Abstract: This paper covers fundamentals of the Health Insurance Portability and Accountability Act (HIPAA). Through case studies, it examines some of the practical aspects of administration and enforcement of HIPAA. It makes observations on how EHR (Electronic Health Record) and internet are posing new challenges to the healthcare community.
Keywords — PHI, EHR, HIPAA, Internet, Privacy, OCR, HHS, HITECH
I. EXECUTIVE SUMMARY
HIPAA is separated into two sections.
1. The first is called “Health Care Access, Portability, and Renewability”, It relates to two acts: the Employee Retirement Income Security Act and the Public Health Service Act. This part of the Act protects the insurance coverage of workers between jobs or periods of unemployment.
2. The second is called “Preventing Health Care Fraud and Abuse; Administrative Simplification,” It defines HIPAA offenses, sets penalties for HIPAA violations, HIPAA regulations, and creates programs to control fraud and abuse within the healthcare system. The scope of the paper is limited to this part of act.
A. HIPAA and EHR
EHR is a technology aid for automating (not replacing) activities in healthcare provisioning. It ensures better process control, reduces medication errors and provides controlled access to patient information (protected health information (PHI) and patient identifiable information (PII)) under HIPAA. However the very technology poses new risks like misuse of privileges, vulnerability of systems hacking (frail solutions), poor adoption among healthcare staff etc. This warrants organizations to train their staff and build awareness. This has been a challenge far bigger than what most would imagine.
In the next few years we will see rapid EHR rollouts as a result of the Health Information for Economic and Clinical Health Act (HITECH). This opportunity also presents new challenges to be addressed like stronger penalties, stringent enforcement and contractual ramifications for Business Associates.
B. HIPAA and Internet
Pervasive computing has touched almost all areas of our lives. It has altered the channels of communication and the speed at which information is exchanged. However this presents new challenges too. While internet facilitates instant communication, HIPAA has to do a fine balancing between freedom of communication and right to privacy. Some of points to note are below:
• With growing use of internet, social networking and third party PHI storekeepers, the risk of unwarranted PHI disclosure has increased. It is likely that Google and Microsoft will be liable under HIPAA if the provider community collaborates with them as its Business Associates.
• With changing social dynamics, it becomes meaningful to understand how the ownership of PHI has to be shared by both the patient and the provider. Some alternatives are explored in a search to seek answers for these questions.
The paper ends with a brief outline of enforcement statistics and the road ahead.
II. INTRODUCTION TO PRIVACY
The Privacy Protection Safety Commission states that privacy is a personal and fundamental right to the citizen protected by the US Constitution. Privacy violation results from information misuse arising from unauthorised collection and use of protected individual information. A victim of such a wrongdoing is likely to be impacted by one or more of the following:
• Vulnerability
• Emotionally distress
• Humiliation
• Loss of opportunities.
In an ongoing attempt to uphold privacy, a number of acts have been instituted. Some of them are below:
1. Privacy Act of 1974
2. Confidentiality of Alcohol and Drug Abuse Patient Records Regulations
3. Family Educational Rights and Privacy Act (FERPA)
4. Americans with Disabilities Act (ADA)
5. Genetic Information Nondiscrimination Act (GINA)
6. HIPAA
7. Patient Safety and Quality Improvement Act of 2005 (PSQIA).
III. PILLARS OF HIPAA
HIPAA shifts the responsibility of information privacy from the patients (through simple consent forms) to the covered entities. It addresses several major areas:
• Privacy – Prevent misuse of patient information by safeguards
• Security – Protect information during storage and provide authorised access to patient information.
• Master data – Unique identifiers for interacting entities in a healthcare setting
• Standardization - Industry standard information exchange to reduce manual effort and clerical error.
• Business associate contracts – Important in outsourced services.
IV. PENALTIES FOR HIPAA VIOLATION
1 Offender did not know, and by exercising reasonable diligence would not have known, that he or she violated the law(Ordinary negligence) $100 for each violation, except that the total amount imposed on the person for all such violations of an identical requirement or prohibition during a calendar year may not exceed $25,000
2 Violation was due to reasonable cause and not willful neglect(Ordinary Negligence) $1,000 for each violation not more than $100,000 cumulative
3 Violation was due to willful neglect and was corrected (Gross negligence) $10,000 for each violation not more than $250,000 cumulative.
4 Violation was due to willful neglect and was not corrected(Gross negligence) $50,000 for each violation and not more than $1,500,000 cumulative.
The Department of Justice (DOJ) says that criminal penalties for a violation of HIPAA are directly applicable to covered entities and even its employees (under “corporate criminal liability”). Where an individual of a covered entity is not directly liable under HIPAA, they can still be charged with conspiracy or aiding and abetting. In the HITECH Act HHS is provided with new audit authority to conduct periodic audits and ensure BAs and Covered Entities are compliant with new rules.
The DOJ interpreted the "knowingly" (wilfully) element of the HIPAA statute for criminal liability as requiring only knowledge of the actions that constitute an offense.
V. EXAMPLE - HIPAA VIOLATION –INFORMATION SECURITY
The case discussed below highlights the potential magnitude of the impact of a HIPAA violation.
A. Case
The Federal Trade Commission (FTC) opened its investigation into CVS Caremark following media reports from around the country that its retail pharmacies were disposing PHI into open, publicly accessible dumpsters. The PHI was contained on labels on pill containers. The information included patient names, addresses, physicians’ names, medication and dosages; consumers’ personal information, employment applications, social security numbers, payroll information; and credit card and insurance card information. Simultaneously HHS opened its investigation into the pharmacies’ disposal of health information protected by HIPAA.
CSV was charged with violations for the following
• Lack of sound processes and policies to ensure HIPAA compliance
• Lack of employee training for dealing with PHI
• Lack of internal measures to assess and assure compliance with its policies and procedures for disposing of personal information
• Misleading and superfluous privacy policy statement.
CVS paid HHS $2.25 million to settle the matter.
Discussion: Is CVS a covered entity? Yes it is. Under 1861(s) of the Act, 42 U.S.C. 1395x(s), CVS (Retail Pharmacy chain) provides medical supplies and biological that may not be self administered and that are furnished as an incident to the physician’s professional service. So HIPAA applies to it.
What is the nature of information that CVS failed to handle with reasonable? The FTC press release states that there was sensitive information pertaining to patients and its own employees. It is important to note that patient health information as well as employee medical information falls under HIPAA. CVS compromised PHI and PII.
Where did CVS fail? CVS violated the following tenets under HIPAA even though no discernable harm had been reported
• Security.
• Privacy.
CVS response has included a settlement amount higher than any other payout on HIPAA violation so far.
CVS Caremark made claims such as “CVS/pharmacy wants you to know that nothing is more central to our operations than maintaining the privacy of your health information.” The FTC alleged that the claim was deceptive and that CVS Caremark’s security practices also were unfair. Unfair and deceptive practices violate the FTC Act. Subsequently CVS entered into a consent order with the FTC to resolve claims made by the latter. As a part of the Corporate Integrity Program, CVS agreed to institute a Corrective Action Plan (CAP). It requires CVS, in the next three years, to create processes for
• Correct disposal of PHI
• Institutionalize a training program
• Have a third party audit to certify the effectiveness of the CAP.
