicaid under enormous fiscal and political pressure. Unlike their federal counterpart, state and local governments must balance budgets. They are in a full-blown fiscal crisis that will worsen when federal stimulus package subsidies end in June.

It is easy to imagine terrible scenarios. As competition for scarce public funding intensifies, fewer vulnerable citizens qualify for Medicaid, and services available within Medicaid shrink. Stressed safety net hospitals are overwhelmed and financially collapse, transferring the care burden to community hospitals. To contain the damage, policies shift so that health care systems’ care for the poor becomes purely voluntary.

The problem is acute in our home state of Florida. Since 2007, the Sunshine State’s unemployment rate rose from �ٴ��and��Medicaid enrollment��grew by 40 percent, exacerbating an already dire state budget shortfall. Medicaid spending consumes more than $20 billion dollars of the state’s approximately $70 billion budget, and is climbing.��Each of the past two years,��Florida’s Medicaid expenditures increased��about 25 percent, or double the national average.

Absent a robust economic recovery or more federal assistance, complying with reform’s requirements will force state and local governments to cut eligibility and services to the extent regulations allow. Raising taxes and fees is highly improbable in Republican-controlled states. Some states have talked about getting out of Medicaid altogether.

The new health law will further��, adding 16 million more Medicaid beneficiaries nationally by 2019. The feds will cover expansion costs through 2016, but then gradually transfer a 10 percent share to the states.��Reform’s impact on state Medicaid budgets partly explains Republican governors’ fierce lobbying for congressional repeal of the health law.��

The various lawsuits brought by states and other stakeholders challenging parts of the sweeping overhaul, including its Medicaid expansion, also are evidence of state-level uncertainty.��

When it comes to Medicaid, politicians avoid characterizing the issue as “class warfare.” But efforts to diminish or eliminate the program, combined with other trends bearing down on the disadvantaged, can be understood as that. Unemployment, the decreasing availability of health care, and a��create a “perfect storm” for social unrest and political instability.

If history repeats itself, state governments will likely shift as much cost as possible to local governments through unfunded state mandates. Coupled with continuing pressures to lower property taxes, that approach will merely push the crisis closer to home.

All these social and fiscal trends are “counter-cyclical.” As tax revenues fall, demand for services rises. These circumstances are complex and difficult to resolve. Their solutions demand strong political will combined with innovations that ensure the needy continue to have access to health and human services while holding programs such as Medicaid accountable for value.

Of course, approaches that reflect the politics of sustainability seem like an elusive ideal. But as we’re seeing elsewhere around the world, the politics of scarcity, combined with the new openness in communications, make transformative change possible.��This is the opportunity in the present crisis:��To use sustainable governance to transcend the politics of scarcity and to avoid the upheaval that so often��accompanies it.

Larry Arrington

��
is a public management consultant and author. His new book��

, is due out in 2011.��

Brian Klepper

��
is a health care analyst.

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Quit The RUC

Brian Klepper, PhD, — Thu, 20 Jan 2011 19:44:00 +0000

Recently, a and a New York Times column detailed how vast health care resources are steered by the American Medical Association’s Relative Value Scale Update Committee — or RUC, a secretive, 29 person, specialist-dominated panel. Since 1991, the RUC has been the main, if unofficial, adviser on Medicare physician reimbursement how specific procedures should be valued – to what is now called the Centers for Medicare & Medicaid Services. Many Medicaid and commercial health plans follow Medicare’s lead on payment, so the RUC’s influence is sweeping.

Not surprisingly, the Committee’s payment recommendations have consistently favored specialists at the expense of primary care physicians. More striking, however, is CMS’ rubber stamping of about 90 percent of their suggestions, even though, in their last three service reviews, the RUC urged payment increases six times more often than decreases.

This arrangement has played out well for specialists, but the health system consequences have been catastrophic. One significant result has been a primary care shortage. Specialists now earn, on average, ��more than their primary care colleagues. The income disparity has driven all but the most idealistic medical students from primary care.

