Thursday, August 27, 2015

Fwd: qotd: Readmission penalties dodged by placing patients on observation status

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-------- Forwarded Message --------
Subject: qotd: Readmission penalties dodged by placing patients on
observation status
Date: Thu, 27 Aug 2015 09:06:09 -0700
From: Don McCanne <>
To: Quote-of-the-Day <>

Health Affairs Blog
August 27, 2015
Quality Improvement: 'Become Good At Cheating And You Never Need To
Become Good At Anything Else'

By David Himmelstein and Steffie Woolhandler

The Centers for Medicare and Medicaid Services (CMS) has trumpeted the
recent drop in hospital readmissions among Medicare patients as a major
advance for patient safety. But lost amidst the celebration is the fact
that hospitals are increasingly "observing" patients (or treating
returning patients in the emergency department) rather than
"readmitting" them. But while re-labeling helps hospitals meet CMS'
quality standards (and avoid costly fines), it probably signals little
real quality gain and often leaves patients worse off financially.

Observation Status

In most cases, observation patients receive care in a regular inpatient
unit, and get treated just like other inpatients. And in many cases,
observation stays stretch out to several days: in 2012, 26 percent
lasted two nights and 11 percent at least three. But from Medicare's
point of view, this is outpatient care, which leaves patients
responsible for more of the bill, and ineligible for Medicare-paid rehab
or skilled nursing care.

Hospitals started designating more stays as "observation" after
Medicare's auditors began disallowing the entire payment for some brief
hospital "admissions." Even though "observation stays" pay less than
inpatient admissions, hospitals took a better safe than sorry approach,
classifying many brief stays as "observation." Between 2006 and 2013,
observation stays increased by 96 percent, accounting for more than half
of the apparent decline in total Medicare admissions during that
seven-year period.

Observation Classification

Medicare's recent adoption of penalties for readmissions offered
hospitals a new incentive to shift some patients returning within 30
days of their discharge to observation status. A patient stay labeled
"observation" doesn't count as a readmission, allowing hospitals that
might otherwise be fined for having too many readmissions to skirt the

About 10 percent of all hospital stays occurring within 30 days of
discharge are now classified as "observation;" a quarter of hospitals
classified 14.3 percent or more of all repeat stays as "observation."
Moreover, analysis of time trends in observation stays makes it clear
that they account for a significant chunk of the reduction in
readmissions. Between 2010 and 2013, 36 percent of the claimed decrease
in readmissions was actually just a shift to observation stays.

Emergency Department Use

And it's not just observation stays that have been on the increase. More
of the recently discharged patients are being treated in emergency
departments (EDs) — without being admitted — as well.

Factoring in the 0.4 percent increase in ED visits within 30 days of
discharge, the fall in the percent of discharged patients returning to
hospitals for urgent problems is only 0.3 percent over the past three
years — less than one-third of the improvement that CMS claims. And even
this 0.3 percent overall fall may be partly an artifact of hospitals'
"upcoding" (exaggerating the severity of patients' illnesses), which
boosts diagnosis-related group (DRG) payments, and could also corrupt
the formula used to risk-adjust expected readmission rates.

Medicare's readmission penalties are among the growing number of
pay-for-performance (P4P) and value-based purchasing initiatives that
offer bonuses to high performers and/or penalize the laggards. We
previously pointed out that the evidence for this carrot and stick
approach is unconvincing. More recently, a long-term follow-up of the
English hospital P4P program found that P4P generated no improvement in
patient outcomes, damping the enthusiasm generated by the rosy
short-term findings, and reinforcing the need for skepticism.

Adopting unproven everywhere P4P strategies that have been proven
nowhere risks quality failure on a monumental scale. It pressures
hospitals to cheat, saps doctors' and nurses' intrinsic motivation to do
good work even when no one is looking, and corrupts the data vital for
quality improvement.

As the graffiti artist Banksy once said: "Become good at cheating and
you never need to become good at anything else."


