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Health Care Reform in Arizona - AZ Business Magazine Nov/Dec 2010

Business And Community Leaders Are Trying To Figure Out What Health Care Reform Will Mean In Arizona

For government and business, providers and patients, the U.S. health care reform legislation promises a new world of costs and care.

Most individuals without insurance will be able to get it. Those who have insurance already probably will have to pay more for it. Hospitals, doctors and others in the front lines of health care will begin to change long-established ways of doing business. State governments and many businesses, already battered by recession, will face new costs and possibly some benefits.

But beyond these generalizations, little is certain about what health care reform will mean in Arizona and across the country. The bill is vague in many areas and leaves important details of implementation to be determined by federal regulators and other officials in the weeks and months ahead.

“Quite frankly, we won’t know the financial impacts until we move through the process and see what the federal government and insurance companies do,” says Donna Davis, chief executive officer of the Arizona Small Business Association (ASBA).

Barry Broome, president and chief executive officer of the Greater Phoenix Economic Council (GPEC), says it is too early know what the bill will mean.

“It sounds very good to be able to cover the uninsured, but what the costs are and how they are going to be distributed are still not clear,” he says.

Marjorie Baldwin, director of the School of Health Management and Policy and assistant dean at Arizona State University’s W. P. Carey School of Business, says it is important to note that the law’s primary purpose is to cover the uninsured.

“This bill is about access,” Baldwin says. “It’s designed to cover the uninsured. There is much less in it about quality of care and little about cost controls.”

On what the price tag for health care reform will be, Baldwin says, “The one safe prediction is that it is going to cost much more than anticipated.”

Hospitals and doctors
Whether the health care overhaul is ultimately deemed a success will be determined to a large extent by what happens inside the nation’s hospitals, clinics and doctors’ offices.

Peter Pavarini, a health care lawyer for Squire, Sanders and Dempsey and an adviser to health care organizations, believes hospitals are actually well-positioned to adapt to the new law.

“Hospitals have been anticipating something happening for some time,” Pavarini says. “Hospitals have the resources to prepare better than some of the other players in the health care system.”

Several provisions in the law are expected to lead to a dramatic shift in the way hospitals are paid by insurance. Under the existing system, providers receive set rates for specific medical procedures. The new law moves toward a system in which hospitals receive a set amount for treating an overall condition or a so-called “bundled payment.” This shift is expected to require more detailed treatment plans, coordinated care and closer cooperation among hospitals and physicians.

“With the bundled payments, you have to have a more integrated approach and an approach that aligns physicians and hospitals,” says Suzanne Pfister, vice president of external affairs at St. Joseph’s Hospital and Medical Center in Phoenix.

The hospital already has been moving in this direction, according to Pfister. St. Joseph’s has forged a series of partnerships with area health care organizations, including outpatient and short-stay providers United Surgical Partners and SimonMed Imaging
.
“We are continuing to look at moving from acute care to a continuum of care,” Pfister says.

Pavarini believes the new payment systems for Medicaid and Medicare will bring big changes to care at hospitals. When the system is in place, hospitals will get a set payment for delivering all of the care a patient receives from 72 hours before admission to 30 days after discharge, he notes.

“That’s a whole different model from what we have now,” Pavarini says. “This means it’s not good enough just to get the patient in and out of the hospital. It means testing can’t be duplicative. And it means patients better be ready for discharge when they’re released.”

Pavarini says doctors and hospitals will need to cooperate more closely as the law is implemented. He sees hospitals forging formal alliances with physician groups and appointing more practicing physicians to their boards of directors.
A more basic concern for hospitals is how much they will be paid. Because expansion of Medicaid is a key feature of the law, hospitals are concerned about long-term revenue.

“Payments are going to shift more to the level of Medicaid, and Medicaid has not been a particularly good payer,” Pfister says.

Officials at Phoenix-based Banner Health, one of the largest nonprofit health care systems in the country, are still examining the legislation to assess its consequences.

“This reform is primarily about health insurance, not health care reform,” the organization said in a statement. “It will result in expanded AHCCCS (Medicaid) coverage in Arizona and access to insurance, but the need remains to address reducing the cost of health care.”

The bill includes a number of provisions that will increase the role of primary-care physicians. Medicaid fees will go up for primary-care doctors, who also will be eligible for bonuses from Medicare.

