The ability to harness demographic data and develop psychographic profiles of individual communities to create unique programs is a great benefit. The standardization of food service occurs in the production of the food itself. It's the result of meeting menu costs, recipes, and reducing waste. And control is increased through the supplier contract, which outlines clear financial and quality key performance indicators.
You know exactly how they should work and what to expect in terms of results. Typical outsourcing in this category translates to savings of 11% system-wide, so it must be part of your hospital's cost-reduction strategy. When you consider that approximately 1 in 31 patients in the United States has at least one healthcare-associated infection (HAI), environmental services are not something that health leaders can (or should) take lightly. Therefore, at first glance, high-quality environmental services and cost reduction in healthcare may seem mutually exclusive.
At Compass One Healthcare, for example, hourly employees who received a GEM award (our company's recognition program for hourly employees) were more than 20% more likely to get a job at the end of a 38-month period. Receiving a GEM award was also found to be a better indicator of employee retention than variables such as age or hourly pay rate. By continuing to our website, you accept our use of the cookie for statistical and personalization purposes. Learn more Our scorecard ranks each state's healthcare system based on how well it provides high-quality, accessible, and equitable health care.
Read the report to see your state's ranking. Health policy commissions can play an important role in helping states achieve their health spending goals. States have many strategies available to control health spending, including promoting competition, reducing prices, and decreasing the use of low-value care. This is of particular concern to states.
Unlike the federal government, states must balance their budgets. The more dollars spent on health care, the less will be spent on other priorities, such as education and transportation. In addition, there is growing concern on the part of voters, who are facing higher premiums and out-of-pocket expenses as spending increases. To this end, many states have expressed interest in reducing the growth rate of healthcare spending.
To do this, states, by definition, must change the behavior of healthcare providers and payers. The first is to identify the components of spending that should change. For example, one strategy may be to reduce or limit the growth of healthcare prices. Another could be to reduce the use of low-value care.
The second challenge is to design a system that encourages or enforces those changes. States have a wide variety of legislative and regulatory tools at their disposal, such as sharing data analysis, regulating prices, or preventing mergers and consolidations, which often lead to rising prices. Health policy commissions can also play an important role in helping states achieve their health spending goals. Massachusetts and Maryland, for example, rely on a state commission to support their political objectives.
In some cases, commissions can support strategies implemented through existing state agencies. In other cases, they may have the authority to directly implement strategies to limit healthcare spending. Commissions are ideal to serve as a deliberative forum to achieve political objectives. A commission can consider data points and analysis together with input from experts and stakeholders, and guide state legislators and regulators in implementing optimal state policy.
The appropriate structure of a state policy commission will depend on the resources available and the combination of strategies that states choose to follow. This report looks at several approaches that states can take to control spending for all taxpayers and describes how state commissions can support those goals. We focus on reducing overall spending, as opposed to strategies designed for specific patient populations, such as Medicaid recipients or state employees. We study ways to improve competition, reduce prices, reduce the use of low-value care, and limit expenses or premiums.
We analyze the role that state commissions can play in supporting these strategies, offer ideas on how commissions could be structured, and analyze the impact of the authority that could be granted to them. For example, Massachusetts, along with some other states, relies on “soft authority,” while others, such as Maryland, give commissions strong regulatory powers. Health care spending is determined by pricing and utilization, and both, in turn, reflect a wide range of market characteristics, such as the degree of competition between providers and insurers and local practice patterns. Premiums reflect that expense and any profit margin of the insurer, which also reflects the competence of the insurers (annex).
For this reason, a strategy to control spending focuses on improving competition between providers or insurers. The closest, but limited, strategies focus on high prices or utilization of health care services. Broader direct strategies focus on spending itself. In each case, policy tools can range from soft stimulus to incentives and regulations with varying degrees of implementation.
