DGA Policy Series March 26, 2012

Capitalizing on Opportunities to Improve Patient Outcomes and Lower Healthcare Costs

www.DemocraticGovernors.org

 

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Governors are Key to Capitalizing on Opportunities to Improve Patient Outcomes and Lower Healthcare Costs

“The critical flaw in our healthcare system is that it was never designed for the kind of patients who incur the highest costs. Medicine’s primary mechanism of service is the doctor visit and the E.R. visit. For a 30-year-old with a fever, a 20-minute visit to the doctor’s office may be just the thing. For a pedestrian hit by a minivan, there’s nowhere better than an emergency room. But these institutions are vastly inadequate for people with complex problems: the 40-year-old with drug and alcohol addiction; the 84-year-old with advanced Alzheimer’s disease and pneumonia; the 60-year-old with heart failure, obesity, gout, a bad memory for his 11 medications and a half a dozen specialists recommending different tests and procedures. It’s like arriving at a construction site with nothing but a screwdriver and a crane.”

Atul Gawande, “The Hot Spotters,” The New Yorker, January 24, 2011

Preface

Governors are Key to Capitalizing on Opportunities to Improve Patient Outcomes and Lower Healthcare Costs, is a white paper prepared by the Democratic Governors Association with help from My Campaign Group and research and guidance provided by Pharmaceutical Research and Manufacturers of America and the Partnership to Fight Chronic Disease. The document summarizes the ever-increasing financial burden placed on states to maintain healthcare services through Medicaid with attention focused on the leading cost driver of healthcare expenditures – chronic disease. The paper proposes a number of reforms for Democratic governors to consider implementing to improve the health of citizens and control healthcare costs based on proven chronic disease management and prevention programs already in practice.

Democratic governors have a record of supporting policies that provide quality, affordable healthcare to citizens in their states. Several governors are enacting new healthcare expansion laws and seeking federal waivers to implement innovative healthcare delivery systems that go beyond the Affordable Care Act to achieve reforms that make sense for their individual states. To aid states in these efforts, the federal government is making funds available to states choosing to engage in reforms focused on primary cost drivers, including chronic disease. States should take full advantage of these opportunities. Although the Affordable Care Act is a solid first step toward addressing the challenges of our nation’s healthcare system, it’s clear that funding changes are necessary to ease the pressure rising healthcare costs have on states’ budgets if we are to create a sustainable healthcare system for generations today and those to come.

 

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Introduction

In the U.S., healthcare expenditures have increased over the past decades from $256 billion in 1980 to $2.6 trillion in 2010.1 Chronic diseases, which often result in illness, hospitalization and long-term disability of people diagnosed, are a primary contributor to the rise in healthcare costs nationally. Treating people with chronic disease consumes about 83 percent of Medicaid resources and causes seven out of every 10 deaths in America each year.2 Despite these grim statistics, a significant portion of these treatment costs and a number of deaths are avoidable with greater investment in successful chronic disease management and prevention programs.

Unless and until states change the way healthcare services are delivered to people with chronic disease and adopt new methods of payment for providers, healthcare costs will likely continue to increase even as reforms are made to other areas of the healthcare system.

Overview

This year is the make-or-break year for Affordable Care Act implementation at the state level. Much of the preparation for both the healthcare exchanges and Medicaid expansion depends upon state action this year. Early indications are that states will have a great deal of flexibility in tailoring efforts to meet state needs, but with that flexibility comes many questions left for governors and policymakers to answer. Among them will be whether to accept a new Medicaid form of payment to establish “medical homes” and “accountable care organizations,” both of which are designed to expand access, improve the coordination of care among doctors and medical systems, and make healthcare providers responsible for managing the overall costs of care they deliver.

Along with these policy challenges, many states face significant budget shortfalls, putting even greater pressure on the need to find workable solutions for the efficient use of public funds. For Medicaid alone, states are projected to face a combined deficit of $125 billion in FY2012 and are expected to spend $195 billion on Medicaid – a staggering 48 percent increase over 2010 budgets.3 Medicaid spending growth is projected to average 7.9 percent for each year of the 10-year period that started in 2009 and ends 2019 unless reforms can be made to contain rising costs.4 With healthcare issues at the top of policy agendas, governors can meet the

                                                            1 Centers for Medicare & Medicaid Services, Office of the Actuary, National Health Statistics Group, National Health Care Expenditures Data, January 2012. 2 Partnership for Solutions, Chronic Conditions: Making the Case for Ongoing Care. September 2004 Update. http://www.partnershipforsolutions.org/DMS/files/chronicbook2004.pdf and Chronic Diseases and Health Promotion, http://www.cdc.gov/chronicdisease/overview/index.htm. 3 L Winerman and V Dennis, “Exclusive: States Facing Massive Medicaid Budget Crunch,” PBS Newshour, Feb. 17, 2011. Available online at: http://www.pbs.org/newshour/rundown/2011/02/by-the-numbers-states-face-massive-medicaid-budget-crunch.html  4 Centers for Medicare & Medicaid Services, National Health Expenditure Projections 2009-2019,  https://www.cms.gov/NationalHealthExpendData/25_NHE_Fact_Sheet.asp 

 

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challenges presented by building on proven models shown to reduce healthcare spending and improve the health of citizens.

To maximize these opportunities, policymakers should keep a key driver of healthcare costs top of mind in any health reform effort: chronic disease and the supports people and their family caregivers need to effectively manage their health once diagnosed with a chronic illness.

How Chronic Disease Impacts State Health Systems

Today, nearly one in two people in America suffers from a chronic disease, like diabetes, arthritis, asthma, depression or heart disease.5 While this figure is significant, the number of people with chronic disease is projected to continually increase over time by about 1 percent each year, as Chart 1 illustrates. Chronic disease is the primary driver of healthcare costs, accounting for 75 cents out of every dollar spent on healthcare.6 For public programs the financial toll is even greater, with 83 cents of every Medicaid dollar spent on treating chronic disease; the population served by Medicaid includes many people who are disproportionally affected, particularly the elderly, disabled and low income – all of which are risk factors for chronic disease.7

Wu, Shin-Yi and Green, Anthony. Projection of Chronic Illness Prevalence and Cost Inflation. RAND Corporation, October 2000.

