IMPROVING VALUE BY REFORMING THE HEALTH CARE DELIVERY SYSTEM:

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1 IMPROVING VALUE BY REFORMING THE HEALTH CARE DELIVERY SYSTEM: We believe Congress should move forward more aggressively with new payment and delivery models to bring about critical changes to the delivery system in concert with insurance reforms. We urge Congress to adopt delivery system reforms that are implemented via a muchexpanded pilot structure that allows all organizations to participate, but does not require them to do so immediately. We recommend that Congress adopt mechanisms such as a payment incentive to reward organizations and/or community partnerships that are early adopters of new payment models designed to encourage risk-sharing and greater collaboration among providers across the continuum of care. What Congress Can Do to Promote Greater Alignment of Incentives and Integration of Care STRENGTHENING THE ROLE OF PRIMARY CARE AND CHRONIC CARE MANAGEMENT: Global Primary Care Payment Model o Congress should establish a risk-adjusted per-patient global fee per month to cover all primary care services under Medicare. This would encompass individual primary care services as well as cover the functions of the patient-centered health home. This global fee would be based on the expected average payment for primary care services per Medicare beneficiary, risk-adjusted for those enrolled in the practice and adjusted for differences in the prices of practice inputs. This new primary care payment model should be implemented as an expanded pilot program with broad eligibility for participation and a payment incentive to aid early adopters in developing the necessary infrastructure to be successful in a fully-capitated environment. PROMOTING COLLABORATION AND ACCOUNTABILITY: Creation of New Risk-Sharing Payment Models o Congress should accelerate the implementation of bundled payment systems for specific illnesses that cover physician care, hospital care and post-acute care by establishing a payment incentive for organizations and/or community partnerships that are early adopters of bundled payment, Accountable Care Organization or other coordinated care payment models. This could be a bonus payment add-on that phases down over a five-year period similar to the HITECH Act Meaningful Use bonus payment structure for Electronic Health Records adoption. Subsequent bonuses could be a shared savings mechanism between the federal government and provider organization. o Organize payment under a structure that eliminates financial incentives for one provider group relative to others. One example is the PROMETHEUS recommendation that payers pay evidence-informed case rates (ECRs) to all providers (e.g., hospitals, Primary care physicians, specialists, etc.) who treat a patient with a specific condition. o Congress should modify any willing provider requirements on hospitals for postdischarge care if they are participating in a bundled payment, Accountable Care Organization or other coordinated care model. o Establish chronic condition-specific capitated payment. Develop per-episode payment rates for management of chronic disease, such as congestive heart failure. Similar to the bundled payment model, one entity either a hospital or September 30,

2 other organization capable of managing the payment would be responsible for distributing payment to all participating providers and ensuring quality targets are achieved. The episode would be defined as a period of time, such as admission to 60 days post discharge. Episodes of varying severity would be defined and the payment would include risk corridors or other risk adjustment mechanisms. Group Purchasing Organizations o Congress should avoid any legislation that would limit the effectiveness of group purchasing organizations. These organizations play an important role in convening hospitals and physicians to discuss opportunities to improve the quality of care and select the best products and supplies in the interest of patient safety. IMPROVING THE HEALTH CARE INFRASTRUCTURE: Health Information Technology o Congress should appoint an independent panel to create standards including precise data definitions and architecture for aggregating data for patients over time and across providers. o Medicare payment policy should Incentivize the adoption of interoperable EHRs and the development of sustainable Health Information Exchanges. REMOVING BARRIERS TO COLLABORATION AND ACCOUNTABILITY State Laws Limiting Collaboration and Integration Uniform Physician Licensure o Congress should adopt legislation allowing for a single physician licensure application that is recognized by all states and territories. The practical challenges of obtaining separate medical licensure in multiple states represents a significant barrier to the expansion of telemedicine, e-icus and other advances in health care delivery that improve access and care coordination. If a state medical board needs additional information specific to its state for example, a requirement for criminal background checks an addendum can be included. Physicians can fill out the uniform application online once and then make it available to multiple state boards. State Insurance Laws o Congress should review and establish reasonable exemptions from state insurance laws for organizations engaging in bundled payment, Accountable Care Organizations and other risk-sharing models. Some state insurance laws require that health care providers assume financial risk in the arrangement and provision of health care services to consumers and employer groups be regulated as health insurers. This can entail risk-based capital reserve requirements and other state law obligations that make it difficult for provider organizations to enter into risk-sharing arrangements. Corporate Practice of Medicine o Congress should establish a waiver or exemption from state corporate practice of medicine laws to those organizations and/or consortia that are pursuing bundled September 30,