Comment by Don McCanne

In lieu of adopting comprehensive health car financing that actually
would improve value - a single payer system - our national leaders have
elected to continue with our current dysfunctional system and try to
make it work. One measure that has been introduced is the assessment of
penalties for patients who are readmitted within 30 days of being
discharged from a hospital - on the theory that the patients should be
fully stabilized at discharge with followup arranged that would prevent
the need for readmission.

Physician and hospital administrators do not want patients readmitted
soon after discharge. Their efforts are directed at providing the best
care appropriate to improve patient outcomes. But there are some
clinical conditions that are inherently unstable, or that can have
unavoidable complications, that can result in the need for readmission.
Also, in spite of outreach efforts, socioeconomic variables can result
in destabilization of the patient's condition. Some readmissions are
absolutely inevitable.

This report is important because it shows that the improvement in
lowering readmission rates that occurred after the introduction of
penalties is not so much due to improved inpatient and post-discharge
management, but rather is due to gaming rules that are characteristic of
pay-for-performance (P4P) schemes.

Specifically, there has been a dramatic increase in placing patients on
observation status instead of formally admitting them to the hospital.
The care may be identical - provided in the inpatient service
departments - but by not certifying the patient as being a formal
readmission within 30 days of the last admission, the penalty is
avoided. Medicare comes out ahead since outpatient services are priced
lower than inpatient services, even if they are identical services -
thus the trumpeting by CMS of another success in their reform efforts.
But the patient loses since the cost sharing requirements for outpatient
services are much higher than they are for inpatient. But then who ever
said that health care reform was to benefit patients?

A variation of this gaming is to manage the followup hospitalization
completely within the emergency department, perhaps even holding the
patient overnight. The result is essentially the same as holding them on
observation status.

This P4P-type gamesmanship is really a form of cheating. But it works.
Instead of shifting to a much more efficient financing infrastructure -
a single payer system - we can continue to follow the Banksy dictum -
"Become good at cheating and you never need to become good at anything

Maybe we should start to think about becoming good at financing health
care instead.

Tuesday, August 25, 2015

Fwd: qotd: Claxton and Levitt on the Cadillac plan tax

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-------- Forwarded Message --------
Subject: qotd: Claxton and Levitt on the Cadillac plan tax
Date: Tue, 25 Aug 2015 11:44:20 -0700
From: Don McCanne <>
To: Quote-of-the-Day <>

Kaiser Family Foundation
August 25, 2015
How Many Employers Could be Affected by the Cadillac Plan Tax?
By Gary Claxton and Larry Levitt

As fall approaches, we can expect to hear more about how employers are
adapting their health plans for 2016 open enrollments. One topic likely
to garner a good deal of attention is how the Affordable Care Act's
high-cost plan tax (HCPT), sometimes called the "Cadillac plan" tax, is
affecting employer decisions about their health benefits. The tax takes
effect in 2018.

The potential of facing an HCPT assessment as soon as 2018 is
encouraging employers to assess their current health benefits and
consider cost reductions to avoid triggering the tax. Some employers
announced that they made changes in 2014 in anticipation of the HCPT,
and more are likely to do so as the implementation date gets closer. By
making modifications now, employers can phase-in changes to avoid a
bigger disruption later on. Some of the things that employers can do to
reduce costs under the tax include:

* Increasing deductibles and other cost sharing;

* Eliminating covered services;

* Capping or eliminating tax-preferred savings accounts like Flexible
Spending Accounts (FSAs), Health Savings Accounts (HSAs), or Health
Reimbursement Arrangements (HRAs);

* Eliminating higher-cost health insurance options;

* Using less expensive (often narrower) provider networks; or

* Offering benefits through a private exchange (which can use all of
these tools to cap the value of plan choices to stay under the thresholds).

For the most part these changes will result in employees paying for a
greater share of their health care out-of-pocket.


Comment by Don McCanne

During the markup process for the Affordable Care Act it was common to
hear our legislators talk about patients demanding too much health care
as an explanation for why our health care spending was so high. They
blamed health plans that provided extra-rich benefits - plans they
labeled Cadillac plans. The problem is that their premise was wrong.

These supposedly extra-rich benefits were merely standard benefits
characteristic of the older employer-sponsored indemnity plans such as
Blue Cross and Blue Shield. These were not plans with Cadillac benefits
but rather they were plans with standard benefits, but benefits that are
now provided at Cadillac prices because of our failure to adopt a health
care financing system that would slow the rate of health care inflation.