Figure 1. Comparison of annual income (median compensation) by physician subspecialty. Source: Phillips RL Jr, et al.; Robert Graham Center. : what influences medical student and resident choices? March 2009. Accessed January 4, 2010.

Most health care professionals acknowledge the compelling and are chagrined by its devaluation. Susan Dentzer, editor-in-chief of Health Affairs, calls American primary care “.” A found an overwhelming 78 percent of doctors in all specialties believe the U.S. has a primary care shortage. During the reform debate, advocates and critics alike whether universal coverage was practical in a system in which most primary care doctors’ capacity was already saturated.

But there is a more insidious and destructive issue at hand. The perverse incentives that are embedded in fee-for-service physician payments influence care decisions and are a principal driver of the health system’s immense excesses. Encouraged by the RUC, sometimes unnecessary specialty procedures may appear more valuable and appropriate than primary care services. The system pays more for invasive approaches, so conservative treatment choices that are lower cost and lower risk to the patient may be passed over, especially near the end of life. The resulting waste, , has fueled a cost explosion that has led the industry and the larger economy to the .

Even so, although the health law began a transition away from fee-for-service reimbursement, it gave short shrift to remedying the shortcomings in primary care reimbursement, offering a mere 10 percent boost, and only if office visits account for at least 60 percent of overall Medicare charges. One can speculate why primary care was mostly ignored. But the wealthier specialists, and the drug and device firms that support them, apparently had more influence over policy.

In the absence of meaningful policy-based payment reforms, the RUC’s specialty bias continues to hold sway over payment policy. Dr. Reinhardt calls for a broader, more balanced, independent panel. We agree.

Given the recent attention to the issue, it is possible — but unlikely — that CMS will move toward that approach. The professionals and organizations that benefit from the current structure will fight to maintain the status quo.

So we propose a radical action. Quit the RUC.

America’s primary care medical societies should loudly and visibly leave, while presenting evidence that the process has been unfair to their physicians and, worse, to American patients and purchasers. Primary care physicians have tried to change the process, but to no avail. Leaving would de-legitimize the RUC, paving the way for a new, more balanced process to supplant it.

There are times when hopeful discussions and appeasement simply enable the continuation of an unhealthy situation. Abandoning and replacing the RUC would be an important first step toward re-stabilizing primary care, health care and the larger economy.

Brian Klepper, PhD and David C Kibbe, MD MBA write together on health care issues. The views stated are their own. Although David Kibbe is a senior adviser to the American Academy of Family Physicians, this commentary is not associated with the AAFP.��

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If Employers Walked Away From Health Coverage

Brian Klepper, PhD, — Wed, 24 Nov 2010 00:30:14 +0000

What would happen if the rank and file of America’s employers, financially overwhelmed by the burden associated with sponsoring health coverage, suddenly opted out?

It isn’t so far-fetched. Enrollment by working age families in private health coverage more than 10 percent over the last decade, as individuals and business were priced out of the coverage market. Others, victims of the downturned economy, have lost their jobs and access to subsidized coverage. Those who still have coverage have narrower benefits with higher out-of-pocket costs than before.

In 2010, . Employee health costs rose 14 percent. Over the last five years, their costs have risen 47 percent, while wages have increased only 18 percent.

It may be reasonable to interpret this action as a line in the sand. Employers, who typically provide about a $10,000 subsidy for family coverage, are saying, “Enough. This is the limit of our financial commitment. More cost will have to be passed on to someone else.”

That someone else, of course, would be employees and his/her families, who, on average, will make about $50,000 gross this year, and who are paying about $4,000, or 8% of that income, for health coverage.

Employer frustration with being held hostage by America’s health system has been percolating for a long time. Various arguments — both for and against — recur in the debate over whether employers should sponsor health coverage. On one hand, healthier employees are more productive, and comprehensive health coverage is critical to recruiting and retaining better employers. But on the other, health care’s relentless cost inflation renders American businesses that offer coverage less competitive than their domestic counterparts that don’t. Similarly, they are less competitive than international firms whose employees’ coverage costs significantly less.

