Guest post by Ken Perez, vice president of healthcare policy, Omnicell.
On April 30, 2014, the Centers for Medicare & Medicaid Services issued its proposed rule for the Inpatient Prospective Payment System (IPPS), which pays about 3,400 acute care hospitals, and the Long-term Care Hospital Prospective Payment System (LTCH PPS), which pays about 435 LTCHs.
The issuance of this proposed rule is a significant event, as it discloses CMS’s intent regarding the average change (increase or decrease) to the IPPS reimbursement rate, what one might call an “annual inflation adjustment.”
While CMS projects that the payment rate update to general acute care hospitals will be 1.3 percent in FY 2015—which on the face of it doesn’t look too bad—it’s important to understand how CMS arrived at that figure, what is the projected overall impact on hospital payments because of other regulatory changes, and how the proposed update compares with the recommendation of the nonpartisan Medicare Payment Advisory Commission (MedPAC).
How did CMS arrive at the 1.3 percent update (adjustment)?
CMS started with a proposed annual market basket update (inflation projection) from research firm IHS of 2.7 percent. That starting point was then reduced, per the Affordable Care Act, by a multi-factor productivity adjustment of 0.4 percent and a specified reduction to the market basket update of 0.2 percent, yielding 2.1 percent. Then CMS reduced it by a documentation and coding recoupment adjustment (basically to correct for past, unintended documentation and coding over payments) of 0.8 percent, resulting in a net update of 1.3 percent.
In mid-September, the Congressional Budget Office (CBO) estimated that the cost of H.R. 2810, a permanent Sustainable Growth Rate (SGR) repeal or “doc fix,” would be $175.5 billion from 2014 through 2023, up from the CBO’s estimates of $139.1 billion in May and $138 billion in February for freezing (i.e., holding flat) all Medicare physician rates for 10 years.
H.R. 2810 would be more costly, as it does not freeze rates, it raises them slightly. As with all other SGR reform bills, its implementation would avoid an estimated 24.4 percent reduction to Medicare physician payment rates that is scheduled to take effect Jan. 1, 2014, but the bill would also increase payment rates by 0.5 percent per year during 2014-2018. That change would increase federal spending by $63.5 billion through 2018, relative to the spending projection under the SGR.
To this point in the meaningful use experiment, Phil Suiter, CEO of digiChart, has had the privilege of sitting at the front of one of healthcare’s greatest movements. From his place, he’s watched the market act and react, and has seen colleagues seek solutions to corner their respective markets all in the name of providing the best service for the most people.
Suiter, however, may have a view of the current health IT landscape like no other. Leading a specialty only provider of electronic health records and practice management systems, digiChart serves only OBGYNs.
Long before healthcare reform and the thought of meaningful use, digiChart created and built solutions solely for this space, and, unaplogoetically, will continue to serve the space. Plans for expansion may one day include moving into the pediatrician market, which seems to be a safe bet given the connection between the two specialties, but according to Suiter, that’s not a plan actively being pursued.
What’s interesting about digiChart’s position, as Suiter tells it, is that even though meaningful use is vitally important to digiChart and the company has helped many physician achieve stage 1, OBGYNs have not voraciously jumped aboard the program.
What this means, he says, is that it’s a clear sign that the OBGYN market continues to live up to its reputation as a fiercely independent group of healthcare providers. Suiter said that only 20 percent of all digiChart’s clients have chosen to pursue meaningful use. Apparently, the other 80 percent have chosen to overlook the federal incentives and go at it alone.
From conversations he’s had with clients, they’re just are not seeing the benefit of meaningful use, especially for all of the work required with the only benefit is $44,000 over five years.
“At this particular point, they don’t realistically see a flip side in changing. In some practices, some have decided that they are better off without changing,” Suiter said. “Practices have determined that they can survive and be profitable if they are efficient and continue doing what they are doing, especially in the OBGYN space.”
Being profitable means they’ll ultimately forego Medicare patients to avoid the federal penalties levied against them for not meeting meaningful use. In many cases, they don’t see enough Medicare and Medicaid patients to make all the effort worth their while, Suiter said, so the work required simply is not worth the effort.
And, frankly, the question remains: Is the federal money going to still be available as stage 2 progresses? And, what happens in February 2013, should a new administration take office?
Despite the answers to these questions and whatever happens with the election in November, Suiter sees plenty of change ahead for the market. For example, EHR vendor contraction is coming after a period of great anticipation.
He predicts the market will dramatically shrink from more than 400 companies to less than 100, many fewer of them actually viable and sustainable long term.
At the same time, he believes hospital’s appetite for buying and owning private practices will disintegrate as soon as 12 months from now.
“I think we’ll see a disgorgement of practices by hospital systems within the next 12 to 18 months,” Suiter said, marking the end of a repeat performance last seen in the mid-1990s (1995, ’96 and ’97, he said specifically).
Hospitals have been voraciously trying to align themselves with private practice to capitalize on funds generated from meaningful use; however, they don’t seem capable of effectively managing private practices and their employees as they seem to be able to do with their internal systems and hospital employees, he said.
Private practices are too independent, for the most part, he said; especially, OBGYNs.
The fiercely independent group of physicians might have all the leverage they need to withstand outside pressure for adopting new technologies or changing the way they run there businesses at this point in their careers.
Why?
The average physician in the OBGYN space is 62 years old. At this point in their careers, they are not particularly interested in becoming hospital employees and if they are not interested pursuing meaningful use, which seems to be the case, they’ll either retire or go their own way.
Clearly, the technology used in healthcare will gain greater acceptance as new doctors enter the space. As colleges begin to implement the systems to train their residents (which they are not readily doing now), perhaps the appetite within the space will change. Clearly, there’s room for more adoption in the market Suiter serves.
But, digiChart is positioned well, serving a market it, and Suiter, understand, and know they’re place – as leaders – in it. There are very few vendors that can represent the specialty space well, especially in the land grad market of one-size-fits-all solutions penetrating the market. DigiChart and Suiter seem to understand that sometimes it’s better not to be the jack of all trades, but a master of one.
