Ray Lefton

With the election behind us, the Obama team is quickly assembling a team to implement his broad agenda of healthcare reform. Complicating the matter is the deepening economic crisis and burgeoning federal and state budgetary deficits. Most of Obama's proposals focus heavily on coverage expansion, which will likely accentuate the current growth in healthcare spending. Some unproven, but theoretically sound measures on cost control are also included in Obama's proposals:

  • Implement health IT systems to create efficiencies and improve quality.
  • Focus on disease management, chronic care, and preventive services.
  • Increase cost and quality transparency.
  • Connect reimbursement to quality.

Although a good start, the above ideas lack specificity as to how these reforms will slow the growth of spending in the Medicare and Medicaid programs. In addition, these proposals do not address other important policy options, including rationing care, raising taxes, cutting payments to providers, or requiring beneficiaries to pay a higher percentage of their healthcare costs through increased premiums, copays, and deductibles. The proposals fail to address how to shrink the healthcare pie through shared sacrifices, which will be essential if we truly want to reform the system.

A Bursting Bubble

The United States spends more than any other nation on health care, roughly 16 percent of its gross domestic product, an estimated$2.3 trillion at $7,000 per capita. Major drivers of healthcare costs include but are not limited to duplication of services, end-of-life medical expenditures, advancements in technology, malpractice, overutilization, lack of standardization, medical errors, and administrative overhead.

Economists and health policy experts say the federal health programs are unsustainable in their current form, because they are growing much faster than the economy or the revenues used to finance them. The Medicare program is especially endangered; its hospital insurance trust fund is expected to run out of money in 11 years. Spending on Medicaid is expected to substantially outpace the rate of growth in the U.S. economy over the next decade, according to a recent Medicare Trustees' report.

From a provider perspective, the future is just as challenging. Many hospitals are in a cost containment mode and are delaying and canceling capital expenditures. Physician practices continue to see reimbursement rates threatened by cuts. All providers will have to deal with an increased amount of bad debt as more people fall into the ranks of the uninsured or underinsured.

These are all irrefutable facts. What are we to do as healthcare finance professionals?
Interconnecting Reform Strategies

Over the past seven issues of hfm, I identified 14 strategies that I believe can help us obtain meaningful healthcare reform:

  • Adopt evidence-based medicine.
  • Move malpractice cases out of civil court.
  • Align hospital and physician reimbursement.
  • Develop healthcare IT interoperability.
  • Close the loop in electronic prescribing.
  • Limit drug promotions and increase price competition.
  • Standardize claims processing.
  • Create separate risk pool for costly patients.
  • Eliminate unfunded mandates and time limit laws.
  • Encourage regional planning of health services.
  • Divert nonurgent care to retail clinics.
  • Eliminate physician conflicts of interests.
  • Increase personal accountability for lifestyle choices.
  • Promote better disease management via primary care model.

What is essential for people to understand is that all of these 14 strategies are connected. It is not enough to enact one or two of these ideas and not the others. By ignoring even a few of the interlocking pieces that need to come together for true reform, policymakers, payers, and providers will end up with an incomplete puzzle.

For example, President-elect Obama has repeatedly cited health IT as an investment that will pay dividends by stimulating today's economy and reducing healthcare spending over the long term. However, a May 2008 study by the Congressional Budget Office indicates that IT has the "potential" to be an effective strategy in certain settings-and only if other steps are also taken across the broader healthcare system (Evidence on the Costs and Benefits of Health Information Technology). I would go further and suggest that IT has incredible benefits only if physicians are obligated to use these IT systems and if evidence-based, standardized orders are built into these systems. In addition, to encourage physicians to standardize their practices, they need to be immunized from malpractice litigation when they are strictly following evidence-based guidelines.

We need to be prepared for many uphill battles if we want to see true reform. Given the dollars at stake, all benefactors of the current system are going to fight mightily to protect their stakes and resist change that would result in them receiving fewer profits. Physicians don't want to abrogate their independence. Drug companies will resist the implementation of rigid drug protocols, and attorneys and patient rights advocates will resist giving up their ability to sue for damages. 

Shared Responsibilities

In the road to healthcare reform, providers should lead by example and fight for the changes that we can control. Two areas that I feel strongly about as a healthcare financial leader are the administrative complexity of the healthcare system and the lack of cooperation among not-for-profit hospitals.

With respect to administrative waste, the good intentions of HIPAA have fallen short of expectations. The cost to collect continues to increase.
A lack of consistency exists in billing requirements from one payer to another. There are state requirements and different guidelines under the Employee Retirement Income Security Act. For example, under Medicare, I could not design a more complex system for billing drug therapy administration. The areas of greatest risk for most hospitals under Recovery Audit Contractors are the soft, one-day admissions, but Medicare payments for observation stays are totally inadequate and give consideration only for asthma, chest pain, and congestive heart failure diagnoses. HFMA and other professional organizations should form a coalition and work with the Centers for Medicare & Medicaid Services for change.

You can say that the true tests of whether we have fulfilled our obligation as hospital administrators is whether we have improved the health status of the communities that we serve, focusing on quality, cost, and access-and not solely on our own organization's competitive market share. I think many of us have lost sight of this ultimate prize. Competition in some markets is healthy; however, it needs to be balanced with regional planning and collaboration. I conducted a literature review and contacted other professionals asking for examples of competitor not-for-profit hospitals/health systems working together to better serve their common communities.

There are few examples: Three competing healthcare organizations in Youngstown, Ohio (Humility of Mary Health Partners, Forum Health, and Ohio North East Health System), are in the beginning stages of working together with the primary goal to address the medically uninsured population in their community. The state of Wisconsin has some of the most integrated healthcare networks in the country and has a history of provider collaboration. Milwaukee hospitals have been using a web-based system to update the status of their emergency departments. Also, competitor hospitals openly share quality information through a web-based system call CheckPoint, which was initiated by the Wisconsin Hospital Association and Wisconsin Collaborative for HealthCare Quality. In my November hfm column, I also referenced a consortium of Michigan hospitals trying to bring proton beam therapy to the state.

I am hopeful that some of the proposed IRS Form 990 Community Benefit standards will help facilitate these types of partnerships. Under consideration is whether not-for-profit hospitals will be required to conduct an assessment of their local needs, which presumably will facilitate collaboration-if not with other competing hospitals, at least with other social/health-related organizations. 

Act Now or Pay Later

Now is the time to act before the cost of health care begins to erode our standard of living. What is needed is a new spirit of cooperation, compromise, and shared sacrifice, as well as willingness to implement new systems and discard old paradigms and sacred cows. Americans cannot afford inefficiency on any level, whether clinical, administrative, legal, or regulatory.

Many of the healthcare reform ideas that I have presented over the past seven months have been presented in the literature and have been tried successfully or in various stages of implementation. It is time to implement these ideas on a larger scale-and for the greater good. If we are unable to advance meaningful change, we may be stuck with a government-designed and regulated health plan that may drive up costs and limit access.


Ray Lefton, DDS, FHFMA, CPA, is vice president, finance, Princeton HealthCare System, Princeton, N.J., and a member
of HFMA's Metropolitan Philadelphia Chapter (rlefton@princetonhcs.org).

Publication Date: Thursday, January 01, 2009

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