Critical Conversations: Health Care
Health care costs, cuts, reform, recession among big challenges
By Kevin Gale
Change is a given in the health care business – even if it’s not clear whether reform will survive legal challenges. Our Critical Conversation panelists are coping with major challenges in health care, sometimes making their best guesses on what to do amid all the uncertainty. Panelists included a doctor, hospital administrators, insurance executives, managed care executives, a lawyer and a benefits expert. The following transcript has been edited for clarity and length.
Q: What is the biggest challenge in your industry?
A: Sam Chalfant, president, Chalfant Insurance Services: The cost is unaffordable. If I sold a 54-year-old a $7,500 deductible policy, the premium would be $300 a month. By the time he’s 59, it will most likely be over $600, and by the time he’s 64, it will be over $1,200 a month – a 300 percent increase in 10 years – and it’s not sustainable.
Constance F. Chiara, president, Southeast, CBIZ Benefits & Insurance Services CBIZ Benefits & Insurance Services Latest from The Business Journals Meet the Critical Conversations: Health Care panelChampions of Business JudgesLuncheon honors area’s best businesses Follow this company : I work mostly with middle-market and larger employment groups, who have a lot of issues facing them. The first one is the prolonged recession. The second is the increase in health care cost benefits for employees. Towers Watson put the cost at $11,176 per active employee per year nationally. The other thing impacting employers is legislative uncertainty. Employers kind of sat back this year and are waiting to see what happens before they make strategic decisions.
Mark D. Folk, partner, Shutts & Bowen Shutts & Bowen Latest from The Business Journals Meet the Critical Conversations: Health Care panelState high court rules on who pays staff’s legal billsCase points out issues involved in litigation against tribes Follow this company : When health care reform came about, it had a perfect storm in timing with the economy and legislative uncertainty. Participants in the health care industry threw up their hands and said: “What do we do now?” The first reaction was knee-jerk: Let’s integrate.
Calvin Glidewell, CEO, Imperial Point Medical Center: Reimbursement cuts have hurt us. We just got cuts at the state level for the Medicaid program and, as we listened to the debate in Washington and the wrestling with the debt ceiling level, there’s a lot of talk about further cuts in the Medicare program. We are seeing increasing emergency visits and outpatient visits. With the economic downturn, there is a bigger percentage of uncompensated patients.
Penny Shaffer, South Florida market president, Blue Cross and Blue Shield of Florida: Part of the root cause of some of those challenges is consumer education – really having individuals understand the true cost of care and how their actions can change the cost, quality and care. We are spending a lot of time creating methodology educating consumers on what impact their actions can have, such as the appropriate setting for care and how to best utilize benefits.
Jeffrey P. Freimark, president and CEO, Miami Jewish Health Systems: We have a $9 million to $10 million loss out of the shoot in Medicaid costs. All of our costs are continuing to rise, and we are trying to manage our way through that. We are in an exceedingly burdensome environment, from a regulatory perspective.
Dr. Bernd Wollschlaeger, Aventura Family Health Center: My biggest problem is a dysfunctional health care system that is rapidly spinning out of control. Coordination of care is nonexistent. There is no correlation between cost and quality. For me, as a primary health care physician, the major impetus and focus we need to have is to get a handle on chronic disease management, which takes up 70 to 75 percent of every health care dollar.
Joseph J. Di Capua, CEO, MJM Business Enterprises: Obamacare is the biggest problem right now. You have to be profitable and make some money in this business. There are physicians out there that are on risk contracts that practice excellent care on 800 members and are making $2 million to $3 million. When it comes to fraud, insurance companies do a great job of keeping fraud down. The government needs to give it to the insurance companies to manage this because they do it better. There is enough money in the system for everyone. The waste is what needs to be addressed.
Q: With health care reform up in the air what should businesses do to prepare?
A: Chiara: Think about the impact reform might have as it stands today, although it probably will not be in its current form. As an example, let’s look at a landscaping firm with a large number of full-time employees that is not offering benefits. The impact of reform on those types of companies will be significant tax penalties. For employer groups under 50, health care insurance reform doesn’t apply. South Florida is made up of so many small employers.
Di Capua: Large employers could benefit by eliminating their health care coverage and paying the excise tax.
Folk: What I’ve seen developing in the past two to three years is the development of a concierge clinic where the employer contracts with a provider, be it a hospital or a physician group. The employer says: “We have health care insurance for you, but your primary health care provider is there and, if you need specialty care, you get referred out to another network.”
Glidewell: The whole industry is shifting from a pay-for-procedure mentality to a pay-for-performance mentality. We, as a hospital industry, need to understand what quality is and how it is measured. In Medicare programs, about 6 percent of medical costs will be withheld until they look at core measures, quality measures, readmissions and hospital acquired conditions. It’s going to matter what the patient’s experience is for the hospital stay.
Shaffer: There’s an awful lot that hasn’t been defined yet. These 2,000 pages of law have about 100,000 pages of implementation to be designed. We have the “thou shalts,” but we don’t have the “how thou shalts.” Our recommendation to clients is to be educated and understand what the law says until that law is not a law anymore.
Chiara: The Supreme Court will probably be hearing whether this legislation is constitutional this fall, and make a decision next year. The constitutional issue is whether citizens of this country can be mandated to purchase an insurance product. Then, how can we move forward to require insurance companies to require coverage of pre-existing conditions? We cannot require, in any fiscally responsible way, [companies] to issue coverage without a pre-existing condition exclusion.
Di Capua: Pre-existing is based on risk with everyone having coverage. When they took that away, it really put the insurance companies in a bad situation to offer pre-existing coverage.
Shaffer: If you don’t have universal coverage, you don’t have a tenable risk pool to deal with. It is fire insurance on a burning building.