A similar example is found in the case against Providence Health and Services in June, 2008.
What is missing? Some of the missing facts that could have given us a better insight into the magnitude of violation are
1. Total number of records compromised
2. Number of locations where the breach took place
3. Number of medical or financial identity thefts following the time span from when the violation has been happening.
VI. EXAMPLE – LACK OF AWARENESS
As the concerns of HIPAA become pervasive, covered entities are reluctant to share information in a healthcare setting. This has been observed to hamper care in such situations. The case below illustrates this point.
B. Case
An emergency department requested the transfer of a 40-year-old homeless man with a history of schizophrenia and psychotropic dependence to a local hospital for undergoing inpatient treatment. In his psychotic state, the patient was unable to sign for the release of his records. The psychiatrist on call requested the emergency room (ER) to send across the test results and relevant records via fax for review before a decision could be made about transfer. The ER nurse refused to fax the records, stating that doing so would violate HIPAA. Furthermore, the nurse reported that even signed consent to fax the records would not protect her against a HIPAA violation. After the transfer was refused, the records were faxed with the patient's name blacked out.
Discussion: This is a case where the health worker was misinformed about HIPAA law. The Act does not forbid transfer of necessary and pertinent medical information to aid the treatment of the patient. Effective training program for healthcare workers is critical to the success of HIPAA.
VII. EXAMPLE - HIPAA AND INTERNET
With rapid adoption of unconventional communication channels, there is a need to re-assess the applicability of HIPAA laws. A few scenarios are presented below with observations.
A. Case: Patient participates in indiscriminate information sharing
Scenario One: The patient uses the hospital communication network (assuming it is made available) to share PHI to friends. Although the disclosure is by the patient but since the communication has happened over the hospital network which is under HIPAA rules, the hospital could be held liable.
Scenario Two: The patient communicates PHI using public internet and posts it on social networking sites. It is expected that patient will be discrete about his PHI. Should PHI be guarded under HIPAA only as long as the patient is not found being indiscrete, similar to the client-attorney privilege?
Scenario Three: The patient maintains PHI with a third party and not a covered medical entity. (For example Google Health). The privacy is guarded solely on the basis of authorised consent given by the individual to the third party and a declaration by the third party to be discrete with PHI. The PHI in this case is not protected by HIPAA regulations. Internet has always been an unsecured channel for storing and transmitting confidential information. Can HIPAA be extended to cover the third parties as well?
Scenario Four: Posting surgery updates on Twitter. There have been cases when the hospital surgeons have used Twitter to post surgery updates. It is likely that the patient would be discovered if the operation was a one of its kind or if it involved a novel procedure. How can we discourage such practices?
Scenario Five: YouTube advertising. In an attempt to avail lost cost marketing channels, the hospitals are seeking consent from patients to post their surgery on YouTube. It is possible that after the advertisement was posted, the patient develops a complication and suffers at the hands of the providers. Yet the advertisement continues to be featured in the YouTube without any mention of the post surgery complication. This leaves the patient traumatized. Even though the law may offer remedy, most patients are easily intimidated by idea of a legal recourse against their doctors, not to mention the time and money needed to go up against establishments.
VIII. ELECTRONIC HEALTH RECORD AND HIPAA
EHR solution is defined as a system of collecting, using, storing, disseminating and destroying PHI.
The challenges of implementing EHR are few but critical:
1. Adoption of technology by healthcare community. Physicians often find it difficult to work with technological limitations. All EHR rollouts need a strong technology change management to ensure speedy adoption. Health workers are notorious for their tendencies to skirt the process.
2. Under pressure to cut costs, HIPAA compliance may be compromised by undercutting features or robustness. This is particularly true when the solution is based on off the shelf products.
3. While EHR helps reduce human error, it makes HIPAA violations easier to commit. This is accentuated by the lack of organizational commitment to train and create awareness.
HIPAA safeguards in the EHR include the following:
1. Seamless integration to the billing system for transmitting EDI (Electronic Data Interchange) messages between payer and the payee.
2. Maintaining secure communication when employing outsourced talent with emphasis on business associate agreements
3. Instituting role based privileges for data access.
4. Proper budget to train and create awareness on HIPAA to avoid attacks through social engineering and breaches due to unauthorized information sharing. It is said that most unauthorized system access are through social engineering, an act of manipulating people into performing actions or divulging confidential information. This is an important point in a highly computerized environment.
5. Having routine and event based audits
6. Having a security officer to oversee HIPAA compliance and putting checks and balances for physical safeguard and back up of storage spaces for PHI.
7. Having technical safeguards for secure information exchange using encryption protocols and data corroboration
8. Implement privacy policies and risk management programs.
HIPAA violations today seldom remain limited to a violation of privacy. It is usually followed with either an identity theft or false claim or both. The case discussed below examines how HIPAA violations are easily committed with EHR solution in place and how it leads to felony. One critical point to note here is that the medical is owned by the covered entity
A. Case: Violation and Criminal Law
Without authorization or approval from United HealthCare, two of its employees gained access to the company’s electronic database and obtained names and dates of birth of certain patients. The patients had Flexible Spending Accounts and were covered by a prescription drug plan sponsored by the Federal Employees Health Benefit Plan (“FEHBP”). The employees used this information to create fake and unauthorized prescriptions. These were then presented to pharmacies to illegally obtain controlled substances. The drugs were then illegally sold to third parties. The defendants caused a loss of $72,746 to the Federal government by making false claims.
Discussion: In this case the defendants were guilty of HIPAA violation because they acquired the patient information and shared it with others who participated in their plan. Typically it would have been a civil case.
However defendants were guilty of identity theft which is a felony and the criminal law differs from one state to another. In the state of Texas, Fraudulent Use or Possession of Identifying Information is a felony whose degree varies based on the number of records stolen.
In addition, the defendants used the information to defraud the federal government by making false claims for reimbursement. Under False Claims Act this amounts to a felony. The defendants got a 10 year prison sentence and 250,000 in penalty.
IX. SOME MORE HIPAA
This section touches upon other areas where HIPAA has an impact.
• Under HIPAA, peer review documents are typically not discoverable. Unless there is a court issued subpoena, the hospital is not required to share the peer review documentation publicly. Peer review is a platform for physicians to discuss negligence and near negligence incidents without inhibition to ensure that patient safety standards and quality of care is consistently maintained.
• Medical records are owned by the covered entity although the patients have the right to suggest corrections to its contents. Providers may be free to use the information for treatment, operation and payment without any consent from the patient.
X. HIPAA AND HITECH ACT 2009
The HITECH Act has put in following checks and balances with respect to HIPAA. The section below mentions the notable areas impacted.
• Notifications in the event of confidentiality breach
• Business Associate liability
• Disclosures of PHI limited to the “Limited Data Set” or “Minimum Necessary”
• Expanded accountability for individuals
• Sale of EHR or PHI
• Limited use of PHI for marketing purposes and fund raising
• Expanded enforcement measures for HIPAA violations
• HIPAA compliance audits
• Business associate liability – The HITECH Act makes significant changes to the HIPAA laws and rules, many of which will impact relationships between covered entities and their business associates
• HITECH will require BAs to comply with administrative, technical and physical safeguard requirements
• BAs are also required to appoint a security official, develop written policies and procedures, and train its workforce on how to protect electronic protected health information (EPHI)
• BAs will now be directly liable under HIPAA for using and disclosing PHI in violation of their BA agreements
• A violation of the BA agreement will subject the BA to the same civil and criminal penalties as a Covered Entity who violates the Privacy Rule
In case of a breach of HIPAA guidelines, the following have been recommended under HITECH
• Perform a “Risk Assessment”
• Do an impact assessment resulting from the breach. This includes extent of misuse and tracking the parties involved in it. Type and amount of PHI involved -can it reasonably cause financial, reputational or other harm?