                                                            5 Centers for Disease Control and Prevention, Chronic Diseases and Health Promotion, http://www.cdc.gov/chronicdisease/overview/index.htm 6 Ibid. 7 Partnership for Solutions. Chronic Conditions: Making the Case for Ongoing Care. September 2004 Update. http://www.partnershipforsolutions.org/DMS/files/chronicbook2004.pdf  

 

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The Milken Institute, An Unhealthy America: The Economic Burden of Chronic Disease, US Fact Sheet, http://www.chronicdiseaseimpact.com/state_sheet/USA.pdf

Many chronic diseases are preventable and highly manageable. The World Health Organization estimates that 8 out of 10 cases of premature heart disease, stroke and diabetes are preventable if people ate healthier, were physically active and avoided tobacco.8 Despite what is known about preventing and managing chronic diseases to avoid, slow or delay their progression, people with chronic illnesses receive just 56 percent of the clinically recommended care needed to prevent disease onset and progression.9 This is due to a variety of reasons, including patients with no single set of doctors to monitor their conditions, poor medication management and inadequate access to healthcare networks to support them.

For example, two people diagnosed with the same chronic illness may have very different treatment costs, especially if one of them rarely takes his or her medicine and periodically ends up in the emergency room because symptoms related to his or her condition have worsened. It’s this group of people with poor medication adherence who usually account for the highest costs. States can do better to reduce the prevalence and toll of chronic disease and reap the savings that result by replicating and expanding upon evidenced-based reform strategies with funds made available through the Affordable Care Act. It’s estimated that the U.S. can reduce future economic costs of chronic disease, including treatment expenses and reduced

                                                            8 World Health Organization, Preventing Chronic Diseases a Vital Investment, http://www.who.int/chp/chronic_disease_report/full_report.pdf  9 EA McGlynn, SM Asch, J Adams, et al, “The Quality of Health Care Delivered to Adults in the United States,” New England Journal of Medicine, 2003; 348:2635-264. 

 

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productivity, with reasonable improvement in management by about 27 percent or $1.123 billion in total health expenditures by 2030, as Chart 2 illustrates.10

Understanding these challenges, innovators in communities across the country are implementing programs that efficiently and effectively improve the health of those served. Many of these efforts demonstrate how well-designed targeted chronic disease prevention and care management programs can both improve quality of care and lower treatment costs. Provisions in the Affordable Care Act address healthcare system barriers to prevention and care management and include opportunities for states directly or through public-private efforts to receive additional funding to build on what works (see also Appendix 1).11 Learning from and replicating effective models will allow more states to capitalize on funding opportunities through the Affordable Care Act to establish similar programs.

Opportunities for Reform

Recognizing the severe budget pressures most states face, governors must focus healthcare reform efforts on areas that can have a near-term, sustainable impact. Since the prevalence of chronic disease is projected to increase over time and treating people with chronic disease is already expensive, concentrating efforts on proven chronic disease management and prevention programs is a cost-effective way for states to control costs in their Medicaid programs.

Best practices from model programs that have improved the quality of care and reduced costs for treating people with chronic disease indicate four key areas of immediate opportunity for Democratic governors to consider:

1. Targeting costly hot spots; 2. Bridging gaps in care; 3. Facilitating care coordination; and 4. Enhancing treatment adherence and self-management.

Targeting Costly Hot Spots

Armed with the understanding that more reform can be done to improve disease management practices; the obvious next question is: Where to start? The answer lies in understanding the patterns of costs within the healthcare system and the fact that healthcare spending, regardless of the population considered, is highly concentrated among certain identifiable groups of people or hot spots.

                                                            10 The Milken Institute, An Unhealthy America: The Economic Burden of Chronic Disease, US Fact Sheet, http://www.chronicdiseaseimpact.com/state_sheet/USA.pdf  11 Safety Net and the Medical Home Initiative, Health Reform and the Patient-Centered Medical Home: Policy Provisions and Expectations of the Patient Protection and Affordable Care Act, Policy Brief Issue 2, http://www.qhmedicalhome.org/safety-net/upload/SNMHI_PolicyBrief_Issue2.pdf  

 

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For example, five percent of people account for nearly half of all healthcare spending.12 A mere one percent account for 20 percent of spending with average per person spending of more than $90,000 a year.13 Not only is spending highly concentrated among a small part of the population, those spending patterns show some persistence over time. Simply put, the group labeled “super-utilizers” generally has high spending for an extended time period. The concentration and persistence of high costs or “hot spots” present high-value opportunities to improve health

outcomes and lower costs.

Focusing on hot spots allows a state to strategically deploy evidence-based interventions – ones confirmed to improve health outcomes and/or reduce costs – to generate near-term, sustainable results. Programs that identify and anticipate people at high risks for imminent hospitalization, hospital readmission and emergency department use show the strongest evidence of immediate cost savings and clinical benefit. Model programs in several states highlight the significant opportunity for near-term results.

Ambulatory Intensive Care Model

The Ambulatory Intensive Care model is an innovative approach to primary care for patients with complex, unstable chronic illness, usually identified by having high emergency room utilization and several unplanned hospitalizations in a short timeframe. The model relies on dedicated care teams and personalized care plans that address medical, psychosocial and other issues affecting the program participant’s health. “Intensive” care includes in-home visits, health coaches and regular outreach and follow-up, in addition to collaboration with public health, behavioral health and community resources that are all provided to people through a “medical home.” A medical home is essentially the hub of

                                                            12 S Cohen and W Yu, “The Concentration and Persistence in the Level of Healthcare Expenditures Over Time: Estimates for the Population,” 2008-2009, Statistical Brief #354, Jan. 2012. 13 Ibid. 

