iProtean—House Lawmakers Want RAC Process Reformed

A bipartisan group of more than 100 representatives from the House wrote Kathleen Sibelius, Director of the Department of Health and Human Services (HHS) last week to express their concerns with the Recovery Audit Contractor (RAC) program and strongly urged reform of the RAC process. The letter noted operational problems in the RAC program and the staggering backlog of appeals.

 

RACs evaluate the accuracy of Medicare payments to providers. They are able to audit medical records and claims three years after services have been provided, and are paid a commission on the dollar amount of the claims they deny, which ranges between nine and 12.5 percent. “Although the intent of the program is laudable, operational problems within the program have persisted without corrective action by the Centers on Medicare and Medicaid Services (CMS),” the lawmakers noted in their letter.

 

One of the problems involves the payment structure. RACs have an incentive to deny claims, even when the claims are correct. Data show that when hospitals appeal RAC decisions, 72 percent of hospital Medicare Part A appeals that have reached the third level of the appeals process are overturned in favor of the hospital. This suggests that many RAC decisions may be driven by the incentives the RACs enjoy by denying claims.

 

The lawmakers noted that without more oversight measures in place, RACs have imposed a huge administrative burden on hospitals, which must spend valuable time and resources to appeal denied claims in order to be reimbursed for Medicare services provided.

 

They also noted the consequences of denials to beneficiaries when their inpatient stay is inaccurately denied by a RAC. “They pay higher out-of-pocket expenses under Medicare Part B and are sometimes held financially responsible” for some of their care. “This is not the way the Medicare program was intended to operate,” they said.

 

In the letter to HHS, the lawmakers also cited the recent announcement from the HHS office of Medicare Hearing and Appeals that it has suspended assignment of claim appeals to an Administrative Law Judge for at least the next two years, citing the staggering backlog of cases (460,000 claims in just under two years). The lawmakers strongly recommended that CMS add resources to help resolve the backlog issue so the claims appeal process can resume.

 

With respect to the RAC program itself, the lawmakers want reforms to ensure auditors are charged with identifying “real claim coding and medical documentation errors” and a more transparent mechanism for informing providers of errors. They also want an alternate payment arrangement with auditors to avoid improper incentives to deny claims for profit and to ensure the auditors focus on prevention of errors. They suggested paying RACs a retainer, as many other government contractors are paid.

 

(Sources: Letter from House Representatives to Kathleen Sibelius, February 10, 2014; “Lawmakers Tell HHS Medicare RAC Process Should Be Reformed,” Health Lawyers Weekly, February 14, 2014)

 

iProtean subscribers, a new advanced Quality course, The Importance of Physician Leaders, will soon be in your library. Expert faculty Brian Wong, M.D., Todd Sagin, M.D. and Tom Atchison, Ed.D. discuss the rationale for developing physician leaders in the hospital setting and the role of physician leaders, leadership characteristics including strategic thinking, holding physicians accountable, training physicians leaders, coaching and building teams, leaders as problem solvers and the role of the board. Look for a program summary and preview video in your inbox later this week!

 

For a complete list of iProtean courses, click here.

For more information about iProtean, click here.

 

iProtean—FTC Orders Unwinding of Merger Between Health System and Physician Group

Last week we reported on a new report that found no conclusive relationship between hospital consolidation and price increases in a community. There is a new wrinkle, however. A hospital or system merger with a large physician group practice may not pass the competition/price increase test. In Idaho last month, a district judge sided with the Federal Trade Commission (FTC) and ordered the unwinding of a merger between St. Luke’s Health System and the Saltzer Medical Group. (“Health Law Goals Face Antitrust Hurdles,” The New York Times, February 2, 2014)

 

Legal analysts say the decision illustrates that “even though consolidation can lead to greater coordination and improved patient care, the FTC and state attorneys general will not hesitate to oppose consolidation in highly concentrated markets they believe will lead to the reduction in competition, creating the potential for increased prices.” (FTC Wins Antitrust Challenge to Health System’s Acquisition of Physician Practice, Crowel Moring, February 4, 2014)

 

St. Luke’s general counsel told the New York Times reporter that the acquisition of the medical group was necessary to provide more coordinated care at a lower cost to the community. The judge noted, however, that even if the merger had improved patient outcomes, the health system would be able to demand higher reimbursement rates from health insurers and actually raise rates for some services, ultimately pushing up costs for consumers through higher insurance premiums.

