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The Future of Health Care

April 2017

John Chessare
President/CEO of Greater Baltimore Medical Center (GBMC)

Editor’s note: You’d be challenged to find a subject more complex, more important and more politically polarizing than health care. As we went to press, the Affordable Care Act and the replacement bill offered by House Republicans, the American Health Care Act, were being debated with the outcome still uncertain. Recognizing that this issue will be debated for months, I95 BUSINESS reached out to two hospital executives to discuss the ACA, its impact and future.

The Patient Protection and Affordable Care Act (PPACA) goes by a variety of names, including the Affordable Care Act (ACA) and Obamacare. No matter what you call it, supporters and detractors, both love to weigh in on the subject.

It’s a complicated issue, especially in Maryland. Adding to the fray looms the promised ACA appeal/revision. Even with uncertainty ahead, here are some thoughts from two Maryland hospital executives who know first-hand the issues swirling around the ACA.

John Chessare
President/CEO of Greater Baltimore Medical Center (GBMC)

I95 BUSINESS: What do you think about the ACA?
Chessare: My bias is that, sadly, the American public doesn’t really know very much about the ACA. The only part of it that has gotten much media play is the part that everyone agrees is not working well – which is the individual mandate part.

The rest of the bill has been a profound success for the country. Medicare rates of increase per capita are the lowest they have been in decades, maybe in forever. In part, it is because of the work being done by the Centers for Medicare and Medicaid Services to improve the value of care. Sadly, this issue is dealt with in the media through sound bites, so very few people know what the ACA is all about, but it’s been a profound success.

I95 BUSINESS: Why are Maryland hospitals in a unique situation?
Chessare: In the state of Maryland, it’s particularly complex because we have a waiver with the federal government that allows us to test a different methodology of hospital reimbursement and billing. This is affectionately known as the Medicare Waiver.

The current waiver is a contract between the state of Maryland and an agency called the Centers for Medicare and Medicaid Innovation (CMMI). That agency was created by the ACA. It is an attempt to drive better health and a better care experience at a lower cost.

In Maryland, our Medicare rate of increase has actually been negative over the last three years – and every measurable health outcome has been improved. So, we are getting better health outcomes at lower cost than we were historically. This waiver to Maryland is worth 2.6 billion federal dollars.

I95 BUSINESS: How has the ACA impacted your hospital’s bottom-line?
Chessare: The bottom line is really not a really good marker in health care, and GBMC is a not for profit. If my bottom-line is 15 percent, but the rate of diabetes in the neighborhood was going up, and people’s life expectancy is continuing to go down, that would not be a success. Bottom line is important because we can’t do the real work without a positive bottom line. We get that. But the United States spends 40 percent more per capita than any other country in the world on health care and up to 18 percent of gross domestic product is spent on health care.

Only measuring the bottom line of a hospital is not very sophisticated measure. Now, having said that, our bottom line is safe; GBMC’s bottom line is strong. We are really spending our money on what the community needs us to spend it on. We can send nurse practitioners to a frail elderly person’s home, where otherwise the family with a very frail person would be stuck with calling 911 and have the patient moved to the emergency department for what is not an emergency, but is a real need.

The ACA and the waiver helped us offer such services. Thereby making the care better for the family and improving the patient’s outcome at a much lower cost than shipping these patients to the emergency department. At GBMC, we have built advanced primary care centers throughout the county – we have 12 of them now. Without the ACA, we would have had to take a totally different tact and continued to just fight to do more procedures to increase our bottom line.

I95 BUSINESS: Has the ACA allowed GBMC to provide better patient care?
Chessare: Absolutely. Undeniably. It’s about incentivizing value. Instead of asking, ‘How many back surgeries did you do?’ the ACA now requires us to look at: Did the patient really need back surgery? What was the infection rate from the back surgeries you did? How happy are your patients with the way you did back surgery and the way you treated them? The ACA has done what the market has not been able to do, which is to shine a light on the value of care.

I95 BUSINESS: What happens if ACA is appealed or revised?
Chessare: The Medicare waiver is with the CMMI, which was created by the ACA. It is possible – though not very likely – that the waiver would go away.
Other short-term questions do remain. Would the rate setting commission in Maryland still be able to cover the cost of patients without health insurance? Maryland hospitals don’t have to worry about uncompensated care because it comes to us in a rate set by the commission. The real big issue is that people have been kept in the dark about the ACA. The ACA has turned the tide away from fee for service to fee for value.

I95 BUSINESS: Is your opinion shared among hospital executives?
Chessare: There’s agreement in Maryland among hospitals that the ACA has been helpful due to the Medicare waiver. Maryland health care executives get it that this is a huge positive for the state of Maryland.
The good news is that since the ACA, the percentage of GDP spent on health care has been flat – it hasn’t grown. It was growing at astronomical rates prior to the ACA. The ACA has blunted the Medicare cost inflationary rate – Medicare was growing at seven, eight, 10 percent per year and it has been going down a little bit annually since the ACA.