The Cost of “Headaches” $2,800 vs. $52,000

“A 25-year-old woman who suffered from migraines had a history of high spending, submitting claim after claim

over a 10-month period. What should have cost $2,800 to treat, instead cost $52,000. Upon close inspection of her file, a researcher determined she also was a diabetic and taking two types of

medication – insulin and an anti-migraine medication both of which she faithfully

renewed. Yet the data only tells part of the story. Although she took her medicine, it did not alleviate the

migraines. When the pain became so bad, she went to the emergency room or sought urgent care. Doctors performed CT & MRI scans, to satisfy themselves that she did not have a brain tumor or aneurysm, gave her a narcotic injection

to stop the headache temporarily, maybe renewed her imipramine prescription and sent her home, only to have her return a couple weeks later and see

whoever the next doctor on duty was. She was not getting what she needed for

adequate migraine care – a primary physician taking her in hand, trying

different medications in a systematic way and figuring out how to better keep her

headaches at bay.”

Atul Gawande, “The Hot Spotters,” The New Yorker, January 24, 2011.

 

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the wheel from which an array of healthcare and support services radiate, working collaboratively to improve health for people suffering from one or more chronic disease.

Camden Coalition of Healthcare Providers

The head physician of the Camden Coalition of Healthcare Providers “the Coalition” in Camden, New Jersey used medical billing records from three local hospitals to create a single workable database where he was able to study patterns of people who sought medical care. He used the data to make detailed neighborhood maps of the city, color-coded by the hospital costs of its residents to identify hot spots – a type of Healthstat. For example, the data allowed him to identify where ambulances picked up fall victims, and as it turned out, one building more than any other in the City was responsible for the majority of falls requiring medical attention. The data showed that 57 incidences of falls over a 2-year-period occurred in a single building costing the City nearly $3 million in medical expenses.14

Working with the City of Camden’s highest cost population, the Coalition – a type of “medical home” – brought together a team of doctors across multiple specializations to improve the way healthcare services were delivered to hot spots around the City. The Coalition’s efforts, with its first 36 “super-utilizers” of medical care, reduced average hospital and emergency room visits from 62 to 37 visits a month, cutting hospital costs by more than $500,000 a month.15 The Coalition intends for their healthcare delivery approach to serve as model for other cities and states to improve patient care and reduce costs. For more information on the Coalition, visit: www.camdenhealth.org.

Intensive Outpatient Care Plan

In 2008, the Boeing Corporation, based in Washington State, created a “medical home” as part of a small pilot project, known as the Intensive Outpatient Care Plan (IOCP). The purpose of IOCP was to improve quality of care and reduce per capita spending for employees and their adult dependents with severe chronic disease enrolled in the company’s self-funded, health insurance plan. The pilot involved 740 participants who received intensified primary healthcare services from one of three physician groups taking part in the project.16 Participants were given an individualized care plan and received extensive outreach services to ensure they each received the services required to effectively treat his or her chronic illness.

                                                            14 A Gawande, “The Hot Spotters,” The New Yorker, Jan. 24, 2011, http://www.newyorker.com/reporting/2011/01/24/110124fa_fact_gawande 15 Ibid.  16 A Milstein & P Kothari, “Are Higher-Value Care Models Replicable?” Health Affairs Blog, Oct. 20, 2009, http://healthaffairs.org/blog/2009/10/20/are-higher-value-care-models-replicable/ 

 

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The program yielded a 20 percent drop in net spending and an almost 60 percent decline in missed work days after one year for the Boeing Corporation.17

Bridging Gaps in Care

Once a high-risk, high-opportunity population is identified, employing evidence-based strategies can yield significant results. Working to overcome gaps in care created by fragmentation within the healthcare system offer opportunities to lower utilization of high-cost inpatient services and avoid those significant costs. For example, one rustbelt state has identified more than $170 million in potential cost savings of Medicaid expenditures in avoidable hospital admissions if illnesses could have been managed appropriately prior to admission.18

For Medicaid, the hospital readmission rate for non-elderly Medicaid patients is almost twice the rate for privately insured patients.19 Often this is because of the lack of coordinated care available to this population. Best practices among leading hospitals with low readmission rates show active engagement by the hospitals to avoid the deterioration in health that results in a person being readmitted.

STate Action on Avoidable Rehospitalization

Building on the knowledge base from top-performing hospitals, the STate Action on Avoidable Rehospitalization (STAAR) Initiative is working with Massachusetts, Washington, Michigan and Ohio to implement statewide efforts to

                                                            17 Ibid. 18 “Medicaid Hot Spots,” Ohio Governor’s Office of Health Transformation, (Jan. 2011), http://www.healthtransformation.ohio.gov/LinkClick.aspx?fileticket=_PBdWCq2Yto%3D&tabid=70  19 LM Weir, M Barrett, et al, “All-Cause Readmissions by Payer and Age, 2008,” Healthcare Cost and Utilization Project Statistical Brief #115, June 2011. 

Estimating Savings

Being able to estimate the costs and potential returns on investments in chronic care management strategies

provides essential points of evaluation when pursuing reforms. Tools are

available to assist governors and other policymakers:

Chronic Disease Calculator (http://www.cdc.gov/chronicdisease/resources/calculator/index.htm) The Centers

for Disease Control and Prevention (CDC) developed tool to estimate the

cost burden of six chronic diseases (diabetes, congestive heart failure, stroke, heart disease, hypertension and cancer) on a specific state’s Medicaid program.

The calculator can also provide an estimate of chronic disease costs based on user inputs of disease prevalence and treatment costs for different populations.

The latter is particularly helpful to provide projections based on trends in

costs and disease prevalence.

Return on Investment Forecasting Calculator (http://www.chcsroi.org/) - The tool, developed by the Center for

Health Care Strategies, enables policymakers and program administrators

to evaluate the net financial benefits of initiatives designed to improve healthcare quality and lower costs. There are two

program modules: one calculates the return on investments for medical homes and the other is focused on other quality

initiatives, including care management efforts. 

