ACO's & MSSP: Berwick's 1994

Dr. Don Berwick spoke to health care leaders and providers on health reform in 1994.  He cited the willy-nilly responses to managed care, including mergers, acquisitions, layoffs, shuffling CEO's, and price cutting, He likened it to an anthill that had been trodden upon, lots of scurrying with an unclear purpose.  Berwick shared:

One CEO said "my overhead is killing me.  I want to improve but don’t have the time.  I've never been so scared in my life."  Underneath confident deal makers, CEO’s who end up on top of mergers have no clue what to do.  This is crazy.  Everybody's running around, but no one knows what to do.  All we know is doing nothing is unacceptable.  We're afraid of being left out. There's never been a time when common sense is so uncommon.

Ironically Berwick heads the Centers for Medicare/Medicaid Services, which implements the current version of health reform.  Managed care has been rebranded Accountable Care Organizations, capitation renamed "bundled payment".  CMS released rules for Accountable Care Organizations, causing heath care leaders and providers to scurry around frantically. 

Huge hospital systems in Texas are talking merger to increase the size and scale of ACO operations.   Health care systems look beyond state lines for merger partners.  As in any corporate combination, layoffs are required to achieve cost savings.

ACO rules are Rube Goldberg complexification.  Medicare's Shared Savings Program leverages one horrific management practice, the splitting of "savings" with a contract group.  I never understood what an organization already being paid to do good work, to manage well, needed another incentive.

Extrinsic motivators work best for simple processes, generally under the control or one person.  They distort behavior in systems that require cooperation.  Incentive programs can drive short term behavior change, but come with cheating and fraud.  Nearly 30% of executives backdated stock option grants over a decade to maximize incentive compensation.

Health care costs need to be cut in a hurry, to legitimize PPACA.  OMB Chief Peter Orszag, an architect of health reform, told the Washington Economic Club he would "throw things against the wall to see what sticks." 

Accountable Care Organizations and Medicare's Shared Savings Programs may stick, with what odor?  What does it mean wihen the feds have to incentivize ACO's to even apply?  Don Berwick once called pay for performance a "toxic daisy chain."  Yet, he combines two bad practices, P4P and shared savings, in one deform effort.

Berwick's pushing this version of anthill scurrying makes it more bizarre.  Health care providers no longer have good work to do.  Just like corporate CEO's, they need complex, inane incentive schemes to do their torturous jobs.  That's the precisely wrong leadership transformation.

Do we have White House Health Czar Nancy Ann Deparle, an ex-private equity underwriter (PEU), to thank for this mess?  Now that Uncle Sam is advancing start up ACO capital, PEU's should have the scent.

"Will they ever learn?"--Dr. W. Edwards Deming

Greed will not save health care.  God help us to remember what we've forgotten.

Update 9-3-12:  Berwick's 1994 resurfaces.

Update 8-6-16:  After years of insanely high health insurance premium increases the public is concerned about affordability, according to several of the highly conflicted people who helped create PPACA.  After reforming healthcare Nancy Ann Deparle returned to private equity as founder of Consonance Capital which specializes in health care.

Update 3-15-18:  Skyhigh healthcare prices differentiate the U.S. from the rest of the world.  Cost curve definitely not bent by PPACA.

Update 9-25-18:   Former UN Secretary General calls U.S. healthcare system morally wrong.

Update 4-16-20:  A coronavirus pandemic revealed America's broken healthcare system and PPACA's many shortcomings. How many  22 million newly unemployed  can afford the premiums?  How many of these will get COVID-19 and die at home without proper care?  

Texas Politicans Produce Medicrud

U.S. Representative Mike Conaway (R-TX) announced at his Health Care Open House that 23% of uninsured Texans qualified for Medicaid but weren't enrolled.  He suggested Texas didn't need national health reform, that existing programs could address a large chunk of the problem.  Despite identifying a glaring need in his district, Conaway never went town to town signing up constituents for coverage. 

