Supreme court ruling won't stop push to control health costs
HACKENSACK, N.J. – In 2010, Fred Aueron and his partners looked at
the new health care reform law and decided to sell their five-doctor practice.
Medicare reimbursements were dropping, and private-insurance
reimbursements were worse. To compete, they needed to be much bigger.
And none of those pressures will change, he says, if the Supreme
Court throws out the law when it issues its long-awaited ruling, which could
come soon as Monday.
"The small, onesie-twosie practice where you put up your
shingle out of medical school is not going to be there any more," the
59-year old Millburn, N.J., cardiologist said. "The strategy was to go to
a hospital or a large group. And if the Affordable Care Act (ACA) weren't
there, it would be something else."
From Wall Street, the decision's potential impact on health care —
and the health care business — looks huge.Barclays Captial analyst Joshua
Raskin says some health insurance stocks might drop 30% if the court throws out
the entire law.
The ACA would require Americans to buy insurance by 2014 or pay a
penalty, subsidize coverage for the working class, expand Medicaid and reform
Medicare, and further regulate insurance carriers — all in hopes of covering
most of the 50 million Americans without insurance and cutting the 18% of gross
domestic product the U.S. spends on health care.
Across the Hudson River in New Jersey, the decision's impact looks
much smaller. At Summit Medical Group, which bought Aueron's practice and is
the state's largest practice group, and Hackensack University Medical Center,
its largest hospital, health care's bruising economics and falling reimbursements
are spurring change before most of the act takes effect.
Both institutions provide a similar picture of America's health
care future, with or without the ACA. They're big and getting bigger through
mergers. They're tightening up management to respond to Medicare's push for
cost containment and higher-quality care, which preceded the law.
The reason: Medical inflation, while moderating, continues to
outpace general inflation, driving fiscal problems for states and for
Washington. At the same time, health care remains a tough business: Bond-rating
agency Moody's says non-profit hospitals, which control most of the U.S.
market, have their lowest revenue growth in 50 years.
Both institutions are experimenting with new ways of getting paid.
Hackensack is a trial site for new federally backed payment models such as
Accountable Care Organizations, which bundle payments to encourage preventive
care and try to de-emphasize costly tests and hospitalizations. Summit is part
of a different federally backed experiment where better prevention and
integration has helped a group of New Jersey practices cut emergency-room
visits by a quarter and hospital readmissions by 27%, Horizon Blue Cross Blue
Shield says. Both are spending millions on electronic medical records systems
to avoid mistakes and document quality of care — a must as talks with insurers
to get above-market reimbursements get tougher.
"The act made us all talk about it, think about it, and do
it," said Ihor Sawczuk, chief medical officer at Hackensack. "But I
don't think it will stop. It's the right thing to do."
Building scale to save fees
Jeffrey LeBenger understands the need to make health care cheaper.
But he still wants his doctors to get paid.
The Brooklyn-raised ear-nose-and-throat doctor, who has been
Summit's chairman for 12 years, knows many health care scholars cheer on
networks like Pennsylvania-based Geisinger Health System, believing their use
of salaried doctors limits hospitalizations, expensive tests, even excessive
end-of-life care. But that's not Summit's business model, and LeBenger's job is
to find a way to make his business work in a post-reform world — mending
fee-for-service rather than ending it. Summit charges higher fees, yes, but
delivers a lower total cost by reducing how much care people need to stay
healthy, he says.
"I'll get the patient better, sooner," he said.
"Our rates may be higher, but we don't overutilize, and we can prove
it."
Running essentially a large corporation built on fee-for-service
medicine, the Summit Medical chairman's changes aim to justify Summit's rates
by helping patients reduce how much care they need to stay healthy. Since the
Affordable Care Act is built to accommodate fee-for-service, a lot of health
care's future will reflect his formula: using size and scale as an alternative
to moving doctors onto a hospital payroll.
"The Affordable Care Act reflects a lot of what we're
doing," Chief Financial Officer Rob Booth said. "Electronic medical
records and a multispecialty environment where there is collaboration and
quality management because there's enough scale to make the investment."
Make no mistake: Summit is big. When it took over the Berkley
Heights campus of Dun & Bradstreet, it had to expand it. It has 1,200
employees and 134,000 patients — aided by acquisitions that brought in 27
doctors since 2010, part of the 81 new docs added in the last five years. In
parts of New Jersey, its market share is 40%. It plans more mergers this year
to deepen its share in other counties, LeBenger said.
The goal is end-to-end medicine, nearly eliminating out-of-network
testing and referrals that cost insurers extra. Summit has doctors in 70 specialties,
its own same-day surgery center, even its own urgent-care center, a kind of
junior emergency room. Only 6% to 7% of Summit's urgent-care patients are
admitted to hospitals, LeBenger said, vs. the 13% to 15% of ER patients the
Centers for Disease Control says were admitted in the U.S. in 2008.