Freimark: We have no choice but to continue to identify alternative sources of revenue and alternative focus points. Miami Jewish is far more than a hospital and nursing home. We have world-renowned gerontological psychiatrists, a biofeedback center and comprehensive pain center.
Wollschlaeger: Our ability to adapt will characterize our success rate. This includes providing integrated care of patients with nursing professionals and physicians assistants, and attracting payers to collaborate and cooperate with. We need to integrate with other physicians either under one roof or in a coordinated health care delivery system using one IT system. It boggles me that some doctors still work with paper. Electronics records make the system transparent and accountable. Ignoring health care reform is suicidal.
Di Capua: There is no set standard yet for electronic health care records and, in 2014, it has to be implemented. If you buy the wrong system, it’s not worth anything. Physicians 50 years and older are [finding it] very difficult to do a transition. If you are seeing 30 patients a day, for a 50-year-old-plus physician, their productivity drops to maybe 20 to 22. I’m in the midst of applying for an ACO [accountable care organization] license. The government came out with a pioneer ACO program and will chose 30 to 45 organizations in the country. They are looking for organizations that have managed risk. We have almost 200 physicians statewide who have joined our organization.
Freimark: There are funding issues, in terms of how the electronic medical records systems and technology gets paid for. The availability of grants and funding from the federal level is not near the cost of the systems. There are not compliant systems for all the institutions that have need for it, including longer-term care. It means we may well have to take a risk position of: Which one has the greater likelihood of being compliant?
Glidewell: Hospitals have electronic medical records for nursing and ancillary purposes, but physician documentation today is pretty much still long-hand dictation. I think we will be the first Broward hospital to budget computerized order entry. It does come with some pain and time, and we expect it will be enacted 18 to 24 months from now. We don’t justify it just from an information technology investment, but more of a quality investment. If we can eliminate some practice variations, as you could imagine there are very inefficient providers and very efficient providers, this can drive costs out of the system.
Chiara: I went through a medical issue. The frustration level I had as a patient to try and get all the information from one provider to another, in this day and age with the technology we have? I couldn’t get one doctor to talk to another, and I had to refill out all the information. It was crazy.
Glidewell: Your primary care provider is the person who should be managing all these different consultants and managing the information. More and more, that will occur.
Shaffer: Miami-Dade County has over 700,000 uninsured, most of who are working. On Jan. 1, 2014, 700,000 people have to incorporate in their household budget the equivalent of an additional cellphone and cable bill. That doesn’t happen overnight.
Folk: I have clients who wanted to jump the gun on integration – acute care organizations integrating with straight employment or clinical co-management agreements. After two years, I’m getting phone calls: “Oops. Integration didn’t quite work the way we thought it would.” I do think the days of the onesie, twosie physician office are gone, except for maybe in the rural markets. It may last another decade.
Glidewell: There’s a lot of interest in ACOs, and it’s conceptually a great idea. But when you look at the very burdensome regulations that just came out and the initial investment to set up an ACO could go from $2 million to $15 million, a lot of hospitals and a lot of physician groups can’t afford that. After you set up the system, you really don’t know who your patients are because your patients will be assigned to you retroactively. This is prompting a lot of hospitals to wait.
Shaffer: The theory is absolutely sound, but it’s clear the originators of the regulations have not worked with the economics. As Mother Theresa said: “No margin, no mission.”
Freimark: I don’t think we are going to be seeing accountable care organizations as it’s currently contrived.
Wollschlaeger: Most risk takers will take a standby position to see how it works out. An initial investment of $2 million to $15 million is gigantic.
Di Capua: $1.8 million is what they are talking about. For me, that $1.8 million is nothing because if you are an MSO [management service organization], you have the infrastructure. I have the coders and I have the software. I have the provider relations people that go out to my doctors. The problem is the government is saying they are going to hold back 25 percent. They will pay fee for service less 25 percent. If you meet the criteria for quality, then they will split. ACOs are a duplication – Blue Cross and Humana Humana Latest from The Business Journals UF dean takes Humana to task for HMO shutdownHumana to start tobacco-free hiring policyHumana unit opens health care center in New York Follow this company know how to do the program. All the government is doing is so they can share what they believe is the profits.
Q: What about House Budget Committee Chairman Paul Ryan’s proposal to provide Medicare vouchers for private insurance?
A: Chalfant: I hope I never have to sell Medicare vouchers. I think Medicare is a fantastic program. I don’t talk to anyone on Medicare who is unhappy. The idea that it is a government giveaway? We have paid for it since the 1960s and we continue to pay for it when we go on Medicare. Maybe we didn’t pay enough, but it’s not our fault they didn’t ask for more. You can’t get individual insurance over age 65. If, at 65, you are paying $1,000 a month for an individual, it would continue to go up: by the time you are 70, $2,000, and by the time you are 75, $4,000.
Chiara: I hear politicians refer to Medicare as an entitlement but every week, there’s a piece of my paycheck that goes for that program.
Folk: Right now, it’s just a proposal, so it’s difficult to counsel clients.
Glidewell: There has to be some way of dealing with the Medicare crisis. There will be a point where there will not be enough people paying for all the baby boomers who will need health care over the next 10 or 15 years. On the other side, most hospitals have pretty slim operating margins – maybe 1 to 2 percent, up to 5 percent. I don’t think either the state or federal government should be balancing their budgets on the back of hospitals. If my mother is any example, I don’t know if she is prepared for vouchers. She’s 88. I don’t know if she has the cognitive skills or navigational skills to take care of her own health care insurance needs.
Wollschlaeger: It’s a bad proposal. The problem needs to be addressed and debated.
Di Capua: I just don’t think it’s feasible and the voucher system won’t work. The bottom line: We need to address Obamacare.