The Changed Paradigm
President Johnson signing the Medicare Act 1965
The United States transitioned from a 1000+ year-old model of fee for service to a third party payer model. In 1965, Congress created Medicare under Title XVIII of the Social Security Act to provide health insurance to people age 65 and older, regardless of income and younger people with disabilities. The purpose for this transition was to create a safety net for the retired individuals to have healthcare when their individual resources were fixed and no new source of revenue was available to them. It was a great boon for the elderly. The payment model was quite simple: after the physician interaction, a form was submitted to the CMS Medicare by the patient and within six weeks the money was processed and the patient paid directly. The public viewed it, massaged by the relentless media, as a transition from a horse drawn buggy to riding the Mercedes.
Soon the polity decided that if the physicians participated in accepting assignments, they would be paid a small premium over the normal costs as a bonus and all payments would then be sent directly to the physicians. This had a two-fold advantage for both the patient and the physician. The patient did not have to outlay for the initial bill and the physician under most circumstances did not have to wait for the patient to be paid in order to receive his or her remunerations. The physicians lined up in droves and those that didn’t the market forces forced them into the fray eventually. After all the population was not getting any younger.
The time value of money was definitely on the government and the patient’s side since the six-week and sometimes more delay in payment due to processing delays, favored the two entities and not the physician who had already expended work and energy some time ago. Why quibble about minor things?
ICD codes and Denials
Lo and behold as things became complicated with the ICD coding promulgated by the Government and created by the AMA at a cost of millions to the taxpayers, to use as measurable metrics, the decisions regarding payment of legitimate expenses for rendered care resulted in an automatic 12% denial. This denial was willy-nilly and reasoned as poor interface of paper submission. If the physician office who was the direct recipient of the monies was not on top of perfect paper submissions with the right “ps” and “qs” a denial would be generated by the central (Medicare) and peripheral (Non-Medicare Insurers) planners. The interface between the patient and physician remained at the health level but the cost of that care was now directed towards the government and third party insurance. And if the physician’s office with its burgeoning staff, to accommodate the bureaucracy, was equally incompetent and limited in knowledge of processing the claims, then the physician suffered an economic blow that became apparent to him or her at the end of the year (since physicians by their very nature are not business people). Once the bulb of understanding was lit, it was already too late, further claims resubmission could not be processed because of the 90-day resubmission rule at the Insurer level. So the dragnet of financial squeeze was in place.
Electronic Submissions of Claims
Along came the digital age and every office had to now perforce of mandate employ the digital mode of claim transmission. Well as you might have guessed the initial processing was quicker with a 3-4 week return on the claim. Suddenly the denial rate increased many fold because of the missed “.” and “,” in the generated claims report. Additionally quasi rules of payments were conjured up based on soft “evidentiary” rule-making. This resulted in denials for “appropriateness of care.” The once reasoned arguments for reimbursements now became unreasonable. Given the electronic submission of data, an automatic audit was created to evaluate “appropriateness of care.” Never mind the complexity of the care given, if there were too many high-complexity claim submissions a report was generated to chastise the physician and ultimately used as a denial of services or better yet there was a demand for return of payments via automatic Audits.
As the utilization of the services increased, due in part to an aging populace and because of the multiple co-morbid states represented on the ICD coding method, the healthcare spending rose dramatically, climbing first to12% and then up to 17% of GDP in 2010. With one eye on payments and the other on the spiraling costs, the Insurance audits increased in frequency and more and more human resources were employed in the game of “I did!” against “you did not!”
Alarms and Bells of all shapes and sizes rang out loud and clear that this was an unsustainable progression of events and that something needed to be done to harness this wild and intemperate healthcare beast.
Medicaid, Municipalities, Bankruptcies and Employers.
The model promised and promulgated by the central planners was to provide Universal Healthcare but in conceiving of this largesse they failed to take into account the costs that would be incurred. The states already whimpering in their own financial straits were looking at their own fiscal cliffs of insolvencies and many decided they did not want to partake in the management of the ever-increasing Medicaid eligible individuals because it would collapse them into bankruptcy. A large gaping hole yawned ahead of this conceived healthcare agenda. Physicians, reeling from the non-payment and low-payment model of Medicaid reimbursement cancelled their participation in the Medicaid services, leaving several thousands of the low-income people under the Medicaid rolls without caregivers. (The cost of care delivery exceeded the reimbursements ~an untenable situation for private practitioners). This impact was felt at the state and municipality level who were left without money and a bloated bag of IOUs. However they paid themselves handsomely all the same. In fact four municipalities in California alone declared bankruptcy due to unsustainable costs of rendering services and paying for their own heath benefits and those of its employees. The Universal Coverage model was fast becoming a forced reality with ultimately the Federal Government will end up undertaking the care of the Medicaid eligible individuals. (Not to mention the employers who shun healthcare subsidy for their employees and agree to pay $2000 fine to save $12000 in premium coverage for the same would result in a sea of uninsured individuals, filling the Medicaid rolls). The burgeoning rosters of people needing medical help and little available provisions of care for the same became a dilemma where something had to be done. The falconer was losing sight of the falcon.
IPAB, P4P and EBM.