3 payment, Accountable Care Organizations, or other new risk-sharing delivery models. Restrictive state laws prohibiting the corporate practice of medicine serve to prevent hospitals from employing physicians in California and other states. These laws overly complicate and interfere with what we consider to be the best model of delivering efficient health care through integration of physicians and hospitals into a single coordinated organization. Tort Reform o Congress should address improvements to the tort system as part of reforming the delivery of health care. The current liability environment encourages providers to order tests and procedures to help protect themselves from liability claims. This "defensive medicine" does not add to the quality of patient care and adds unnecessary costs. Federal Laws Limiting Collaboration and Integration Anti-Trust o Congress should reduce anti-trust restrictions on collaboration among hospitals so that communities can more effectively coordinate essential services and eliminate costly duplication, particularly of highly specialized services such as cardiac and cancer care. The Federal Antitrust laws (Sherman, Clayton, and FTC Acts) prohibit joint action (with potential criminal penalties) by hospitals and physicians unless they are sufficiently clinically or financially integrated. The current lack of guidance on clinical integration creates uncertainty, making it difficult for a hospital and doctors to collaborate to improve care coordination across settings. The federal antitrust agencies (DOJ Antitrust Division and FTC) could make a significant contribution to furthering clinical integration by working with the hospital field to provide guidance to providers, who are eager to undertake clinical integration initiatives, that those providers could readily understand and use. Physician-Hospital Gainsharing o Congress should act to clarify the intent of the Medicare Civil Money Penalty Law (CMP) so that it does not inhibit gainsharing opportunities that are demonstrated to improve access, clinical quality and the efficient delivery of health care. This law prohibits hospitals from paying physicians for reducing or limiting services to a Medicare or Medicaid beneficiary. In 1999, the HHS Office of the Inspector General (OIG) surprised the hospital field by issuing a Special Advisory Bulletin interpreting the statute to prohibit any payment that has the effect of reducing or limiting services without regard to whether they were medically necessary or appropriate. This interpretation is obstructing care improvement initiatives, especially incentives for physicians to bring their practices in line with evidencebased, clinical protocols. o Congress should provide more exceptions under the Stark law to allow Electronic Medical Record coordination/assistance between hospitals and physicians (there is an exception now--but one that is more flexible would be useful) and financial incentives for the right kind of care (including less care where appropriate). September 30,

4 o o Congress should create an expedited process for approving Pay for Performance and gainsharing proposals that would be binding on both CMS and OIG. They could publish guidelines and have state or regional panels that could negotiate and sign off on P4P or gainsharing proposals within an appropriate time period say 90 days. Congress should establish appropriate safe harbors and/or exceptions to the Medicare Anti-Kickback law that allow for gainsharing arrangements that are demonstrated to improve access, clinical quality and the efficient delivery of health care. The Anti-Kickback law prohibits any payment or reward to induce patient referrals current agency guidance inhibits the use of savings or performance incentives related to quality or safety of care. The anti-kickback statute prohibits, among other things, knowingly or willfully offering or accepting any benefit or remuneration in exchange for, or to induce the referral of, patients for services, or the purchase, lease, or order of any good, facility, service, or item paid for by Medicare, Medicaid, and most other federally funded health care programs. These carry both civil and criminal penalties. The breadth of the statute places any financial arrangement under scrutiny. While the OIG has authority to issue advisory opinions providing advance clearance for an arrangement, only the person making the request is protected and the opinion is limited to the precise facts provided in the request. Like the Stark law, the antikickback statute inhibits the use of incentives to implement the clinical protocols and practices that are needed to improve quality and efficiency. Health Information Sharing o Congress should establish more exceptions under the Stark law to allow Electronic Medical Record coordination/assistance between hospitals and physicians (there is an exception now--but one that is more flexible would be useful) and financial incentives for the right kind of care (including less care where appropriate). September 30,