St. Joseph’s is concerned about being able to find enough physicians as health care reform is implemented in the coming years, according to Pfister.

“Arizona has fewer physicians per capita than the national average, so we face that already. Arizona does not have enough primary-care physicians and even some specialists,” she says.

The larger hospitals that have formal ties to physicians and other providers probably will fare best under health care reform, according to Pavarini. But he believes smaller, more isolated hospitals will struggle and some will close.

“Arizona has a number of smaller hospitals in less populated areas,” he says. “I think the outlying hospitals in rural communities could have difficulty.”

Businesses
While all businesses will be affected by the health care reform law, some will feel it more than others. Probably least affected will be firms that already provide health insurance now and have a pool of employees large enough to allow the companies to self-insure.

“For most large businesses, fundamentally there’s not a lot of change,” says Keith Maio, president and chief executive officer of National Bank of Arizona. “For us, we’ll have to be a little more paperwork conscious.”

ASU’s Baldwin says the principal effect on large employers will be slightly higher expenses, as they absorb some of the cost of the system’s expanded coverage.

“For larger employers, the law is not going to mean a big difference, but they are going to see their costs go up,” she says.

Smaller businesses though will face new uncertainties, and, for some, significant new costs.

“I would say that there is a cloud of concern generally for small businesses,” says Maio, whose bank has many small business customers. “People who have been through the recession and are still slugging it out have learned to survive. But they still have trouble seeing how they can get back to where they were . That’s why something like the health care bill can have such an impact.”

The law offers a complex mix of incentives and penalties designed to spur employers to offer health insurance. In 2014, employers with 50 or more workers who do not provide coverage will face penalties of $2,000 or $3,000 per employee. Some employers who provide insurance and have fewer than 50 workers will be eligible for tax credits.

“In a sense there is both a carrot and a stick,” says Bradford Kirkman-Liff, professor in the School of Health Management and Policy at W. P Carey. “The idea is to create a very strong incentive to provide insurance.”

The tax credits could offset as much as half of the insurance costs for some employers, Kirkman-Liff notes.

“Arizona has a high number of small employers. Many of them don’t provide health insurance, but some do. This would give them a reason not to drop it,” he says.

The law also instructs states to establish insurance exchanges, where small employers and individuals can purchase policies from insurance companies. The exchanges are designed to bring down the cost of insurance by combining groups of buyers into large pools.

But even with government subsidies and insurance exchanges, some businesses will find the burden too large, according Maio.

“The greatest impact will be on those that employ entry-level employees,” he says. “Arizona has a lot of lower-wage businesses who won’t be able to afford to provide insurance. I think some will opt to pay the fine. Then what have you accomplished?”

Another problem that Maio sees is the 50-employee threshold for the coverage requirement. Employers with fewer than 50 can escape penalties for not providing insurance.

“Have you given them a disincentive to adding people?” he asks.

Davis at ASBA says most business owners are focused on short-term challenges and do not have a clear picture of how the law will affect them.

“For some small businesses who fit the prescribed requirements, it will help offset some of their costs,” Davis says. “For others, it simply won’t.”

House Call

Valley Doctors Balance Offices With House Calls

Sitting impatiently in a packed waiting room past your appointment time just hoping to be called next, seems like a far cry from the comfort of the old country doctor that made house calls.

A few Valley doctors are resurrecting this relationship-oriented style of medicine through a hybrid concierge model; some even make house calls in urgent situations.

Concierge care, which solely caters to a VIP clientele, has been around for a while. But Wayne Lipton, the founder of Concierge Choice Physicians, is touting a hybrid model that has a handful of doctors practicing in Arizona and more than 160 physicians in 16 states.

The hybrid approach allows concierge patients to have direct contact with their physician through e-mail or phone, same- or next-day appointments, extended visits and executive physicals. The doctors can still see other patients who didn’t feel the need to pay extra to join a concierge model.

“This approach is not only kinder and gentler to an area, it helps accomplish a number of goals,” Lipton says. “It’s a choice, not a requirement on the part of patients. So it’s an opportunity, and the opportunity is to have something that’s more akin to old-fashioned primary care. It’s also an opportunity for the doctor to continue to participate in the plan and the government plan they’d been in before.”

Dr. Susan Wilder, who has been a physician for more than 20 years, switched her practice, LifeScape Medical Associates, to the hybrid model about two years ago.

