Healthcare Financial News

In a letter to state Medicaid directors, the Centers for Medicare and Medicaid Services explains recent amendments to the Social Security Act, which exempt two additional groups of individuals from having to prove their citizenship before receiving Medicaid benefits. Now exempt are individuals who are receiving disability insurance benefits, and children who are receiving child welfare services because they are in foster care and children who are receiving adoption or foster care assistance. Read the letter.

The Congressional Budget Office has released a document detailing numerous “budget options”--scenarios and cost reductions for cutting various federal programs over the next five years--that lawmakers will be considering. CQ Healthbeat News examines several of the proposed options for cutting Medicare. One option sure to get attention by Democrats is that by making payments to Medicare Advantage plans equal to reimbursements received by fee-for-service providers, Medicare can realize a savings of $64.8 billion from 2008 to 2012. The drawback is that equalizing reimbursement might lead some Medicare Advantage plans to offer fewer benefits, raise premiums, or drop out of the program, according to the CBO. Another option is to reduce by 1 percentage point the increases hospitals will receive in FY08 for inpatient care, thereby saving $17.8 billion over five years. Freezing reimbursement to home health agencies at 2007 levels would lower Medicare spending by $8.5 billion, while charging copays for home health visits--a strategy that has been proposed several times before--would save $12.9 billion over five years.

The CBO also outlines the savings potential of using a block grant to pay disproportionate share hospitals (savings of $11.2 billion), and reducing the adjustment for indirect medical education costs to teaching hospitals from 5.35% to 2.2% (savings of $21.6 billion). And if Medicare beneficiaries rather than providers are the target of Medicare cuts, increasing seniors’ share of Medicare Part B from 25% to 30% would save $42.2 billion over five years; creating a combined deductible for Medicare Part A and Part B would save $11.6 billion over the same period. Download the document.

Microsoft Corp. announced that it has agreed to acquire Medstory Inc., a privately held company based in Foster City, Calif., that develops intelligent web search technology specifically for health information. Microsoft said the acquisition represents a strategic move for the company in the consumer health search arena and signals a long-term commitment toward the development of a broader consumer health strategy. Financial terms were not disclosed. Microsoft said that Medstory’s search technology is different from most search engines because it provides “prequalified” information to people conducting searches. Eventually, Microsoft hopes the search engine will be able to pinpoint specific treatments and drug interactions for individuals, reports The New York Times.

Microsoft’s acquisition of Medstory comes as consumers’ searches on health web sites have intensified and as companies are attempting to generate profits by tapping into the consumer-driven healthcare movement. Recently, for example, America Online founder Stephen Case announced his new health web site, RevolutionHealth.com.

Sixty-eight percent of hospitals implemented electronic health records, either partially or fully, in 2006, according to the American Hospital Association survey of hospital IT use. Only 11% of hospitals have fully implemented EHRs, and they are typically large, urban, and/or teaching hospitals. Last year, 46% of community hospitals reported a “moderate or high use” of health IT, compared with 37% in 2005. Computerized physician order entry was being used at least half the time by physicians to order medications at 10% of hospitals, while physicians used CPOE to place orders for lab and other tests at least half the time at 16% of hospitals. Computerized drug interaction alerts made significant inroads at hospitals, with 51% of hospitals using the technology in 2006 compared with 23% in 2005. “Accelerating adoption among all kinds of hospitals will require a shared investment between providers, payers, and purchasers,” says the report.

The National Governors Association has sent a letter to the Democratic and Republican leaders of Congress opposing a proposed Medicaid policy change that the NGA says will result in a $5 billion cut in federal Medicaid spending over five years. In a separate letter, the NGA asked Congress “to immediately pass legislation” to prevent states from experiencing shortfalls in their State Children’s Health Insurance Program this year, some as soon as March. The proposed Medicaid policy, with which the Bush Administration is proceeding “without any input from Congress or governors,” would cut reimbursement to public providers and shift the cost to the states in a reversal of long-standing policy, according to the NGA. “These proposals would further impede our progress in implementing reform options and expanding affordable health insurance coverage,” said the letter.

The governors in the 13 states that will run out of SCHIP funds said they need immediate assistance and cannot wait until Congress reauthorizes the program, reports The New York Times. President Bush, however, has stated that he wants to continue SCHIP’s current level of funding of $5 billion with an “additional allotment” of $4.8 billion over five years. But many states have stated that they intend to expand eligibility for SCHIP as part of their initiatives to increase healthcare coverage. A Congressional Budget Office report finds that states require $14.1 billion in SCHIP funds to prevent shortfalls. The NGA’s letter states that, “Congress must also provide sufficient funding to fully meet each state’s healthcare coverage objectives for SCHIP.”

Attempts to control the rate of increase in Medicaid spending in recent years have been misguided, argue researchers in an article published in Health Affairs. What is required instead is fundamental Medicaid reform to address state variations in benefits and help states cope with rising health costs. The authors lay out four options for restructuring Medicaid that would shift more of the cost and risk for cost growth onto the federal government with a net increase of $24 billion to $30 billion a year. Their proposals would offer greater uniformity of coverage for low-income populations and provide a foundation for building on many of the expansion and tax credit proposals already put forward by states and others to reduce the number of uninsured Americans.

The Centers for Medicare and Medicaid Services has approved a three-year extension of its pay-for-performance demonstration project involving more than 250 hospitals. The recently released second-year results of the Premier Hospital Quality Incentive Demonstration showed substantial improvement in quality of care across five clinical focus areas, with total gains over the first two years of 11.8 percentage points, according to CMS.

During the extension of the program, CMS will test new incentive models and develop new ways to measure quality. Until now, only top-performing hospitals have been eligible for incentive payments. The extension will test the effectiveness of offering incentive payments to hospitals achieving a defined level of quality, or quality threshold, and to hospitals achieving the greatest improvement in quality that also achieve the quality threshold. The extension will continue to track hospital performance in the five identified clinical focus areas, although additional quality measures and clinical conditions, such as mortality and patient safety measures, may be included in the fifth and sixth years.

The University of Pittsburgh Medical Center is one of the first U.S. health systems to receive provider status by the Irish government, a designation that will allow half of Ireland’s 4 million citizens covered by public health insurance to receive cancer treatment at UPMC’s two radiation therapy centers in Ireland. The Irish government is assisting in the development of private healthcare facilities located near public hospitals to reduce delays in treatment and provide better access to medical care at overcrowded facilities, reports the Pittsburgh Business Times. UPMC has a facility in Waterford and will soon open one near Dublin. The British government is also working with private companies to build new healthcare facilities, and the provider status granted by the Irish government is a big advantage to UPMC, which wants to build radiation therapy centers in the United Kingdom as well. “The government monopoly is being challenged at the moment to save money and improve efficiency,” Joe Farrington-Douglas, research fellow at the London-based Institute for Public Policy Research, told the Times. “It’s almost a new market--opportunities will be there.”

The National Committee on Vital and Health Statistics recently warned the Department of Health and Human Services that many in the healthcare industry will not be able to comply with implementing the National Provider Identifier by the target date of May 23, 2007. In a letter to the secretary of HHS, the committee states that providers, payers, health plans, and the Centers for Medicare and Medicaid Services all testified in January that implementation by May is unrealistic. Many providers have not yet applied for an NPI number because they don’t know they need one, or they believe they are exempt if they don’t do electronic billing or participate in Medicare. The other problem is a lack of access to data from the National Plan/Provider Enumeration System, which is preventing plans from building “crosswalks” between legacy provider identifiers and NPIs to verify providers’ NPIs on claims. Also, very little testing has occurred, which is crucial for a smooth exchange of data. Providers expressed concern that payment for claims will be “substantially delayed” without this testing.

The committee urged HHS to publish a data dissemination notice in the Federal Register as soon as possible so that NPPES data can be released, and recommended that education efforts to inform providers of the need to acquire NPIs be intensified. It also recommends that providers be required to get their NPIs and that plans make system changes to accept NPIs by May 23. Testing, however, cannot be accomplished by the deadline, so the committee recommends a six-month grace period from the time HHS issues the data dissemination notice. Read the letter.