• Implement Risk Mitigation procedure
• The Covered Entity or BA has the burden of proof in demonstrating that no breach has occurred.
• Strong documentation of the risk assessment vital.
• Individual notification by first class mail required (unless individual has consented to electronic notice). Substitute notice is required if contact info is out of date. For 10 or more, notification must be either posted on website for 90 days or posted in major print/broadcast media for 90 days. Media and HHS notification required for breach involving 500 or more residents of a state or jurisdiction. For cases involving smaller number of breached records, log files must be maintained on an annual basis.
XI. SUMMARY STATISTICS OF HIPAA ENFORCEMENT
The Department of Health and Human Services (HHS) is under the executive branch of the US constitution charged with protecting the health of all Americans and providing essential human services, especially for those who are least able to help themselves. The OCR (Office of Civil Rights) is the primary agency under HHS to receive complaints on HIPAA violations and act upon them. Of the 45,630 complaints received so far, about 80% of the cases have been resolved. During the course of investigation, it has been discovered that almost 50% of the reported cases were not eligible to be tried under HIPAA. This statistics reflects two things
1. There may be gap in how the Act is interpreted. A good number of people do not understand the nuances of HIPAA in statement or spirit
2. There may be a gap in the jurisdiction of the law itself that needs to be addressed in the future.
The top reasons for HIPAA violations have been cited as
1. Unsecured PHI
2. Unauthorized access
3. Inappropriate and impermissible disclosures
4. Unauthorized disclosures
5. Lack of patient access to their PHI
6. Uses or disclosures of more than the minimum necessary protected health information
XII. HIPAA - DOWNSIDE
Restricted access to patient data has its drawbacks.
1. HIPAA has and will continue to have an impact on research as PHI becomes increasingly difficult to acquire. Consent forms have become longer ever since the regulations came into effect. Studies have shown that there is a decline in the participation rate in clinical trials and human research.
2. HIPAA compliance cost money. With static or diminishing healthcare budgets, there is a threat that HIPAA spending could be compensated by a compromise in the quality of care.
XIII. FUTURE – BENEFITS AND ROAD AHEAD
Benefits of HIPAA cannot be over-emphasized. The key ones are:
1. Allows patient information to be securely sent from one provider to another in a seamless and secure way. This will be more effectively felt when the percentage of providers on EHR solution increase.
2. By guarding patient privacy it protects patients from being victims of criminal wrong doings.
3. Patients are very vulnerable when they are in the hands of the providers. HIPAA safeguards ensure that information shared during patient-provider encounters are kept confidential
Its future depends on some best practices and legislations; some of which are mentioned below:
1. Effective training and awareness programs for members of the healthcare community.
2. Recognize that HIPAA is a not a one-time activity. It is part of corporate governance objective.
REFERENCES
[1] David Blumenthal, M.D., M.P.P. Stimulating the Adoption of Health Information Technology [Online] Available: http://healthcarereform.nejm.org/?p=436 , 2009.
[2] Consumer Union Report., To Err is Human - To Delay is Deadly: [Online] Available: http://www.consumersunion.org/pub/core_health_care/011324.html 2009.
[3] HHS Press Release, [Online] Available: http://www.hhs.gov/news/press/2009pres/08/20090819f.html, Aug. 2009.
[4] World Privacy Forum, [Online] Available, http://www.worldprivacyforum.org/hipaa/HipaaGuide3.html.
[5] Center for Democracy and Technology, HIPAA and Health Privacy: Myths and Facts Part 2 — January 2009 [Online] Available: http://www.cdt.org/healthprivacy/20090109mythsfacts.pdf
[6] Augustine Weekly - Holland & Knight HIPAA in Private Tort Litigation [Online] Available: http://www.informlegal.com/articles/view.php?article_id=519, 2008
[7] Press Release, CVS Caremark Settles FTC Charges: [Online] Available 2009. http://www.ftc.gov/opa/2009/02/cvs.shtm
[8] Biometrics Direct, Penalties for HIPAA violation [Online] Available: http://www.biometricsdirect.com/Biometrics/laws/HIPAA/hipaaviolations.htm
[9] American Medical Association, HIPAA Violation and Enforcement [Online] Available: http://www.ama-assn.org/ama/pub/physician-resources/solutions-managing-your-practice/coding-billing-insurance/hipaahealth-insurance-portability-accountability-act/hipaa-violations-enforcement.shtml.
[10] Bryan K. Touchet, M.D., Stephanie R. Drummond, D.O. and William R. Yates, M.D, Brief Report, The Impact of Fear on HIPAA violation on Patient Care [Online] Available: http://psychservices.psychiatryonline.org/cgi/content/full/55/5/575A.