 

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reduce rehospitalizations.20 The STAAR Initiative works by improving the patient’s experience of care and transitions between the hospital and out-patient care settings and providers. The effort focuses on five evidence-based interventions:

1. Comprehensive discharge planning; 2. Post-discharge support; 3. Multi-disciplinary team-based care management; 4. Patient education and self-management; and 5. Remote monitoring of the patient’s condition.

Early results from a redesigned transition system in Cambridge, Massachusetts has reduced rehospitalizations and improved outpatient follow-up by more than 25 percent.21 Grant support from The Commonwealth Fund supported the initial phase of the two-year, multi-state STARR Initiative that started in May 1, 2009.22 The project was a public-private partnership between states partaking in the project, the 10 to 20 participating hospitals selected by state project leaders and the Institute for Healthcare Improvement – a nonprofit organization.

By providing guidance and aligning resources to support and encourage readmission reduction, Democratic Governors may choose to facilitate the rapid replication of these best practices in hospitals within their states.23

Interventions to Reduce Acute Care Transfers

While avoiding the need to be rehospitalized after leaving the hospital offers significant opportunities for states to reduce healthcare costs, being able to avoid the initial hospitalization holds potentially greater cost-saving and quality-of-life improvements, as the Interventions to Reduce Acute Care Transfers INTERACT II Collaborative program shows.

The INTERACT II Collaborative program works to reduce the need for hospitalization for long-term care residents whose conditions otherwise can be treated in the nursing home. The program is a long-term care initiative in 25 community-based nursing homes in New York, Massachusetts and Florida. Nursing home staff actively focuses on identifying, assessing and managing residents’ non-life threatening illnesses, such as fevers, respiratory tract infections or

                                                            20 In contrast to readmissions – admissions to the same facility, rehospitalization concerns admission to any inpatient facility for the same condition in a recent, previous hospitalization. 21 Institute for Healthcare Improvement, State Action on Avoidable Rehospitalizations: http://www.ihi.org/offerings/Initiatives/STAAR/Pages/Materials.aspx. A Boutwell & MB Johnson, “STAAR Issue Brief: Reducing Barriers to Care Across the Continuum – Working Together in a Cross-Continuum Team, Institute for Healthcare Improvement, Brief #3, 2010, http://www.ihi.org/offerings/Initiatives/STAAR/Documents/STAAR%20Issue%20Brief%20-%20Cross%20Continuum%20Teams.pdf 22 Ibid. 23 The STAAR Initiative resources include tools to assess state readmission rates and areas ripe for health policy support: http://www.ihi.org/offerings/Initiatives/STAAR/Pages/Materials.aspx 

 

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urinary infections, to prevent conditions from becoming severe enough that hospitalization is required.

For example, typically when a nursing home resident develops infection, low fever and a cough, a night nurse contacts the on-call physician, who has little knowledge of the resident. After a brief discussion of the symptoms, the physician directs the nurse to send the resident to the emergency room for a battery of tests, which ultimately determines the resident is suffering from a respiratory infection; antibiotics are administered and the resident may be hospitalized overnight. Under an INTERACT II Collaborative model, the same night nurse would evaluate the resident based on a standard protocol to identify potentially serious issues, and reports those findings to an on-call nurse practitioner (NP), who visits the home daily and knows the patient. Upon hearing the results of the evaluation, the NP and night nurse agree to manage the resident’s care through monitoring at the nursing home. In the morning, a nurse evaluates the resident’s condition and reports it back to the NP, who also shares it with the resident’s family caregiver; together they decide to put the resident on antibiotics. The outcome is the same, but an unnecessary emergency room visit and hospitalization is avoidable when an intervention strategy, like the INTERACT model, is employed.24

Nursing homes participating in the INTERACT II Collaborative model also offer advanced care and palliative care planning as an alternative to acute hospitalization for residents at the end of life. Within six months of implementation, the program realized a 24 percent reduction in hospitalization rates among “moderately to highly engaged” nursing homes, and a 17 percent reduction in hospital rates overall. Projected savings of $125,000 a year per 100-bed nursing home more than offset the $7,700 per nursing home program cost.25 The project started with funding from the Centers for Medicare & Medicaid Services (CMS) and is now being funded by a grant from The Commonwealth Fund.

Reducing unnecessary rehospitalizations is also impeded by the misalignment of Medicare and Medicaid. Medicaid does not benefit from savings Medicare attains from avoidable hospitalizations for dual eligible beneficiaries. As it stands now, a nursing home stands to gain three to four times the daily Medicaid payment rate by hospitalizing residents with Medicaid coverage; after a 3-day stay in the facility, the resident may qualify for post-acute care under Medicare Part A.26 Replicating reform models with the greatest chance of success in long-term

                                                            24 JG Ouslander and RA Berenson, “Reducing Unnecessary Hospitalizations of Nursing Home Residents,” New England Journal of Medicine, 2011; 365(12): 1165-1167. 25 JG Ouslander, G Lamb, R Tappen, et al., “Interventions to Reduce Hospitalizations from Nursing Homes: Evaluation of the INTERACT II Collaborative Quality Improvement Project,” Journal of the American Geriatrics Society, April 2011 59(4):745-53. 26 Grabowski DC. Medicare and Medicaid: Conflicting incentives for long-term care. Milbank Q 2007;85:579-610 

 

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care facilities therefore must demonstrate a commitment to leadership, culture of quality and safety and have the infrastructure to support them.27

As targeted in the INTERACT model, the poor management of care transitions from in-patient to out-patient, from nursing home to provider or even from specialist to primary care generates avoidable health issues and the costs that follow. Several randomized control trials and real world experience with nurse-led care transition programs show the potential for both health improvements and cost savings that result from careful management of transitions from one care setting to another.

