The following “Ironclad Rules” were authored by Larry Odey after leaving the then Health Care Financing Administration (HCFA) almost two decades ago before it became the Center for Medicare and Medicaid Services (CMS). Mr. Odey’s rules capture the organized chaos that CMS inflicts on hospitals and physicians when trying to bill Medicare for services rendered. Even commercial insurers have regressed to this foolishness to cut costs. The "rules" have increased provider administrative FTEs three or more times the number needed pre-price controls, even with the advancements in technology.
The Ironclad Rules of Medicare: by Larry Odey
Just because you have a code doesn't mean it's covered.
Just because it's covered doesn't mean you can bill for it.
Just because you can bill for it doesn't mean you'll get paid.
Just because you've been paid doesn't mean you can keep the money.
Just because you've been paid once doesn't mean you'll get paid again.
Just because you've been paid in one state doesn't mean you'll get paid in another state.
You'll never know all the rules.
Not knowing the rules can get you in jail.
There's always someone who doesn't get the message.
There's always someone who gets the message and ignores it.
When government is undisciplined and not accountable for the organized chaos it inflicts on healthcare providers through reimbursment policies, we should not be surprised that healthcare leadership reflects the same lack of discipline and accountability in preventing clinical errors and operational inefficiencies.
Friday, August 17, 2007
Wednesday, August 15, 2007
Pay-For-Performance (P4P) Versus Pay-For-Excellence-Not-Failure (P4ENF)
A study on pay-for-performance (P4P), the annual benchmark/reward program the Center for Medicare and Medicaid Services (CMS) and Congress are contemplating, reported that hospitals lacking funds and resources will forego quality improvements and attempt to survive on existing reimbursement and no reward. There is division of whether it will work versus “it’s the silver bullet” that will cure provider malaise to improve patient quality. Edwards Deming, the quality guru whose management theories hospitals once considered a silver bullet, was not a pay-for-performance fan. Clearly his teachings did not have any lasting impression on hospital leadership as it dutifully marches behind CMS towards P4P.
Deming concluded that pay-for-performance “focused on the end product” and “not on leadership to help people.” Because of CMS’s power of price controls and power of scripted regulations, it has a substantial leadership role in hospital revenue and leadership behavior. Therefore, CMS is in a position to take a “leadership” role in providing preventive funds to “help” all hospitals to have a reasonable opportunity to reduce preventable medical errors. Although many hospitals even with prevention funds may only make small gains in lowering preventable errors, the prevention funds at least encourage their attempts at success. If a hospital fails one patient, it would pay back the cost of prevention allocated for one patient for the specific preventable error. In other words, paying for excellence and penalizing failure, daily, I believe is more motivating than a complicated grading system that may or may not reward a hospital’s efforts at the end of each year. It is also an immediate savings for insurers since the cost of prevention is cheaper than the cost of healing a preventable clinical error. A “pay-for-excellence-not failure” (P4ENP) approach eliminates government benchmarks as a "rest stop" because if a hospital is truly striving for excellence, benchmarks are just a mile marker in a never ending journey. P4ENF is designed to create the fundamentals of a free market in a one hospital community with little to no competition in the traditional sence. Competition would be between the forces for a culture of excellence against the forces commitment to the status quo.
When refunds for preventable clinical errors become a line item on a financial report, the cost of preventable failure will get everyone’s attention – board members, bankers, bond underwriters, local newspapers etc., and especially, hospital leadership. Since refunds are patient specific, each nursing unit, emergency room, surgery unit etc. know monthly how their efforts measure up and where improvements need to be achieved. This encourages better inter and intra-departmental communication and efficiency between support departments and care teams breaking down the silos that characterize a culture of failure. With CMS and commercial insurers on the hunt for preventable errors to take back prevention funds and hospital staff and physicians focused on eliminating preventable errors to hold onto prevention funds, the focus changes to the well being of every patient. Where the focus belongs!
This transformation opportunity is a save, inspire free market program that can lead to affordable universal healthcare not a “tax, hope to reward, hope to insure everyone” government program that is gaining momentum. True healthcare transformation will not be about creating winners and losers, it’s about giving all healthcare leadership the financial means and incentive to be in the constant pursuit of excellence in clinical outcomes and operational efficiencies where everyone wins.