“We wanted to take the time needed with patients … not churn them through 40 patients a day,” says Wilder, founder and CEO of LifeScape Medical Associates in Scottsdale.

Wilder became a doctor to provide the kind of care she received as a child from her general practitioner, who knew her family’s medical history and who delivered her and her siblings.

“My ideal was to be the old-fashioned family doctor,” she says. “The concierge model allows us to have that relationship.”

Christine Craft, who has been a concierge patient for two years, says she opted to have more accessibility to and a closer relationship with her doctor.

Craft says most of her questions are health-related as opposed to sickness-related, but the conversations the hybrid model allows her to have with Wilder are worth the extra payments.

Craft and her husband didn’t have health issues when they became concierge patients, but since that time Craft’s husband has developed a serious illness.

She says she thought the concierge practice was valuable when she was healthy, but with a serious illness, “the value of it increases a hundred times. … The accessibility that my husband (has), to have that when times are scary and tough (is) even more valuable.”

Wilder isn’t the only doctor to find the concierge care beneficial to both her and her patients.

“It’s growing leaps and bounds,” Lipton says. “It’s growing numbers amongst the best and the brightest … because it is consistent with why they became primary care doctors to begin with.”

In the current health care system, where the only way to increase income is to increase patients, thereby decreasing the level of care, doctors are turning to concierge care to boost income.

“Sometimes I feel like Charlie Brown and the football” in the current health care system, Wilder says.

Although Wilder only has about 200 concierge patients and her practice has more than 1,500 non-concierge patients, she says the hybrid model has kept her practice alive financially.

“It doesn’t make millionaire doctors, but what it does is it bolsters the revenue of a practice efficiently to make up for what really is a very unsure level of compensation for primary physicians today, and it encourages excellence,” Lipton says.

The hybrid model not only boosts income, but also the fulfillment level of doctors.

It’s “much more rewarding to provide comprehensive care,” Wilder says.

nurses, healthcare, doctors

The State’s Health Care Industry Is Strong, But The Recession Is Taking A Toll

Although I have only been in Arizona 11 years, St. Joseph’s Hospital and Medical Center has been providing high-quality care to Valley residents since 1895. And for the past century, St. Joseph’s has been known for two primary missions: Service to the poor and underserved; and outstanding care, particularly in the neurosciences, driven by groundbreaking innovation.

In the past 25 years, the innovations at St. Joseph’s have been significant, and other hospitals in the state have seen significant growth and expansion of services, as well. We have had unprecedented growth in the Metro Phoenix area, and hospitals have tried valiantly to keep up with the demand for acute care services. In the past 25 years, we have seen many new hospitals built, particularly in the suburban areas, and central hospitals have continued to expand.

Arizona was the very last state in the country to adopt a state Medicaid program in the early 1980s, but the Arizona Healthcare Cost Containment System (AHCCCS) has since been considered a national model of cost effectiveness. We missed out on substantial federal funds for the Medicaid system by being the last state to join, but we have nonetheless run an efficient system with the public dollars Arizona has received.

The health care system has continued to evolve in very interesting ways during the past quarter century. We have seen a clear movement to reduce the length of hospital stays, and many procedures are done in outpatient settings that were once only performed in hospitals.

We have made extraordinary progress in diagnostics and minimally-invasive procedures, which help people recover faster and get treated earlier when disease occurs. In a past era, patients who needed lung surgery had to have their ribcage cracked open and had weeks of extended recovery; now they have it laproscopically and are up walking around the very next day. Cancer used to be a death sentence; now it is often a chronic illness that can be virtually cured. We are better at treating chronic illnesses such as diabetes and heart disease, and we now know how important prevention is to limiting the impact of disease.

But significant challenges still remain. We have evolved into a system of “sick care” not “health care,” and although we know prevention pays dividends, that is not what physicians and hospitals are reimbursed for. The system rewards us when we treat the sickest patients, but not always for keeping them well.

In America, the concept of employer-sponsored health care is considered foundational to our economy. Yet, more than 46 million Americans do not have health insurance, and many of them are vulnerable children. In Arizona, the majority of employees work for small businesses that are under a tremendous strain to provide affordable health insurance. When people transition to public insurance, the reimbursements are declining so much that community physicians are refusing to accept new Medicaid and Medicare patients, while safety-net hospitals struggle to treat all who present themselves at their doors.