Competition, the basis of efficiency in the overall economy, doesn't work well in healthcare markets. Information asymmetries, employer and government subsidies, market consolidation, and distortions in incentives due to the presence of insurance prevent beneficiaries from purchasing higher-quality, lower-priced healthcare. For example, research clearly indicates that vendor consolidation through mergers or acquisitions leads to higher prices without a significant and measurable improvement in quality or results. 3.Similarly, evidence suggests that a lack of competition from insurers can increase premiums.
4 Efforts to improve supplier competition include initiatives such as price transparency, to support consumer purchases, as well as limits to supplier consolidation and other anti-competitive behavior, such as the prohibition of “anti-stratification”, when hospitals with a significant demand for market power placement in preferential groups during benefit design, 5 Of these strategies, the promotion of price transparency is particularly popular. Existing evidence suggests that the price transparency offered to employees has minimal effect. 6 State-sponsored transparency initiatives that work through broader mechanisms may have some potential value, but that literature is incipient and it seems unlikely that price transparency, as currently practiced, will significantly slow spending growth.7 Its weak impact may be due to the fact that only certain services are purchasable. In addition, even for services that can be purchased, insurance protects patients from the real price of their care, reducing the incentive to use transparency tools and seek providers.
Some patients also prefer to follow doctors' recommendations, while others simply cannot seek low-cost, high-quality care because of the limitations of consumer choices in established markets. It might be useful to encourage insurance plans to use reference prices, that is, to have patients pay the difference between the actual price and the reference price or tiered or limited provider networks. However, these types of plans have drawbacks. In some cases, patients may be charged significant amounts out of pocket or unable to receive care from the desired providers.
In addition, patients may experience interruptions in existing relationships with providers. Finally, because employers often control benefit designs, policies to promote consumer buying should involve employers who may be reluctant to change. State commissions can be useful in supporting pro-competition policies. While existing agencies can support competition through antitrust policies and regulations, state commissions can serve as a venue for hearings on anti-competitive practices, such as all-or-nothing hiring, in which a healthcare organization requires the insurer to keep all of its facilities within the network instead of just those that are considered to be of high value.
8.Commissions can then suggest solutions to this anti-competitive behavior. They can also be a center for information and strategies to promote the dissemination of insurance plans that encourage consumer purchases and competition. A number of approaches, in addition to the pro-competitive strategies discussed above, could be used to limit prices. Non-intervention strategies include requiring suppliers to publicly justify high prices or having the state discourage, but not prohibit, high prices.
Vendors could be publicly identified as expensive and possibly embarrassed to restrict their prices. It's also possible to disadvantage high-priced providers in any deal they have with the state. Alternative approaches involve more direct forms of regulation. One approach is to set prices.
Maryland used this approach for decades along with other strategies; more recently, the state has adopted a more global budget model (see box). Pricing can be difficult, because to encourage the optimal allocation of services, it is necessary to set thousands of prices between them. Pricing based on an external benchmark, such as Medicare prices, can simplify the process; this approach can also help address the introduction of new services. However, even in this model, regulators must be concerned about differences between providers.
For example, should prices at academic medical centers be the same as at community hospitals? Inevitably, if rates are established to be the same across all suppliers, many prices will rise in many cases, diminishing any savings. If they vary by supplier, analytical challenges and equity issues will arise. In addition, because tariff setting replaces market dynamics, it limits the ability of competition to boost efficiency or improve quality. For example, suppliers generally can't increase their prices if they improve quality.
Later, 19yland received an exemption from the Centers for Medicare and Medicaid Services that allowed the state to pay the fees approved by the HSCRC, which were established prospectively, to both Medicare and Medicaid. This exemption gave the state significant regulatory authority over healthcare spending. By legislative mandate, all intensive care hospitals in Maryland must submit confidential patient-level administrative data about discharges and visits to the HSCRC. This includes demographic, financial, and clinical information.
This data is then managed by the Chesapeake Regional Information System. The HSCRC itself is comprised of members who have been appointed by the governor. They represent independent experts, payers, providers and consumers, including those under the commission's jurisdiction. A more modest approach is to limit prices.