 

Analysts noted the potential impact on the Affordable Care Act (ACA). Hospitals have been merging with or acquiring physician group practices to better position themselves for taking care of large pools of patients and improving patient care. The mergers also improve the hospitals’ bargaining power with health insurers.

 

This type of merger could achieve the goals of the ACA by addressing concerns over cost and quality through integration of primary care physicians with teams of specialists to achieve common goals for patients. Accountable care organizations (ACOs) also influence the desire to merge.

 

But “vertical integration” also raises competitive/antitrust concerns for the legal community. Analysts note that in the future, the government may not hesitate to enforce antitrust laws against ACOs when their activities are deemed to have an anticompetitive effect. “This in turn could lead to a loss of enthusiasm for this popular government program.” (FTC Wins Antitrust Challenge to Health System’s Acquisition of Physician Practice, Crowel Moring, February 4, 2014)

iProtean subscribers, a new advanced Quality course will soon be in your library. Look for The Importance of Physician Leaders featuring Brian Wong, M.D., Todd Sagin, M.D. and Tom Atchison, Ph.D. later this month.

 

For a complete list of iProtean courses, click here.

For more information about iProtean, click here.

iProtean—Study Shows Mergers Have Little or No Impact on Prices

The Center for Healthcare Economics and Policy released a report in late January that found no conclusive relationship between hospital consolidation and hospital price increases in communities in the U.S.  HFMA wrote that the study “challenges conventional wisdom about the impact of consolidation on hospital prices.” (“Study: Relationship Between Hospital Mergers, Price Increases Often Overstated,” HFMA Weekly News, January 28, 2014)

 

Policy experts and legal analysts typically cite research that shows consolidation in a market increases the probability of higher prices due to decreased competition. The report’s authors note, however, that today’s different market conditions could and do imply that past research is “ill-suited—if not misleading—to inform current understanding of likely merger effects,” and that the risks of decreased competition may be significant in only a few markets. In fact, hospital price growth has been slowing and is at a record low, suggesting that “healthcare system redesign and realignment is yielding some benefits.”

 

Based on an antitrust review of hospital transactions, the authors concluded that:

 

  • Only a small proportion of actual hospital transactions raise significant risks of substantial lessening of competition. The vast majority of transactions occurred in separate geographies or in ones with numerous competitors. Only a minority of mergers involved prolonged review by the antitrust agencies and, of those, several were not challenged.
  • These trends are more supportive of a conclusion that the majority of transactions are competitively benign or value-enhancing transactions.
  • High concentration, high market shares and the number of competitors are not predictive of either hospital merger challenges or predicted or actual anticompetitive effects. Both retrospective and prospective hospital merger analyses in highly concentrated markets show that mergers even in concentrated markets were not predicted to bring about, nor resulted in, substantial increases in prices.

(Hospital Realignment: Mergers Offer Significant Patient and Community Benefits, Center for Healthcare Economics and Policy, January 23, 2014)

 

The report also presented conclusions from an analysis of the potential benefits from mergers, focusing on cost, quality and access. The benefits identified included:

 

  • •Administrative and overhead savings
  • Reduced costs or reduced rate of cost/expense growth through improved operating efficiency or reduction/elimination of redundant services
  • Improved overall operations and efficiency
  • Realignment of services to achieve greater scale of operations or to improve quality of care delivered
  • Reduction of excess capacity
  • Access to capital and improved ability to make necessary investments such as technology and update facilities or services
  • Ability to maintain or expand services in a community (and thereby maintain quality of services or care and/or access to care)

(Hospital Realignment: Mergers Offer Significant Patient and Community Benefits, Center for Healthcare Economics and Policy, January 23, 2014)

 

But What’s Next?