The boom-and-bust cycle is hard on the economy, but it is also hard on health care providers. We face a physician shortage in the Valley and a dearth of key sub-specialists for a region this size. In a recession, more people turn to public assistance at the same time the state is trying to cut budgets to compensate for diminished reserves.

Still, I remain hopeful for our state and our industry. Health care continues to be a strong economic engine for Arizona; good paying jobs, great career paths for a wide variety of disciplines and many avenues for innovation. Catholic Healthcare West, of which St. Joseph’s is the flagship hospital, is actively working with the new president and Congress to help shape health care reform so all Americans can have affordable and accessible health coverage. I believe there has never been a time when so much good is possible, and that change can help all of us live better.

Richard L. Boals President and CEO Blue Cross Blue Shield of Arizona

CEO Series: Richard L. Boals

Richard L. Boals
President and CEO
Blue Cross Blue Shield of Arizona

What are some of the major trends in the health insurance industry?
In health, I think there is a shift toward an increased responsibility toward the individual. We’re asking people to take accountability for themselves. We’re giving them information that they can use to monitor their health status, but we also would hope that they would lose weight, they would quit smoking, they would wear their seatbelt and do the things that are sort of common sense, but can make their life much more enjoyable and in the net, save a lot of money.

In the business world in terms of health insurance, how is that industry looking right now in Arizona?
It’s actually, I think, very healthy. We, like every other industry, are starting to feel the pain of companies who are laying-off employees. So, we’re seeing a little bit of shrinkage within the general size of our group, but we’re growing at about 7 to 8 percent a year, so we feel very good about where we’ll be when we come out the other side of this economic downslide.

How has the recession affected the health care industry in general and health insurers in particular?
There are a couple of things that are happening. In the hospitals, they are starting to see fewer elective surgeries and to some extent that is the bread and butter of a hospital, and if people are holding off getting things done, that pulls down on their revenues. They are also seeing more cost-shifting from the government — or we’re seeing the cost-shifting from the government — and as Medicare and Medicaid pay less and less, I think it’s difficult for hospitals to make a bottom line.

What role is Blue Cross Blue Shield of Arizona taking in the debate over health care reform?
We’re trying to take a very active role both locally and in Washington. We believe that everybody ought to be covered. We’re a little perplexed that of the 40 million or so uninsured that about a quarter of them already qualify for some state or federal program and simply have not been enrolled. So as we talk about expanding the government’s role, I think we need to expand their accountability for getting people enrolled. But we believe that everybody should have access to good coverage. We believe that the government should not form a competing model, to not promote us but to try to bring us down. Beyond that, I think we’ll see what comes of it. I really believe that the government has an extraordinary opportunity here to inject energy into the health care system. My fear is that as they try to ratchet costs down and save money, they’re going to discourage innovations, and a few years from now we are going to be very disappointed that the supply of physicians and nurses and new technologies is going to be less than it is today.

BCBS of Arizona is working with the Arizona Healthcare and Hospital Association and the Arizona Chamber Foundation on what has been called “the hidden health care tax” in the state. How and why did Blue Cross Blue Shield become involved in this issue?
We’ve been interested in this issue for a long, long time. We were happy to see that others were beginning to recognize that this is a serious problem. About 15 percent of our premium is a result of a government program not paying their fair share. As the hospitals and doctors figure out that they can only push so much to the insurance companies or to the private individuals, they have to speak up and say it’s time for the government to start paying a more realistic amount for the care they are providing to their accountabilities, the elderly and the indigent.

What advice do you have for a C-level job candidate on how they can show either that board of directors or that panel they’re interviewing with that they are somebody who can successfully lead a change in a business?
I think it gets down to two things. One, it’s about the customer — you always have to have them in mind. And it’s about the people you hire to support you. Being in a C suite assumes that you are not doing the physical work, that you’ve hired a team of talented and dedicated people who are going to make you look good, and over the years I have been very fortunate; people have made me look good.