The Texas Legislature sees this pool of uninsured Texans as a flock of golden geese.  House Bill 13 wants the federal government to give Texas matching Medicaid funds (FMAP) based on:

A modification to the formula prescribed by federal law for determining this state ’s FMAP to achieve a formula that would produce an FMAP that accounts for and is periodically adjusted to reflect changes in the following factors in this state:
(1) the total population;
(2) the population growth rate; and
(3) the percentage of the population with household incomes below the federal poverty level.

For twelve years the State of Texas mostly sat on its backside regarding its legions of uninsureds.  Now it wants federal money for low income people it hasn't bothered to cover. 

HB13 aims to gain control over Medicaid "disproportionate share" and "upper payment limit" funds.  Fitch Ratings said Shannon Medical Center received $15.5 million in DSH/UPL payments in 2010.  Major tampering with this funding stream could jeopardize Shannon's safety net hospital role for the Concho Valley.  First, who would be covered under the Legislature's alternate methods, which:

(1) provide flexibility to determine Medicaid eligibility categories and income levels; 

I expect Texas, with the highest percent of uninsured citizens, to continue underachieving by setting bare bones eligibility categories and income levels.  The bill will also:

(2) provide flexibility to design Medicaid benefits that meet the demographic, public health, clinical, and cultural needs of this state or regions within this state;

Texas redefined public health in 2000, dropping "access to primary care" as an essential public health service.  How will they redefine other needs to the state Treasury's advantage?

The bill goes on to identify coverage elements under Medicaid's alternative methods.  Low income people can expect:

(3) encourage use of the private health benefits coverage market rather than public benefits systems;
(4)  encourage people who have access to private employer-based health benefits to obtain or maintain those benefits;
(5) create a culture of shared financial responsibility, accountability, and participation in the Medicaid program by:

(A) establishing and enforcing copayment requirements similar to private sector principles for all eligibility groups;
(B)  promoting the use of health savings accounts to influence a culture of individual responsibility; and
(C) promoting the use of vouchers for consumer-directed services in which consumers manage and pay for health-related services provided to them using program vouchers

Ignore that Texas legislators favor private health insurers, responsible for distortions making coverage nearly unaffordable for many.  The above language has local implications.  The City of San Angelo sent 200 people from the ranks of the insured with draconian premium sharing for early retirees and dependents.  Oddly, the City participated in a program encouraging employers to maintain affordable health coverage for early retirees.  The City did the exact opposite.  How would reformed Medicaid "encourage" low paid COSA workers to obtain or maintain health insurance benefits?

Cost sharing mechanisms, copayments, health savings accounts and vouchers, mean more work for Shannon's Business Office.    Recall that Medicaid is already a notoriously poor payor to hospitals.  Add the 8% hospital payment cut in the Texas budget and Medicaid becomes a larger deadbeat.

Reformed Medicaid would have hospitals chasing low income people for copayments and distributions from likely empty HSA's,  Hospitals would compete for low income consumers and their likely measly payment vouchers.

Let's hope the following fable doesn't come true, although it's entirely predictable:

Once upon a time hospitals existed to serve all people, providing high quality health care regardless of ability to pay.  Then the Legislature privatized everything, with pay for performance permeating the system.  Intrinsically motivated organizations and workers found themselves under Rube Goldberg financial complexification, which killed their internal desire to do good work. They eventually said, "You can't pay me enough to deal with this crap." So, they quit or sold out to for-profiteers.

That's when the heart of health care died and was replaced by a mechanical version.  Should the fable come true, be sure to thank the system's deformers, your elected representatives.

Darby Claims Credit for Bone Crushing Budget

Rep. Drew Darby spoke to school funding and the overall budget passed by the Texas Legislature

"I'm going to support it because we have no choice, this is how much money we have, and we have to reallocate the resources within the existing available funds," said Darby, who helped write the budget as a House Appropriations subcommittee chairman.  "The reality is, every part of Texas is having to take a hit."

"The overall budget is down about 8 percent," he said. "We've made almost $15 billion in cuts. I think it reflects priorities. I think we've restored funding in education to a level that is appropriate for right now."

Will Lady Justice pay attention to a Texas Legislature living within its meanness?  Will Medicaid recipients, university students and parents of public school kids line up to vote in the next election?