With such a large financial stake in the process, most employers are carefully watching the health reform battle and its potential implications. Those could be very different, depending on which side prevails. Now that the Republican Party has resurged in Congress, in large measure galvanized by a “Repeal Reform” platform, let’s imagine two scenarios.

In the first, Republicans, backed by a health care industry daunted by the prospect of lower revenues if the health law’s cost control provisions remain intact, nullify those provisions. Freed from constraints once again, excessive practice patterns continue unabated and costs continue to soar.

With the economy still weak, employers withdraw even faster to escape the higher costs. With government programs only capable of absorbing some new participants, the number of uninsured people mushrooms. Safety net programs are overwhelmed, and pressure on government to devise a new solution rapidly intensifies.

In the second scenario, the Democrats hold fast. But in 2014, the health insurance exchange provision kicks in, allowing businesses to drop coverage sponsorship by paying a $2,000 per employee penalty, plus . In a recent , Tennessee Governor Philip Bredesen detailed an analysis showing an immediate $146 million dollar yearly savings by transferring coverage of core state employees to the exchanges. It seems an attractive solution.

How many businesses would likely maintain coverage at $10,000 per employee if they had, say, a $6,000 alternative? Many might, according to a recent ��by Mercer, the benefits consulting firm. But some wouldn’t. Those that make tremendous per employee profits, like financial services, technology and pharmaceutical firms, may not drop coverage. Those with occupational health exposures that give them reason to aggressively and directly manage employee health might not. But for small businesses, which are less likely to offer coverage anyway and typically struggle more with these costs, the health exchanges may be an appealing option. With so many variables, it’s hard to know. But in the face of a weak economy and continued explosive health care cost growth, a mass employer exodus is not outside the realm of possibility.

In round numbers, America now spends about $2.6 trillion annually on health care. Commercial coverage comprises half ($1.3 trillion), with $300 billion paid by individuals or families and $1 trillion by businesses. The question, then, is how the reduction in business’ health coverage subsidy — $400 billion a year in the example here — would be replaced, and what might happen if it isn’t.

In the current anti-tax political environment, it is difficult to imagine Congress could compensate for the lost employer subsidy by raising taxes. Business is unlikely to acquiesce to paying higher taxes commensurate with whatever health care costs accrue.

And consider that a new dedicated tax of $400 billion per year would be an astounding five times the bailout and economic stimulus that, earlier this year, rightly or wrongly, raised the fury of the American people. Will we also be willing to bail out the health care industry, because it is “too big to fail?” Finding the dollars to keep the current health system and the industry afloat would require a new national commitment of historic proportion, far greater than the recent Wall Street bailout.

Either of these scenarios could result in massive public conflict and, equally importantly, significantly diminished resources for the health care sector. An inability to continue funding the industry’s excesses would surely burst the health care cost bubble, unleashing a cascade of harshly chaotic consequences. Only then might we see a reform process that more rank and file Americans might appreciate and embrace.

Brian Klepper
and

write together about health care market dynamics, economics and technology.

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Keeping An Eye On The Health Care Prize

Brian Klepper, PhD, — Mon, 20 Sep 2010 00:30:00 +0000

Many reformers undoubtedly believe that passage of the health overhaul law laid the issue to rest. But policy’s wheels continue to turn, and the process is anything but over.

Decades of fee-for-service reimbursement became the health industry’s article of faith, encouraging virtually everyone in the system to do as much as possible to every patient, with half or more of all expenditures wasted or unnecessary. But it was also a recipe for national disaster. Over the last decade, nearly all U.S. economic growth was absorbed by health care.

Now, after reform, the industry faces the prospect that the payment equation will be reversed. The money will be tied, in still unclear ways, to doing only what’s appropriate. The notion terrifies many health care professionals. Sustaining the industry’s current prosperity levels will depend on an ongoing excess from reform’s failure.