Transitional Care Nurse Model

Multiple studies using the Transitional Care Nurse Model, including one with Aetna’s Medicare Advantage plan serving dual eligibles or people qualifying for Medicare and Medicaid benefits, have shown the program works to improve outcomes and lower costs by equipping patients and family caregivers with the knowledge, skills and resources essential to prevent future decline and rehospitalization. Initially, a patient is enrolled in the program when hospitalized. Within 24 hours a transitional care nurse (TCN) performs an assessment. Over the course of one to three months, the TCN performs an in-home assessment, provides weekly in-home or telephonic visits, attends doctor visits as needed, develops and tracks progress on a personalized care plan and regularly collaborates with the patient, the family caregiver and the patient’s primary care provider. In the Aetna study, the program reduced hospital readmissions significantly within three months of patient enrollment and cut healthcare costs by $439 per member per month.28 Aetna found the total savings significantly greater than the cost of the program, reporting a positive return on investment.29

Readmission Payment Reforms

The Affordable Care Act strengthens efforts to overhaul the physician fee schedule and permits initiatives to study broader payment reforms, like accountable care organizations and bundled payments.30 Since state Medicaid programs typically use some of the same payment systems as

                                                            27 “Reducing Unnecessary Hospitalizations of Nursing Home Residents,” Joseph G. Ouslander, M.D., and Robert A. Berenson, M.D., New England Journal of Medicine, Sep. 29, 2011; 365:1165-1167, http://www.nejm.org/doi/full/10.1056/NEJMp1105449#t=article 28 MD Naylor, KH Bowles, KM McCaluley, et al. “High-Value Transitional Care: Translation of Research into Practice,” Journal of Evaluation in Clinical Practice, published online March 16, 2011; MD Naylor, et al., “Transitional care of Older Adults Hospitalized with Heart Failure: A Randomized, Controlled Trial,” Journal of the American Geriatric Society, 2004;52: 675-84; MD Naylor, et al., “Comprehensive Discharge Planning and Home Follow-up of Hospitalized Elders,” JAMA 1999;281(7): 613-20.  29 “How to Save a Bundle on Hospital Readmissions,” Lola Butcher, Managed Care, July 2009, http://www.managedcaremag.com/archives/0907/0907.readmissions.html  30 “Rapidly Evolving Physician-Payment Policy – More Than the SGR,” Paul B. Ginsburg, Ph.D., The New England Journal of Medicine; January 13, 2011, http://www.nejm.org/doi/full/10.1056/NEJMhpr1004028  

 

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Medicare, many of the changes to the Medicare physician-payment system will also likely impact Medicaid payment systems as well.31

Readmission payment reforms reinforce hospitals’ desire to do right by patients by aligning incentives to promote quality of care improvements, assure smooth care transitions and reduce readmissions. Recognition of the volume-driven incentives in the traditional fee-for-service system has led to several experimental models aimed at promoting quality improvement through a series of rewards and penalties. Several are outlined below with the benefits and detractions associated with each.

• Refusing to pay for preventable readmissions. Medicare and some private health plans are experimenting with refusing to pay for “preventable” readmissions. While “never” events (e.g., failing to remove surgical instruments) are relatively straightforward, other “preventable” occurrences will be much more difficult to determine, particularly in areas of chronic disease management that rely on patient follow through post-discharge. The gray areas will make implementation of these programs on a larger scale difficult.

• Scorecards on readmissions. Producing reports that examine readmission rates for hospitals in the state that serve Medicaid patients can work to facilitate improvement. In the past, Medicare has produced similar reporting with the first year being reported in private and subsequent years reported publicly. Hospitals receive information on individual performance and how they rank within the state. Such an evaluation can also be used to set the baseline for measuring improvements over time. Reporting alone has generated improvements as hospitals seek to attract new patients and gain advantages in contract negotiations for establishing reimbursement rates. Tying scorecards with public recognition for excellence and significant improvements may also provide significant incentives for improvement.

• Shared savings. Reducing readmissions can cause hospitals to lose revenues. To overcome this financial barrier, several programs are looking at ways to share the reduced readmissions’ savings with providers.

o Measuring savings can be based on traditional costs of care and readmission rates within the service area or similarly situated providers not participating in the program.

o Given the investments needed in infrastructure (Health Information Technology (HIT) systems, etc.) some safety net providers or rural

                                                            31 Ibid.  

 

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hospitals may need access to funding or advancements in shared savings to establish needed systems.

• Bundled payments. Ongoing pilots in New Hampshire and Massachusetts, among other states, are exploring the use of bundled payments. CMS is also authorized to begin a pilot under the Affordable Care Act within Medicare to test this concept. The idea is to provide a single payment for inpatient and outpatient care to encourage coordination among multiple providers (e.g., a hospital and primary care provider).

o Given the newness in approach, it’s not clear what services and/or products will be included in a bundle and how providers are to share payments. For patients in an integrated hospital-physician system, the payment problem is readily resolved, but without such an arrangement, these issues may be difficult to sort out, particularly where a primary care provider is not affiliated with the hospital receiving the payment.

Both the timeframe for evaluation and the quality measures that assure the quality of care provided will be critically important. The length of the timeframe involved could incentivize actions with less durability in the results than if a longer timeframe is used for evaluation. Also, the reason for the admission could have an influence on the timeframe considered. For example, a patient with congestive heart failure is much more likely to experience deterioration in health status that results in a readmission in a shorter timeframe than a diabetic, who is stabilized in the hospital might. Assuring that the quality of care is not compromised can be addressed by including quality of care measures that must be met as a part of the payment scheme.