Defining price limits based on Medicare rates is probably the simplest approach. Limits that reflect a multiple of relatively low rates at the national level or in the state or local market respond better to market conditions or changes in delivery costs and are less dependent on changes in Medicare policy. This allows the increase in rates to more closely match the cost of supplies, such as salaries for nurses or medical supplies, as opposed to the scheduled increases in Medicare rates, which are set below the growth in the costs of supplies. This concern is particularly important if the limits on fees for medical services are expanded, since current Medicare policy provides for virtually no scheduled fee increases for doctors in nominal terms over many years.
From a state perspective, the advantages of using Medicare rates are likely to outweigh the disadvantages. However, from a federal perspective, Medicare policy would be more complicated if all rates were based on Medicare rates. This is because the stakes of Medicare price changes would be greater, putting more pressure on Congress every time prices change. Addressing high prices is more limited than addressing overall health care spending, as prices reflect a single transaction that policy makers could directly regulate.
However, in practice, price regulation poses a number of practical problems that commissions can help to solve. On the one hand, commissions could develop and implement soft strategies to control prices, such as holding hearings to shed light on high prices or requiring suppliers to publicly justify their prices. State commissions can also play an important role if regulatory strategies are used. For example, if states decide to set prices, instead of maximum limits, fees (such as Maryland's) could help determine the appropriate price.
While this may not be necessary if prices are based on a multiple of Medicare or Medicaid rates, in many cases some variation between centers can be significant due to variation in markets or quality. Commissions can perform or support related analysis and can even be given authority to set prices. Commissions can also play a similar role if limits are placed on prices or price growth, especially considering the logistical challenges associated with any price regulation (fixing or limiting). Specifically, healthcare services are paid for in a variety of ways.
For example, hospitals can be reimbursed for travel or DRG. States that focus on price regulation must be able to manage the various payment structures used (or require uniformity in pricing systems, which can block existing models that are not optimal). States must also recognize the ways in which providers and insurers can circumvent pricing regulations. For example, quality-based payment models could be modified so that they are not designed to promote quality but rather to circumvent price regulations, for example, reducing the performance needed to meet quality objectives.
Commissions can help monitor the effects of price regulations and adapt regulations accordingly to conform to payments that occur outside of current traditional procedural terminology (CPT) or DRG bases. Because this type of analysis requires more experience and resources, commissions can be valuable in helping states explore potential policy options and find the tools that work best for them. In addition, they can help to reduce prices, to a certain extent, by making it easier to reduce administrative costs. This could be done by standardizing billing and quality metrics or by simplifying the processes of presenting data to states.
Indiana, for example, operates a health information exchange that allows data to be more easily shared between hospitals, payers, and public health officials. 19 However, there is little evidence that such initiatives significantly reduce spending or spending growth. The usefulness of a clinical service ultimately depends on the context in which it is provided. For example, images are often unnecessary for headaches and are therefore of low value in many cases.
However, for a patient who has risk factors or symptoms that may indicate a more serious underlying etiology, imaging is of much greater value. This distinction is often difficult to make with administrative data, which may lack clinical details and nuances. Despite these measurement challenges, initiatives such as Choosing Wisely, implemented by the Foundation of the American Board of Internal Medicine, have created lists of care that are often of low value, and private providers sell software to measure how often these services are provided. These lists have been used to analyze Medicare applications and develop measures of low-value services in a variety of categories, such as surgical and diagnostic imaging procedures.
21 In one study, the more delicate versions of these measures revealed that 42 percent of patients received low-value care, representing a total of 2.7 percent of total annual spending. However, more specific versions of these measures revealed that 25 percent of patients received low-value care, representing a total of 0.6 percent of total expenditure.22 This difference suggests that the impact of any policy aimed at low-value care will largely depend on the measures used. Efforts to eliminate low-value care focus on education or incentives. For example, with respect to education, Colorado plans to generate and share vendor-specific data to encourage improvement at the local level.