5 The following organizations have reviewed the attached document entitled Improving Value by Reforming the Health Care Delivery System and strongly encourage Senator Baucus to consider the recommendations included therein. Richard Afable, M.D. President & CEO, Hoag Memorial Hospital Presbyterian Newport Beach, California Joel T. Allison, FACHE President & CEO, Baylor Care Health System Dallas, Texas Barry S. Arbuckle, Ph.D. President & CEO, Memorial Care Fountain Valley, California Alan W. Brass CEO, ProMedica Health System Toledo, Ohio Sandra Bruce, FACHE President & CEO, Resurrection Healthcare Chicago, Illinois Michael D. Connelly President & CEO, Catholic Healthcare Partners Cincinnati, Ohio Denis A. Cortese President & CEO, Mayo Clinic Rochester, Minnesota Lloyd H. Dean President & CEO, Catholic Healthcare West San Francisco, California Mark A. Eustis President & CEO, Fairview Health Services Minneapolis, Minnesota Daniel F. Evans, Jr. President & CEO, Clarian Health Indianapolis, Indiana Peter S. Fine President & CEO, Banner Health Phoenix, Arizona Douglas D. Hawthorne, FACHE CEO, Texas Health Resources Arlington, Texas

6 James H. Hinton President & CEO, Presbyterian Healthcare Services Albuquerque, New Mexico Rodney F. Hochman, M.D. President & CEO, Swedish Medical Center Seattle, Washington Philip A. Incarnati President & CEO, McLaren Health Care Flint, Michigan Donald L. Jernigan President & CEO, Adventist Health System Winter Park, Florida John Koster, M.D. President & CEO, Providence Health & Services Renton, Washington William B. Leaver President & CEO. Iowa Health System Des Moines, Iowa Kevin E. Lofton President & CEO, Catholic Health Initiatives Denver, Colorado Kenneth J. Matzick President & CEO, Beaumont Hospitals Royal Oak, Michigan Richard P. Miller President & CEO, Virtua Health Marlton, New Jersey Keith B. Pitts Vice Chairman, Vanguard Health Systems Nashville, Tennessee John T. Porter President & CEO, Avera Health Sioux Falls, South Dakota Deborah A. Proctor President & CEO St. Joseph Heatlh System

7 Patrick J. Quinlan, M.D. CEO, Ochsner Health System New Orleans, Louisiana Thomas C. Royer, M.D. President & CEO, CHRISTUS Health Irving, Texas J. Knox Singleton President & CEO, Inova Health System Falls Church, Virginia James H. Skogsbergh President & CEO, Advocate Health Oak Brook, Illinois R. Timothy Stack President & CEO, Piedmont Healthcare Atlanta, Georgia Robert V. Stanek President & CEO, Catholic Healthcare East Newton Square, Pennsylvania Charles A. Sted President & CEO, Hawaii Pacific Health Honolulu, Hawaii Joseph R. Swedish, FACHE President & CEO, Trinity Health Novi, Michigan Anthony R. Tersigni, Ed.D., FACHE President and CEO, Ascension Health St. Louis, Missouri Nick W. Turkal, M.D. President & CEO, Aurora Health Care Milwaukee, Wisconsin Stephen A. Williams President & CEO, Norton Healthcare Louisville, Kentucky

8 Represented Health Systems Health System States Number of Communities Adventist Health System Advocate Health 1 11 Ascension Health Aurora Health Care 1 13 Avera Health System 4 38 Banner Health 7 22 Baylor Health Care System 1 21 Beaumont Hospitals 1 3 Catholic Health East 9 38 Catholic Health Initiatives Catholic Healthcare Partners 4 32 Catholic Healthcare West 3 41 CHRISTUS Health 6 40 Clarian Health 1 20 Fairview Health Services 1 10 Hawaii Pacific Health 1 6 Hoag Memorial Hospital Presbyterian 1 1 Inova Health System 1 7 Iowa Health System 2 11 Mayo Clinic 3 8 McLaren Health Care 1 8 Memorial Care 1 5 Norton Healthcare 2 6 Ochsner Health System 1 7 Piedmont Healthcare 1 4 Presbyterian Healthcare Systems 1 8 ProMedica Health System 2 9 Providence Health & Services 5 27 Resurrection Health Care 1 8 St. Joseph Health System 3 14 Swedish Medical Center 1 3 Texas Health Resources 1 19 Trinity Health 7 45 Vanguard Health Systems 4 15 Virtua Health 1 4 Total 697 States Represented (44 states and the District of Columbia) Alabama Iowa New York Alaska Kansas North Carolina Arizona Kentucky North Dakota Arkansas Louisiana Ohio California Maine Oregon Colorado Maryland Pennsylvania Connecticut Massachusetts South Carolina Delaware Michigan South Dakota District of Columbia Minnesota Tennessee Florida Missouri Texas Georgia Montana Virginia Hawaii Nebraska Washington Idaho Nevada West Virginia Illinois New Jersey Wisconsin Indiana New Mexico Wyoming