A new study of future funding requirements for Medicaid projects a less dire situation than suggested by conventional wisdom. The study by the Kaiser Family Foundation’s Commission on Medicaid and the Uninsured and published in Health Affairs finds that expected growth in government revenues is likely to be large enough to sustain Medicaid spending increases over the next 40 years, while also allowing substantial real growth in spending for other public services. The study projects that over the next 40 years, as overall health spending grows, Medicaid will also grow but stay at roughly the same share of national health spending in the coming decades.

After accounting for demographic and health coverage trends such as an aging population and declines in employer-sponsored insurance, the study finds that Medicaid’s share (16.5% in 2005) of national health expenditures is expected to remain at an average of 16.6% from 2005 to 2025 and slowly rise to 19% by 2045. But as overall health spending increases as a share of gross domestic product from 2005 to 2045, there will be a commensurate increase in the share of GDP that Medicaid spending represents, according to the study. The results lead the authors to conclude that “there is little that is special about Medicaid spending: It is likely to increase with health spending more generally, neither much more quickly nor much more slowly.”

Health Level Seven has announced that it has passed the first ANSI-approved standard specifying the functional requirements for an electronic health record system. The standard contains approximately 1,000 conformance criteria across 130 functions, including medication history, problem lists, orders, clinical decision support, and those supporting privacy and security. The function list is described from a user perspective and enables consistent expression of EHR system functions, while the conformance criteria serves as a reference for purchasers of EHR systems and vendors developing EHR software.

Additional EHR standards development efforts are also under way, said HL7. The EHR functional model will serve as a framework for the legal EHR and for specific profiles for long-term care, emergency department information systems, and behavioral health, for example. And an international team is working toward producing a set of functions and criteria in order for EHR systems to be used as a source of data for clinical research.

A North Carolina Court of Appeals has ruled that Health Insurance Portability and Accountability Act regulations can be used to demonstrate the standard of care in common law claims involving the privacy of medical information. According to an article published by the law firm Stinson Morrison Hecker LLP, the case alleged that the manager of a psychiatric practice used a patient’s medical records to reveal confidential information to third parties. The patient claimed that the physician owner was required to keep her medical records private under HIPAA. The trial court dismissed that claim, but an appellate court agreed with the patient that HIPAA could be used as evidence of the standard of care. Although not binding outside North Carolina, the article states that similar decisions “may become more common.”

The Federation of American Hospitals has released a healthcare reform proposal that will provide coverage to 98% of Americans “by building on what works in our system”--namely, employer-sponsored insurance and Medicaid and the State Children’s Health Insurance Program.

The plan, entitled “Health Coverage Passport,” would subsidize all or some of the cost of health insurance premiums, depending on income, for individuals living below 400% of the federal poverty level if they are not eligible for Medicaid or SCHIP. Health coverage passports would be issued directly to individuals, who would use them to pay the premiums for employer-sponsored insurance if it was available. Under the plan, employer coverage would insure 55% of Americans. People who purchase insurance in the individual market would use the passports to pay premiums if they were eligible, and all premiums would be tax-deductible. Individual insurance plans would also be held to the same quality as major employers’ health plans. In addition, Medicaid and SCHIP would be expanded to cover more low-income Americans. To ensure coverage, individuals who are uninsured when they file tax returns or see a healthcare provider wwould be enrolled in the program and be expected to pay the premiums less any subsidies. The cost to the federal government: an additional $115.2 billion.

FAH also released a survey of voters that identifies health care as the most important domestic issue for the president and Congress to address, and 79% said a presidential candidate’s position on health coverage for the uninsured would affect their vote. Download the proposal.

Employers expect health benefit cost increases to stay at 8% in 2007 and continue at that rate through 2008, according to an annual survey of 573 large employers conducted by Watson Wyatt Worldwide and the National Business Group on Health. While costs remain high, they have also become more predictable with 82% of employers saying their healthcare costs came in at or below budget in 2006. Meanwhile, employers continue to invest in on-site medical clinics (23%), on-site pharmacies (14%), call-in medical help lines (78%), and employee health appraisals (72%) in efforts to control those costs. In addition, 42% are implementing programs that focus on reducing obesity among employees.

In related news, The New York Times reports on a growing trend of employers providing free prescription drugs to their employees to help them manage chronic illnesses such as diabetes, asthma, and depression before they escalate into costly complications and hospitalizations. The idea of increasing costs through free drugs is in stark contrast to the healthcare cost-cutting measures employers have been using in the past. Employers are realizing that cost-shifting to employees goes only so far, according to the article, and they may be hoping they can avoid government interference in their health benefits by focusing on prevention measures. Among the companies offering free drug programs are Marriott International, Pitney Bowes, Mohawk Industries, Eastman Chemical, and the state of Maine.

Over the next decade, U.S. healthcare spending is expected to double from today’s level, reaching $4.1 trillion and consuming almost 20 cents of every dollar spent--or nearly 20% of the nation’s gross domestic product. That is the report of federal forecasters in an article published Feb. 21 as a Health Affairs web exclusive. Health spending in 2006 is projected at $2.1 trillion, which accounts for 16% of the GDP.

The average annual growth in healthcare spending is projected to remain relatively steady at 6.9% from 2006 through 2016, predict economists and actuaries from the Office of the Actuary at the Centers for Medicare and Medicaid Services in their annual forecasting report. The growth in health spending is expected to drop slightly from 6.9% in 2005 to 6.8% in 2006, marking the fourth consecutive year of a slowdown in spending, preliminary data show. The CMS authors say that the addition of the Medicare drug benefit, slower projected growth in Medicaid, and slower growth in private healthcare spending are among the factors contributing to these trends. However, despite the mild expected slowdown, consumers’ out-of-pocket spending on health care--expected to reach $250.6 billion in 2006--is projected to climb to more than $440.8 billion by 2016, they report, “caused by gradually accelerating medical price inflation and increases in use.” Read the report.

Current health insurance benefit designs that simply rely on higher, one-size-fits-all patient cost sharing have limited potential to curb rising costs, but innovations in benefit design can potentially make cost sharing a more effective tool, according to a study released by the Center for Studying Health System Change. Large employers and health plans have begun experimenting with such new benefit designs as providing incentives to encourage healthy behaviors and self-management; incentives that vary by service type, patient condition, or enrollee income; and incentives to use efficient providers.

“Most employers have not incorporated innovative designs into their health benefit offerings--and are not even in the planning stages, suggesting that the ability to use substantial cost sharing more effectively is many years off,” said Paul B. Ginsburg, PhD, co-author of the study and president of HSC. “This will limit the extent to which cost sharing can be used as a cost-control tool.”

Under California Gov. Arnold Schwarzenegger’s proposal to provide universal healthcare coverage to all Californians, providers are expected to fund a large portion of the program with a “coverage dividend”--4% of gross revenues from hospitals and 2% of gross revenues from physicians. But it’s an open question whether hospitals and physicians will financially benefit once the nearly 19% of residents in the state who are currently uninsured have healthcare coverage. Schwarzenegger’s proposal also calls for an additional $10 billion to $15 billion in reimbursements for providers through increased Medi-Cal rates and coverage for the uninsured.

“We believe the financial and credit impact to the 27 hospitals and health systems rated by Moody’s in the state could vary widely, both positively and negatively, depending on whether and to what degree the benefits of additional reimbursement offset the cost of the coverage dividend,” writes Moody’s. On average, the 4% coverage dividend would “be equal to a significant 34% of total cash flow available to pay debt service, fund capital expenditures, and contribute to pension plans,” estimates the service. Only seven out of 27 Moody’s-rated hospitals have amounts of charity care that would exceed the dividend, so most hospitals would experience a net financial loss. That universal coverage would erase all bad debt from patients, however, is unrealistic, says Moody’s. For more information on this special comment, contact Moody’s at 212-553-1653.

The Consumer Price Index increased 0.3% in January, before seasonal adjustment, and was 2.1% higher than it was a year ago, according to the Bureau of Labor Statistics. Seasonally adjusted, the index for all items with the exception of food and energy advanced 0.3% in January, following a 0.1% rise in December. An increase in the index for medical care accounted for about 60% of the acceleration.

