Carrots and Sticks — But Mostly Sticks: Senate Finance Committee Releases Options Paper on Healthcare Reform

June 24, 2011
In case there were any doubts about the inevitability of substantive healthcare reform, the recent conversion of Senator Arlen Specter (R PA,
In case there were any doubts about the inevitability of substantive healthcare reform, the recent conversion of Senator Arlen Specter (R PA, now D PA) to the Democratic Party should now put those doubts to rest. Even closer now to the 60 percent majority needed to end potential filibusters, the Democratic Senate may now be able to move reform packages through with even greater speed and with perhaps less deliberation than we might have expected. Is that good news or bad news?

For some good clues as to what might be coming down the line, I suggest you turn to recent options paper released by the Senate Finance Committee.

See press release by Sens. Baucus (D Mont.) and Grassley (R Iowa), Chair and Ranking Member of the Senate Finance Committee.

http://finance.senate.gov/press/Bpress/2009press/prb042809.pdf

The full 47 page option paper makes for some interesting reading.

http://www.finance.senate.gov/sitepages/leg/LEG%202009/042809%20Health%20Care%20Description%20of%20Policy%20Option.pdf.

For one thing, a significant amount of the annual payment update (up to 5% in 2015) would be tied to hospitals’ achievement of top quality benchmarks or to their achieving substantial improvements. That’s the good news. The bad news is that, if adopted as proposed, the annual payment update (minus adjustments for DSH, IME, etc.) is now essentially “at risk” in that hospitals who fail to obtain a threshold level of performance, or who don’t meet top performance will forfeit at least a portion of their update and any left over money returns to CMS – not to the qualifying hospitals or to help fund improvement efforts as some have proposed.

The paper outlines a desire to increase even further the incentives for adoption of the EHR to nurse practitioners, physicians’ assistants and other health care providers, so long as use is “meaningful.” Much more to come on that last point as HIMSS and others weigh in. (See my recent entry: When Does Use Become Meaningful?)

The paper also proposes increased payments (5%) to primary care physicians and to general surgeons practicing in underserved areas. That’s good news for the docs. They are certainly going to need some extra income once they find out that the proposal also calls for their fee schedules to increased only 1 % 2010 and 2011, 0% in 2012, with an uncertain future after that.

Those of you who were wondering if we would have a proposal for bundling of payments to hospitals and physicians or if we would have a reduction in payments for readmissions can now worry no more. The answer is we will have both. The paper lays out a fairly aggressive schedule of disallowed payments for hospitals with readmissions above the “75th percentile”(in 2013) transitioning to bundled payments (in 2015) as we go. This last statistic is interesting since it guarantees that 25% of hospitals in 2013 will not receive payments for readmissions in the selected patient classes once the policies take full effect.

If you have even a passing interest in the future cash flow of your institution, I highly suggest you review the paper and ponder its potential consequences. There are some carrots, many sticks, and it’s important to understand the contents, public comments on which are due May 15.

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