They'll have a choice, as did this year's Legislature.  Will their priorities align with Rep. Darby's?  Time will tell.

Great Texas Ex-Perryment to Go National?

Texas Governor Rick Perry gave his best "aw shucks" in reference to a possible Presidential bid. Here's the evolution of Perry's thinking on running "Just Say No to Washington, D.C."  Six months ago:

Perry said he would not consider running for president because he had "the best job in the world."

 One week ago Perry focused on cutting health care and firing educators:

When asked earlier this week if he had "ruled out" a bid, he said he would remain focused on the legislative session.

 With the session closing in sight, Perry suddenly became open to a Presidential run:

Gov. Rick Perry has said that he will consider running for president after the state legislative session ends Monday. "I'm going to think about it," Perry said Friday morning

The Texas Legislative session seemed thematically orchestrated to give Perry his conservative bonafides.  He can load up his privatization pack with voter ID, sonogram, bone crushing budget cuts, no new taxes, no rainy day fund, and ride with his gang to Washington.  He needs to get out of Dodge before September 1.  That's when his Great Texas Ex-Perryment officially begins,with its $15 billion hole.

While this has aspects of the Wayback Machine, which gave us a "no fly zone" to reign in a heinous dictator, an unprecedented radiation disaster and the prospect of a government shutdown , it's not the second coming of George W. Bush.  Bush actually worked in a bipartisan fashion during his time as governor.  W. jettisoned it outside the D.C  Beltway.

Perry wants to run the federal government he so readily derides?  Might he use trillions in federal funds to share loot to his friends?  Highly likely. 

Who will ride with Perry, should he get the Republican nomination?  Sweet Sarah Palin, with her rugged Perry-like husband, could ride sidesaddle.  That's be the prettiest pair of gun-totting politico's America has seen in years.  When will America stop offering caricatures for office and run real people?

Update 5-29-11:  Others noticed the Legislative set up for a Perry Presidential run.

Update 6-12-11:  Rumors have Newt Gingrich's campaign staff jumping to the Rick Perry Presidential ship.

Rallo Cites Gift Aid as Recruitment Tool

Angelo State University President Joseph Rallo isn't letting $1 billion in state budget cuts for higher education cloud his vision.  Rallo cited a key recruitment tool in reaching 10,000 students, gift aid.  Money comes courtesy of the Robert G. Carr and Nona K. Carr Scholarship Foundation's corpus of $86 million.

Students will need all the help they can get, considering the Legislature plans to cut Texas scholarships by 30,000 students and ASU's "up to 9.9%" tuition and fee hike.  Fall '10 saw 86.1% of full time undergraduate students receiving any form of financial aid.  ASU's statistics show funding of $16.4 million in state scholarships/grants (includes Texas and all states).  Funding cuts and rising tuition could become a financial storm for some ASU students.

Despite headwinds, Rallo projects student enrollment to be 7,000 this fall, up from 6,155 in Fall 2010.  That's after letting go many professorial extenders, instructors and lecturers.  Fewer educators will teach more students, which translates to larger class sizes, in person and online. ASU's retention rate isn't stellar to begin with.  It's graduation rate is even worse.

A mass move to online teaching frequently brings problems with student engagement and retention. It will be a dicey fall for ASU.  The faculty to student ratio should soar from the advertised 20:1.  ASU may get more students, but how many will stay Rams?

Click on the image below to make it bigger:  The graph shows ASU's retention and graduation rates for the last five years.

Update 6-23-11: ASU's tuition hike came in at the maximum 9.9%

Legislature Cuts Residency Funds for Family Docs

The primary care shortage isn't going away anytime soon, courtesy of the Texas Legislature.  (The projected national shortage is the gap pictured above.)  Texas Tribune reported:

State funding for the family practice residency program will drop more than 70 percent, from $21.2 million in the current biennium to $5.6 million in 2012-13 — a cut of roughly $10,000 per student. The primary care residency program will be zeroed out entirely. These cuts come on top of 10 percent formula funding cuts for medical schools, and Medicaid rate cuts at the hospitals that train these med students.