Medical care costs rose 0.8% in January and are 4.3% higher than a year ago. The index for medical care commodities--prescription and nonprescription drugs and medical supplies--increased 0.6%. The index for medical care services advanced 0.9%. And the indexes for professional services and for hospital and related services increased 0.8% and 0.6%, respectively. Read the news release.

Under proposed requirements issued last week, all health plans seeking accreditation from the National Committee for Quality Assurance will be required to report on the quality of care delivered to patients. NCQA said it will now evaluate preferred provider organizations on the same set of standards, clinical measures, and patient experience ratings (Health Plan Employer Data and Information Set and Consumer Assessment of Healthcare Providers and Systems) that it uses to evaluate health maintenance organizations and point-of-service plans so that consumers and purchasers can make objective comparisons among different types of health plans. NCQA also proposes to increase the weight of HEDIS and CAHPS scores from the current one-third of the score a health plan needs to become accredited to 50% beginning in 2008. NCQA’s public comment period will last through March 30. Final standards will be released in July of this year and take effect on July 1, 2008. Read the news release.

In a study of more than 60 of the nation’s most influential healthcare leaders, PricewaterhouseCoopers has found that the quality of the U.S. healthcare system is not what it should be and is not likely to change within the next three to five years. After two decades of efforts to improve the quality of health care, momentum has stalled at a critical juncture. The analysis finds healthcare organizations are confused by multiple quality mandates and frustrated by mounting requirements for quality performance reporting in the absence of government standards or industry consensus.

PricewaterhouseCoopers called on the healthcare industry to come together to develop common standards and procedures around quality. It warned that failure to act puts the sustainability of the nation’s healthcare system and the nation’s economic competitiveness at risk. “Real improvements in the quality of health care will occur only after incentives are properly aligned around creating value, and performance can be rewarded appropriately,” said David Chin, partner of PricewaterhouseCoopers’ Health Research Institute. “But quality is a conundrum because you cannot improve what you cannot measure, and you cannot measure what you cannot define. What’s clear is that organizations can no longer stick their heads in the sand. Hospitals and physicians without a quality strategy will find their revenue and reputations at risk.”

In a report issued this month, the Government Accountability Office says that the Department of Health and Human Services is in the “early stages of its efforts” to protect personal health information in electronic health records. The report says HHS has “not yet defined an overall approach for integrating its various privacy-related initiatives and addressing key privacy principles” despite the work of several IT contracts and advisory committees that were mandated to develop strategies for ensuring privacy. HHS did not concur with the GAO’s findings, saying it was “very committed to privacy and security,” reports The New York Times. But Jim Nicholson, the secretary of Veterans Affairs, and Mark A. Rothstein, the chairman of a panel that advises the government on health information policy, both supported the GAO’s recommendations that HHS needs to develop a comprehensive approach to guarantee patient privacy during the exchange of electronic data. “Health privacy has not received adequate attention at the Department of Health and Human Services,” Rothstein told the Times. “A sense of urgency is lacking,” which could stall further progress on electronic health records, he said.

Americans’ satisfaction with the goods and services they buy reached an all-time high in the fourth quarter of 2006, according to a report released by the University of Michigan’s American Customer Satisfaction Index. The index climbed to 74.9 on the ACSI’s 100-point scale, up 0.7% from the previous quarter, and up almost 2% from the previous year. This is the highest score the index has had since its first measure in 1994, suggesting that consumers will continue to prop up the economy, driving consumer spending growth of between 3.5% and 4.1% for the first quarter of 2007.

“The economy may not be coming in for a soft landing,” said Claes Fornell, director of the University of Michigan’s National Quality Research Center, which compiles and analyzes the ACSI data. “With the confluence of a number of favorable economic factors, there may be no landing at all. Rising wages, little inflation, and falling unemployment combined with higher customer satisfaction and strong consumer confidence suggest the trend in spending growth will continue to drive economic growth.” Among the industries the ACSI measured was health insurance, which showed a 6% improvement in customer satisfaction--to reach its highest ever score of 72.

In a convergence of healthcare and financial services, the Blue Cross and Blue Shield Association announced that it has received approval to provide healthcare-related banking services in all 50 states. Its bank will allow consumers to manage and direct their healthcare spending by paying for qualified medical expenses via a debit card linked to multiple personal accounts such as health savings accounts, flexible spending accounts, and health reimbursement arrangements. The revenue generated from this enterprise is not expected to affect insurance rates, but rather is intended to be competitive positioning for the Blues and to provide a service for members and support to providers facing a higher collection burden than in the past. Having members present a debit card in the provider’s office that will adjudicate the claim assures the provider that he or she will receive appropriate payment. Read the news release.

Basing subsidies for health coverage on the federal poverty level doesn’t protect low-income families from rising health insurance premiums, finds a new report by the Kaiser Family Foundation. As premiums for family health coverage more than doubled between 1996 and 2004 and premiums for individual coverage rose 86%, the federal poverty level increased only about 20%. “For a family whose income is just over the eligibility threshold, the share of family income required to purchase health insurance would rise over the period by about 55% for single coverage and by about 68% for family coverage,” said the report. Instead of tying subsidy eligibility requirements directly to FPL, policymakers should consider either increasing the FPL threshold at the same rate as the increase in health insurance premiums, or periodically adjust thresholds to take into consideration health insurance costs relative to income and other costs, recommends the report.

Several states have announced proposals to provide health insurance to more of their residents, but the federal government is likely to restrict initiatives that involve increased federal spending, reports The New York Times. Many of the states’ healthcare reform programs include expansion of the State Children’s Health Insurance Program by raising the income threshold so more children are eligible for coverage. New York, for example, wants children whose families earn incomes up to 400% of the federal poverty level to be eligible for SCHIP coverage, and California is advocating for an income ceiling of 300%. Yet President Bush has said that SCHIP should cover only children with family incomes less than 200% of FPL. Some states are also proposing mandates for employers to provide health insurance for workers, a move that may run afoul of the federal Employee Retirement Income Security Act of 1974.

Besides the laws passed by Massachusetts and Vermont to provide near universal health coverage, six states have initiated programs to reduce the cost of health insurance for small businesses, Colorado and Delaware are requiring insurers to cover young adults, and the governor of Pennsylvania has proposed a plan that will fund expanded coverage by raising taxes, such as those on tobacco, according to the Times.

Michigan hospitals and universities are using layoffs in the depressed auto industry to their advantage by enticing unemployed workers to consider accelerated nursing programs, reports The Detroit News. Oakland University, for example, has teamed with the Henry Ford Health System to create a fast-track nursing program specifically for unemployed Ford Motor Company workers. For those without a college degree, the program is three years, and those who already have a degree can earn a nursing degree in a year. The hospitals are hoping not only to help solve their nursing shortage but also to train new healthcare employees in the culture and practices of their institutions right from the start. “We are trying in every way that we can to create this pipeline for nurses at Henry Ford Health System,” Jeri Jackson, administrator for nursing development and research at Henry Ford, told the News. Since 2001, Michigan has lost 92,200 auto jobs, and it is expected to lose another 44,900 by 2008. A shortage of 7,000 nurses is expected in the state by 2010.

Despite continued negative pressures on the not-for-profit healthcare sector, Standard & Poor’s predicts a continuation of 2006’s solid performance for 2007 and into 2008 for the organizations that it rates. The report, U.S. Not-for-Profit Health Care Rating Trends Should Remain Stable Despite Growing Pressures, says that although President Bush is calling for deep cuts to in federal healthcare spending, Medicare and Medicaid reimbursement will likely remain stable until 2009, and healthcare reform initiated by various states is still in the planning stages and thus won’t significantly affect providers yet. Also expected for 2007 are strong “income and cash flow measures, growth in liquidity, and overall improvement in balance sheet measures across most rating categories.” Rapid capital spending will continue over the next two years, although Standard & Poor’s expresses worry that “increased debt levels, coupled with interest costs and depreciation expense that arise when projects are completed, could place further stress on organizations in the coming years when the revenue environment is expected to be less favorable.”