[11] Internet Article, HIPAA Law and Guidelines for Employers, [Online] Available: http://www.hrhero.com/topics/hipaa.html
[12] Internet Article CVS Pays $2.25 Million in Record HIPAA Settlement [Online] Available: http://www.huntonprivacyblog.com/2009/02/articles/hipaa-1/cvs-pays-225-million-in-record-hipaa-settlement/
[13] Comments by World Privacy Forum, [Online] Available: http://www.ftc.gov/os/comments/cvscaremark/540386-00004.pdf
[14] Privacy Rights Clearing House, Chronology of Data Breaches [Online] Available: http://www.privacyrights.org/ar/ChronDataBreaches.htm
[15] Internet Article [Online] Available: http://www.law.uh.edu/healthlaw/perspectives/2008/(NA)%20blog.pdf
[16] OCR website. [Online] Available: http://www.hhs.gov/ocr/privacy/hipaa/enforcement/highlights/numbersataglanceindex.html
[17] U.S. Department of Labor Employee Benefits
Security Administration [Online] Available: http://www.dol.gov/ebsa/publications/top15tips.html
[18] Google Definition [Online] Available: http://www.google.com/search?hl=en&rlz=1R2ADBF_enIN335&defl=en&q=define:Social+engineering+&ei=QfSqSo62B4KntgeEpKDzBw&sa=X&oi=glossary_definition&ct=title
[19] Healthcare Applications and HIPAA [Online] Available: http://citebm.business.uiuc.edu/TWC%20Class/Project_reports_Spring2007/HIPAA/mtmcinto/McIntosh.pdf
Showing posts with label Health Regulation. Show all posts
Showing posts with label Health Regulation. Show all posts
Wednesday, November 11, 2009
Wednesday, October 28, 2009
Regulating private healthcare Hospitals, Clinics Must Register, Follow Standards
Nirmala M Nagaraj, TNN 26 October 2009, 03:17am IST
http://timesofindia.indiatimes.com/city/bangalore/Regulating-private-healthcare-Hospitals-Clinics-Must-Register-Follow-Standards/articleshow/5161243.cms
BANGALORE: After three decades of lobbying, the private health sector had to finally give in. The final notification of Karnataka Private Medical
Establishment(KPME) Rules, 2009, has been approved by the ministry and has been gazetted in the first week of October. With this notification, now hospitals have to register and maintain the standards as outlined in the notification. The rules are aimed at regulating private medical establishments, including clinics, diagnostic centres and alternative medicine centres to ensure that people get quality healthcare. The new rules stipulate minimum standards in terms of physical infrastructure, technical know-how and staff qualification to set up a private healthcare institution. More importantly, the rules will make it mandatory for private hospitals to display the rate charts. The rule covers all forms of medical practices __ from allopathy, ayurveda, unani to homeopathy. The efforts to regulate private medical establishments in the state began in 1976. Health and family welfare deputy director H C Ramesh said: "Due to lot of pressure from the private medical establishments, regulation was delayed for more than three decades. Now, with the gazette notification of the rules, the Act will be implemented in the state.'' Though there is a list of Karnataka Medical Council-registered doctors, the actual numbers are not known. This was evident during the recent chikungunya and H1N1 flu outbreak __ lack of list of private medical practitioners affected the disease-prevention programme. WHAT DOES IT MEAN? For registration which is mandatory, all private medical establishments __ from clinics to hospitals __ should ensure clean and hygienic surroundings, proper lighting, ventilation, adequate/hygienic sanitation facility, proper maintenance of medical records, standard bio-medical waste disposal system, accessibility to attending doctors and qualified staff appointed in proportion to number of patients treated in a day. REGISTRATION While the registration fee under allopathy for medical clinics is Rs 1,000, a nursing home with more than 2,000 beds has to pay registration fee of Rs 2 lakh. There is concession in fee for charitable and non-profit hospitals. For alternative Indian system of medicine, it is Rs 500 for clinic and dispensary, Rs 2,000 for hospital with 20 beds and more and Rs 10,000 for diagnostic centres with advanced facilities. The registration is valid for five years. Hospitals have to be registerd within 90 days from the date of the Act coming into force. At the district level, a regulatory committee is formed. It comprises deputy commissioner, district health officer and an Indian Medical Association member. STANDARDS From comfortable seating arrangements for patients in reception to examination room having minimum area of 125 sq ft and consultation chambers equipped with basic investigation facilities, standards have been set for the hospitals. "There are several hospitals functioning without basic infrastructure and medical equipment and there are several hospitals functioning without qualified staff. So, we have listed mandatory basic equipment and required qualified hospital staff. Private medical establishments have to display charges to all the services rendered," said health and family welfare deputy director H C Ramesh. QUOTE HANGER We are glad to have KPME rules as this will check quacks. With registration made mandatory, we will get to known as to how many private medical establishments are there in the state. __ Karnataka private hospitals and nursing Home Association vice president P S Premnath There is need for regulation as the environment of accredited healthcare promises patient safety. And the rules need to facilitate reform in the healthcare sector and should be covered by good governance for efficient implementation. __ Wockhardt Hospitals Group CEO Vishal Bali It is a welcome move as the rules will bring in quality, standard and accountability in healthcare. Along with patient safety, it will stop mushrooming of private hospitals without proper infrastructure and staff. It will assure quality players in healthcare sector. __ Manipal Hospital COO and Medical Director Dr S C Nagendra Swamy.
http://timesofindia.indiatimes.com/city/bangalore/Regulating-private-healthcare-Hospitals-Clinics-Must-Register-Follow-Standards/articleshow/5161243.cms
BANGALORE: After three decades of lobbying, the private health sector had to finally give in. The final notification of Karnataka Private Medical
Establishment(KPME) Rules, 2009, has been approved by the ministry and has been gazetted in the first week of October. With this notification, now hospitals have to register and maintain the standards as outlined in the notification. The rules are aimed at regulating private medical establishments, including clinics, diagnostic centres and alternative medicine centres to ensure that people get quality healthcare. The new rules stipulate minimum standards in terms of physical infrastructure, technical know-how and staff qualification to set up a private healthcare institution. More importantly, the rules will make it mandatory for private hospitals to display the rate charts. The rule covers all forms of medical practices __ from allopathy, ayurveda, unani to homeopathy. The efforts to regulate private medical establishments in the state began in 1976. Health and family welfare deputy director H C Ramesh said: "Due to lot of pressure from the private medical establishments, regulation was delayed for more than three decades. Now, with the gazette notification of the rules, the Act will be implemented in the state.'' Though there is a list of Karnataka Medical Council-registered doctors, the actual numbers are not known. This was evident during the recent chikungunya and H1N1 flu outbreak __ lack of list of private medical practitioners affected the disease-prevention programme. WHAT DOES IT MEAN? For registration which is mandatory, all private medical establishments __ from clinics to hospitals __ should ensure clean and hygienic surroundings, proper lighting, ventilation, adequate/hygienic sanitation facility, proper maintenance of medical records, standard bio-medical waste disposal system, accessibility to attending doctors and qualified staff appointed in proportion to number of patients treated in a day. REGISTRATION While the registration fee under allopathy for medical clinics is Rs 1,000, a nursing home with more than 2,000 beds has to pay registration fee of Rs 2 lakh. There is concession in fee for charitable and non-profit hospitals. For alternative Indian system of medicine, it is Rs 500 for clinic and dispensary, Rs 2,000 for hospital with 20 beds and more and Rs 10,000 for diagnostic centres with advanced facilities. The registration is valid for five years. Hospitals have to be registerd within 90 days from the date of the Act coming into force. At the district level, a regulatory committee is formed. It comprises deputy commissioner, district health officer and an Indian Medical Association member. STANDARDS From comfortable seating arrangements for patients in reception to examination room having minimum area of 125 sq ft and consultation chambers equipped with basic investigation facilities, standards have been set for the hospitals. "There are several hospitals functioning without basic infrastructure and medical equipment and there are several hospitals functioning without qualified staff. So, we have listed mandatory basic equipment and required qualified hospital staff. Private medical establishments have to display charges to all the services rendered," said health and family welfare deputy director H C Ramesh. QUOTE HANGER We are glad to have KPME rules as this will check quacks. With registration made mandatory, we will get to known as to how many private medical establishments are there in the state. __ Karnataka private hospitals and nursing Home Association vice president P S Premnath There is need for regulation as the environment of accredited healthcare promises patient safety. And the rules need to facilitate reform in the healthcare sector and should be covered by good governance for efficient implementation. __ Wockhardt Hospitals Group CEO Vishal Bali It is a welcome move as the rules will bring in quality, standard and accountability in healthcare. Along with patient safety, it will stop mushrooming of private hospitals without proper infrastructure and staff. It will assure quality players in healthcare sector. __ Manipal Hospital COO and Medical Director Dr S C Nagendra Swamy.
Tuesday, October 20, 2009
Why does healthcare cost so much
Abstract: We try to understand the nature of spending in healthcare. We will uncover alternativse to rein in the inflationary trend.
I. Background
Over the last several decades, healthcare spending in the USA has steadily climbed. Although several attempts have been made to restrain the trend, none so far (regulation, public programs, voluntary effort by insurance companies, market competition) has had a lasting impact. The problem of healthcare spending is not a singular one and hence does not have a single solution. Unless the challenge is addressed comprehensively, we will continue to see symptomatic and short sighted reforms.