The Cadillac tax, probably the law’s strongest cost control��provision, threatens health plans with a 40 percent tax on the portion of premium that’s higher than $10,200 (individual) and $27,500 (family), starting in 2018. The logic is straightforward. Health plans, which aggregate lives and dollars, will be encouraged to reduce costs, and will in turn create incentives throughout the continuum for more efficient care delivery. Everyone will follow the money.

The 2018 premium targets may seem high, but they are a short distance from here to where the penalties begin. Just-released show that the growth in premiums for family coverage slowed dramatically, rising an average of 3 percent this year. (KHN is a project of the Foundation). If premium growth rates don’t exceed an average of 8.2 % until 2018, as they have for most of the past decade, then they’ll come in under the threshold for the Cadillac tax. But if they rise at all beyond this, consequences will accrue. And, of course, for the many higher cost union and governmental health plans, the threshold is even closer. Many health care professionals will see this mechanism as a financial peril, and seek to neutralize it.

The new law also hangs its hopes on , still unproven structures that will demand dramatic changes in health systems operations. Integrated Delivery Networks, hospitals, physician group practices and Independent Practice Associations are anxiously awaiting the fall release of the government’s proposed rules describing the short- and long-term financial incentives for hitting quality and cost targets. The key question will be whether the arrangement warrants transitioning to a system that actually strives for efficient, quality care. Some thoughtful, experienced market analysts like and doubt most organizations’ capacity to develop and maintain the collaborative trust required for ACO success.

Many physicians, particularly , see moves away from fee-for-service and toward accountability as an assault on “the patient-physician relationship,” code for revenue generation. Infuriated over the American Medical Association’s support of the health care law, the and to advocate for unregulated health care.

In 2009, health care-related organizations contributed to protect their financial interests. That resolve makes it seem unlikely that the nation’s wealthiest and most influential economic sector will simply accept constraints on its historical profitability.

Now the health industry’s goals are aligned with the GOP, which has vowed to dismantle health reform after November and fostered . With reform teams focused on rule clarification and implementation, opportunities will abound for special interest influence.

Nor is the business community likely to mobilize to ensure that appropriateness and efficiency remain at the core of the law. During the fevered battles surrounding health care reform, expressing their frustration with the lack of cost controls in the bills. But their lobbying contributions failed to provide a meaningful counterweight to the health industry’s influence. They acquiesced, despite a direct productivity interest in higher-value health care and the fact that non-health care business represents five-sixths of the U.S. economy (to health care’s one-sixth).

Last week’s news that can be understood as a self-imposed limit on their health care financial commitments. If this is confirmed by employers’ withdrawal from health plan sponsorship, then the health industry could be stymied. The new rules promoting universal coverage notwithstanding, declining employer subsidies, increasingly nervous international creditors, and a recession that makes it harder to raise and allocate tax dollars could converge to price the rank and file of America’s families out of the health care market. American health care could implode.

Even if the forces against health care policy change triumph, though, a new market interest in value is growing rapidly. Innovative new services and tools Web-based data exchange, analytics to identify patient risk and provider performance, clinical decision support, patient engagement, medical homes, value-based benefit design, new clinical technologies are achieving cost and quality improvements unimaginable a decade ago.

But everyone in health care is aware that both policy- and market-based reforms’ ultimate goals are better care for less money. The operative words, “less money,” mean we should expect a fierce, sustained effort by health care groups, bolstered by the opposition political party, to preserve and increase the profitability it has come to feel entitled to.

From where we sit, with the withering campaign that must be in the works, the odds of the new law remaining intact, with teeth, are questionable. For reforms to succeed, then, steady vigilant hands, focused on the nation’s larger interest, will be critical.

Brian Klepper, PhD and David C. Kibbe, MD, MBA write together about health care policy, market dynamics, technology and economics.

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