I95 BUSINESS: How does the ACA impact the business community?
Chessare: Businesses need to plot their annual rate of increase of health insurance benefit year over year. At GBMC, our employee heath insurance costs have gone down this year, and they’ve been flat the last couple of years with the exception of drug costs. Somebody should get a handle on how much profit is enough for drug makers. But other than drug costs, our health insurance costs are going down because of the incentives put in place with doctors and hospitals to create better value. Without the incentives of the ACA, we would not be where we are today.

Henry J. Franey
Executive Vice President and Chief Financial Officer, University of Maryland Medical System (UMMS)

Henry J. Franey
Executive Vice President and Chief Financial Officer, University of Maryland Medical System (UMMS)

I95 BUSINESS: What do you think of the ACA?
Franey: The ACA has provided improved access to health care. It has allowed formerly uninsured patients to get access to a wide array of health services. Hospitals are the most expensive component of the health care system, and in many circumstances the only access patients have to receive care. With the ACA, they have an insurance card. They have access to primary care and other specialists outside the hospital.
We believe that hospitals should be caring for the sickest of the sick. When people can be provided services outside the hospital that ends up benefiting everybody. We think, in the long haul, that’s a much more affordable and appropriate way to deliver care.

I95 BUSINESS: How are Maryland hospitals different than rest of country?
Franey: Maryland is unique when it comes to hospital billing. Hospital patient charges in Maryland are approved by an independent rate setting authority, the Health Services Cost Review Commission (HSCRC). Each hospital has its unique rates and must charge every patient the same amount of money for the same services.
Whether a patient has Medicare, Medicaid, Blue Cross, United Health or other insurance, they are all going to get the same bill. That’s not what’s happening around the rest of country.

Outside the state of Maryland, patients receiving the same service are paying hospitals different amounts depending upon the reimbursement levels allowed by their insurance plan. It’s the classic airline story. How much did you pay for your airplane seat? Everyone seems to have a different answer. Not in Maryland.
What makes the Maryland hospital payment system particularly unique is that Medicare also pays the rates established by the HSCRC. Maryland hospitals are exempt from the national payment system, through the Medicare waiver. While it’s been around since 1977, it went through a major change in 2014 when hospitals were not paid simply on volume, but the quality and value of those services.

A critical feature and component of the Maryland payment system is the funding of hospital based care for the uninsured. Simply put, Maryland’s hospital rates are set a little higher to cover the costs of treating the uninsured. In Maryland, an uninsured patient can walk into any hospital Emergency Department and will be treated like any other patient. The rate setting system has provided them access to hospital services.

I95 BUSINESS: How has the ACA impacted Maryland hospitals?
Franey: When the ACA started, Marylanders who were uninsured received access to insurance through Medicaid. Or, they may have been an under-insured, employed person who went on the exchange and got coverage.

When the expansion in coverage occurred in Maryland through the ACA and there were less uninsured patients, the HSCRC naturally reduced hospital rates. So rates increased when there were more uninsured people, and decreased when the ACA happened.

I95 BUSINESS: Anything else?
Franey: Maryland hospitals are under a lot of pressure with this new regulatory system. It’s changed the entire way Maryland hospitals practice. In 2014, the new waiver turned the hospital delivery system on its head. Previously, Maryland’s hospitals, as most all delivery systems in health care, got paid based on volume. So the more services we provided, the more revenue generated. But that’s not how Maryland hospitals are reimbursed anymore. The focus now is on the value generated for the service, not the volume of services provided.

Maryland hospitals have been innovators in the delivery of care for quite a while. We stepped it up three years ago in a large way. It has been tough. It’s a change – not necessarily consistent with how providers historically paid for services. It is making us think differently. That’s all good. We can focus even more on the value we provide the patient.

I95 BUSINESS: What happens next?
Franey: I assume if the ACA goes away and uninsured patients increase, the HSCRC will increase Maryland hospitals’ approved rates to pay for uncompensated care. However, we may have a wrinkle with that assumption. Maryland hospitals have an agreement – through the current waiver – that annual rate increases are limited. We are capped as to how much we can increase charges. Will there be room to increase rates to cover both the uninsured and inflation? That is one of the things Maryland hospitals are thinking about.

If the ACA is replaced, will Medicare have any interest with the Waiver? That’s the big question for Maryland hospitals. We think they will. We have had a very successful last three years in changing how we think about our patients. We think this has been a very successful experiment with the current waiver. So we don’t think that it’s a real threat that it will go away. Nevertheless, we have our eye on it.

Leadership in both health care and government get it. The insurance companies do, too. It would be a Draconian action if people lost access to health insurance. I don’t see how that occurs. I think between the federal government, state government and the regulatory system, everyone is working to keep the ACA and Maryland’s unique rate setting system together. You just can’t turn your back on so very many people. I do not see it happening, especially in the State of Maryland.

I am not the expert to say how to improve the ACA. But I will offer up one observation: provide stability and certainty that it will continue to be funded … it’s good for those in need of care. I95