II. Who Pays
Most people believe that it is the government, employers or the business that pays for the healthcare. In reality, it is the individual who eventually pays all and any form of healthcare expense. Following are some of the ways:
· Employers don’t give healthcare benefits as they claim. They merely set aside a part of employee compensation (Cost to Company) to pay for the health insurance premium.
· Government collects taxes and funds its Medicare and Medicaid program. It is uses a number of channels like
o Income tax - FICA (Federal Insurance Contribution Act), Federal Tax, State Tax (not applicable in Texas)
o Sales tax – controlled by states on goods and services purchased.
· Patients pay additionally through deductible, copayments and other out of pocket expenses
III. Why does it cost so much
A brief analysis of soaring healthcare expenditure is presented below.
· In a typical care transaction, the consumer of medical services is not the payer. The patient does not know the cost of an episode of care and hence does not care. As a result the patients have no interest to monitor their spending or to maintain their health through preventive care programs.
· Patients want the best and the latest and not value-for-money. When it comes to healthcare, less expensive medical services or drugs are often perceived to be of inferior quality.
· Multi-payer system builds in inefficiencies and cost (claims processing, management overhead, and administration) that translate to higher premiums.
· Medical innovation raises cost of care. America is responsible for leading the majority of the medical innovations and path breaking research for the rest of the world to follow. However when new procedures and medicines are invented, the companies try to recover the cost of the innovation through high pricing. When patients want the most advanced medical care available, they land up paying more. The pharmaceutical companies charge more for their drugs in America. There are 3 reasons to it
o Novelty factor – The new drugs are marketed only in America for the first few years and are aggressively promoted.
o Drugs patents lead to market monopoly and high prices. There is no government control in determining the market price for the drug.
· Healthcare is a “superior” good. It means that those who can pay higher premiums demand disproportionately higher levels of care. Senior executives in Goldman Sachs who have $40,000/year “Cadillac” plans will demand five star hospital suites and state of the art services. However we must examine the rationale of providing the same level of care/luxury (not to be mistaken with outcome of care) to those having simple $8000/year insurance plan.
· A significant part of the national health expense is due to an aging population (Baby boomers) who have greater episodes of care and greater number of co-mobilities (meaning more complications and more cost of care).
· The uninsured either utilize emergency services or postpone their treatment. Using trauma centres to address routine illness is expensive for providers. They recover this cost by charging their insured patients more. Postponing medical care eventually leads to complication and warrants more expensive care being required in the future.
· Shifting care. Medical care has shifted from primary physicians to specialty caregivers and from in-patient to out-patient setting. Both have ramifications. Specialty care givers charge higher fees for the same service that could have been provided by the primary care physician. They will also be inclined to recommend higher number of high end test and procedures. With rising demand for out-patient services caregivers have invested in infrastructure and facilities. This cost is reclaimed through inflated fees.
IV. What may be our position to rein in cost
Each point in the previous section may be looked in greater detail for areas of improvement. For this paper we will focus on some of the most important ones.
· Empower primary care physician to treat patients for more medical conditions. Incentivize caregivers to keep patients healthy and not make money through a barrage of tests. Resolve the inequality in the number of primary care physicians and specialists. Put moratorium on building new speciality units.
· Encourage consumers to get value-for-money treatment and drugs. Encourage Health Savings Accounts (HSA). Mandate employers to put their contributions to the HSA and not combine it with the compensation. Exempt taxes for contributions to HSA. Get individuals to be aware of how much their cost involved in each episode of care.
· If insurance is mandatory, then allow the insured to purchase plans that where they will decide how to spend the indemnity value (how much for inpatient, drugs, dentist, diagnostics etc). This will motivate people to seek insurance and spread the risk. Regulate insurance sector to become not-for-profit. Mandate the insurance to do away with pre-existing conditions and denial of care.
· Regulate the drug companies by fixing price of drugs. Offer patents only for radically new drugs - the ones that enhance the quality of life significantly and not those that are mere alterations at a molecular level causing marginally higher benefits than an existing or substitute drug.
In sum, healthcare cost a result of interplay of several factors and must be dealt with holistically.
I. Background
Over the last several decades, healthcare spending in the USA has steadily climbed. Although several attempts have been made to restrain the trend, none so far (regulation, public programs, voluntary effort by insurance companies, market competition) has had a lasting impact. The problem of healthcare spending is not a singular one and hence does not have a single solution. Unless the challenge is addressed comprehensively, we will continue to see symptomatic and short sighted reforms.
II. Who Pays
Most people believe that it is the government, employers or the business that pays for the healthcare. In reality, it is the individual who eventually pays all and any form of healthcare expense. Following are some of the ways:
· Employers don’t give healthcare benefits as they claim. They merely set aside a part of employee compensation (Cost to Company) to pay for the health insurance premium.
· Government collects taxes and funds its Medicare and Medicaid program. It is uses a number of channels like
o Income tax - FICA (Federal Insurance Contribution Act), Federal Tax, State Tax (not applicable in Texas)
o Sales tax – controlled by states on goods and services purchased.
· Patients pay additionally through deductible, copayments and other out of pocket expenses
III. Why does it cost so much
A brief analysis of soaring healthcare expenditure is presented below.
· In a typical care transaction, the consumer of medical services is not the payer. The patient does not know the cost of an episode of care and hence does not care. As a result the patients have no interest to monitor their spending or to maintain their health through preventive care programs.
· Patients want the best and the latest and not value-for-money. When it comes to healthcare, less expensive medical services or drugs are often perceived to be of inferior quality.
· Multi-payer system builds in inefficiencies and cost (claims processing, management overhead, and administration) that translate to higher premiums.
· Medical innovation raises cost of care. America is responsible for leading the majority of the medical innovations and path breaking research for the rest of the world to follow. However when new procedures and medicines are invented, the companies try to recover the cost of the innovation through high pricing. When patients want the most advanced medical care available, they land up paying more. The pharmaceutical companies charge more for their drugs in America. There are 3 reasons to it
o Novelty factor – The new drugs are marketed only in America for the first few years and are aggressively promoted.
o Drugs patents lead to market monopoly and high prices. There is no government control in determining the market price for the drug.
· Healthcare is a “superior” good. It means that those who can pay higher premiums demand disproportionately higher levels of care. Senior executives in Goldman Sachs who have $40,000/year “Cadillac” plans will demand five star hospital suites and state of the art services. However we must examine the rationale of providing the same level of care/luxury (not to be mistaken with outcome of care) to those having simple $8000/year insurance plan.
· A significant part of the national health expense is due to an aging population (Baby boomers) who have greater episodes of care and greater number of co-mobilities (meaning more complications and more cost of care).
· The uninsured either utilize emergency services or postpone their treatment. Using trauma centres to address routine illness is expensive for providers. They recover this cost by charging their insured patients more. Postponing medical care eventually leads to complication and warrants more expensive care being required in the future.
· Shifting care. Medical care has shifted from primary physicians to specialty caregivers and from in-patient to out-patient setting. Both have ramifications. Specialty care givers charge higher fees for the same service that could have been provided by the primary care physician. They will also be inclined to recommend higher number of high end test and procedures. With rising demand for out-patient services caregivers have invested in infrastructure and facilities. This cost is reclaimed through inflated fees.