In a new report to Congress, the Government Accountability Office questions whether the flexibility states have in administering their State Children’s Health Insurance Programs undermines the primary goal of covering children not eligible for Medicaid. The GAO also raises the question whether the federal government, in bailing out states that exceed their SCHIP allotments, is turning SCHIP into an entitlement program like Medicaid. In testimony before the House Subcommittee on Health, Committee on Energy and Commerce, the GAO’s director of health care said that 14 states are expected to have shortfalls in SCHIP funding this year and that seven states exceed the eligibility requirement of 200% of the federal poverty level set by most states in offering coverage to individuals. Enrollment in the program, which covered 6 million individuals in 2005, has stabilized, yet 11.7% of children remain uninsured even though many are eligible for SCHIP or Medicaid. SCHIP is up for congressional reauthorization in June.

The GAO asked Congress to consider whether the design of SCHIP, which gives considerable flexibility to states, should allow states to exceed their allotment of funds by covering adults or those with higher household incomes. It posed the question, Because SCHIP is a capped program, does the federal government have a responsibility to allocate additional funds for states that have exceeded their share? And would SCHIP funds be better spent by targeting them to states that have not met minimum coverage levels for children?

One of the nation’s largest and most ambitious electronic health record projects, which will be rolled out to Kaiser Permanente’s more than three dozen hospitals over the next two years, continues to be plagued with technical problems, reports the Los Angeles Times. The $4 billion project that will computerize the medical records of 8.6 million members is being viewed as a possible national model, but according to an internal Kaiser document and interviews with staff, the glitches have led to “potentially dangerous incidents,” writes the Times, including delays in emergency department care, malfunctioning bedside scanners to confirm medications, and patients being listed in the wrong beds.

Kaiser admits to the technical difficulties but says they have been resolved and that patient safety has never been in jeopardy. And although the internal report says that the EHR system--now fully in place in two Kaiser hospitals--was operational 80% to 88% of the time, Kaiser’s interim chief information officer says the system is now available 99.2% of the time. Kaiser CEO George Halvorson told the Times that, given the scope of the EHR project, “it couldn’t be going better.” The Times also reports that the California Department of Managed Health Care has asked about the project, a “first step before a possible formal investigation.”

Circulatory diseases accounted for one out of every six hospital stays--the most prevalent reason for hospitalization in 2004 with the exception of pregnancy and childbirth, according to the Agency for Healthcare Research and Quality. The hospitalization costs for these diseases were $71.2 billion, or one-fourth of the total cost of hospital care in the United States. The mean length of stay was 4.5 days--the same length of stay for all conditions combined--and more patients died in the hospital with these diseases (3.3%) than all other patients, who had an average in-hospital death rate of 2.1%.

The average cost per hospitalization for circulatory diseases was 41% higher than for other conditions ($10,800 versus $7,700). Medicare was the payer for more than half of all hospitalizations for circulatory diseases. Coronary atherosclerosis was the most common circulatory disease requiring hospitalization in 2004 (3.1% of all admissions), followed by congestive heart failure (2.9% of admissions). Read the briefing.

The Centers for Medicare and Medicaid Services, through one of its quality improvement organizations, has subcontracted with four regional collaboratives in Indiana, Massachusetts, Minnesota, and Wisconsin to provide Medicare beneficiaries with physician performance data. The information is intended to be used as an aid to beneficiaries in choosing physicians and to help physicians improve their quality through performance data. The Better Quality Information to Improve Care for Medicare Beneficiaries Project is part of HHS Secretary Mike Leavitt’s Value-Driven Health Care Initiative, which is based on four cornerstones announced in President Bush’s Executive Order issued August 2006 and includes transparency of healthcare quality. The quality measures to be used in the BQI project have been adopted by the AQA, and Medicare claims data will be aggregated with claims data from other payers, including employers, health insurance plans, and in some cases Medicaid programs, to produce more accurate measures of the quality of services being provided by physicians. CMS plans to announce two additional BQI subcontractors in the near future.

Health IT will bring even more cost savings to the U.S. healthcare system than expected, but those benefits will take quite some time to mature, said David Brailer, the former national HIT coordinator, in an interview published in Health Affairs. Based on other industries that underwent substantial automation, “it takes about a decade after the substantial majority of the players are automated for full benefit to be gleaned,” said Brailer. “It’s not until the second decade that users say, ‘Now that we have the tools in place, let’s use them to redesign our fundamental processes.’”

Studies forecasting savings from IT tend to “overestimate near-term savings and underestimate long-term savings,” added Brailer. “This is because they didn’t take into account second-order effects, such as elimination of excess hospital capacity or the market forces that currently enable medical specialists to protect their guilds,” which can be substantial. So how big could long-term savings be? “About a third of our spending and probably a third of our healthcare capacity are likely unnecessary,” Brailer said, although he warns that “provider-induced demand has traditionally filled any extra provider capacity.”

Beyond this, Brailer noted that in a previous stint as a hospital consultant, he “found up to two-to-one variation in true production costs among hospitals where there were very good data. That supports a 50% estimated savings above and beyond the 33% savings from eliminating nonvaluable services and their associated unnecessary capacity.” In addition, “HIT could drive a radical disruption of what we consider to be hospitalizable diseases or what we consider to be necessary primary care interventions,” producing even more savings.

Sen. Max Baucus, D-Mont., chairman of the Senate Finance Committee, outlined the five principles he says will “truly change the climate of the healthcare dialogue” in his remarks before the National Health Policy Conference on Feb. 13: universal coverage, “sharing the burden” (including insurance pooling), controlling costs, disease prevention, and shared responsibility. Baucus said he would work to pass legislation to encourage healthcare IT; he also wants to give health researchers access to Medicare databases and identify accurate performance measures.

Baucus further stated that expanding the State Children’s Health Insurance Program “is the Finance Committee’s first healthcare priority this year.” He also said he planned to “ramp up oversight” of the Medicare drug benefit and of the Centers for Medicare and Medicaid Services in addition to exploring whether Medicare Advantage plans should be paid, “on average, 12% more than fee-for-service care.” Read the press release.

U.S. Sens. Jim Bunning, R-Ky., and Ben Nelson, D-Neb., introduced the Preserving Patient Access to Inpatient Rehabilitation Hospitals Act of 2007 on Feb. 12. The bill would alter a CMS regulation that requires that 75% of patients at an inpatient rehabilitation hospital have at least one specified condition (stroke, brain injury, etc.). The legislation would extend indefinitely the current 60% compliance threshold. The 75% rule unfairly forces hospitals to turn away patients based on arbitrary compliance levels rather than actual medical needs and physician determinations, said Bunning in a statement. The bill would also allow rehabilitation hospitals to continue counting patients with comorbidities in their compliance percentage.

To change the sustainable growth rate in the Medicare payment formula for physicians will cost between $4.2 billion and $252.2 billion, say House and Senate aides. In March, the Medicare Payment Advisory Committee will make its recommendations to Congress on changing the SGR to comply with the mandated cuts to Medicare physician payment rates, but one House Democratic aide said the proposed solutions aren’t “going to be all that magic” and will still require substantial expense, reports CQ Healthbeat News. One scenario that postpones the cuts for one year and freezes current payment rates would cost $28 billion over 10 years. And another option “to freeze updates for the next 10 years would cost $170.8 billion and even more if lawmakers inserted a clause to keep beneficiaries’ share of premiums stable,” according to the article.

More than 37% of U.S. households use some form of alternative medicine, according to Thomson Medstat’s 2006 consumer healthcare survey of 23,000 adults, and 42% said at least some of the costs were covered by insurance. The study also found that affluent, highly educated Americans are driving the growth of the alternative market. Nearly half of households earning more than $100,000 per year sought alternative treatments in the past 12 months. Likewise, 49.6% of those with postgraduate degrees used alternative medicine. At the lower end of the income/education scale, utilization dropped to 30% in households earning $15,000-$24,999 per year and to 18.1% among those without a high school diploma. Herbal supplements and massage/chiropractic care were the most commonly used alternative care, followed by mind/body practices, energy therapies, and naturopathy. Nearly two-thirds of respondents said their physicians were aware of their use of alternative medicine use.