The only route to control costs was rationing the expected care, Committees like IPAB and NCAB were established to figure out the appropriateness of care delivery. (This scenario has yet to play out). Not withstanding the demands of the elderly and the poor the scenario seems replete with cost curtailment by acronyms like P4P (pay for performance) and EBM (Evidence Based Medicine). The problems with eaxh of these, remains as to how does one consider performance? The P4P is already being played out, and as all such implied top-down simplicity faces the day of reckoning, the physicians realized that the really sick patients would reduce their (the physicians) performance numbers. So they stopped accepting complicated cases and referred them to the tertiary centers. In time the tertiary centers saw their “health grades” dip due to high costs and poor “performance” and that racked the ivory tower industry to the core. Suddenly articles populated the journals decrying that P4P doesn’t really work and a better system needs to be in place. What was good for the goose was not apparently good for the gander.
As far as the “Evidence Based Medicine” scenario is concerned, it was based on the shifting sands of the word, “Evidence.” In medicine, as in all fast changing fields, today’s evidence is tomorrows “What were we thinking?” that if latched on to, will exact its own pound of flesh.
The metrics for measurable intent was falling apart and along came the EMRs (Electronic Medical Records). The federal government initially enticed the physicians with subsidizing the cost of implementing such hardware and software requirements (you pay now and we will determine “meaningful use” later and reimburse part of your expense) and then lowered the boom by saying that those that did not implement EMR in their offices would be penalized annually on an incremental basis, starting at a 1.0% reduction in their Medicare reimbursements.
SGR and the “Doc Fix.”
The only thing left to tackle by the bureaucrats was the SGR (Sustained Growth Formula) whereby the physicians were being paid for services rendered through the CMS system. The polity seeing the red climbing the financial charts decided that to keep the costs down, the doctors would have to have a cut in their payments. So new formulas were used and to achieve the required cuts in healthcare costs, a 21%, then a 24.7% and finally a 30% cut had to be made to the physician reimbursement to recast the resources to service the millions of newly added individuals to the healthcare roster. The problem here was that using such draconian measures and using them as the sword of Damocles, forced the physicians to bow out of the Medicare system. After all being a physician is still not considered “indentured servitude.” The policy-makers fearful of a backlash from the voters unable to pull the lever, keep kicking the can forward because they can’t stomach losing their privileged seats in the halls of Congress where entitlements are sprinkled everywhere and everything is for free all admixed with a pension that would make CEOs of a large company blush!
Meanwhile the physicians who had private practices initially employing one or two individuals as office staff suddenly found themselves with 10,11 or even 12 members of the staff each fulfilling some regulatory requirement. The cost of rendering care suddenly seemed insurmountable. They had to find alternatives. Many closed their offices; some turned into entrepreneurs, chefs, businessmen and women while others found shelter in hospitals working as hospitalists.
Hospitalists and Outcomes.
Hospitals, too had to remake their image and those that did not venture into the new grid of such forced compliance, or were serving the indigent and poor patient clientele became victims to the financial losses and closed doors. The nonprofit large institutions and most for-profit hospitals were happy because they controlled the physician behavior through their paycheck and rallied large resources to pay their CEOs and CFOs. Many small hospitals merged with larger ones as promises were made and appointments to storied positions meted out to the acquired administrative staff. The consolidation resulted in a safety for the hospitals as 83% of the newly minted doctors out of residency wanted to be on the hospital payroll and forfeit independence to this new form of subjugated practice of medicine. This number a short four years before was at 18%.
Time forces reality to rear its ugly head eventually; a review of the costs suggested that the cost of rendering patient care by the hospitalists and hospitals had, via this model skyrocketed, actually doubled. The AHA lobby along with the patient advocacy groups continued the pressure on the policy-makers not to cut costs to the hospitals. Meanwhile in the dimly-lit rooms astride the large chambers, future is being planned to reduce the salaries of the physicians and base it on productivity. Some will feel the pinch of a pink slip soon. After all something will have to give and it will be the new, expensive employees. A substitution will be needed. Always ratcheting down payments to the new incoming “eager to change the world” doctors, indoctrinated in the cost-conscious, arbitrary “appropriateness of care.”
Back to the Envisioned Future.
From a global perspective given the limited resource of physician and no plans to increase recruitment of younger minds into the medical field, a band aid is being offered by convincing the laity that other “providers” including nurses, physician assistants, and nurse practitioners could function as ancillary physicians and “better” care would be rendered. The experts cite the European and the United Kingdom models. (In UK, five years ago a bill in the parliament was floated to allow nurses to perform major abdominal surgeries ~ it was defeated by one vote). Alas what they don’t include is the 6-month wait for specialists, an equal wait for surgeries, multiple cancellations of surgeries, lack of new life-extending medicines and a medical staff embedded in the bureaucratic morass unable to lift itself from a recliner to render care to the sick. They, the policy-makers also figured that these “providers” would receive a lower reimbursement because of their education and everyone would be covered. Unfortunately the seams of this fabric seem rather frayed. The hue and cry from the public used to “I want it now” over equity will be loud and clear soon.
So what is the answer to this demand and desire for a "controversial" substitution model as the standard bearer for all healthcare in the land.
Maybe some answers in the next discussion.
UK model of Healthcare under NHS
Patient Harm under NHS
General Practioners complain about patient harm.
Total projected cost of PPACA
PPACA cost and options for Employers
Medicare Law 1965
Bankruptcy in Municipalities across US
The Rise in the number of Hospitalists