IV. What may be our position to rein in cost
Each point in the previous section may be looked in greater detail for areas of improvement. For this paper we will focus on some of the most important ones.
· Empower primary care physician to treat patients for more medical conditions. Incentivize caregivers to keep patients healthy and not make money through a barrage of tests. Resolve the inequality in the number of primary care physicians and specialists. Put moratorium on building new speciality units.
· Encourage consumers to get value-for-money treatment and drugs. Encourage Health Savings Accounts (HSA). Mandate employers to put their contributions to the HSA and not combine it with the compensation. Exempt taxes for contributions to HSA. Get individuals to be aware of how much their cost involved in each episode of care.
· If insurance is mandatory, then allow the insured to purchase plans that where they will decide how to spend the indemnity value (how much for inpatient, drugs, dentist, diagnostics etc). This will motivate people to seek insurance and spread the risk. Regulate insurance sector to become not-for-profit. Mandate the insurance to do away with pre-existing conditions and denial of care.
· Regulate the drug companies by fixing price of drugs. Offer patents only for radically new drugs - the ones that enhance the quality of life significantly and not those that are mere alterations at a molecular level causing marginally higher benefits than an existing or substitute drug.
In sum, healthcare cost a result of interplay of several factors and must be dealt with holistically.
Friday, October 2, 2009
Issues with employer based health insurance
Abstract: We try to understand why current healthcare system threatens to crush the employer based insurance in the context of the changes in the industry. The brief gives the pros and cons and some suggestion as to what can be done to put it back on course.
I. Background
Modern employer based insurance emerged as a fringe benefit during the Second World War when the government implemented wage and price controls in private industries. It went on to become a dominant model of US mode of healthcare finance when the government allowed companies to get tax deductions for the expense of paying for insurance premium (IRS provision). The government did not tax the employees for receiving the benefit but the taxpayers were not allowed to deduct the cost of insurance if they got it on their own. The largest decline in the employer based health insurance was seen since the 2000s. However, even today, when employer based healthcare is under criticism, a high percent of the working individuals in the private sector are offered some form of health insurance financing through their employers (around 160 million people, 60% of the under-65 population).
II. Milestone legislation
Some key laws passed in the pass that were relevant to the employer based healthcare
· ERISA (Employee Retirement and Income Security Act) which did not mandate an employer to offer health insurance but instead regulated their plan only if the employer chose to provide one. A provision of this law allowed employers to escape state regulations and allowed them to directly pay for health benefits through self insurance. Self funding reduced employer overhead. It however undermined the broad risk pooling (A practice of pooling large number of people for health insurance plans which facilitated inclusive, inexpensive coverage). Smaller employers looked at the notion of consortium using MEWA (Multiple Employer Welfare Arrangements). This had the inherent risk of employees leaving the cooperative and causing an adverse selection bias.
· The proposed Health Security Act was perceived to be extremely complicated and government intrusive and was not passed. However, it gave rise to the idea Medical Savings Account. Along with variants like Health Reimbursement Account and Flexible Spending Account, these allowed for the employees to manage their own insurance accounts with some restrictions.
III. Employer Challenges
Healthcare has changed in terms of how much the medicines cost and how much it can do.
· Rate of rise in healthcare spending has outpaced the rate of rise of income, productivity and inflation.
· Advances in medical technology and drugs have given the ability to combat diseases and conditions (especially heart disease, cancer and stroke). This along with decline in tobacco use and increased cholesterol awareness has led to higher longevity.
· An aging population with higher episodes of care result in higher healthcare spending
· The insurance cost that was about 2 % in 1960 is now more than 10% of the compensation and the employers have to grapple with that reality.
· The healthy and young, working age population is opting to not have insurance reducing risk spread.
· Group premium is based on the claims experience – that is, the health history — of just that small group of employees. This is a nightmare for small companies.
IV. Employer Response
The employers had relied on managed care to keep the cost of healthcare down. Later they pulled back from it and shifted their efforts on imposing more cost sharing on individuals and creating plans that involve more management of disease and conditions. This included higher deductible, higher copayment, payment incentives to insurers for preventive care and disease management. Clearly these strategies have failed and the system is badly bruised.
V. Pros and Cons
· CONS of employer based insurance
o Can't move your insurance around. Locked into jobs that people may not necessarily want to keep.
o Employees can't see the stresses on the health care system because the employer is paying the premiums.
· PROS of employer based insurance
o Employer gives you a risk pool to buy into. Not rejected for pre-existing conditions or poor health.
o Employer contracts out with insurers, offering more choices, at a lower price, and with an administrative buffer - an HR person to turn to if the going gets rough.
o Employer offers an easy, centralized access point to the system. and give individuals a way to pool their purchasing power for better prices and treatment
o Lead the spread of wellness and prevention-focused programs, the management of chronic diseases, and the use of incentives to medical providers for better performance – these elements are not found in public programs like Medicare and Medicaid, which focus on reducing payments to providers
VI. Alternatives and Conclusion
We need not create a new world order but an intelligent restructuring and realignment of employer provided insurance.
· Health insurance “connector/exchange” that will match buyers and sellers, collect premiums and bill employers.
· Promote consumer directed portable health savings or reimbursement accounts. This allows employees to be informed about the cost of the healthcare. Alter the perception that health care costs only $10, (Copayment).
· Mandate employer based healthcare. Companies stand to benefit from a healthy workforce. Mandate preventive care programs via employers.
· Mandate health insurance for all citizens and legal immigrants to broaden the risk pool and bring the cost of healthcare down. Healthcare cost must be shared reasonably between employer and employees
· Have equitable insurance premiums based on ability to pay and demographics.
I. Background
Modern employer based insurance emerged as a fringe benefit during the Second World War when the government implemented wage and price controls in private industries. It went on to become a dominant model of US mode of healthcare finance when the government allowed companies to get tax deductions for the expense of paying for insurance premium (IRS provision). The government did not tax the employees for receiving the benefit but the taxpayers were not allowed to deduct the cost of insurance if they got it on their own. The largest decline in the employer based health insurance was seen since the 2000s. However, even today, when employer based healthcare is under criticism, a high percent of the working individuals in the private sector are offered some form of health insurance financing through their employers (around 160 million people, 60% of the under-65 population).
II. Milestone legislation
Some key laws passed in the pass that were relevant to the employer based healthcare
· ERISA (Employee Retirement and Income Security Act) which did not mandate an employer to offer health insurance but instead regulated their plan only if the employer chose to provide one. A provision of this law allowed employers to escape state regulations and allowed them to directly pay for health benefits through self insurance. Self funding reduced employer overhead. It however undermined the broad risk pooling (A practice of pooling large number of people for health insurance plans which facilitated inclusive, inexpensive coverage). Smaller employers looked at the notion of consortium using MEWA (Multiple Employer Welfare Arrangements). This had the inherent risk of employees leaving the cooperative and causing an adverse selection bias.
· The proposed Health Security Act was perceived to be extremely complicated and government intrusive and was not passed. However, it gave rise to the idea Medical Savings Account. Along with variants like Health Reimbursement Account and Flexible Spending Account, these allowed for the employees to manage their own insurance accounts with some restrictions.
III. Employer Challenges
Healthcare has changed in terms of how much the medicines cost and how much it can do.