Medical imaging promises to transform the practice of medicine, but the techniques, which are increasing dramatically in cost, must be used cost-effectively, according to an interview with Bill Clarke, a former executive with GE Healthcare, and E. James Potchen, the chairman of radiology at Michigan State University, published in Health Affairs. Although the United States has more imaging equipment per capita than in most western European countries, it is not necessarily overspending on imaging, says Clarke. Costs are increasing because innovation is allowing the technology to be pushed further, and it will be incumbent on the industry to demonstrate the value of molecular imaging to payers by doing high-quality clinical trials. He also endorses the “coverage with evidence development” approach taken by CMS for positron emission tomography scans, which covers certain oncological applications of PET scanning on an interim basis while data are being collected on their effectiveness.

Potchen recommends that CMS pay only for images read by those who have demonstrated a certain level of skill in doing so. “Whoever does the job well should be paid,” Potchen says, regardless of whether he or she is a radiologist, a cardiologist, or a member of some other specialty. “The trouble is, [imaging is] so profitable that many people with less-than-adequate knowledge enter the business because there are no restrictions on who does it.”

A novel “patient-centered” case management program designed to improve healthcare quality and reduce medical expenses for those with late-stage illnesses--mostly cancer--resulted in a 38% decrease in hospital admissions, reduced costs by more than $18,000 per patient, and garnered high satisfaction rates among patients, according to a study by Blue Shield of California published in The American Journal of Managed Care. More comprehensive than usual case management interventions, patient-centered management assigns nurses to provide extensive patient education and care coordination as well as pain and end-of-life management. The goal is to change patient behaviors and environments that impair care or yield unnecessary healthcare expense. PCM reduced overall costs by 26% by reducing hospital days by 36% and emergency department visits by 30%, while increasing home care by 22% and hospice use by 62%. Survival rates were the same as a control group that received usual case management. After accounting for the additional cost of the program, the return on investment was 2:1.

U.S. Senators Max Baucus, D-Mont.; Chuck Grassley, R-Iowa; and U. S. Representative Pete Stark, D-Calif., have sent a letter to the Centers for Medicare and Medicaid Services asking it to account for more than $4 million in Medicare reimbursements to physician-owned West Texas Hospital in Abilene during an 18-month moratorium on Medicare payments to new physician-owned specialty hospitals. The lawmakers have attempted to stem the growth of physician-owned specialty hospitals and are now spotlighting the death of a 44-year-old patient who underwent spinal disk-fusion surgery in January at West Texas Hospital. After the patient went into cardiac arrest, the hospital called 911 to have him transferred to Abilene Regional Medical Center, where he died. “It really seems to me that if you call a place a hospital, it should have the facilities to handle an emergency, but all this facility could do was call 911,” said Baucus, chairman of the Senate Finance Committee. Added Stark, chairman of the Ways and Means Health Subcommittee, “If specialty hospitals are unable to provide adequate care to Medicare beneficiaries, we should shut them down.”

Ron Rives, West Texas Hospital’s CEO, said the hospital is not a specialty hospital and that staff did everything they could to revive the patient, reports The Houston Chronicle. “It was only as a last resort and in the interest of saving a life that a call was placed to 911,” Rives said in a statement. Texas has 57 physician-owned hospitals and 20 more are being developed.

First-year enrollment in U.S. medical schools is projected to increase 17% by 2012 to nearly 19,300 students, according to an annual survey of medical school expansion plans released by the Association of American Medical Colleges. The estimated expansion would move U.S. medical schools closer to the 30% enrollment increase recommended by the AAMC last year. However, the report notes that many of these planned increases depend on state support or other outside funding sources. Existing U.S. medical schools that are expanding will do so through a variety of mechanisms, including new clinical affiliations, expansion of existing campuses, and new regional/branch campuses.

Hospitals and other providers would benefit from more transparent price and quality information as a feedback loop for improved performance and for identifying the most efficient and effective referrals, according to a new report from The Commonwealth Fund. The report examines some of the controversies surrounding transparency reporting, such as the accuracy of price information and outcomes, and how patients, employers, providers, and payers will use the data to make decisions. The report also summarizes some of the lessons already learned about public reporting of prices, which are that the manner in which data are presented is crucial in how they are used in decision making; collaboration between providers and payers and among private and public sectors has produced the most successful public reporting and transparency efforts; state and local reporting initiatives have proven to be successful because of their manageable scale; and using automated systems to collect data is essential to remove an onerous burden on providers. Momentum for transparency will undoubtedly increase, since advocates can point to improved quality performance as a direct result of public reporting. Download the report.

Some health insurers are paying for both aggressive medical care and hospice care for terminally ill patients and not forcing patients to choose between treatment and palliation, reports The New York Times. Aetna and UnitedHealth are letting enrollees participate in “open access” hospice, which allows them to continue receiving traditional medical care for as long as they wish. The hope is that the seriously ill will take advantage of hospice benefits sooner, avoid frequent hospitalizations because family members can’t provide necessary home care, and not have to spend their last days in a hospital. Aetna has an open-access hospice pilot program but will likely extend the benefit to more enrollees. Medicare, however, still requires patients to select either hospice care or traditional medical care, claiming that paying for both is too expensive. Sen. Ron Wyden, D-Ore., has introduced a bill that would give Medicare beneficiaries the option for open access hospice. “People don’t want government making their choices,” he told the Times.

Unlike the coordinated care that private health plans provide for adults with chronic illnesses, few offer the same benefits to children with special healthcare needs, according to a study by Mathematica Policy Research, Inc. The study finds that almost three-quarters of parents with children who need coordinated care get little or no help from their health plans, and one-third are not happy with the services they do receive. As a result, parents often have to limit their employment in order to coordinate extensive care for their children at the same time they are paying more out of pocket for health care. The study recommends that health plans carve out expensive pediatric health conditions and provide coordinated care for those illnesses.

The rapidly expanding retail medical clinics are a boon to those without insurance or those who have high deductible plans, reports The Wall Street Journal. Treatment for minor medical problems costs much less at store clinics--averaging $49 to $59--than at physicians’ offices. And while most people with employer-sponsored insurance pay the same copay whether they see a physician or go to a nurse practitioner at a retail clinic, some employers are encouraging workers to use the store clinics by reducing the copay. People who use the store clinics like both the convenience and the fact that prices for procedures and treatment are posted. Some physician groups have argued that the store-based clinics prevent patients from establishing a “medical home” for consistent medical care, but the clinics say they won’t treat problems best handled at a physician’s office and they do refer patients to their physicians for recurring illnesses. And with a nurse practitioner available at nights and on weekends, the clinics offer patients an alternative to the hospital emergency department for routine medical care.

Generic medications account for nearly 60% of drugs dispensed to people in Medicare prescription drug plans and Medicare Advantage plans, announced the Centers for Medicare and Medicaid Services. Among private third-party payers, generics made up 52.6% of medications dispensed in 2006--up 9% over the previous year, according to the National Association of Chain Drug Stores. That Medicare beneficiaries are using generic drugs at a higher rate than those who are privately insured demonstrates that “the Part D program is delivering savings well above the national average to beneficiaries and the government alike,” said CMS. The new data mark the third consecutive quarter of growth in generic medication use among those in the Medicare prescription drug benefit. Read the news release.

The State Children’s Health Insurance Program has signed up close to 70% of its target population, but 1.8 million eligible children nationwide are yet to be enrolled, according to a new Urban Institute report. But federal funding, about $5 billion this year, will have to increase substantially if these children are to join the approximately 3.9 million children now with SCHIP coverage, said Urban Institute researchers. SCHIP is awaiting congressional reauthorization this year.

The study also found that only 25% of SCHIP enrollees live in families with access to employer-sponsored insurance, far below the 40% figure assumed by the Congressional Budget Office in 1997. Two-thirds of SCHIP enrollees live in families where neither parent has employer-sponsored coverage, and three-quarters are in families in which at least one parent is not covered by employer insurance. When parents lack coverage, the researchers noted, they are more likely to experience unmet health needs, which can adversely affect their children. For example, children whose parents have mental health problems are more likely to have difficulties getting access to necessary medical care.