Deming concluded that pay-for-performance “focused on the end product” and “not on leadership to help people.” Because of CMS’s power of price controls and power of scripted regulations, it has a substantial leadership role in hospital revenue and leadership behavior. Therefore, CMS is in a position to take a “leadership” role in providing preventive funds to “help” all hospitals to have a reasonable opportunity to reduce preventable medical errors. Although many hospitals even with prevention funds may only make small gains in lowering preventable errors, the prevention funds at least encourage their attempts at success. If a hospital fails one patient, it would pay back the cost of prevention allocated for one patient for the specific preventable error. In other words, paying for excellence and penalizing failure, daily, I believe is more motivating than a complicated grading system that may or may not reward a hospital’s efforts at the end of each year. It is also an immediate savings for insurers since the cost of prevention is cheaper than the cost of healing a preventable clinical error. A “pay-for-excellence-not failure” (P4ENP) approach eliminates government benchmarks as a "rest stop" because if a hospital is truly striving for excellence, benchmarks are just a mile marker in a never ending journey. P4ENF is designed to create the fundamentals of a free market in a one hospital community with little to no competition in the traditional sence. Competition would be between the forces for a culture of excellence against the forces commitment to the status quo.
When refunds for preventable clinical errors become a line item on a financial report, the cost of preventable failure will get everyone’s attention – board members, bankers, bond underwriters, local newspapers etc., and especially, hospital leadership. Since refunds are patient specific, each nursing unit, emergency room, surgery unit etc. know monthly how their efforts measure up and where improvements need to be achieved. This encourages better inter and intra-departmental communication and efficiency between support departments and care teams breaking down the silos that characterize a culture of failure. With CMS and commercial insurers on the hunt for preventable errors to take back prevention funds and hospital staff and physicians focused on eliminating preventable errors to hold onto prevention funds, the focus changes to the well being of every patient. Where the focus belongs!
This transformation opportunity is a save, inspire free market program that can lead to affordable universal healthcare not a “tax, hope to reward, hope to insure everyone” government program that is gaining momentum. True healthcare transformation will not be about creating winners and losers, it’s about giving all healthcare leadership the financial means and incentive to be in the constant pursuit of excellence in clinical outcomes and operational efficiencies where everyone wins.
Government Sponsored Failure Spawns Organized Chaos
In May, 2001, Janet M. Corrigan a director at the Institute of Medicine reported before a U.S. Senate committee that “medical science and technology have advanced at an extraordinary pace, the health care delivery system has floundered,” and falls far short in an “ability to translate knowledge into practice, and to apply new technology safely and appropriately. As currently structured, the health care enterprise does not make the best use of its resources.” Why after four decades of government mandates, regulations and price controls do hospitals lack the incentive to achieve excellence in clinical outcomes and operational efficiencies? Simple answer, hospitals are rewarded for failing.
How Rewarding Failure Conditioned Hospitals To Failure
When Medicare was first implemented four decades ago, it utilized fee-for-service reimbursement based on a hospital’s costs, which inadvertently introduced rewards for operational inefficiencies. If leadership at all levels could not manage a process, unneeded staff was hired bloating payrolls and lowering productivity with the reward of future Medicare payment increases. Failure quickly became a cash cow giving rise to a culture of failure and inadequate leadership. Senior leadership focused on preserving the status quo hiring “team players” who would be comfortable with failure as a cash cow rather than change agents who would address productivity and preventable clinical outcomes. The costly consequences drove Medicare to price controls and insurers to experiment with managed care.
How Price Controls Cut CMS’s Cost of Failure But Inflated Insurance Premiums
In 1983, CMS introduced Diagnosis Related Groups (DRG), a form of price controls, to control bloasting Medicare payments to hospitals which inflated 13 percent the prior year. Medicare speculated that price controls for different types of services would give hospitals the incentive to perform the procedure more efficiently to maximize profits. But, two decades of being rewarded for operational inefficiencies conditioned hospitals to seek other means rather than cost accounting and managing resources to compensate for price controls. No surprise, two decades of CMS regulations gave government sufficient influence over hospitals devolving hospitals into bureaucratic subsidiaries. Like an inefficient government agency, hospitals did what governments do; they focused on innovative ways for new revenue streams (taxes) rather than gaining new efficiencies. Enter cost shifting.
Cost-Shifting: A Stealth Federal Tax On Commercial Premiums
DRGs (price controls) introduced a new dimension to the culture of failure: underpayments for success and upward adjustments for preventable clinical outcomes, which conditioned hospitals to have a tolerance for clinical failure, the new cash cow, further devolving hospitals into a culture of failure while accelerating health care inflation into warp speed. Hospitals recouped losses from price controls through “cost-shifting,” which is adding losses from price controls to services paid by commercial insurers and patients with no insurance like a stealth federal tax.