· Rate of rise in healthcare spending has outpaced the rate of rise of income, productivity and inflation.
· Advances in medical technology and drugs have given the ability to combat diseases and conditions (especially heart disease, cancer and stroke). This along with decline in tobacco use and increased cholesterol awareness has led to higher longevity.
· An aging population with higher episodes of care result in higher healthcare spending
· The insurance cost that was about 2 % in 1960 is now more than 10% of the compensation and the employers have to grapple with that reality.
· The healthy and young, working age population is opting to not have insurance reducing risk spread.
· Group premium is based on the claims experience – that is, the health history — of just that small group of employees. This is a nightmare for small companies.
IV. Employer Response
The employers had relied on managed care to keep the cost of healthcare down. Later they pulled back from it and shifted their efforts on imposing more cost sharing on individuals and creating plans that involve more management of disease and conditions. This included higher deductible, higher copayment, payment incentives to insurers for preventive care and disease management. Clearly these strategies have failed and the system is badly bruised.
V. Pros and Cons
· CONS of employer based insurance
o Can't move your insurance around. Locked into jobs that people may not necessarily want to keep.
o Employees can't see the stresses on the health care system because the employer is paying the premiums.
· PROS of employer based insurance
o Employer gives you a risk pool to buy into. Not rejected for pre-existing conditions or poor health.
o Employer contracts out with insurers, offering more choices, at a lower price, and with an administrative buffer - an HR person to turn to if the going gets rough.
o Employer offers an easy, centralized access point to the system. and give individuals a way to pool their purchasing power for better prices and treatment
o Lead the spread of wellness and prevention-focused programs, the management of chronic diseases, and the use of incentives to medical providers for better performance – these elements are not found in public programs like Medicare and Medicaid, which focus on reducing payments to providers
VI. Alternatives and Conclusion
We need not create a new world order but an intelligent restructuring and realignment of employer provided insurance.
· Health insurance “connector/exchange” that will match buyers and sellers, collect premiums and bill employers.
· Promote consumer directed portable health savings or reimbursement accounts. This allows employees to be informed about the cost of the healthcare. Alter the perception that health care costs only $10, (Copayment).
· Mandate employer based healthcare. Companies stand to benefit from a healthy workforce. Mandate preventive care programs via employers.
· Mandate health insurance for all citizens and legal immigrants to broaden the risk pool and bring the cost of healthcare down. Healthcare cost must be shared reasonably between employer and employees
· Have equitable insurance premiums based on ability to pay and demographics.
Tuesday, September 29, 2009
Why are providers struggling
Abstract: In the current healthcare setting, the providers (hospitals and physicians) are under pressures that stem from gaps in market and legislation. Our response must include ways to stabilize the current dynamics between payers, the providers and the patient using a mix of legislative guidelines and financial incentives.
I. Background - From Then to NOW
The healthcare ecosystem is shared by patients, providers (hospitals and physicians) and payers/insurers (managed care organizations, Medicare, Medicare). The payers played a big role in the corporatization of healthcare. Their main intention was to curb exploitation of fee-for-service system by providers. Gradually, the payers took control over the functioning of healthcare in America by containing cost in all respects. Managed care organizations did so by restricting patient’s preferences, limiting access to care (using gatekeepers), denying coverage, risk contracting and rationing based on the ability of the patients to pay premium. All payers resorted to standard reimbursement schemes with variants (Medicare had diagnosis related groups - DRG, managed care used flat fee per day etc). The payers enjoyed the advantage of huge subscriber (patient) base, which was used to negotiate (dictate) terms with providers. During this time the cost of healthcare (Premiums, out of pocket, copayments) rose at a rate higher than inflation and the rate of growth of income. The situation roused much public discontent and a power struggle between provider and the payers ensued.
The providers responded by consolidating amongst themselves through mergers and acquisitions, by forming large physician groups and by becoming process efficient. Thus they were in a position to negotiate better reimbursement rates from the payers (especially commercial insurers). Responding to their subscriber sentiments, the payers began to loosen up (like offer more flexible plans and relax pre authorization rules) and an uneasy cease fire was established among the players in the healthcare industry.
In the current scheme of things, the providers are under struggling to survive due to asymmetric market forces and regulations. Profit margins are triumphing over social medicine. To be successful, the current health reform will have to balance the loci of power among the players in the healthcare industry.
II. Provider Challenges
The impact the challenges given below may vary in degree for hospitals and physicians
· Treatment of uninsured – Under EMTALA (Emergency Medical Treatment and Active Labour Act), the hospitals may not turn down patients coming to the ER. The hospitals incur a high financial overhead to maintain and run an ER. There is a growing number of uninsured visiting the ER to address their medical needs. This is in addition to the valid emergency cases without insurance. The cost of care in all such cases (including follow up post the ER episode) is borne by the provider bringing down the profit margin.
· Labour costs – There is a shortage of medical staff. High demand and low supply cause the providers to offer competitive salary to attract quality care givers. Specialists consider ER duty as unrewarding. It is known to take a toll on their personal life. In their perception, ER duty takes away the time they would have otherwise spent attending insured (financially rewarding) patients.
· Cost shifting – High-end cost effective technology is helping day care (out-patient) surgery units to succeed. Traditional hospitals are not set up for this and suffer loss of in-patient revenue from lost patients. This market is dominated by specialty hospitals which work with insured patients and revenue generating medical conditions. They minimize losses by not having the obligation to treat uninsured or provide public welfare programs, ER and trauma units. Competition from specialty units is driving traditional providers to take losses or invest in similar initiatives. Increase in proportion of out-patient visits are also contributing to loss in in-patient revenue.
· Low reimbursements – Medicare and Medicaid pay hospitals 95% and 73% of what it costs them to provide care, while private insurance pays about 120% of those costs. This mechanism of cross subsidy employed by providers allows them to sustain themselves, financially. The healthcare reform bill in its current draft proposes to cut funds to Medicare and Medicaid even further which would mean even lower payments to the provider.
· Cost of drugs – Newer drugs are costly and many a time the physician’s choice of drugs is in conflict with the hospitals cost containment efforts. Number of episodes due to lifestyle related diseases are rising and driving up cost of care.
III. Provider Response
The providers may respond to their current challenges using a combination of strategies outlined below.
· Contain labour costs and close less-profitable services and consolidate by mergers and acquisitions
· Integrate logistics to negotiate better rates for purchasing medical supplies from corporate vendors.
· Seek a more favourable payer mix to be able to cross subsidize better. A public option will make this difficult as government run programs will continue to pay less for care in line with Medicare and Medicaid.
· Restructure hospital and physician relationship. Become competitive by creating specialty units (possibly in partnership with physicians) and retain both good physicians and their patients.
· Increase reliance on non operating income (The portion of an organization's income that is derived from activities not related to its core operations). Engage staff in financial performance improvement
IV. Our Response and conclusion
Our response must include ways to enable the providers to sustain and grow. A mix of regulatory mandates and financial incentives are suggested below.
· Mandate insurance for one and all. This will reduce financial burden of the provider to give charity care to uninsured (Reference: Senate Finance Committee draft by Sen. Max Baucus).