Booth claims Summit can deliver 20% lower costs when its doctors
provide more than half of a patient's care.
The strategy also demands management and supervision of individual
doctors by the firm itself.
Summit has an in-house quality assessment team, whose tasks
include reviewing care to make sure hospital stays are kept as short as
possible; an electronic medical records system to coordinate care, prevent
mistakes that require more treatment and to emphasize generic medications. It
even commissioned New York University’s business school to create a
medical-economics and management course for SMG doctors The intense focus on
studying practice patterns lets Summit sign contracts with insurers that let
them gain rewards for saving payers money, said Pegeen Butterfield, a nurse who
is Summit's director of care management.
It all costs money small practices don't have, up to 20% of
Summit's revenue, Booth says. It's also leading to changes in pay practices:
For example, the group now employs hospitalists to monitor patients inside
hospitals, and up to a third of their compensation is bonuses tied to quality
metrics, tracked by the EMRs, such as average length of stay and how often
patients are readmitted.
The benefit patients can see is convenience, says Kara Whitely, a
client from Summit, N.J.
Summit doctors delivered Whitely's baby, gave her shots before she
traveled to Tanzania to climb Mount Kilimanjaro and, she says, removed her
toenail and fixed her stress fracture when she got back. The shared records
mean everyone she sees "knows my story." The size of the practice
doesn't make it too impersonal, she said.
"If you go to a big university, you still find professors you
connect with," she said. "I know the campus and doctors. It's a brand
thing, and a trust thing."
There's a harder-headed economic reason, too, Aueron says. The
mergers let Summit have enough presence at more hospitals in New Jersey that it
gains more leverage on insurers.
Specialization and market share
Robert Garrett says to forget the idea
that health care reform will mean lots of money for hospitals. Instead, the
chief executive of Hackensack says it has to get smarter — and bigger — with or
without the Affordable Care Act.
"If there's an increase in Medicaid, it will be more than
paid for by Medicare cuts," Garrett said. The hospital, which gets nearly
40% of its $1.3 billion in annual revenue from Medicare and Medicaid, never
took a position on the law, he said.
Like Summit, Hackensack is making deals to grow. Already the
biggest employer in an affluent county of 900,000, the hospital, 7 miles west
of Manhattan, has taken over the closed 128-bed Pascack Valley Hospital. It has
also applied for permission to acquire 365-bed Mountainside Hospital in
Montclair and has an alliance with a third hospital for cancer care. Dallas
investor Legacy Health Systems will own a majority of Pascack and Mountainside,
contributing $90 million to the Pascack deal.
Its strategy is to use Hackensack's national-class capabilities in
areas such as cardiology and oncology to lure New Jersey's most complex cases
to doctors who handle such patients more often.
"The idea is to export Hackensack quality to the community
hospitals, but if there's something very specialized, rather than sending that
patient to New York they can come to Hackensack," Garrett said.
One measure the plan is working: The bond-rating agency Moody's
raised Hackensack's credit rating last July, saying the non-profit company's
combination of mergers, specialized units that are boosting volume, and
cost-cutting, including freezing its pension plan, made its already
investment-grade debt even stronger.
Quality counts
Another part of Hackensack's plan is becoming a test site for a
Medicare cost-containment plan called Accountable Care Organizations.
Launched in April, Hackensack's ACO is an alliance of the hospital
and local doctors to emphasize prevention by encouraging early-intervention and
disease management plans, and letting providers keep part of the savings. The
pilot was authorized by the Affordable Care Act but is similar to earlier
Medicare quality initiatives, Sawczuk said.
Hackensack has a toe in the waters of even deeper reforms. About
250 of the 1,600 doctors who practice at the hospital are salaried employees,
rather than independent contractors like Summit. And the hospital, along with
other New Jersey health systems, owns a small stake in an insurance plan.
Both point toward the possibility of a very different future for
the health care business, in which independent doctors become even less
important, and there is much more integration between insurance companies and
health care providers. That's already common in parts of the country, where
integrated plans such as Kaiser Permanente and Utah's Intermountain Healthcare
do business.
Movement in those directions will be gradual, hospital executives
say. Younger physicians are more likely to adopt the salaried-doctor model than
older colleagues, Sawczuk said. For Hackensack, an important question is how
rapidly doctors can be asked to change a system that has served them well, he
said.
While more radical change may take years, and the court may force
trillion-dollar changes in the industry's plans, electronic medical records, mergers
and incremental shifts in doctors' financial incentives to emphasize prevention
and quality care will go on.
"Medicare is demanding better outcomes and lower costs
regardless of what the Supreme Court does," said Bernard Bober, patient
representative on the board of Hackensack's Accountable Care Organization.
"It's early days. But you can bet they'll know what the outcomes of these
changes are, because measurement is a big part of it."
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