With chronic disease responsible for 60% of deaths worldwide--and up to 77% over the next 10 years as a result of an aging population--the World Economic Forum’s Working Towards Wellness initiative is calling on leaders of multinational companies to take action to prevent chronic disease among their employees. A report prepared by PricewaterhouseCoopers found that 33% of companies surveyed are launching comprehensive wellness programs in several countries, while another 17% are focusing on a single wellness program. The report, which discusses various models of wellness programs adopted by the world’s corporations, recommends that companies “embrace a culture of health” by making wellness part of overall mission and corporate responsibility. Because employers can have significant influence over their workers’ lifestyle choices, businesses need to also commit resources to develop wellness programs at work and support similar programs in the community, and company CEOs and leaders should inspire employees by practicing a healthy lifestyle themselves.

Providers say they are frustrated and angry enough to file lawsuits against insurers that have initiated programs to measure the quality of physicians in order that employers can curb healthcare costs, reports the Associated Press. The article quotes physicians who are suing Regence BlueShield over a program, now defunct, that barred them from a network of high-quality physicians. The physicians say insurers are choosing low-cost physicians to be in high-quality networks and are basing their measures of quality on claims data instead rather than on medical records, which provide a truer picture of quality. Insurers such as Cigna Corp., UnitedHealth Group Inc., Aetna Inc., and WellPoint Inc. argue that ratings are based on “very good” measures and that having patients seek care from high-quality providers can lower healthcare costs by 3% to 5%. But only about 9% of large employers are adjusting benefit levels to provider quality ratings, according to Mercer Health & Benefits LLC, due to concerns that there are no universally accepted quality measures. And physicians often have no idea how much procedures cost, said one Aetna medical director, even if they do understand that employers want assurances that they’re receiving high quality for their healthcare dollars.

The Leapfrog Group and health informatics company Med-Vantage are calling on payers and purchasers to participate in an annual pay-for-performance survey. Responses are due by April 1. This year’s survey also includes pay-for-performance programs targeting health plans and incentives aimed at consumers. Access the survey at http://survey.medvantageinc.com/2006Survey.

Washington has become the most recent state to announce that all its residents will be covered by health insurance. Gov. Chris Gregoire and the state’s Democratic lawmakers said they are committed to providing universal coverage to all Washingtonians within five years--all children will be covered by 2010--and to curbing medical spending so it doesn’t rise above personal income growth, according to the Associated Press. The plan focuses more on finding ways for individuals to acquire affordable insurance than the use of employer mandates to provide healthcare coverage. Gregoire’s proposal, which would cost $142 million over the next two years, would decrease emergency department use, provide insurance purchasing pools, make insurance plans portable when people switch jobs, allow young adults to remain on their parents’ policies until age 25, and manage chronically ill individuals.

Some hospitals are taking an aggressive stance against methicillin-resistant Staphylococcus aureus infections by universally screening all patients admitted to the hospital--and it is paying off, reports the Associated Press. Evanston Northwestern Healthcare in Illinois, for example, uses a $27 gene-based test to screen all patients for MRSA instead of the typical $9 test in order to get results in a matter of hours. For every MRSA infection prevented, the hospital saves about $25,000 in medical costs. Universal screening, rigorous hand-washing rules, and the sterilization of all equipment used on patients with MRSA has lowered the infection rate by more than 70% in the surgical unit at the Pittsburgh Veteran Affairs Healthcare System. The results have been so spectacular that all 150 VA hospitals will adopt the MRSA-prevention strategy. Although the Centers for Disease Control and Prevention recommends screening only patients at risk for staph infections, the practice of universal testing for MRSA has proven to be very effective, having essentially eradicated the staph infection from hospitals in Denmark, Finland, and the Netherlands.

The Internal Revenue Service has issued nine voluntary “good governance practices” for tax-exempt organizations. The guidelines are directed at governing boards to help them understand their roles and responsibilities. The IRS advises boards to have expertise in “accounting, finance, compensation, and ethics,” and for large governing boards to establish advisory committees so that no duties get overlooked. Some of the specific practices outlined by the IRS include establishing a clear mission statement that the board of directors adopts; developing a code of ethics and a whistleblower policy to communicate to employees that the institution has ethical integrity and will not tolerate financial impropriety; determining what constitutes a conflict of interest among directors and staff and developing a policy that such conflicts must be disclosed; ensuring that fundraising materials are accurate and truthful; and evaluating director compensation to ensure it is reasonable. Read the document.

In an unlikely alliance, the CEO of Wal-Mart Stores, Inc., and the president of the Service Employees International Union announced a campaign to overhaul the nation’s healthcare system by 2012. Other partners include AT&T; Intel; Kelly Services, Inc.; Communications Workers of America; the Center for American Progress; the Howard H. Baker, Jr. Center for Public Policy; and the Committee for Economic Development.

The campaign founders pledged to convene a national summit by the end of May and recruit additional business, labor, government, and not-for-profit leaders to form a wide-ranging coalition that will push for “quality, affordable health insurance coverage” for all Americans. Besides universal coverage, the “Better Health Care Together” campaign maintains that the country’s healthcare system must be based on the following principles: individuals have a responsibility to maintain and protect their health; America must dramatically improve the value it receives for every healthcare dollar; and businesses, governments, and individuals all should contribute to managing and financing a new American healthcare system.

Wal-Mart currently provides health insurance for about 47% of its U.S. workers, and CEO Lee Scott was “ambivalent” at the press conference announcing the campaign about whether Wal-Mart planned to expand health coverage to its own workers, reports CNNMoney.com.

States will play a larger role in not-for-profit hospitals’ financial performance in 2007, according to a Moody’s Investors Service special comment. State initiatives affecting hospital finances include revamping Medicaid programs, proposing universal coverage laws, evaluating the need for certain hospitals, and scrutinizing the amount of charity care hospitals provide. The special comment covers credit issues facing not-for-profit hospitals in California (“significant capital needs in the state are exacerbated by excessive construction cost inflation”); Florida (“steady population growth and financial stability are expected”)’ Illinois (“financial stability is expected”); Michigan (“relative stability...although negative outlooks exceed positive outlooks reflecting economic challenges in many local markets”); New Jersey (“financial challenges expected” from lack of charity care subsidies); New York (“one of the most challenging healthcare environments in the nation”); Ohio (“negative outlooks exceed positive outlooks” due to “relatively flat patient volumes, modest economic conditions, and increased competition”); Pennsylvania (“future performance is expected to come under pressure”); and Texas (“favorable operating performance in 2006...although physician and for-profit competition is fierce”). For more information about this special comment, contact Moody’s at 212-553-4431.

The Centers for Medicare and Medicaid Services announced that it is proposing to expand its coverage policy for carotid artery stenting. Under Medicare’s current policy, patients with no symptoms of carotid artery stenosis and who are at high risk for carotid endarterectomy are covered only when stenting procedures are performed in Food and Drug Administration Category B investigational device exemption trials, FDA-approved post-approval studies, or in accordance with the Medicare clinical trial policy. Medicare is proposing to expand coverage for CAS to this group of patients who have greater than 80% carotid artery stenosis.

Medicare is also proposing to modify coverage for patients who are 80 years of age and older as a result of safety concerns. This proposed decision allows for coverage of patients age 80 and above only when CAS procedures are performed in Category B investigational device exemption trials, FDA-approved post- approval studies, or in accordance with the clinical trial policy. In addition, the proposal formalizes the certification and recertification process for hospitals that are inserting carotid stents.

Consumers do limited comparison shopping for the lowest-cost, highest-quality care, even when they are paying the full cost of medical care out of pocket, according to a study by researchers at the Center for Studying Health System Change published online in Health Affairs. The study looks at the self-pay markets for LASIK, in vitro fertilization, cosmetic rhinoplasty, and dental crowns. Even in the LASIK market, with the most favorable conditions for consumer shopping, patients still face significant hurdles from inconsistent bundling of what’s included in the procedure price to misleading advertising to quality concerns. And when the care is more complex and urgent, even less comparison shopping occurs, say the study’s authors.

An accompanying article by HSC president Paul Ginsburg points out that current efforts to increase price transparency often downplay “the complexity of decisions about medical care, patients’ dependence on physicians for guidance about appropriate services, and the need for information on quality.” Ginsburg cautions that simply giving consumers a price list of “a la carte” services does little to help them make informed choices about which providers will cost less for an episode of care, let alone which providers offer the best value or the optimal combination of the lowest cost and highest quality.