Facilitating Care Coordination

Appropriate treatment for chronic conditions, particularly for people with more than one chronic disease, often involves multiple providers, providing care in different settings, requiring regular follow-up and depending upon a well-prepared patient or family caregiver to follow through on care recommendations. Without coordination, these factors can and often do result in fragmentation, higher costs and poor health outcomes. In general, a lack of coordination and awareness of treatment plans can exist between multiple healthcare providers, especially primary care physicians, specialists and hospitals, and sometimes result in duplicate tests and services that lead to inadequate care.32 Several states have implemented

                                                            32 “Patient-Centered Medical Homes,” Health Affairs, Health Policy Brief, Sept. 14, 2010, http://www.rwjf.org/files/research/68929.pdf 

 

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models that promote greater coordination of care, including the development of patient-centered medical homes. While there are no set guidelines for medical homes, they generally require that a patient has close contact with a clinician to coordinate care (e.g., a physician, nurse practitioner or physician assistant), use of electronic records and engaging the patient and family caregiver in the care regimen.33 Perhaps the two models cited most often are Community Care of North Carolina and Vermont’s Blueprint for Health.

Community Care of North Carolina

Community Care of North Carolina (CCNC) not only serves more than a million North Carolina Medicaid recipients statewide, but is also developing Patient-Centered Medical Home programs for individuals covered by Medicare (including dual eligibles) private sector insurers, such as market leader Blue Cross and Blue Shield of North Carolina and self-funded employers, such as GlaxoSmithKline. CCNC’s local healthcare networks support primary care practices through care management, clinical support, population care management tools, data analysis and feedback, web-based electronic medical records and linkages to community, pharmacy, public health and behavioral resources. CCNC’s local networks share best practices with each other and local primary care, behavioral and pharmacy providers. Independent analysis of program savings estimate CCNC reduced costs for the State of North Carolina by $984 million from 2007, through 2010.34

CCNC’s unique infrastructure is the result of over a decade of a successful and energetic collaboration by clinical leaders and government. CCNC’s patient-focused, clinical-lead approach has a demonstrated ability both to reduce costs and improve care delivery in ways that are patient- and physician-friendly. CCNC’s locally driven, “quality-first” approach is considered by many healthcare policymakers as a promising model for delivery system transformation in other states and across the nation. For more information on CCNC, visit: www.communitycarenc.org.  

Vermont’s Blueprint for Health

Similarly, Vermont’s Blueprint for Health – a state led program designed to modify and reform the delivery of healthcare and services available to Vermont citizens – depends on advanced primary care practices serving as medical homes for state residents. The effort aims to transform care delivery and improve health by promoting prevention, wellness and seamless, well-coordinated care across the state. Primary care providers are supported by Community Health Teams, which provide direct access to multi-disciplinary support, such as care managers, counselors, health educators, dietitians and linkages to other community services. The program also relies on an integrated information technology infrastructure and all-payer database to measure, report and spur improvement from the state to practice level. Unlike                                                             33 Ibid. 34 Milliman, Inc. Analysis of Community Care of North Carolina Savings, December 2011 

 

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CCNC, the Blueprint operated as a multi-payer model from its outset. Early results show decreases in hospital admissions and associated costs (down 22 percent) since the program started about four years ago.35 For more information on the Blueprint for Health, visit: http://hcr.vermont.gov/blueprint_for_health.

Mental and Behavioral Healthcare Integration

Recognizing the close relationship between physical and mental well-being, innovators in several states are focusing care coordination efforts to address the need for greater integration between primary care and mental and behavioral health. Fortunately, the evidence base on both methods for and results from integrating mental and behavioral health services with primary care is solid and growing. The level of integration can vary from providing linkages to telephonic support to physical co-location and full integration among primary care and mental and behavioral health providers and services.36

Massachusetts Child Psychiatry Access Project

To address the lack of integration, growing need for children’s mental health services, the shortage of pediatric mental health professionals and the challenges for primary care providers in filling these needs, the Massachusetts Behavioral Partnership operates the Massachusetts Child Psychiatry Access Project (MCPAP), which is funded by the Massachusetts Department of Mental Health. MCPAP provides pediatricians with timely phone access to children’s mental health consultations, including advice on prescribing psychotropic medicines to pediatric patients. MCPAP is available to any child with mental health needs, regardless of insurance status at a cost of about 2 cents per child per month. As of December 2010, MCPAP was providing mental health consultations to pediatricians, who served about 85 percent of Massachusetts children and youth with a total operating budget at full implementation of $3.2 million.37 Illinois, Washington, Iowa, New York, Arkansas, Maine, Ohio, Texas and Wyoming have replicated the program and Connecticut, California and New Jersey are planning for implementation. For more information on MCPAP, visit: www.mcpap.org.38

                                                            35 C Bielaszka-DuVernay, “Vermont’s Blueprint for Medical Homes, Community Health Teams, and Better Health at Lower Cost,” Health Affairs, 2011; 30(2): 383-86; Blueprint for Health 2010 Annual Report, http://hcr.vermont.gov/sites/hcr/files/final_annual_report_01_26_11.pdf 36 For a description of the continuum of integration with models of each described, see C. Collins, D. Hewson, and T. Wade, “Evolving Models of Behavioral Health Integration in Primary Care,” Milbank Memorial Fund, available at: http://www.milbank.org/reports/10430EvolvingCare/EvolvingCare.pdf, accessed December 22, 2011. 37 The Catalyst Center, “The Massachusetts Child Psychiatry Access Project: Combining Innovation and Collaboration to Enhance Children’s Mental Health Services in the Primary Care Setting,” February 2011, http://hdwg.org/sites/default/files/MCPAP.pdf 38 Ibid.  

 

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Additional Resources

The U.S. Substance Abuse and Mental Health Services Agency (SAMHSA) has issued guidance for states seeking to

establish health homes for people with behavioral health disorders:

http://www.samhsa.gov/healthReform/healthHomes/index.aspx

Improving Mood: Promoting Access to Collaborative Treatment

Under Project IMPACT (Improving Mood: Promoting Access to Collaborative Treatment), a depression care manager provides education, behavioral activation, support of medication management prescribed by a primary care provider and problem-solving treatment in primary care settings for up to 12 months. In a randomized control trial, IMPACT lowered average total healthcare costs by more than $3,300, net of program costs, with savings across every category of healthcare service, which includes outpatient mental health, pharmacy, other outpatient care, inpatient medical care and inpatient mental health or substance abuse care. Minnesota is implementing IMPACT under its DIAMOND (Depression Improvement Across Minnesota – Offering a New Direction) program.39 For more information on DIAMOND, visit http://www.icsi.org/health_care_redesign_/diamond_35953/. More information about Project IMPACT is available here: http://impact-uw.org/about/research.html.