The next wrinkle in the competitive argument became evident in last week’s ruling by the Federal Trade Commission (FTC) against St. Luke’s Health System’s 2012 purchase of the Saltzer Medical Group. Next week’s post will cover the FTC’s decision about the competitive aspects of system acquisition of a large medical group and what analysts are saying about its impact on the Affordable Care Act.

 

For a full copy of the report from the Center for Healthcare Economics and Policy, please contact Carlin Lockee at clockee@iprotean.com. iProtean subscribers will have access to the report under the Resources tab of the upcoming courses, Strategic Responses to the Competitive Market, featuring Michael Irwin and Dan Grauman.

 

 

For a complete list of iProtean courses, click here.

For more information about iProtean, click here.

 

iProtean—CMS Reports Financial Results for 114 Shared Savings ACOs

About half of Medicare’s accountable care organizations (ACOs) saved the program money in their first year of operation, but only 25 percent of participants earned a share of those savings, according to an announcement by the Centers for Medicare & Medicaid Services (CMS) on January 30.

 

In 2012, the first year of Medicare’s ACO program, its two components—the Medicare Shared Savings Program and the Pioneer ACO model—saved more than $380 million, CMS said. Those savings included $128 million from about half of the 114 first-year participants exceeding their first-year targets. Another $126 million went to 29, or 25 percent, of the participating provider groups that met cost-reduction benchmarks under the program.

 

“While still early in the program, with some ACOs making greater progress than others, the $275 million in savings—and the high quality of care that has accompanied it—are admirable results,” CMS wrote on its blog. (“Medicare’s delivery system reform initiatives achieve significant savings and quality improvements – off to a strong start,” CMS Blog, January 31, 2014)

 

According to CMS, 54 out of 114 Medicare Shared Savings Program ACOs that started operations in 2012 already had lower expenditures than projected. ACOs are designed to achieve savings over several years, not necessarily on an annual basis.

 

The 23 provider organizations in the Pioneer ACO program saved between $128 million (as reported by HFMA) and $147 million (as reported by AHLA). Of the 23 Pioneer ACOs, “nine had significantly lower spending growth relative to Medicare fee for service while exceeding quality reporting requirements,” CMS said.

 

According to CMS, the Physician Group Practice Demonstration initiatives, which offered incentive payments for delivering high-quality, coordinated health care that generates Medicare savings, also performed well in terms of cost savings—approximately $108 million over the course of the five-year demonstration project.

 

Shared Savings

Jonathan Blum, principle deputy administrator for CMS, said the lack of shared savings by most participating organizations resulted from the build up required to effectively coordinate care across multiple care settings, thus delaying progress. He added that CMS is “in this for the long term.” He noted that organizations that have reported quality metrics “are doing better than the underlying trend.”

 

(Sources include “Medicare’s delivery system reform initiatives achieve significant savings and quality improvements – off to a strong start,” CMS Blog, January 31, 2014; “Half of ACOs Save Money; a Quarter Share Savings,” HFMA Weekly News, January 30, 2014; “CMS Says Data Show ACOs Have Achieved Cost Savings and Quality Improvements,” Health Lawyers Weekly, January 31, 2014; and “Providers net uneven results from ACO experiment,” Modern Healthcare, January 30, 2014.)

 

 

iProtean subscribers, we are working on the next advanced Quality course, The Importance of Physician Leaders, featuring Brian Wong, M.D., Todd Sagin, M.D., and Tom Atchison, Ph.D. Topics covered in the course include leadership characteristics, holding physicians accountable, coaching others, building teams and the role of the board. Look for it in your course library later this month.

 

 

For a complete list of iProtean courses, click here.

For more information about iProtean, click here.