Cost Control

State Employee Health Plan Sparks Debate 

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Medical Economics Feature – November 2012 

 By Amy Lynn Sorrel 
Associate Editor 

Tex Med. 2012;108(11):25-29.

A September report on the sustainability of the health care benefits plan for half-a-million state workers and retirees is expected to set the stage for the upcoming legislative session and the larger debates over how to keep health care costs under control.

Facing an ongoing budget crunch, the legislature under House Bill 1 last session directed the state Employees Retirement System (ERS) to study the long-term viability of its health insurance benefits program for the state's workforce. On top of a $198 million reserve, ERS plans to ask the legislature for another $382 million to maintain the current level of insurance benefits.

Following a year of research involving input from a host of interested parties including the Texas Medical Association, ERS reported back on Sept. 4 on a breadth of ideas on how to better manage the system's health care costs. The 200-page report included everything from alternative payment and health care delivery models like accountable care organizations (ACOs) and medical homes, to expanding allied health professionals' scope of practice, to increasing patient responsibility.

Many of those ideas could require legislative changes. Some could spark agreement, while others stir the pot. But wherever the legislature leads, because ERS' health benefits plan covers 511,000 state workers, their families, and retirees, and contributes roughly $2 billion annually in health expenditures, the outcome will have no small impact on physicians and those patients.

A Legislative Budget Board spokesperson says the report is one of several resources budget writers will analyze when formulating its recommendations to the legislature, set to convene Jan. 8.

Physicians agree they have a part to play in keeping health care costs down. But they also raise concerns that dollars too often come ahead of patients' best interests.

"There is little disagreement the status quo needs to change," said Tyler anesthesiologist Asa Lockhart, MD, chair of TMA's Ad Hoc Committee on Accountable Care Organizations (ACOs).

What has not changed, he says, is physicians' primary responsibility to advocate for their patients. "Our new job is to discern the best use of our limited health care resources. It's going to require true change, and doctors have to decide if we are going to lead the change or react to it."

TMA has no stance on any particular benefit or contribution structure for the state employee health coverage program. But with a quarter of Texans uninsured, whatever policies the state implements, "we don't want to see them compound the problem," said Lee Spangler, JD, TMA's vice president of medical economics.

The report says few state employees would be able to afford the same coverage they receive through ERS' group benefits plan on their own. Seventy-five percent of full-time state employees enrolled in the program earn less than $48,000 a year. Only 12 percent make more than $60,000 a year, and the average retiree earns a pension of less than $20,000 a year.

The study does not include specific recommendations, but instead "reinforces that we are going to look at all the options in the marketplace in determining whether or not they would be of value to our members. It would be inappropriate for us to exclude something that is being discussed in the marketplace just because it might be controversial," said Rob Kukla, who oversees contract management at ERS as the agency's director of benefit contracts.

He pointed to a discussion in the report of potentially dropping health care coverage altogether and instead shifting members to a state or federally run health insurance exchange in 2014. "That's an option. Whether we like it or not is irrelevant. But it's an option."

The ERS board can consider some strategies without legislative approval, as well. Whatever course ERS ultimately takes, "our responsibility is to ensure we have a contract that not only provides the lowest possible cost, but also meets the needs of our members," Mr. Kukla said, adding that it takes cooperation from all players.

For example, in the past, the agency was willing to pay a little more for prescription medications for specialty care versus reducing patients' access. The recent study suggests using high-performance networks that rank physicians based on cost and quality, but having explored the option in the past, ERS decided against it. On the other hand, the agency as of Jan. 1, 2011, launched three successful medical home projects, also mentioned in the study, that pay participants based on cost and quality targets. All three realized savings in their first year.

ERS identified a number of cost drivers, including an aging workforce, overutilization in the fee-for-service system, rising hospital and drug costs, and unhealthy lifestyles. In addition, provisions of the Patient Protection and Affordable Care Act (PPACA), such as required coverage of preventive care without cost sharing, are projected to cost the plan $82.8 million in the current 2012-13 biennium.

Mr. Kukla says hospital services account for a large portion of the plan's costs at 45 percent.

But Mr. Spangler questions critiques in the report that physician-owned hospitals (POHs) unfairly profit from ordering unnecessary tests or procedures. Instead, the facilities have been shown to produce better health care outcomes, shorter hospital stays, and higher patient satisfaction ratings than non-POHs, typically at a lower cost.

Patients First 

Physicians also are skeptical of the report's suggestions that state restrictions on hospitals' ability to hire physicians under the corporate practice of medicine ban could pose a barrier to the formation of ACOs as a potential alternative payment model and health care delivery system that could save money, foster better care coordination, and improve care quality.

That notion overlooks certain policies and exceptions – and patient protections – that already exist in Texas law, Dr. Lockhart says.

Senate Bill 1661, passed in the last session of the Texas Legislature, enacted landmark protections for the patient-physician relationship and independent medical judgment for physicians employed by hospital-run, nonprofit health care corporations, known as 501(a) corporations. The law also reinforced the physician board of directors' authority over clinical matters and prohibited administrative interference in clinical decision making.

In addition, Senate Bill 7 paved the way for creating health care collaboratives among physicians and other health care professionals that also make sure doctors have an equal say in the arrangements' financial and clinical affairs.

Protecting physicians' unfettered medical judgment is the key to ensuring they can remain beholden to their patients' best interests and not to hospital management, whose focus is typically on the financial picture, Dr. Lockhart says. He added that those protections are not necessarily guaranteed under the federal ACO model.