    Vital Stats




  • Joined BCBSAZ in 1971
  • Appointed CEO in April 2003
  • Board member for BCBSAZ, the Blue Cross and Blue Shield Association and TriWest Healthcare Alliance
  • Board member for Greater Phoenix Leadership, the Translational Genomics Research Institute and the ASU W.P. Carey School of Business Center for Services Leadership
  • Won the ASU Alumni Leadership Award and the American Jewish Committee’s National Human Relations and Centennial Leadership Awards
  • Bachelor’s degree in accounting from Arizona State University; completed executive development courses at Duke University, the University of California, Harvard University and the University of Michigan
pill to swallow

Arizona’s Health Care Industry Must Adapt To New Compliance Procedures In 2009

The current economic downturn and the prospect of dramatic changes to the nation’s health care system under a new administration are making 2009 one of the most challenging years ever for Arizona’s medical industry.

If that weren’t enough, however, our state’s hospitals, clinics, and diagnostic and out-patient centers — and the physicians who serve them — are getting a crash course on how to administer sweeping new compliance procedures and regulations recently issued by the Centers for Medicare and Medicaid Services (CMS).

Last year, CMS posted the 2009 Final Hospital Inpatient Prospective Payment System (IPPS) rule, which is having an impact on hospital operations and policies, as well as physician arrangements. Included were several changes to the so-called Stark Law (named for U.S. Rep. Pete Stark, D-Calif.) covering Medicare and Medicaid.

The impetus for the new provisions was a worthy one — curbing physician self-referrals and stopping kickbacks. Nevertheless, Arizona doctors and health care entities are scrambling to alter their ways of doing business. The downside for not doing so: denied payments, or penalties, from Medicare and/or Medicaid.

Some of the provisions went into effect last October and others begin this October. They will result in the significant restructuring of many physician arrangements, particularly joint ventures between doctors and facilities. Some of the rules are providing more flexibility in these arrangements, while others have become more restrictive.

Stand in its Shoes
One area of flexibility is CMS’ decision, effective last October, to decline adopting tougher “stand-in-your-shoes” procedures. This would have mandated that when physicians’ organizations contracted with an entity such as a hospital, each physician in those groups would have been deemed to be part of that contract as well.

Under the finalized rules, only physicians who have an “ownership or investment interest” in such an organization will be considered to “stand in its shoes” for purposes of compliance with the Stark regulations.

Percentage-Based Compensation
Soon to be a thing of the past is percentage-based compensation arrangements for space and equipment rental lease arrangements. CMS initially proposed a broad prohibition for using percentage-based compensation formulas to calculate revenue from services performed or business generated in leased office space or from leased equipment.

This October, the final rules will take a more targeted approach, specifically addressing CMS’ concerns with percentage-based compensation regarding lease arrangements.

Per Click: Lease Arrangement Payments
Also this October, the new procedures will significantly limit the use of unit-of-service, or “per-click,” payments in the context of physicians’ space and equipment lease arrangements. This pertains to physicians leasing time on diagnostic equipment to perform tests on Medicare and Medicaid patients.

Specifically, CMS revised exceptions for such leases, determining fair market value, and for indirect compensation arrangements to prohibit “per-click” payments to a physician lessor where the payments reflect services on patients who had been referred to the lessee by the physician.

Furthermore, the prohibition applies regardless of whether the physician is the lessor or whether the lessor is an entity in which the referring physician has an ownership or investment interest.

CMS states that the new rule does not prohibit physicians from leasing equipment or space to entities on a per-use basis for services rendered to patients who were referred from others. In most cases, CMS will not prohibit time-based deals in which a physician rents time on a CT or MRI scanner.

Services Provided Under Arrangements
Entities, including physicians, that provide services to hospitals “under arrangements” (for example, when a hospital bills for services but arranges for another entity to provide the services), will now be considered DHS (designated health services) entities themselves for Stark Law purposes.

Previously, only the person or entity that billed for DHS was deemed to be “furnishing” the DHS. CMS’ new definition of entity, effective in October, is that a person or entity is considered to be “furnishing” DHS if it has (1) performed the DHS even if another entity bills for the services; or (2) presented a claim for Medicare benefits of the DHS.

As a result, physicians will be limited in their ability to refer patients to “under arrangement” service providers in which they have an ownership or investment interest. Restructuring of existing joint ventures between physicians and hospitals will be needed.

This is only the start. There are several other provisions — including malpractice insurance, physician retirement plans, disallowed referrals, compliance requirements and other hospital-physician agreements. Hopefully, this gives you an idea of the issues and challenges facing Arizona’s health care industry during the rest of 2009.