Enhancing Treatment Adherence and Self-Management

Most decisions that affect an individual’s health take place outside the medical system. The choices people make, including how well they follow through on treatment recommendations, have a profound impact on their health and healthcare costs. For example, though medications are a powerful tool to prevent the onset and worsening of chronic diseases, poor medication adherence is common and a ripe source for improvement. For example, one in four Americans do not follow directions in taking medications, and three out of four admit to having not taken their medicines as prescribed at some point.40 Poor medication adherence is associated with avoidable hospitalizations, readmissions, emergency room use, disease progression and health status decline. In fact, one-third to two-thirds of all medication-related hospital admissions are attributable to poor medication adherence.41 Overall, poor medication adherence costs more than $300 billion a year nationwide.42 The evidence base for the causes of poor medication

                                                            39 J Unutzer, W Katon, M-Y Fan, et al., “Long-term Effects of Collaborative Care for Late-life Depression,” American Journal of Managed Care, 2008; 14:95-100;  40 National Community Pharmacists Association and Pharmacists for the Protection of Patient Care Adherence Survey 2006. 41 MA Munger, et al, “Medication Non-adherence: An Unrecognized Cardiovascular Risk Factor,” Medscape General Medicine, Vol. 9, No. 3, Issue 58, Sept. 2007. 42 R Balkrishnan, “The Importance of Medication Adherence in Improving Chronic Disease Related Outcomes,” Med Care 2005; 43:517-20; New England Healthcare Institute, “Thinking Outside the Pillbox,” http://www.nehi.net/publications/44/thinking_outside_the_pillbox_a_systemwide_approach_to_improving_patient_medication_adherence_for_chronic_disease 

 

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adherence, how to address them and the gains that result is significant and robust.43 In fact, Comprehensive Medication Management (CMM) services, along with access and affordability to the most appropriate medications, results in optimizing clinical and patient goals of therapy in a safe and effective manner, can significantly improve clinical outcomes and quality while reducing overall healthcare costs. 44 CMM is the standard of care that ensures each patient’s medications are individually assessed to make certain that the medication is appropriate, effective for the medical condition, safe given the comorbidities and other medications being taken and willing and able to be taken by the patient, as intended.

Connecticut Pharmacists Association Demonstration

To tackle the problem, the Connecticut Pharmacists Association formed a network of independent pharmacists to work directly with payers, provider groups and employers to provide comprehensive medication management services within a primary care medical home model. In the demonstration, pharmacists were paid a fixed-fee to review patients’ medical charts and pharmacy claims, provide medication management services, develop medication action plans and send reports on the plans and results to providers. Working closely with Medicaid patients for 10 months, pharmacists identified 3,248 medication discrepancies (e.g., patient’s reported use compared to medical charts or claims data) and 917 drug problems (e.g., dosage, safety, poor adherence, unnecessary drug or additional drug needed). Pharmacists resolved 80 percent of problems without needing a follow-up appointment with the primary care provider. The program saved $1,600 per patient in total healthcare expenditures, generating a 2.5 to 1 return on investment.45

Minnesota Medication Therapy Management Program

Similarly, a medication therapy management program in Minnesota, engaged pharmacists to provide face-to-face comprehensive medication management services for Blue Cross Blue Shield health plan members with at least 1 of 12 medical conditions. In the year-long program, more than 600 drug therapy problems were identified and resolved and patient achievement of therapy goals increased from 76 percent to 90 percent, according to a study of the program conducted by the University of Minnesota College of Pharmacy in partnership with Blue Cross Blue Shield of Minnesota. The program also realized HEDIS46 measure improvements in both

                                                            43 See, e.g., R Cauchi, “Medication Therapy Management: Catching Errors, Saving Lives and Money,” National Conference of State Legislators LegisBrief, Vol. 18, No. 4, Jan. 2010. 44 Comprehensive Medication Management in The Patient-Centered Primary Care Collaborative Resource Document: “The Patient-Centered Medical Home-Integrating Comprehensive Medication Management to Optimize Outcomes.” Available online at: http://www.pcpcc.net/files/medmanagement.pdf  45 M Smith, M Giuliano, and M Starkowski, “In Connecticut: Improving Patient Medication Management in Primary Care,” Health Affairs, 2011; 30(4): 646-54. 46 HEDIS is a performance measurement tool used by the majority of health plans in the U.S. that enables equal comparison of reform initiatives across multiple plan types. 

 

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hypertension and hyperlipidemia. Total healthcare costs dropped from $11,965 to $8,197 per person, generating a 12 to 1 return on investment.47 The success of the program and others like it led to the State developing its own Medication Therapy Management program in 2005.

