The airways are awash with debate over healthcare reform. By the time this article is in print, there may actually be recorded votes on the proposals. As clinicians working daily in the healthcare maze, we all see the need for reform. But how do we navigate our complex system to get there? We are a big nation, and our healthcare issues are sophisticated. There is no easy fix, and history demonstrates that change will not be fast. History also reveals that we are likely to face more than a few speed bumps that slow us down.

As we attend to the debate, it is important to recognize that our healthcare system has both short- and long-term problems. Most of the public buzz has been focused on short-term issues. How do we get coverage for the approximately 48 million Americans without any type of health insurance? How can we make healthcare affordable for working families? How can we help employers who can no longer bear the burden of employer-sponsored health plans? And, what does this all mean for my patients, my family, and me? However, we should also be concerned with the comparative lack of debate about the long-term problems of Medicare and Medicaid. The sobering fact is that the current number of Medicare beneficiaries will nearly double in the next 20 years.1 The Medicare Hospital Trust Fund is projected to go bankrupt in 7 short years.2 Current debate calls for extracting $500 billion over 10 years from the Medicare system in order to offset the cost of providing care to uninsured Americans. Rewarding quality and reducing fraud will accomplish some of this, but it is unlikely to offset the entire cost.

As the baby-boom generation ages, the typical Medicare beneficiary will have different needs. The healthcare system must change and Medicare will drive this change. Multiple emerging factors will influence the future of Medicare and healthcare delivery in general. They include (1) a higher prevalence of obesity and related health issues, (2) diminished access to employer-based supplemental insurance, (3) fewer adult children to provide assistance, (4) increased access to health-related information, and (5) better educated beneficiaries. It is fair to anticipate that aging boomers will live longer with multiple chronic illnesses. They will spend more of their own finances on healthcare, at the expense of entertainment, travel, leisure activities, and hobbies. There will be increased demands for long-term care, home care, and assisted living arrangements. More community resources will be needed to replace the assistance previously provided in earlier generations by larger families. They will demand more transparency and will want more involvement in their healthcare decisions.3 It seems inevitable that baby boomers will change the way healthcare is delivered, just as they have changed other aspects of the social fabric. The sooner reforms are enacted, the more time all of us have to plan.

Value-Based Purchasing

In looking to the future, the Centers for Medicare & Medicaid Services (CMS) is adopting value-based purchasing (VBP), where they are becoming a "smart shopper" of healthcare goods and services. Market forces are being applied to the healthcare system by adding more transparency and then paying for the results. There are 3 components to VBP: (1) pay-for-reporting; (2) pay-for-performance, and (3) competitive bidding. Facilities and agencies that have embraced high-quality care while curtailing costs will fare well under this system. Even small changes in how we deliver care can add up quickly when applied across the board.4

Pay-for-reporting is a system that provides financial incentives to facilities and agencies that voluntarily submit quality measures on a wide variety of medical conditions such as acute myocardial infarction, congestive heart failure, chronic obstructive pulmonary disease, pneumonia, and surgical care. Payment rates and quality comparison by nation, state, and locality are now publicly available. Most recently, data have been added to the Webpage on mortality and readmission rates for these medical conditions. Currently 97% of hospitals are participating in the program.5

Pay-for-performance is designed to build financial incentives into a reimbursement system that previously rewarded efficiency rather than quality. The CMS has identified 11 conditions that are high cost and high volume, and are reasonably preventable. Payment will be at the base rate if any of these conditions are facility acquired, and they are the only complication or comorbidity reported.6 Hospitals are currently impacted by the pay-for-performance measures, but plans are under way to expand the program to outpatient settings.7 Eventually, it is expected that the data on these hospital-acquired conditions will also be publicly reported. The challenge will be to report these data in a manner that protects patient confidentiality, maintains the hospital's peer review protection, and is understandable to consumers.

The CMS is indicating its desire to eventually replace this reporting program with one tying financial incentives to a composite score. Hospitals will receive a VBP grade based on their overall quality performance. Financial incentives will be applied based on the facility's ability to maintain a high level of performance or to show improvement in performance. An example of composite scoring would be the 5-star quality rating system currently used for long-term care facilities.8 Plans are also under way to develop a VBP plan for physicians. Demonstration projects are in process for VBP for home healthcare and nursing homes.9

The third component of VBP is competitive bidding. Medical suppliers of certain durable medical equipment and supplies will no longer be paid by a set fee schedule. In contrast, payment will be based on competition, with payment being set by the "low bid."10 Small medical supply retailers, medical equipment manufacturers, and clinician groups have viewed the idea of competitive bidding suspiciously, expressing concerns about access to durable medical equipment and supplies, as well as future commitments to repair, maintenance, and customer service. Round 1 of the bidding process for 9 selected metropolitan areas will be completed in 2009. Round 2 will include 70 metropolitan areas and is expected to be completed by 2011. The table lists the product categories included in round 1 of the bidding process.11 Negative pressure wound therapy was removed from the original list of products, but the Office of Inspector General is recommending that it be added to round 2.12

Timing Is Everything

Implementing VBP has been a challenge for facilities and agencies. Many are experiencing increased costs at the same time they are realizing reduced revenues. An escalating unemployment rate has resulted in a decline in hospital census, fewer elective procedures, more bad debt, and more uninsured Americans using hospital emergency rooms for their primary care, especially in certain regions of the country hardest hit with job losses. Implementing a new payment structure comes with the training costs of coders, physicians, and caregivers; the purchase of new software and the administrative costs of revising policies, documentation forms, computer screens, and tools. The current economic downturn has no doubt made it harder for some to implement best practices as they have had to curtail spending on large capital purchases and some have had to cut staff.