Both San Angelo hospitals and Esperanza Clinic have struggled at times to add primary care physicians.  Two Texas family practice residency programs closed in the last four years.  Legislators made it more challenging for the Esperanza's of the world to recruit new doctors.

The physician education loan repayment program, which pays the medical school bills of new doctors who agree to practice in underserved communities, is losing 76 percent of its funding — a $17 million hit over the next two years.

San Angelo is finding more water to grow.  Texas plans to have millions more people.  Who will take care of them, insured or uninsured?  The Texas Legislature doesn't care.

Shannon's Exposure to Texas Budget Cuts

Medicaid is taking the biggest hit from the Texas legislature's bone crushing budget cuts.  Hospitals will receive 8% less in funding from Texas Medicaid.  Shannon Medical Center, the area's safety net provider, provides care for people regardless of ability to pay.  Fitch Ratings cited Medicaid as comprising 10.6% of Shannon's patients.  For the year ended 2010 Shannon had roughly $230 million in revenue, with $24.4 million Medicaid related.  An 8% decrease in reimbursement would cost Shannon $2 million over a two year period.The hospital's $4.4 million profit margin would be dinged, but Shannon could survive this cut.

Fitch cited a deeper concern, Shannon's Disproportionate Share (DSH) and Upper Payment Limit (UPL) payments.

Shannon Health System anticipates that a constrained state budget will negatively impact Medicaid reimbursement, and could also impact DSH/UPL payments. SHS received $15.5 million in DSH/UPL payments in fiscal 2010, equating to approximately 4.9% of net patient revenues. SHS's future profitability is extremely vulnerable to changes in state and federal reimbursement methodology given the hospital's exposure to governmental payors.

DSH/UPL payments are funneled through the state for federal matching funds.  Tom Green County Commissioners recently pushed forward $1 million in UPL payments to ensure a higher match. 

The devil is in how Texas cuts DSH/UPL and how much they choke from Washington, D.C.  Let's say those funds are cut a third.  Shannon's two year hit grows from $2 million to $12 million.

Shannon's profit margin of $4.4 million comes after Trust funding of $6.2 million.  A major cut in DSH/UPL could push Shannon Medical Center to shop for a buyer.  For-profit hospitals are salivating over the current environment.  For-profiteers are cold calling and e-mailing hospital CEO's.  The last time health care had such uncertainty, Community Medical Center sold out to Columbia/HCA.  Health reform is back to the future in more ways than one.

The Texas Legislature's budget will have second order effects that could swamp Shannon.  The City of San Angelo sent over 200 people to the ranks of the uninsured from City budget moves.  State cuts could cause thousands of Concho Valley residents to lose health insurance.

ASU communicated with its 767 employees on future job loss, although it's not clear how many positions will be cut through direct layoff or contract non-renewal.  SAISD is playing the same word game.  Both hospitals will likely cut staff due to Medicaid cuts.  Four major employers will drop positions with health insurance benefit.  How many dependents will lose coverage as well?  The spinoff will smack Shannon's payor mix.  Watch "self pays" rise from 8.9% to what, 12%, 15% of patients?  That's another $9 million to $18 million hit.  Will price increases to Shannon's remaining paying patients fill the holes?   Maybe, maybe not.

Throw in beds stacked with patients ready for discharge to a nursing home bed, yet none are available and Shannon's cost per case rises.  Fleeting revenue, costs exploding?  A sickly green storm is brewing over Shannon, courtesy of the Texas Legislature.  I hope Shannon survives as a nonprofit community hospital.

Update 5-24-11:  HCA's provision for doubtful accounts rose to 8.1% of revenue, up from 7.5% a year ago.   A recent SEC filing stated "Same facility uninsured admissions increased 4.7 percent in the first quarter compared to the prior year and comprised 6.5 percent of total admissions compared to 6.3 percent of total admissions in the first quarter of 2010."  PPACA's foot dragging is even hurting For-Profiteers.  HCA's investor presentation cites low unemployment in their hospital service areas and an improving acquisition environment.