He also called it a fallacy that integrated health care delivery models must center around a hospital to succeed. Nor must a physician be an employee to participate.

"We can already do these things in Texas, and the idea that you can put physicians on a salary and that will cure all of the ills in the world is overly simplistic," Dr. Lockhart said.

Instead of reducing costs, eliminating the state ban on the corporate practice of medicine could have what he called a "paradoxical effect" and actually increase costs. That's because hospital-based services, such as labs and imaging – which an employee would be required to use – come at a considerably higher rate than those a private practice physician might find at an independent facility.

"What makes these models work – whether it's an ACO or a health care collaborative, I don't care what you call it – is providing an integrated delivery system with effective physician governance, where policies are designed so we physicians can discharge our primary role as patient advocate," Dr. Lockhart said.

Physicians also caution that health care delivery is a local issue, and any policy must give physicians and others the latitude to organize and integrate in a way that meets the their communities' needs.

"ACOs are one option, but not the right thing. Nor is the patient-centered medical home the right thing, although these ideas are a step in the right direction generally," said Plano family physician, Christopher Crow, MD, chair of TMA's Council on Socioeconomics.

About half of primary care practices in Texas comprise small physician groups that often lack the financial or administrative wherewithal to form the large, coordinated systems needed to manage large patient populations, he says. On the flip side, it can be inefficient for purchasers, such as health plans, to contract with a myriad of small practices using something other than a fee-for-service payment model.

Dr. Crow's primary care practice, Village Health Partners, was one of the first in Texas to launch a National Center for Quality Assurance-certified medical home, which now contracts with three major payers under a value-based payment system.

But even for groups like his that succeeded in improving access to care and in reducing readmissions in the short term, "you don't necessarily get an immediate bang for your buck, so we have to take a multiyear approach in these models to see the cost and quality benefits," he said.

A Team-Based Approach  

Physicians agree it also takes a team-based approach to realize those benefits and to truly integrate care. That includes making the most effective use of allied health professionals, another option presented in the ERS report.

The study suggested that expanding allied professionals' scope of practice beyond their expertise would translate to expanded and more affordable access to care.

"Our population has increased so much and we have such a severe shortage of physicians that patients do not have access to care. They end up in the emergency department, and that is the costliest kind of care we could have," said former State Rep. Arlene Wohlgemuth. She is executive director of the Texas Public Policy Foundation (TPPF) and director of the nonpartisan research organization's Center for Health Care Policy.

Advanced practice nurses could help fill those gaps, she says, but Texas strictly limits their ability to do so.

TPPF advocates scaling back those regulations, e.g., requirements for physician supervision of nurse practitioners, and it favors permitting nurses to practice more independently.

Rather than helping costs or quality, however, the idea of unsupervised independent practice of allied professionals creates the risk of diagnosis and treatments that can harm patients, increase costs, and diminish accountability, says Les Secrest, MD, chair of TMA's Council on Legislation. During the last legislative session, TMA fought off several proposed scope-of-practice expansions for nurse practitioners and other health care professionals.

The Dallas psychiatrist agreed there is no way for health care teams to address access-to-care shortages without using allied professionals to the maximum limit of their licenses and abilities. That could be a pharmacist freeing up an emergency physician by reviewing medications with a patient or a physician delegating patient follow-up to a nurse or physician assistant. But as the highest-trained team member, the physician is the most qualified to diagnose patients and direct their care, and that doctor is ultimately accountable for those clinical activities.

"We know it's going to be a challenge as we move forward in developing delivery systems, but we have to do it in a way that is sensible and efficient and yet still preserves the patient-physician relationship," he said. "We talk about access as if that's the only thing in patients' best interest. But if they are accessing something that doesn't provide quality care and good supervision and good accountability, is that what we want?"

A Sept. 18 report by the American Academy of Family Physicians echoes that concern. It also stresses that the best, most efficient care is provided by teams of health professionals in a patient-centered medical home model, not independent practice by a single health professional. 

Physicians and others agree upon at least this one thing: The patient is an important member of that team, and perhaps among the best opportunities for ameliorating the cost curve – and creating some common ground – are initiatives that engage patients in their own health care.

That could be through raising ERS members' financial contributions to their own health care coverage, offering incentives for participating in disease management programs, or encouraging employee wellness programs, according to proposals in the ERS report.

"These are things we did think participants could be doing to lower health care costs," Mr. Kukla said. "On the flip side, as this report suggests, we haven't gotten our members to embrace these types of programs, so the question is: Are there incentives or disincentives that could be used?"

Certainly, patients, employers, and policymakers can employ a number of preventive care interventions that not only are relatively inexpensive to implement, but also "are probably the best ways for us to avoid preventable illnesses," said TMA Board of Trustee member Lewis E. Foxhall, MD.  

Dr. Foxhall, a Houston family physician and vice president of health policy at The University of Texas M.D. Anderson Cancer Center, says chronic diseases such as heart disease, cancer, and diabetes remain some of the largest cost-drivers in the health care system.

Tobacco prevention programs, cancer screenings, child and adult immunizations, and physical activity programs are just a few of the more cost- and medically effective interventions available, Dr. Foxhall says. Such efforts could save as many as 2 million lives and $4 billion annually, according to national figures from the U.S. Department of Health and Human Services.

"State health is a team sport, and there is a growing awareness of the opportunities we are missing to help people stay healthy," Dr. Foxhall said. 

Amy Lynn Sorrel can be reached by telephone at (800) 880-1300, ext. 1392, or (512) 370-1392; by fax at (512) 370-1629; or by email. 

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