Describing President Bush’s 2008 budget as “devastating” and “the wrong way to go,” several healthcare leaders were blunt in their assessment of the president’s proposal, announced yesterday. Rich Umbdenstock, president of the American Hospital Association, is urging Congress to reject Bush’s Medicare and Medicaid cuts, which, he says, “will inflict real damage on hospitals’ ability” to care for patients. Umbdenstock said the budget does nothing to address “the very serious challenges” facing the country’s healthcare system. “The real answer lies with comprehensive reforms that address coverage for all, coordination of care and wellness,” he said.

U.S. Rep. Pete Stark, D-Calif., chairman of the Ways and Means Health Subcommittee, also had strong words for Bush’s budget, which he said ends Medicare as an entitlement. “In explicitly capping Medicare spending at 45% of general revenues, the president would compel automatic and across-the-board cuts that will undermine the quality of health care delivered to America’s seniors and people with disabilities,” said Stark. “The budget preempts Congress’ annual review of Medicare payment policy, calling for permanent and long-term cuts that even Republican Congresses would be unlikely to enact.”

The American Medical Association said it was “deeply disappointed” that Bush did not call on Congress to “right the wrongs in the current Medicare physician payment system.” Instead, “over the next eight years, Medicare payments to physicians will be slashed nearly 40%, while practice costs increase about 20%,” said Cecil Wilson, MD, AMA Board Chair. Wilson also said that “cutting funding for SCHIP is the wrong way to go. This proposal ties states’ hands by narrowly focusing the program as they work on innovative ways to provide healthcare coverage for more of the uninsured.”

AARP’s CEO Bill Novelli took issue with the budget’s proposed cap on Medicare spending, which, if exceeded, would result in increased patient cost sharing and across-the-board cuts in provider reimbursement. “The cap would increase out-of-pocket costs and reduce quality of care for the millions of older Americans and those with disabilities who rely on Medicare, while doing nothing to rein in skyrocketing healthcare costs,” said Novelli.

Health and Human Services Secretary Mike Leavitt defended the president’s proposed cuts to Medicare, claiming that the program will continue to have “robust growth” at a rate of 5.6% rather than its current 6.5% rate, reports the Associated Press. “We are serving our citizens with compassion while maintaining sensible stewardship of their tax dollars,” he said.

John Edwards, Democratic presidential candidate, has released his version of healthcare reform, which would insure all Americans. Edwards’ plan would require employers to provide insurance for their employees or pay a portion of payroll into a fund that workers would use to acquire their own insurance. Employers would receive tax credits to help pay insurance premiums for workers, and the federal government would establish purchasing pools through the states to allow individuals to purchase insurance at more competitive prices. Edwards claims that a large portion of the cost of his universal health insurance plan could be paid for by eliminating the tax breaks for families earning more than $200,000. An article in The Washington Post puts the cost of the plan at $100 billion annually. “This is the shared-responsibility approach to reforming our healthcare system,” Edwards told the Post. “I think it’s a dramatic change in the healthcare system, the kind of transformation it needs. It’s a truly universal system."

In a survey of 557 pediatric attendings and residents in St. Louis and Seattle, 60% said their hospitals’ procedures for reporting errors are inadequate, reports MedPage Today. The survey, published in the February issue of The Archives of Pediatrics and Adolescent Medicine, found that most respondents wanted to report medical errors to their hospitals--and nearly all of them admitted to making errors--but they were afraid of the institutions’ reprisals. Nearly 90% said they would like to see a reporting system that would be confidential and not punitive and one in which lessons learned from mistakes would be applied to hospitals’ overall improvement efforts. Nearly three-quarters of respondents said that it should take less than two minutes to report an error.

“The hospital must facilitate the reporting of errors and near misses by pediatricians so that effective, safer systems of care can be developed and implemented,” wrote the researchers. “In addition, open and honest discussions following pediatric errors must occur to maintain and improve patient trust.”

In his FY08 budget proposal released Feb. 5, President Bush took aim at Medicare and Medicaid--and the news is not good for providers. If adopted, the proposed budget would save $65.6 billion over the next five years in Medicare spending; another $10.2 billion would come from administrative or regulatory changes. The plan for Medicaid includes five-year savings of $13 billion from new legislation and $12.7 billion through administrative action.

According to the budget document, providers would take the following five-year payment hits:
• Hospitals, hospices, and ambulance services would see their update factor reduced by 0.65% annually ($18.7 billion), starting in FY08.
• Skilled nursing facilities and inpatient rehabilitation facilities would get no payment increase in FY08 and would have future updates reduced by 0.65% ($11.1 billion).
• Home health would receive no payment update during 2008 through 2012, and would get a 0.65% reduction ($9.7 billion) to updates thereafter.
• Ambulatory surgical centers would have the payment update reduced by 0.65% ($90 million through 2012) starting in 2010.

Other notable cuts include the elimination of indirect medical education payments to hospitals from Medicare Advantage plans ($4.37 billion), a leveling of post-hospital payments to SNFs and inpatient rehab facilities ($2.93 billion), and a phase-out of Medicare coverage of bad debts for unpaid beneficiary cost sharing ($7.15 billion).
These changes and others are proposed to encourage efficient payment for services, foster competition, improve program integrity, and promote beneficiary involvement in healthcare decisions.

“Solving the federal budget shortfall and strengthening Medicare’s financial status will take a collaborative approach with all options on the table,” said HFMA’s president and CEO, Richard L. Clarke, DHA, FHFMA. “The president’s budget proposal, with providers the key source of cost savings, looks more like slash-and-burn budgeting than like a balanced approach that will benefit our communities.” Download the proposal.

The federal requirement that individuals must document their U.S. citizenship when they apply for or renew their Medicaid coverage is reducing Medicaid enrollment, particularly among low-income children, and raising state administrative costs, according to a report by the Center on Budget and Policy Priorities. The center obtained information from six states--Iowa, Kansas, Louisiana, New Hampshire, Virginia, and Wisconsin--that have collected data on changes in enrollment since July 2006, when the requirement went into effect. All six states show significant declines in Medicaid enrollment since implementation began. Wisconsin found that 14,000 Medicaid-eligible individuals were either denied Medicaid or lost coverage between August and December as a result of the new rule. Louisiana experienced a net loss of more than 7,500 children from Medicaid in September and October despite a vigorous back-to-school outreach effort.

And evidence from Virginia suggests that thousands of people who have lost or been denied Medicaid coverage as a result of the new rule are U.S. citizens. The number of children on Medicaid in Virginia declined by 12,000 from July through November but then increased slightly in December. State officials say the reason may be that children who were eligible for Medicaid at the time they applied but lacked the required documentation were ultimately approved for coverage after delays of many months. The new rule will also raise state administrative costs, according to six states for which the center collected administrative cost data. Illinois, for example, projects up to $19 million in increased staffing costs in the first year.

Businesses should pay at least 50% of employees’ health insurance premiums, stated Robert Baker, president of the Smaller Business Association of New England. Baker was offering his opinion that the minimum employer contributions to workers’ health insurance that the Massachusetts universal coverage law mandates is too low, reports The Boston Globe. To avoid having to pay a penalty of $295 per employee, employers with more than 11 workers must pay at least 33% of the insurance premium or have 25% of their employees enrolled in an employer-sponsored health plan. Baker said that among his association’s 700 members, most pay 50% to 80% of their employees’ premiums and that 50% should be considered “the standard.” His remarks were welcomed by state legislators, who have introduced a bill to raise employers’ minimum contributions to 50% of premiums if they don’t have at least 50% of their employees enrolled in a health plan at work.

Three of the nation’s largest retail health clinic chains--RediClinic, MinuteClinic, and Take Care Health--have agreed to provide medical care in accordance with the American Academy of Family Physicians’ guidelines for safe patient care. Based on the AAFP’s attributes for retail clinics, the three chains will offer a limited scope of clinical services; provide evidence-based medicine; be formally connected with physician practices in the local communities to provide continuity of care; have a licensed physician supervise nurse practitioners; urge all patients to have a “medical home” and have a referral system to physician practices; and have an electronic health record system to communicate patient information with a physician’s office. The retail health industry now has clinics in 40 states. Read the news release.