25 In addition, VCHI created the Smarter Virginia Health Care Coalition and is working with the state's major health systems to reduce the use of low-value services. This involves training and educating doctors and developing strategies, together with large health systems, to reduce low-value care. With respect to incentives, payment models, such as Accountable Care Organizations (ACOs), reward providers for providing high-value care and reducing unnecessary expenses. While not aimed exclusively at low-value care, these efforts have been shown to reduce the use of low-value services.
Value-based insurance design (VBID) plans, which often encourage patients to choose services whose clinical benefits outweigh the costs or high-value services, sometimes also actively discourage the use of low-value care. Commissions can be useful to support efforts to reduce low-value care. They can help interpret and publicize state measurement activities. They can develop priorities for low-value care services to focus on.
In some cases, they may develop more aggressive strategies, or even sanctions, designed to discourage the use of low-value care. Holistic strategies are designed to influence overall spending, as opposed to particular components, such as prices or utilization. Broader holistic strategies focus on the total cost of care or premiums, but more limited versions may focus on episodes of care or expenses from specific types of providers, such as inpatient hospitals. These approaches often assign people to responsible entities, such as insurers or provider systems, and hold those entities accountable, to varying degrees, for expenses.
Some examples of these strategies would be the regulation of premiums and the promotion of alternative payment models or global hospital budgets (in particular those that expand the responsibility for care provided outside the hospital). Soft holistic approaches could involve monitoring and reporting on spending or promoting policies that promote alternative payment models. For example, states could use alternative payment models for Medicaid or state employees, which could induce participation in such models in the commercial sector. In other cases, states could apply soft sanctions if spending targets are exceeded.
For example, in Massachusetts, the state attributes patients to providers and may require them to submit improvement plans if spending exceeds the goal. In these approaches, vendors' systems are responsible for total spending, making them responsible for the care provided by organizations outside their system. While provider systems can influence that care or the providers who visit their patients, it can be problematic to severely penalize providers for actions over which they may have limited control. Other states have taken stronger approaches.
For example, Arkansas previously used an episod-based multi-paying payment model. This was facilitated by collaboration between the state Medicaid program and the state's largest insurance company, which had a dominant market share. However, the state program was limited by the number of conditions suitable for paying for episodes: those with clear episode definitions and sufficient volume to adequately adjust for differences in risk. Their experience suggests that paying for episodes may be more useful for a limited and specific set of conditions.
Maryland has succeeded with a broader hospital budgeting model. While the state model was initially limited to price regulation, it evolved into a global hospital budgeting model and has recently expanded to include part of the responsibility for the total costs of care. An alternative approach would be to hold insurers accountable for the total costs of care. Insurers are a natural target because insurers add all expenses (claim costs, other financial transfers, and insurance company administration) to the population level and therefore have the broadest reach.
To the extent that high premiums are the main concern, insurers are the closest organization to the goal of the policy. However, using a holistic approach has complications. For example, insurers must negotiate prices with providers, and if providers have significant market power, insurers may not be able to successfully control spending. In addition, some tools that insurers can use to control expenses, such as limited networks or utilization management, may not be acceptable to customers (or policy makers), making it difficult for insurers to meet any premium targets without pressuring providers.
If premium targets are too strict in relation to the tools available, some insurers may leave the market, further complicating cost containment activities. Many holistic strategies also require the attribution of patients to providers. For example, in Maryland, the state attributes patients to hospitals through a multi-step process that is based first on attributing patients to doctors and then attributing doctors to hospitals. In cases where patients cannot be attributed using this method, other approaches are used, such as the use of geography.
Similarly, holistic approaches must also address risk adjustment. Risk adjustment is included in many existing population-based programs, such as the health insurance marketplaces, the Medicare Advantage program, and the Medicare ACO program. While the adjustment models appear to work acceptably, there are concerns both about the adjustment of the models and about the susceptibility of the models to changes in the vendor's coding behavior. For example, Massachusetts and public programs such as Medicare Advantage have seen significant increases in risk scores.