The success of VBP will be greatly impacted by the systemwide implementation of electronic medical records (EMRs). EMRs are estimated to save $77 billion in efficiency costs per year. Nearly $1 billion savings would come from reducing the need for hospital transcription services alone. Errors in coding cost hospitals large amounts of revenue that could be better captured with EMR. Currently 20% of physicians and 25% of hospitals use EMR, which is far short of where we need to be. The American Recovery and Reinvestment Act of 2009 provides for a $20.8 billion investment in healthcare information technology, which will help. Hospitals and physicians will see a reduction in their Medicare payment effective 2015 if health information technology is not in place.13 Nevertheless, the costs of implementing an EMR in many hospitals and physician offices will far exceed the amount available through the stimulus. This has led to a legitimate concern that the current downturn in the economy may limit the ability of many to implement EMR and thus jeopardize the savings proposed by the program.

As we transition into pay-for-performance, there will be some form of risk adjustment applied to some of the quality measures for certain populations. Although we do not yet know how this will be applied, it is gratifying for the CMS to acknowledge that a zero incidence of all hospital-acquired conditions is not realistic. Although the intent is to reward quality care, they do not want to set up a system that encourages cherry picking of patients or discourages access to care for patients normally viewed as financially unattractive. It is shortsighted to punish facilities and agencies that are willing to care for the sickest and most costly beneficiaries, recognizing that these patients are at the highest risk of developing unavoidable complications.

Recovery Audit Contractors

In addition to the implementation of VBP, the CMS will continue its ongoing efforts to identify fraud, waste, and abuse. The next wave in this program is the implementation of the recovery audit contractors.14 These are private contractors hired by the CMS with the goal of identifying improper payments made to hospitals, physicians, nursing homes, home health agencies, and durable medical equipment suppliers. They will specifically target documentation of medical necessity for the setting of care. Once improper payments are detected and corrected, the CMS, fiscal intermediaries, and contractors can implement policies and actions that prevent improper payment in the future. The goal is to ultimately lower the error rate and protect the Medicare Trust Fund.15

Future Direction

Efforts to curb the escalating costs of Medicare will continue. Current demonstration projects suggest that future emphasis will be directed toward better coordination of care and the reduction of hospitalizations. Recognizing that half of all Medicare beneficiaries suffer from multiple chronic conditions, it is believed that at least some repeated hospitalizations are the result of poor coordination of care between practice settings and inadequate communication between specialists.

It seems likely that payment systems will continue to move away from a fee-for-service model, since this encourages the delivery of more services and procedures. Future payment systems will likely move toward bundling as a way to control costs and reward value.16 For example, payment may be bundled for a specific episode of care. The hospital, skilled nursing facility, and home care agency may all share one bundled payment. This may promote better coordination between care settings and reward effective patient teaching. Another example may be bundling of physician payments. The primary physician and all specialist providers may be paid one bundled payment, thus encouraging and rewarding the judicious use of specialists and effective communication between all physician providers.

Death Panels?

The debate on healthcare reform has triggered discussions of "death panels" and "pulling the plug" on seniors. Some of this rhetoric seems politically driven, but the underlying emotions are real. Because of the intimate nature of healthcare, debate on broad policies easily becomes personal. Nevertheless, discussions on national healthcare policies must consider financial realities. For example, 25% of Medicare beneficiaries use 88% of Medicare expenditures,17 30% of all expenditures occur in the last year of life, and one-third of these dollars are spent in the last month of life.18 Moreover, these statistics do not vary much when compared to the private healthcare sector. Generally a small population uses the majority of the resources at any given point in time. If you are looking to extract savings or reduce the growth of spending, you have to look at where the spending is greatest. Certainly the challenge is how to predict who will fall into this exclusive club and when they will join.

Many individuals acknowledge that they do not want to be a burden on their children and grandchildren as they age and are faced with physical and mental decline. And yet, there needs to be awareness that death-delaying procedures do create a financial burden on children and grandchildren and to society as a whole. This cost inevitably leads to higher taxes, higher costs of consumer goods and services, and lower wages.19 The question is not what healthcare services we are entitled to receive, but rather who should pick up the tab. How do we sort out what is a life-saving procedure versus a death-delaying procedure? And, who should decide? There are certainly no easy answers.

So while the volume of the vitriol has softened, the debate continues unabated. The nation needs to have a serious discussion of what end-of-life care should entail, and the healthcare community should lead the charge. Extending life expectancy poses challenges that the healthcare system and payment structure has not yet adapted to. Healthcare reform should ultimately change how we spend the last years of life.20 Baby boomers will not tolerate a healthcare system that leaves them at the end of life in pain, scared, and bankrupt.

Conclusion

As the debate continues on the future of healthcare, the reality is that reform is already under way. Change is inevitable as the population continues to age and the current system is stressed. Reform that continues to focus on quality, safety, and efficiencies in Medicare will continue regardless of current legislative efforts. The steps outlined here are small and incremental and will not significantly impact the true magnitude of the cost problem. Options to curb costs without reducing quality or restricting access are limited. The really tough decisions will be made another day. We can expect more change to come.

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