Healthcare Business Trends

Jan. 14-18: Focus Falls on Medicare Finances

January 10, 2019 3:59 pm

Instead of hospitalizations driving Medicare spending, expensive drugs and potentially wasteful spending in the outpatient and post-acute care settings are the biggest factors among persistently high-cost beneficiaries, the study found.

Jan. 10—As Congress’s primary Medicare advisory panel meets next week to recommend 2020 payment rates, new research has identified a leading cost challenge in the program.

The Medicare Payment Advisory Commission (MedPAC) is expected at a Jan. 17-18 meeting in Washington, D.C., to consider rates for various Medicare providers that its chairman first proposed in December. For instance, Chairman Francis Crosson, MD, recommended a 2 percent increase in overall hospital Medicare payment rates in 2020 and an additional 0.8 percent increase tied to a new quality incentive program.

Those rate votes will follow research published this week in Health Affairs that identified the number and characteristics of Medicare patients who remain high-cost over several years. The authors hope the information helps providers design effective treatment programs for a group helping to drive cost increases in the program.

Based of a sample of 20 percent of Medicare’s fee-for-service beneficiaries in 2012-14, the researchers found that among the patients in the top 10 percent of Medicare spending in the first year, 28.1 percent remained persistently high cost over the three-year period.

On average, persistently high-cost patients were younger, more likely to be members of racial or ethnic minority groups, eligible for Medicare based on having end-stage renal disease, and dually eligible for Medicaid, compared to patients who were transiently or never high-cost.

Persistently high-cost patients had greater relative spending on outpatient care and medications, with very little spending related to preventable hospitalizations.

José F. Figueroa, MD, an author of the study and an instructor of medicine at Harvard Medical School, said some findings were expected, such as that patients with end-stage renal disease or major disabilities incurred high costs over many years.

“However, one finding that was concerning was the fact that black people and Hispanics, even after controlling for other demographics and patient comorbidities, are much more likely to be persistently high-cost than non-Hispanic whites,” Figueroa said in an interview.

Among potential explanations for the finding are poor access to high-quality primary care and inadequate care coordination for these populations.

“Also, issues related to social determinants of health may be at play, including inadequate access to stable housing, food insecurity, and lack of other social support services,” Figueroa said.

Figueroa also highlighted the study finding that costs related to potentially preventable acute care use were not a big driver of spending in patients who remain persistently expensive over time.

“Much of the efforts by providers and policymakers tend to focus on reducing preventable hospitalizations as the main focus for addressing costs,” Figueroa said. “However, our study shows that these efforts may be more effective if they instead focused more on other sources of spending, such as addressing expensive drugs and potentially wasteful spending in the outpatient and post-acute care setting.”

The Provider Impact

The significance of the findings for the finances of providers stems from their increasing engagement in alternative payment models such as accountable care organizations and bundled payments, which provide incentives for providers to keep costs down for their patient populations, Figueroa said.

“Therefore, understanding the types of patients that are at risk for remaining expensive over time, and the type of spending they incur, is important so they can begin designing programs, policies, and interventions to better care for these high-need patients and potentially mitigate any unnecessary spending,” Figueroa said.

Providers also can take steps to address the cost drivers identified in the study. Such efforts should focus on reducing potentially unnecessary spending, Figueroa said.

“For example, persistently high-cost patients are spending nearly four times as much in the outpatient care setting and nearly twice as much in the post-acute care setting relative to the ones who were only transiently high-cost,” Figueroa said. “Understanding what type of utilization in these care settings, including use of low-value services, was unnecessary will be important for them to begin to address this issue.”

To tackle challenges among racial and ethnic minorities, it will be important for providers to address potential issues that include poor quality of care, inadequate care coordination, and problems that stem from social determinants of health, Figueroa said.

 As for Medicare beneficiaries who are persistently high-cost due to expensive drugs, providers are limited in terms of what they can do. One strategy may be to consider switching appropriate patients to cheaper generic drugs if they exist and do not compromise patients’ health, Figueroa said.

“Others believe, however, that without meaningful health reform—for example, allowing Medicare to negotiate drug prices—it may be difficult to prevent some of these patients from continuing to be expensive to care for over time,” Figueroa said.

Monday, Jan. 14

Deadline for comments on the  Centers for Medicare & Medicaid Services’ proposed rule for managed care in Medicaid and the Children’s Health Insurance Program. Learn more.

Tuesday, Jan. 15

Webinar by HFMA titled “Can Improving the Patient Experience Help Reduce Bad Debt?” Learn more.

Conference call by CMS titled “ESRD Quality Incentive Program: CY 2019 ESRD PPS Final Rule.” Learn more.

Webinar sponsored by America’s Health Insurance Plans titled “Shattering Legacy IT.” Learn more.

Webinar by CMS titled “Eligible Clinician eCQM Preventive Care and Screening Measures.” Learn more.

Wednesday, Jan. 16

Webinar by the American Hospital Association (AHA) titled “A Framework for Disruptive Innovation: Emerging Trends, Major Players and Implications for Hospitals and Health Systems.” Learn more.

Webinar by the National Quality Forum titled “Attribution—Unlocking Value-based Purchasing’s Full Potential.” Learn more.

Thursday, Jan. 17

Webinar by AHA titled “Northwell Health’s Quest for Quality: Lessons Learned from the 2018 Quest for Quality Winner.” Learn more.

Webinar by the Better Care Playbook titled “Integrating Nurses into Complex Care Teams.” Learn more.

Friday, Jan. 18

Deadline to file Notices of Intent to Apply as accountable care organizations with CMS for the July 1, 2019, start date of the redesigned Medicare Shared Savings Program, called Pathways to Success. Learn more.


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