The original intention of the Maryland waiver was to set hospital rates that all patients would be required to pay. This all-payer system prevented cost shifting from privately insured patients to government-insured patients. The waiver also sought to recognize social costs, such as uncompensated care and teaching costs, as part of the rate-setting system.
The old system was based on case rates. Now, to control overall costs, the system is transitioning to an all-payer global budget for hospitals, to encourage reductions in volume as well as cost per case. Essentially, if hospitals decrease their volume, they will now keep the savings. If volume increases, they may not receive more dollars.
Global budgets provide incentives for hospitals to keep patients healthy and out of the hospital. They also seek to reduce costs by improving quality and reducing unnecessary admissions, especially for Medicare fee-for-service, which has not invested in care coordination, as have commercial and other payers. For the first time, economic incentives for good population-based preventive care exist. Gone are the days of hospitals encouraging (or turning a blind eye to) overuse of the ER, OR, or cath lab.
Physicians have numerous business opportunities under the new waiver. Those who help design and implement programs that keep patients healthier and prevent hospitalizations will thrive. Research at the Centers for Medicare and Medicaid Services has identified billions annually in preventable admissions. Hospital use is the single most controllable part of the healthcare cost structure.
Hospitals now have incentives to extend their services into post-acute care, and develop programs that reduce ‘avoidable’ readmissions by encouraging medication compliance, preventive followup, etc. The skilled nursing facilities (SNFs) in our network, for example, have developed Step Up™ units that can provide a higher acuity of care for patients with flare-ups in their chronic conditions. They have also developed tighter coordination with home care companies.
National Post-Acute Healthcare (NPH), a company that provides government contracting and post-acute network creation for hospitals and SNFs, is working with our SNFs not only to provide enhanced clinical capabilities at the nursing facility, but also to provide coordinated patient flow procedures, transition protocols, electronic data mining and analysis, and negotiated gain-sharing incentives. Using this approach in Pennsylvania, we reduced hospital usage 50% and accessed new revenue streams that we share with our primary care physicians and hospital partners. Similar programs can be structured in Maryland.
Physicians also can partner with hospitals to keep appropriate patients from being admitted in the first place. Direct Admissions, an NPH program, will seek an exemption from the three-day hospital stay rule, which artificially keeps patients in the hospital for three days before going to a SNF. The company also negotiates a share in those savings for the physicians who help to keep patients healthier and, therefore, using fewer hospital days.
My colleagues and I developed this pilot program to allow emergency room physicians and case managers to seamlessly transition appropriate patients to a nearby SNF that has agreed to meet certain standards of quality medical care, data integration, and oversight responsibility. This model aligns incentives and provides gain-sharing opportunities. An example is an Alzheimer’s patient that hits the ER with dehydration, confusion, and a urinary tract infection, but can be stabilized in the ER and transferred directly to a contracted SNF.
Outpatient Surgical Centers
Surgeons can prevent unnecessary admissions through better population health management, encouraging more outpatient cases and surgical alternatives. Hospitals may be willing to fund programs that reduce surgical volumes, even ones that divert patients to your outpatient surgery center, as long as you are committed to lowering total costs.
For the first time, the talk about preventive care will be supported by the system’s incentives. We chose to be physicians to help our patients become healthier. This change offers tremendous promise for Maryland to be a national leader in improving quality and reducing hospitalizations and costs.
Scott Rifkin, M.D., practiced internal medicine for 20 years, and now owns Mid-Atlantic Health Care, which owns and operates 16 skilled nursing facilities with a total of 3,000 beds. He is also a partner/investor in NPH and several other companies. He can be reached at email@example.com.