Therefore, strategies to combat increases in coding are very important. The Centers for Medicare and Medicaid Services adopts several such strategies for ACOs, including normalizing risk scores each year and limiting the growth of risk scores. In addition, holistic models, such as population-based payment models, are best suited for large groups of providers. Holding small businesses to account for total spending is more problematic, even when risk adjustment works well, as risk adjustment takes into account expected utilization and there can be a great deal of variation in actual utilization.
The choice between holistic strategies depends on many factors. If the service delivery system is highly fragmented, soft strategies that focus on episodes may be preferred to population-based models, such as an ACO, as small providers may not be adequate to manage risk. In addition, relative to population-based approaches, event-based models rely less on attribution (for many episodes) and risk adjustment. However, episod-based strategies often only cover part of the expense and often overlook patients with multiple and complex chronic conditions.
Global and population-based budget models are more comprehensive and are well suited to the medical and social needs of high-risk, high-cost patients. However, these larger models are best suited for larger delivery systems. And while broader payment models don't need to address the overlapping of medical episodes or conditions, issues related to risk adjustment and attribution are more important. The Maryland model has evolved over time from a pricing model to a hospital budgeting model, and has now begun to move closer to a population-based payment model.
It's worth noting that holistic strategies don't have to be applied on their own and can complement other approaches. For example, states that adopt a holistic approach can adopt any of the other strategies with respect to competition, pricing, or even use to support the ultimate goal of reducing state spending. Rhode Island not only used inflation limits, but it made hospitals switch from diet to DRG-based payments to curb the growth of healthcare spending. 29 The state also combined these efforts with the requirement that commercial insurers increase their spending on primary care and care coordination services (see box).
Rhode Island has a database of claims from all payers, but given limited resources, this data is managed by researchers at Brown University. The OHIC is led by the state health insurance commissioner, who is appointed by the governor. Given these challenges, state commissions can be very useful in developing holistic strategies. In soft approaches, they can analyze the data, recommend specific policy actions, and support any sanctions, if appropriate.
In more regulatory approaches, the commission can support the development of important policy parameters. The experiences of the different states are instructive. Massachusetts operates a soft-touch holistic system in which the Health Policy Commission (HPC) acts as an independent agency, with the goal of making care more affordable for state residents. While HPC has no direct regulatory authority, it plays a number of influential roles, such as conducting and sharing analyses on the drivers of healthcare spending, making evidence-based public policy recommendations, and supporting regulatory measures by other agencies.
31 While the commission may not be able to penalize payers or suppliers, it can “encourage, cajole and, if necessary, embarrass them to do their part to control costs.”. A simple but important way to do this is to be transparent. Commissions can share their analyses with the public through regular reports or offer perspectives and recommendations by talking to the media and thus influence the debate. If more people know about the commission and are involved in its work, the harder it will be to ignore the recommendations.
Many, like the one in Massachusetts, gain authority by working with other regulatory agencies. Therefore, even if the commission itself cannot impose sanctions, it can transmit information to agencies that do. Instead, states may prefer to create commissions with greater holistic authority, giving them the ability to force changes in the health sector. For example, Maryland has focused on hospital budgets and measures of the total cost of care.
This is feasible in Maryland because their commission has a long and well-established history. It's also worth noting that stakeholders have a keen interest in working with the commission, given the state's Medicare exemption. Without it, Medicare and Medicaid payment rates would drop significantly, as the exemption created rates for all payers that increased public payers' rates. While the difference could be offset as trade rates increase, that would take time and create something like golden handcuffs that would encourage hospitals to make the current system successful.
To understand spending trends and implement many of the strategies discussed, states need data. States with the right regulatory authority can compel organizations, in particular payers, to report data. This is useful not only because it requires fewer resources from the state, but also because payers are likely to be better prepared to make accurate estimates of their members' spending. Aggregate data provided by payers may be sufficient, but more detailed data at the claims level allows for more thorough and accurate analyses.