In recent decades, plan purchasers in the individual market became less
able to afford the high premiums commanded by the ever-increasing health
care costs. In order to keep their premiums affordable, insurers reduced
benefits and increased patient cost sharing, making health care less
affordable even for those who were insured. Medical debt became a
significant contributor to personal bankruptcy and having insurance
often no longer prevented it.

Our legislators, after being spoon-fed by lobbyists and the policy
community, decided that these inferior plans on the individual market
would become the new standard, and the more traditional plans that
provided more effective coverage would suddenly become Cadillac plans.

Thus the advent of the high-cost plan tax (HCPT) - often referred to by
the misnomer, Cadillac plan tax - a 40 percent tax on plan costs above a
certain threshold. This tax was intended to disincentivize the selection
of full coverage plans. By having out-of-pocket money at stake with less
comprehensive coverage, patients would be forced to decide which of
their medical problems they would want managed and which they would
decide to live with (or die from). What a terrible way to reduce spending.

In retrospect, both Republicans and Democrats in Congress have decided
that this tax should be repealed, but for different reasons. Republicans
are simply opposed to any taxes, and Democrats are concerned about
additional tax burdens on lower income individuals with
employer-sponsored plans that provide reasonable coverage (assuming the
tax is paid by forgone wage increases). Hurdles to the repeal of this
tax include reluctance to compensate for the loss of these government
revenues by either assessing new taxes (Republicans opposed) or by
cutting spending on other programs (Democrats opposed), plus a
reluctance for a highly polarized Congress to work together on anything.

The important policy issue is not the tax, it is the decision to control
spending by erecting financial barriers to care through the design of
the insurance product - consumer-directed health care. This prevents
patients from getting care that they should have while exposing them to
financial hardship. Instead we should be providing everyone with prepaid
health care while controlling spending through more humane, proven
policies that are in use in many other nations. Of course, these are the
policies that are inherent in a well-designed single payer national
health program.

Forget the Cadillac imagery. Let's talk about providing affordable
health care for everyone.

Friday, August 21, 2015

Fwd: qotd: What do insured patients see as financial burdens of health care?

Quote-of-the-day mailing list

-------- Forwarded Message --------
Subject: qotd: What do insured patients see as financial burdens of
health care?
Date: Fri, 21 Aug 2015 10:50:21 -0700
From: Don McCanne <>
To: Quote-of-the-Day <>

Kaiser Family Foundation
August 20, 2013
Kaiser Health Tracking Poll: August 2015
By Bianca DiJulio, Jamie Firth, and Mollyann Brodie

Financial Burden of Health Care Costs Among Insured

Among insured: Thinking about your own health care costs, which of the
following do you find to be the greatest financial burden?

17% The deductible you pay before insurance kicks in

14% Your health insurance premiums

11% Your prescription drugs

7% Your doctor visits

3% Some other health care cost

44% Paying for health care and health insurance is not a financial burden

(Note: "All equally" and "Don't know/Refused" responses not shown)


Comment by Don McCanne

It is nice to know that health insurance and paying for health care do
not create a financial burden for 44% of those who are insured. The
system is working well for the almost half of the insured who have
decent incomes who remain in good health. But what about the other half?

Being insured is no assurance that you will not face significant
financial burdens. The most common are high deductibles, high insurance
premiums, high costs of prescription drugs, and, to some extent,
physician fees. But shouldn't the health care financing system be
designed to remove financial burdens whenever people need health care?
Our system is not working well for patients who have modest incomes and
current significant health care needs.

Under a single payer system, there is no need for deductibles to save
money by discouraging the use of beneficial health care services,
because spending is controlled though other less intrusive, more
patient-friendly economic measures. Physician fees are negotiated and
paid by the single payer administrator, and prescription drug spending
is controlled through negotiation and bulk purchasing. Insurance
premiums are eliminated and replaced with equitable, progressive taxes
that place a burden on no one. Instead of deliberately building
financial barriers into the system, shouldn't we eliminate them?