A study addressing the inflationary impact of cost-shifting by Premera Blue Cross of Washington found, “In 2004, this hidden tax cost Washington employers an average of $902 per family health insurance contract –13 percent of all commercial hospital and physician costs.” Even though Blue Cross has to absorb losses from Medicare price controls, it also negotiates its own discounts forcing hospitals to shift both Blue Cross and Medicare discounts to commercial insurers with less negotiating or regulatory power.
The consequences of CMS indirectly shifting its cost of failure to commercial insurers can be seen when comparing premium growth to Medicare cost growth from 2000 to 2004 when Medicare cost averaged an increased of 6.55% annually while employer premiums averaged 11.16% annually. In other words, commercial premium inflation includes their cost of failure and through cost shifting a significant portion of Medicare’s cost of failure. Should we be surprised that employers offering health care coverage have dropped from 69% to 61% as the rewarding failure “tax” taxes employers out of the health insurance market?
The irony is that government policies that reward failure have caused health insurance premiums to inflate faster than inflation forcing individuals and businesses to drop policies. Now the same government wants to subsidize commercial premiums with these saved tax dollars so that individuals and businesses forced out by government policies can reenter the insurance market under government control which will cause more cost shifting to commercial premiums resulting in more uninsured seeking government controlled premium subsidies.
The devolution of the nation’s health care delivery system is evidence that government controlled markets inspire organized chaos with an insatiable appetite for tax and premium dollars and a tolerance for patient suffering.
How Rewarding Failure Conditioned Hospitals To Failure
When Medicare was first implemented four decades ago, it utilized fee-for-service reimbursement based on a hospital’s costs, which inadvertently introduced rewards for operational inefficiencies. If leadership at all levels could not manage a process, unneeded staff was hired bloating payrolls and lowering productivity with the reward of future Medicare payment increases. Failure quickly became a cash cow giving rise to a culture of failure and inadequate leadership. Senior leadership focused on preserving the status quo hiring “team players” who would be comfortable with failure as a cash cow rather than change agents who would address productivity and preventable clinical outcomes. The costly consequences drove Medicare to price controls and insurers to experiment with managed care.
How Price Controls Cut CMS’s Cost of Failure But Inflated Insurance Premiums
In 1983, CMS introduced Diagnosis Related Groups (DRG), a form of price controls, to control bloasting Medicare payments to hospitals which inflated 13 percent the prior year. Medicare speculated that price controls for different types of services would give hospitals the incentive to perform the procedure more efficiently to maximize profits. But, two decades of being rewarded for operational inefficiencies conditioned hospitals to seek other means rather than cost accounting and managing resources to compensate for price controls. No surprise, two decades of CMS regulations gave government sufficient influence over hospitals devolving hospitals into bureaucratic subsidiaries. Like an inefficient government agency, hospitals did what governments do; they focused on innovative ways for new revenue streams (taxes) rather than gaining new efficiencies. Enter cost shifting.
Cost-Shifting: A Stealth Federal Tax On Commercial Premiums
DRGs (price controls) introduced a new dimension to the culture of failure: underpayments for success and upward adjustments for preventable clinical outcomes, which conditioned hospitals to have a tolerance for clinical failure, the new cash cow, further devolving hospitals into a culture of failure while accelerating health care inflation into warp speed. Hospitals recouped losses from price controls through “cost-shifting,” which is adding losses from price controls to services paid by commercial insurers and patients with no insurance like a stealth federal tax.
A study addressing the inflationary impact of cost-shifting by Premera Blue Cross of Washington found, “In 2004, this hidden tax cost Washington employers an average of $902 per family health insurance contract –13 percent of all commercial hospital and physician costs.” Even though Blue Cross has to absorb losses from Medicare price controls, it also negotiates its own discounts forcing hospitals to shift both Blue Cross and Medicare discounts to commercial insurers with less negotiating or regulatory power.
The consequences of CMS indirectly shifting its cost of failure to commercial insurers can be seen when comparing premium growth to Medicare cost growth from 2000 to 2004 when Medicare cost averaged an increased of 6.55% annually while employer premiums averaged 11.16% annually. In other words, commercial premium inflation includes their cost of failure and through cost shifting a significant portion of Medicare’s cost of failure. Should we be surprised that employers offering health care coverage have dropped from 69% to 61% as the rewarding failure “tax” taxes employers out of the health insurance market?