· Provide financial incentive for providers to adopt technology to improve process efficiency and care coordination. Example: Shared nomenclature between hospital billing system and insurance companies(that reduce cost towards healthcare clearinghouse), e-prescription, etc (Reference: HITECH Bill)
· Mandate specialty hospitals to offer, at least one, public welfare program(s). This will rein in elements of social medicine in their practice.
· Provide incentives for providers to come together and form shared-services department (where feasible) especially in high-end diagnostics, medical coding, etc. This will result in cost sharing and higher utilization for the providers.
I. Background - From Then to NOW
The healthcare ecosystem is shared by patients, providers (hospitals and physicians) and payers/insurers (managed care organizations, Medicare, Medicare). The payers played a big role in the corporatization of healthcare. Their main intention was to curb exploitation of fee-for-service system by providers. Gradually, the payers took control over the functioning of healthcare in America by containing cost in all respects. Managed care organizations did so by restricting patient’s preferences, limiting access to care (using gatekeepers), denying coverage, risk contracting and rationing based on the ability of the patients to pay premium. All payers resorted to standard reimbursement schemes with variants (Medicare had diagnosis related groups - DRG, managed care used flat fee per day etc). The payers enjoyed the advantage of huge subscriber (patient) base, which was used to negotiate (dictate) terms with providers. During this time the cost of healthcare (Premiums, out of pocket, copayments) rose at a rate higher than inflation and the rate of growth of income. The situation roused much public discontent and a power struggle between provider and the payers ensued.
The providers responded by consolidating amongst themselves through mergers and acquisitions, by forming large physician groups and by becoming process efficient. Thus they were in a position to negotiate better reimbursement rates from the payers (especially commercial insurers). Responding to their subscriber sentiments, the payers began to loosen up (like offer more flexible plans and relax pre authorization rules) and an uneasy cease fire was established among the players in the healthcare industry.
In the current scheme of things, the providers are under struggling to survive due to asymmetric market forces and regulations. Profit margins are triumphing over social medicine. To be successful, the current health reform will have to balance the loci of power among the players in the healthcare industry.
II. Provider Challenges
The impact the challenges given below may vary in degree for hospitals and physicians
· Treatment of uninsured – Under EMTALA (Emergency Medical Treatment and Active Labour Act), the hospitals may not turn down patients coming to the ER. The hospitals incur a high financial overhead to maintain and run an ER. There is a growing number of uninsured visiting the ER to address their medical needs. This is in addition to the valid emergency cases without insurance. The cost of care in all such cases (including follow up post the ER episode) is borne by the provider bringing down the profit margin.
· Labour costs – There is a shortage of medical staff. High demand and low supply cause the providers to offer competitive salary to attract quality care givers. Specialists consider ER duty as unrewarding. It is known to take a toll on their personal life. In their perception, ER duty takes away the time they would have otherwise spent attending insured (financially rewarding) patients.
· Cost shifting – High-end cost effective technology is helping day care (out-patient) surgery units to succeed. Traditional hospitals are not set up for this and suffer loss of in-patient revenue from lost patients. This market is dominated by specialty hospitals which work with insured patients and revenue generating medical conditions. They minimize losses by not having the obligation to treat uninsured or provide public welfare programs, ER and trauma units. Competition from specialty units is driving traditional providers to take losses or invest in similar initiatives. Increase in proportion of out-patient visits are also contributing to loss in in-patient revenue.
· Low reimbursements – Medicare and Medicaid pay hospitals 95% and 73% of what it costs them to provide care, while private insurance pays about 120% of those costs. This mechanism of cross subsidy employed by providers allows them to sustain themselves, financially. The healthcare reform bill in its current draft proposes to cut funds to Medicare and Medicaid even further which would mean even lower payments to the provider.
· Cost of drugs – Newer drugs are costly and many a time the physician’s choice of drugs is in conflict with the hospitals cost containment efforts. Number of episodes due to lifestyle related diseases are rising and driving up cost of care.
III. Provider Response
The providers may respond to their current challenges using a combination of strategies outlined below.
· Contain labour costs and close less-profitable services and consolidate by mergers and acquisitions
· Integrate logistics to negotiate better rates for purchasing medical supplies from corporate vendors.
· Seek a more favourable payer mix to be able to cross subsidize better. A public option will make this difficult as government run programs will continue to pay less for care in line with Medicare and Medicaid.
· Restructure hospital and physician relationship. Become competitive by creating specialty units (possibly in partnership with physicians) and retain both good physicians and their patients.
· Increase reliance on non operating income (The portion of an organization's income that is derived from activities not related to its core operations). Engage staff in financial performance improvement
IV. Our Response and conclusion
Our response must include ways to enable the providers to sustain and grow. A mix of regulatory mandates and financial incentives are suggested below.
· Mandate insurance for one and all. This will reduce financial burden of the provider to give charity care to uninsured (Reference: Senate Finance Committee draft by Sen. Max Baucus).
· Provide financial incentive for providers to adopt technology to improve process efficiency and care coordination. Example: Shared nomenclature between hospital billing system and insurance companies(that reduce cost towards healthcare clearinghouse), e-prescription, etc (Reference: HITECH Bill)
· Mandate specialty hospitals to offer, at least one, public welfare program(s). This will rein in elements of social medicine in their practice.
· Provide incentives for providers to come together and form shared-services department (where feasible) especially in high-end diagnostics, medical coding, etc. This will result in cost sharing and higher utilization for the providers.
Friday, August 21, 2009
Thursday, August 20, 2009
Healthcare Reforms 2009 - Implications
The Final Rule for SNF PPS came out on July 31st, 2009. After repeated review of the document, my understanding of its impact are as follows For SNFs effective October 2010 RUGs III to RUGs IV MDS 2.0 to mDS 3.0 Decreased in 1.1% net payments to SNF Change in RUG categories from 53 to 66 ( would be interesting to know more on this) Rehabilitation in SNF Impact Most important is the change in the practice of concurrent therapy provision as we understand it now Current practice allows us to provide therapy to 2 Medicare A patients at the same time and bill each patient the whole time. This allowed therapy practitioners to manage their patient schedule and caseload effectively especially given the shortage of skilled clinicians especially in the SNF practice setting Starting October 2010, concurrent therapy delivery will mean that the total time spent with 2 patients simultaneously will be split and billed as such. This would mean that clinicians will not be able to use the current efficiency strategy to effectively attend to the patients they are currently being able to- significant negative impact for both to the SNFs and Rehab industry Let us further observe how else the changes will impact the rehab industry OMRA days of 8-10 days reduced to 1-3 days post therapy discharge- Again little room for any make up of the over delivery of minutes beyond what is allowed for each category- fair enough Start of Care OMRA will allow to start a new assessment if therapy is initiated instead of waiting until the scheduled assessment window starts- this is good news If the patient is discharged prior to reaching their 5 day assessment, they may not receive any higher RUG level than a Rehab High- Not bad T section that is currently allowed for RH and RM patients to be eliminated- This will have a significant negative impact especially for those SNFs that admit patients receiving dialysis etc.. So far, the above bullets are a fair summary of my reading and comprehension of the final rule document More to come....Stay tuned as Medicare B rules are released hopefully sometime soon Happy Reading and email me if have a different read or need further clarification- I am no expert but have familiarized myself to ensure I make sense when training clinicians
Subscribe to:
Posts (Atom)