Medicare beneficiaries who earn more than $160,000 as a couple and $80,000 for individuals would, according to President Bush’s 2008 budget proposal, be required to pay higher premiums for Part D coverage, reports The New York Times. Bush’s budget, which will be released today, would also eliminate the “annual indexing of income threshold” to increase the number of beneficiaries who currently shoulder higher Medicare premiums--a measure expected to raise $10 billion over five years. While most Republicans favor tying Medicare premiums to income, Democrats are split, with some saying that there is a risk that wealthier beneficiaries will leave the program.

In addition, Bush’s budget will seek to cut a total of $101.5 billion from federal health programs over the same period: $65.6 billion from Medicare and $13 billion from Medicaid over five years, while changes to federal regulations will save an additional $22.9 billion from the two programs, according to the Times. From the Children’s Health Insurance Program, Bush is asking for a 4% cut in spending in 2008 and a $5 billion “additional allotment” over five years to bring the program back to its “original objective” of covering only children whose families earn less than twice the poverty level. Currently 16 states exceed that level in their coverage of uninsured children.

The Government Accountability Office has electronically issued the 2007 revision of the Government Auditing Standards, which supersedes the 2003 revisions and contains final revisions with the exception of the quality control and peer review sections in chapter 3. These sections are still open for comment and will be incorporated into the final revision expected to be issued in late spring 2007. The revised standards are effective for financial audits, performance audits, and attestation engagements as of Jan. 1, 2008.

The standards--also known as the “Yellow Book”--cover federal entities and organizations receiving federal funds. Some laws require that audits of federal entities and funds comply with the government auditing standards. And many states and local governments and entities have adopted them as well.

Corporations are increasingly exploring the use of trusts to pay retiree medical costs so the companies no longer have to negotiate with unions over health benefits, reports The Wall Street Journal. Goodyear Tire & Rubber Company and the United Steelworkers union, for example, now have a trust that is governed by a committee of company and union representatives to pay retirees’ health claims. Goodyear funded the trust with $1 billion and will add cost-of-living allowances and profit-sharing contributions, but the trust is still $200 million short of the amount required to cover retiree health costs. Detroit’s auto makers are also considering similar arrangements. The richness of the benefits paid from such a trust, however, will depend on the vagaries of the market. Stellar investment returns will result in better benefits, while years of underperformance could mean cuts in benefits. About a quarter of big companies have now formed these trusts, according to one principal with Mercer Health & Benefits.

Seven California hospitals are testing a program that pairs new nurses with veteran staff nurse mentors in an attempt to reduce nurse turnover. Sponsored by the California Nurses Foundation, the nurse mentor program provides an outlet for nurses in the first two years of their career--or those returning to nursing--to get advice and discuss job problems with someone other than management. Besides having a nonjudgmental person with whom a fledgling nurse can admit mistakes and uncertainties, a long-time staff nurse can help a new nurse understand the political terrain of the hospital and feel connected to the unit. Preliminary results indicate that mentors are having a positive effect on nurse retention. In a two-year pilot study involving three of the hospitals with nurse mentors, only 5% of 83 nurses quit versus 35% of 310 nurses in a control group, reports the East Bay Business Times. Kaiser Permanente, one of the hospitals testing the program, is now planning on assigning mentors to new nurses at two other sites besides its hospital in Hayward, Calif.

The Medicare savings that President Bush is expected to propose in his budget next week will come mostly from reduced payment to providers, according to a story in The New York Times that cites administration officials and lobbyists as its sources. The story says that the budget will propose reducing the rate of increase in Medicare payment to hospitals and long-term care organizations and freezing payments to home care organizations. Some Medicare beneficiaries would pay higher premiums, as well. Read the story. The budget proposal is expected to face strong opposition in the Democratic-controlled Congress.

Although the sickest patients are the ones most likely to receive recommended medical care, physicians may be giving too little preventive care to chronically ill but stable patients without acute needs, according to researchers from the RAND Corporation and the University of California at Los Angeles. The study is among the first to link better outpatient care to improved health outcomes among nonelderly patients. All patients in the study had serious illnesses--heart disease, asthma, emphysema, or diabetes--so their health declined during the two-and-a-half-year study. But those who received higher-quality medical care experienced the smallest decline in health, delaying some of the effects of aging. Even patients who received moderately better care were observed to have significantly improved quality of life and function.

In studying how care influences outcomes, researchers accounted for the unique ways in which physicians and other clinicians tailor individual patient care to patients’ dynamic medical needs to more accurately assess the effect of high-quality medical care on patient outcomes.

Starting this year, daylight savings time will extend from the second Sunday in March to the first Sunday in November, reports The Washington Post. A little-known bill passed by Congress in August 2005 established a longer daylight savings time as part of an energy-saving measure; as a result, clocks should be set ahead on March 11 this year--three weeks earlier than usual. This could spell trouble for automated systems that are programmed to change the hour in April. Many businesses, however, are unaware of the earlier time change and, consequently, haven’t yet adjusted their technical systems to reflect the new date. Microsoft, for example, is telling customers that some of its systems will require manual updates. And Cisco Systems is advising customers to contact vendors that use time-stamped communications to make sure they are aligned with the new daylight savings time date.

A new report from the Commonwealth Fund discusses factors driving up healthcare spending and examines strategies that may help achieve savings. A policy option that has the effect of achieving a one-time reduction of 5% in healthcare spending in 2007 would result in cumulative savings of $1.31 trillion over eight years, according to the report. By lowering the average rate of increase in healthcare spending by 1% each year, $1.39 trillion could be saved during the same period. “In combination, one-time changes in spending levels plus even small changes in projected rates of increase interact to produce even more substantial long-term yields,” write the authors.

The strategies the report recommends for the United States to obtain long-term healthcare savings include reducing high insurance administrative overhead, providing payment incentives to promote efficient and effective care, promoting patient-centered primary care, investing in infrastructure such as health IT, and investing strategically to improve access, affordability, and equity. “Effective policy options should focus on changing total national expenditures rather than simply shifting costs from one payer source to another,” the report states. And strategies to reduce costs should involve both the public and private sectors “with all parties working in concert toward agreed-upon health system aims.” Read the report.

With hundreds of people suing insurers in California for allegedly canceling their health insurance policies after they submitted high-cost claims, the state’s Department of Managed Health Care says it wants to take action to make canceling coverage more difficult, reports The Los Angeles Times. Director Cindy Ehnes says she wants “independent oversight”--possibly the department or an outside panel--to review policy cancellation decisions by insurers. Ehnes says her reading of the law is that insurers cannot cancel policies unless individuals intentionally lied about their health history on their applications, while insurers believe that the law gives them license to dump policyholders even if they made an inadvertent mistake on their applications. One plaintiffs’ lawyer who has brought suit against health plans says that insurers have cancelled “tens of thousands” of individuals’ health policies in California over the past 10 years.

In a Jan. 30 letter to Congress, the American Hospital Association stated its strong opposition to proposed FY08 cuts to payments for hospital services under Medicare and Medicaid. Hospitals’ ability to care for patients “would be seriously challenged,” said the letter, signed by Rick Pollack, AHA executive vice president. “Indiscriminate ratcheting of reimbursement for caregivers on the frontlines who provide needed services does nothing to address the underlying challenges.”

Pointing out that both Medicare and Medicaid reimburse hospitals for less than the cost of providing services, the letter also emphasizes the many costs hospitals face: investing in technology, preparing to respond to catastrophic disasters, modernizing aging facilities, and dealing with growing labor shortages. “The real answer lies in a comprehensive approach that addresses coverage for all, coordinated care and enhancing value, focus on wellness, and providing accessible information,” said Pollack.

Total compensation costs for hospitals rose 4% from fourth quarter 2005 to fourth quarter 2006. For the last three months of 2006, compensation costs increased 0.8%. For nursing and residential care facilities, the 12-month increase in compensation costs was 3.7% and the three-month increase was 1.1%. The Employment Cost Index, issued by the U.S. Department of Labor’s Bureau of Labor Statistics, measures changes in compensation costs, which includes wages, salaries, and employers’ cost to provide benefits.