The irony is that government policies that reward failure have caused health insurance premiums to inflate faster than inflation forcing individuals and businesses to drop policies. Now the same government wants to subsidize commercial premiums with these saved tax dollars so that individuals and businesses forced out by government policies can reenter the insurance market under government control which will cause more cost shifting to commercial premiums resulting in more uninsured seeking government controlled premium subsidies.
The devolution of the nation’s health care delivery system is evidence that government controlled markets inspire organized chaos with an insatiable appetite for tax and premium dollars and a tolerance for patient suffering.
Saturday, August 11, 2007
Can the Center for Medicare and Medicaid Services Walk the Talk?
Evidence-based strategies to address preventable health-related problems have been pushed to the forefront. We see advocates like the U.S. Preventive Service Task Force (USPSTF) recommend the nation invest in 50 plus health screenings for prevention based on the strength of evidence and magnitude of net benefit (benefit minus harms). Each of the recommended screenings has a present cost with a long range benefit, maybe. But, if CMS and special interest groups are truly interested in prevention, there is a program that is “self-funding” with an immediate benefit if CMS can "walk the talk."
In 2006, the Administrator of the Center for Medicare and Medicaid Services (CMS) told a U.S Senate committee that it would be better if Medicare paid for the prevention of medical errors rather than more when they occur (the talk). Well, unfortunately when it comes to healing a hospital acquired decubitus ulcer, Medicare limits its cost to $735 for a decubitus that cost $3,539 to heal and $1,410 to prevent (the reality). CMS saves $675 by ignoring prevention and saves $2,804 with price controls when a patient is subjected to a decubitus. What looks like a $2,804 loss for the hospital actually becomes a “rewarding failure tax” placed on commercial insurers because of cost-shifting.
Cost shifting is what Congress crucifies drug companies for doing. An example is when drug companies negotiate cheap drug prices with Canadian provinces and then recoup the discounts with higher prices for Americans. Although Congress criticizes the practice, it uses price controls to force discounts onto hospitals and then hospitals acting as a CMS surrogate, add the discounts to the charges non-Medicare citizens pay. Medicare cost shifting acts like a stealth federal tax inflating commercial premiums presenting the illusion that commercial insurers are greedy profiteers and that Medicare is a model program.
If we calculate a USPSTF “benefit minus harm” grade, we find CMS’s practice of price controls/cost shifting is harmful to premiums and patients with only government benefiting. There is a self-funding alternative with a substantial benefit to all patients, commercial premiums and even government if it has the discipline and courage to participate in the free market. It is the tried and true free market concept of paying for excellence and penalizing failure. I call the program "pay-for-excellence not failure" (P4ENF).
It is estimated that 4-14 percent of hospital patients acquire a decubitus ulcer. If we use a lower recently published percentage of 3.4, the nation’s cost to heal preventable ulcers is $4.7 billion and could be as much as $19.4 billion. If insurers and Medicare paid hospitals $1.9 billion of the cost to heal for prevention, the nation would save $2.8 billion in insurance premiums, taxes and out of pocket expenses in the first year, and possibly more if we had better statistics. If Medicare and insurers took back the prevention allowance ($1,410 per patient) when a hospital failed to prevent a decubitus, hospitals would have both the incentive and financial resources for prevention and be subject to market forces when they fail.
If CMS wanted to “walk the talk” in October 2008 when Medicare plans “downward adjustments” for preventable infections in hospitals, they would share projected savings with hospitals for prevention (the walk). If we utilize the state of Pennsylvania 2005 data, all insurers, including Medicare, were projected to have paid hospitals 6.7 percent more because of preventable infections. If we utilize this percentage as a national average, the nation spent $43.7 billion on preventable hospital infections. Utilize the data from an independent study published in Public Health Reports, March-April, 2007 the number approaches $80 billion and 98,987 deaths! If CMS shared half the projected savings for prevention, the nation would “benefit” $21.85-$40 billion the first year. Again, hospitals would have the financial resources and incentive to prevent infections (patients and hospitals benefit) and be subject to refunding prevention funds if they failed (non-performers are “harmed”). Plus, all insurers and hospitals would have the incentive to achieve accurate data on hospital acquired infections rather the “guestimates” one presently has to use.
For CMS to “walk the talk” means CMS has to put patients first and play by the same rules as commercial insurers, a big transformation for a self-serving bureaucracy that gets a flunking “benefit minus harms” grade when it comes to prevention of medical errors. In other words, “Sicko” continues to place Medicare’s money on Death to win, Suffering to show and Excellence to fail.