To this end, many states now have (or are creating) databases of claims for all payers, which are particularly useful for understanding pricing or conducting comprehensive examinations of specific services or patient populations. 33 However, these databases are resource intensive and states may lack the funds and experience to analyze the data. Every payer claims that databases not only require an admission platform and servers, but also experienced statisticians and programmers. In Massachusetts, the state manages its own data with the Center for Health Information Analysis (CHIA).
The CHIA manages the claims database for all payers in the state and also collects financial data from payers and providers. In particular, the CHIA functions as an independent entity that collaborates with state agencies, such as the Health Policy Commission. While this separation has the potential to create inefficiencies, it also builds trust in CHIA's work. The data is aggregated and analyzed without taking into account what other agencies hope to do with the results.
Oregon has a similar Health Policy and Analysis Division. Rhode Island, on the other hand, doesn't leverage its own data. Instead, the state works with Brown University researchers who receive funding through grants. Therefore, the design of a state's policies may depend on its analytical capabilities and available funding sources.
The composition of the commission is a key consideration and depends on the role played by the commission. While the knowledge of payers and providers is generally crucial for political and substantive reasons, some states may consider better to minimize the number of commission members directly employed by providers, insurers, or groups funded by those sectors to avoid conflicts of interest. Including people who are retired from those segments or who work for organizations that involve those sectors can be useful, and that's what Massachusetts has done. The Oregon commission includes stakeholders, such as large hospital systems and strong consumer advocates.
Arguably, their inclusion increases acceptance, as they can participate in the decisions that are made. However, it is important that stakeholders have a strong incentive, as in Maryland, for the commission to succeed. For example, a legal reduction in prices, if the objectives are not met, could encourage constructive participation. In either case, experience in hospital care, nursing care, behavioral health, doctors, and long-term care can be important.
Scholars with experience in health policies, particularly related to healthcare markets and funding, are valuable, as are representatives of employers and organized workers and consumer or patient advocates. In addition, it is important to have some state government representatives, even if they are ex officio. The Massachusetts Health Policy Commission has 11 members covering relevant areas of expertise, while the Maryland Health Services Cost Review Commission also includes providers and insurers, among others. Given the barriers to significant federal action, substantial policy changes to control spending growth are likely to be limited to state policy.
States can implement many different strategies, ranging from efforts to promote competition, reduce prices, or decrease the use of low-value care to broader strategies that address overall spending. State health policy commissions can play a central role in supporting any of these efforts. However, given the differences in political economy and resources, there is likely to be no one-size-fits-all approach to successfully designing commissions. Some states may choose to use commissions to provide analytical, convening and advisory information, while other states may give commissions more regulatory authority.
States must reflect on their respective priorities, decide the basic approach they want to take to address healthcare spending, and then design the commission that works best to support those approaches. Schaeffer Professor of Health Policy, State Health Policy at Harvard Medical School, Government Programs% 26 policies, private insurance, Medicare, Medicaid. Of every dollar spent on healthcare in the United States, 33 cents go to hospitals. Another 20 cents go to doctors and clinics, while 27 cents go to non-medical providers, such as nurse practitioners, optometrists, chiropractors, and occupational and speech therapists.
When you consider doctors and clinics owned by hospitals, it's fair to say that hospitals control more than half of all healthcare spending. Nearly nine out of 10 hospital executives agree that their organizations are at competitive risk against non-hospital competitors such as Optum, CVS Health and Amazon. The number of walk-in clinics continues to grow, and more and more companies are setting up workplace clinics for employees. For a patient who needs surgery, medical care doesn't start on the day of surgery or end on that day.
The surgery is part of an ongoing treatment that begins 30 days earlier and lasts for a similar period afterwards. It could start with the patient on the couch, researching conditions and providers on a smartphone. .