Stanford Chronic Disease Self-Management Program

For improving overall self-management skills for people with chronic diseases, the Stanford Chronic Disease Self-Management program is the gold standard. The well-tested model relies on community-based or online workshops for people coping with chronic disease. The workshops are led by peer coaches with health problems of their own and focus on building self-management skills, sharing experiences and offering support. Results include improvements in self-management skills, more appropriate utilization of healthcare services that maintain – even with declines in health and cost-savings – in terms of reduced use of emergency care, hospitalizations and other intensive services. Replication has occurred nationwide and internationally with consistent results and holds the potential to be replicated at the state-level.48

Improving Population Health

Over the long-term, reducing healthcare spending will depend upon broader improvements in health status and a dedicated focus on prevention and public health. For states, the costs of poor health are clear, particularly within Medicaid. Overall, Medicaid recipients have higher levels of behavioral risk factors for poor health compared to the general population. For example, the smoking rate in Medicaid is almost 53 percent higher than among the general public, and smoking-attributable costs added $22 billion in costs to the states under Medicaid in 2004.49 The obesity epidemic also adds significant costs, including additional Medicaid spending. For obese enrollees compared to their normal weight peers, Medicaid spends, on average, $213 more for inpatient services, $175 more for outpatient services and $230 more for medications each year.50

Policy changes and small investments that support healthier behaviors can make a significant difference. According to Trust for America’s Health, an investment of $10 per person a year in proven community-based programs to increase physical activity, prevent smoking and other tobacco use and improve nutrition could save the U.S. more than $16 billion annually within

                                                            47 B Isetts, S Schondelmyer, M Artz, et al., “Clinical and Economic Outcomes of Medication Therapy Management Services: The Minnesota Experience,” Journal of the American Pharmacist Association, 2008; 48(2): 203-11. 48 Stanford University, “Review of Findings on Chronic Disease Self-Management Program (CDSMP) Outcomes: Physical, Emotional & Health-Related Quality of Life, Healthcare Utilization and Costs,” 2008. http://patienteducation.stanford.edu/research/Review_Findings_CDSMP_Outcomes1%208%2008.pdf 49 B Armour, E Finkelstein, and I Fiebelkorn, “State-Level Medicaid Expenditures Attributable to Smoking,” Preventing Chronic Disease: Public Health Research, Practice, and Policy (CDC, July 2009). 50 E Finkelstein, I Fiebelkorn, and G Wagner, “National Medical Spending Attributable to Overweight and Obesity: How Much, and Who’s Paying,” Health Affairs, May 2003: W3-219-W3-226. 

 

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five years.51 For example, according to a recent CDC report, nine out of ten of Americans consume too much salt, which increases blood pressure – a leading risk for vascular diseases.52 If people reduced their sodium intake by 1,200 milligrams on average per day, as much as $120 billion could be saved in total healthcare expenditures.

Addressing key risk factors for poor health and the development of costly chronic diseases through initiatives promoting prevention and wellness can lower the cost burden of chronic diseases over time. The Affordable Care Act includes additional funding and other resources (See also Appendix 1) to help states identify and support prevention and public health efforts at the state and community level. Online tools offer a snapshot of where individual states stand nationally in relation to key health data and can assist policymakers and clinical providers in determining priority areas for population health improvement.53

Conclusion

Bending the healthcare cost curve in the states cannot be accomplished without addressing the primary driver of those costs – chronic disease. Policy changes that address chronic disease as a cost driver and work to reorient the delivery of care toward preventing chronic disease onset and progression are essential to sustainable cost management strategies.

Several provisions in the Affordable Care Act address these problems head on and include opportunities for states directly or through public-private efforts to receive additional funding to develop and implement programs. Learning from and replicating effective models will allow states to capitalize on funding opportunities to replicate these models. Although state programs, populations and policies vary, the challenges represented by rising rates of chronic disease and the associated costs are universal.

Acquiring knowledge about and replicating programs that work to prevent the onset and progression of chronic disease make efficient use of public funds by yielding near-term results. As both the chief executive and administrator of both Medicaid and employee and retiree health programs, Democratic governors have a significant opportunity to lead state healthcare reform efforts that can have a profound impact on their state’s fiscal health and the physical well-being of citizens.

 

 

                                                            51 Trust for America’s Health, “Prevention for a Healthier America,” (July 2008). Available online at: http://healthyamericans.org/reports/prevention08/  52 Centers for Disease Control and Prevention; “Where’s the sodium? There’s too much in many common foods,” Feb 7, 2012, http://www.cdc.gov/Features/VitalSigns/Sodium/  53 For example, Trust for America’s Health, Key Health Data by State is available online at: http://healthyamericans.org/states/ Also, Kaiser Family Foundation makes state health data available online at: http://www.statehealthfacts.org/ 

 

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Appendix 1: Affordable Care Act New Payment Opportunities and Demonstrations

New Payment Opportunities for States Provision Opportunities Sections

Improving access to preventive services in Medicaid and Medicare

4104-06 Enhanced support for preventative

care Incentives for chronic disease prevention for Medicaid beneficiaries

4108

Access and Care Coordination Payment Demonstrations Provision Opportunities Sections

Global Payment: Up to five states can create a global, capitated, bundled payment system for a

large safety-net hospital system to evaluate changes in health care spending and outcomes,

including continuing care hospitals.

2705

Bundled Payments: The CMS Innovations Center would establish a bundled payment

demonstration project under Medicaid in up to 8 states for a Medicaid beneficiary.

2704

Medicaid State Plan Option with enhanced FMAP to promote health homes and integrated care. Enrollees with two chronic conditions, or one chronic condition and risk of a second, can

designate a qualified health provider as their health home. Services include comprehensive

care management, care coordination and health promotion, comprehensive transitional care and community and social support services.

2703

Community health teams to support the development of medical homes for persons

with chronic conditions by increasing access to comprehensive, community-based, coordinated

care.

3502

Grants for medication therapy management (MTM) services provided by licensed

pharmacists as part of a collaborative approach to the treatment of chronic diseases.

3503

Payment Delivery The CMS Innovation Center (CMI)

has been charged with testing innovative payment and service

delivery models with the ability to expand successful models nationally

(Section 3021).

Grants for a consortium of health care providers under a joint governance structure to

create Community Based Collaborative Care Networks comprised of a hospital and an

FQHC (where available) to provide comprehensive coordinated and integrated

health care services for low-income populations.

10333

Source: Safety Net and the Medical Home Initiative, Health Reform and the Patient-Centered Medical Home: Policy Provisions and Expectations of the Patient Protection and Affordable Care Act, Policy Brief Issue 2,

http://www.qhmedicalhome.org/safety-net/upload/SNMHI_PolicyBrief_Issue2.pdf