In 2006, the Administrator of the Center for Medicare and Medicaid Services (CMS) told a U.S Senate committee that it would be better if Medicare paid for the prevention of medical errors rather than more when they occur (the talk). Well, unfortunately when it comes to healing a hospital acquired decubitus ulcer, Medicare limits its cost to $735 for a decubitus that cost $3,539 to heal and $1,410 to prevent (the reality). CMS saves $675 by ignoring prevention and saves $2,804 with price controls when a patient is subjected to a decubitus. What looks like a $2,804 loss for the hospital actually becomes a “rewarding failure tax” placed on commercial insurers because of cost-shifting.
Cost shifting is what Congress crucifies drug companies for doing. An example is when drug companies negotiate cheap drug prices with Canadian provinces and then recoup the discounts with higher prices for Americans. Although Congress criticizes the practice, it uses price controls to force discounts onto hospitals and then hospitals acting as a CMS surrogate, add the discounts to the charges non-Medicare citizens pay. Medicare cost shifting acts like a stealth federal tax inflating commercial premiums presenting the illusion that commercial insurers are greedy profiteers and that Medicare is a model program.
If we calculate a USPSTF “benefit minus harm” grade, we find CMS’s practice of price controls/cost shifting is harmful to premiums and patients with only government benefiting. There is a self-funding alternative with a substantial benefit to all patients, commercial premiums and even government if it has the discipline and courage to participate in the free market. It is the tried and true free market concept of paying for excellence and penalizing failure. I call the program "pay-for-excellence not failure" (P4ENF).
It is estimated that 4-14 percent of hospital patients acquire a decubitus ulcer. If we use a lower recently published percentage of 3.4, the nation’s cost to heal preventable ulcers is $4.7 billion and could be as much as $19.4 billion. If insurers and Medicare paid hospitals $1.9 billion of the cost to heal for prevention, the nation would save $2.8 billion in insurance premiums, taxes and out of pocket expenses in the first year, and possibly more if we had better statistics. If Medicare and insurers took back the prevention allowance ($1,410 per patient) when a hospital failed to prevent a decubitus, hospitals would have both the incentive and financial resources for prevention and be subject to market forces when they fail.
If CMS wanted to “walk the talk” in October 2008 when Medicare plans “downward adjustments” for preventable infections in hospitals, they would share projected savings with hospitals for prevention (the walk). If we utilize the state of Pennsylvania 2005 data, all insurers, including Medicare, were projected to have paid hospitals 6.7 percent more because of preventable infections. If we utilize this percentage as a national average, the nation spent $43.7 billion on preventable hospital infections. Utilize the data from an independent study published in Public Health Reports, March-April, 2007 the number approaches $80 billion and 98,987 deaths! If CMS shared half the projected savings for prevention, the nation would “benefit” $21.85-$40 billion the first year. Again, hospitals would have the financial resources and incentive to prevent infections (patients and hospitals benefit) and be subject to refunding prevention funds if they failed (non-performers are “harmed”). Plus, all insurers and hospitals would have the incentive to achieve accurate data on hospital acquired infections rather the “guestimates” one presently has to use.
For CMS to “walk the talk” means CMS has to put patients first and play by the same rules as commercial insurers, a big transformation for a self-serving bureaucracy that gets a flunking “benefit minus harms” grade when it comes to prevention of medical errors. In other words, “Sicko” continues to place Medicare’s money on Death to win, Suffering to show and Excellence to fail.
Monday, July 30, 2007
Suffering the Illusion
The present health care delivery system is structured to be inflationary and quality challenged because it lacks the forces of a free market. The Center for Medicare and Medicaid Services (CMS) has demonstrated what Adam Smith warned, that government has no “master” in the market and will “set the market rather than abide by it.” CMS, the federal health insurer, has become skilled at “setting” the health care insurance market to reward preventable medical errors and factor operational inefficiencies into provider payments and then utilizing price controls minimizes the costly consequences of it own policies. CMS, the “master,” then allows health care providers to shift the losses from Medicare price controls to the charges paid by “competing” commercial insurers like a stealth tax. This diversion has inspired public outcries of overcharging aimed at health care insurers, hospitals, etc. Meanwhile, the great bureaucratic Houdini is praised for making Medicare comparatively affordable, leaving many to tout it as a template for nationalized health care! But the first casualty of an illusion is reality. In other words, the real “Sicko” resides inside the Beltway. Sorry, Michael Moore you bought the illusion.
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