CHARLES T. FROCK: Health Reform 101: A Local Take on Policy, Politics, Practicalities
The author is CEO of Pinehurst-based FirstHealth of the Carolinas. This is the first of two locally written opinion pieces on the health-care reform debate. The second, by Dr. Peter L. Duffy, will appear in this space next Sunday.
How about another article or column on health reform?
If you Google the topic, you will find 18 million hits -- more than anyone in his right mind would care to review. Every day we are bombarded with the latest twist and turn from the White House, Congress, special interests, and the public. For what it's worth, here's one person's view of the issues and implications, particularly as they affect health care in our region.
One way to categorize the policy issues around health care is to think of three main components: access, cost and quality.
Access deals with the availability of adequate resources (health insurance) to pay for care; adequate numbers of physicians and other practitioners (particularly primary care) to provide a direct health-care service; the distribution of these resources where they are needed (rural, inner city, etc.); and consumer knowledge of access points.
Cost deals with how care is paid for and by whom. We spend almost $2.4 trillion a year in health-care costs in the United States. Costs are borne by all of us in one way or another -- government (general or specific purpose taxes), business (currently included in the cost of the firm's products and services as a tax-advantaged and largely hidden form of employee compensation), and individuals (co-pays and deductibles, health insurance premiums, and self-pay).
Costs are also someone else's revenue. How prices for services are set and paid (fee-for-service, bundled, etc.) as well as the behavior that is incentivized, is another key policy variable dealing with cost.
Quality is the characteristic addressing the actual health services provided. Is it the right clinical service (office visit, test, procedure, surgery) provided at the right time (from prevention to diagnosis, conservative treatment, or significant intervention) in the right way (meeting applicable standards and consistent with current medical evidence)?
Quality also encompasses the nonclinical components of care delivery: service quality. Is the patient informed? Are services provided in a respectful and considerate manner? Does it meet reasonable patient expectations?
There are many other ways of looking at health policy, as well as additional parts of these three categories of access, cost and quality, but these cover most of the elements of health reform being discussed.
The next dimension of health reform is politics.
Political science tells us that politics is how society's resources are allocated. While ideally done in an orderly way, we all know that decisions are sometimes made by our elected officials in a messy way, with less than the desired results. Our democratic form of government has made our nation the greatest in the world, but we know it can be better.
With respect to health care, our nation spends almost 16 percent of our gross domestic product (GDP) on this sector, double that of most other developed countries. And we get results that are only average.
There are many reasons for this: We have a large and diverse population, we value choice, we want the latest and greatest technology, we don't want to wait for care, and we don't always take care of ourselves like we should. And, until fairly recently, we have generally been willing to have 50 million Americans remain uninsured and not have regular access to care (other than emergencies).
In the last general election, health care was a major domestic issue. Candidates from both parties signaled a strong desire to finally do something about the 15 percent of us who don't have or couldn't afford health insurance. With the election of President Obama and a Democratic majority in Congress, plans to develop an approach to reforming health care are well under way.
Predictably, there are many differences emerging as to how to accomplish this mammoth objective.
While most everyone agrees with core principles of full coverage, affordable cost and high quality, the devil is inevitably in the details.
How do we extend coverage to all, how do we pay for the additional costs, and how do we balance priorities with nonhealth obligations?
There are differences based upon partisan politics, liberal versus conservative philosophies, the role of private sector versus government, and influence by special interest groups. And these are playing out in Congress now. This fall will bring things to a head. How it will turn out is anybody's guess at this point, but I'm not overly concerned (with a few caveats).
Let me tell you why.
Using the three elements of health policy -- access, cost and quality -- is also a useful format in assessing the efforts of FirstHealth and its physicians in addressing these issues.
First of all, FirstHealth has -- and will continue to provide -- emergency care to all, regardless of ability to pay. We have a charity care policy, reviewed periodically, that provides a sliding scale of payments suited to an individual's financial capabilities.
Second, we have established and supported existing physician practices and clinics in recruiting additional physicians to the area. This includes primary-care physicians as well as needed specialists. We have established Family Care Centers in less populated areas of our region and transitioned several to free-standing status, thus providing better access to practitioners throughout the region.
Our nonprofit health insurance subsidiary, FirstCarolinaCare, has focused on the small-business community with significant incentives to cover the previously uninsured. The vast majority of our physicians participate, and our efforts to date have reduced the number of uninsured in Moore County alone by over 500 individuals.
Our Community Health Division has brought screening and other preventive services to schools, businesses, churches, and community agencies. In addition, we work with other organizations, such as the Moore Free Clinic, to make primary care more accessible. Our publications, including our Web site, keep local residents informed about services and our physicians.
In the arena of costs, we strive to be as efficient and as cost-effective as possible. Our managers and staff have enabled us to remain a low-cost provider compared to other hospitals offering the same services. In fact, within our peer group of 10 similar hospitals across the Carolinas, we are consistently the first or second least expensive hospital.
We use techniques from industry (Six Sigma, lean, Baldrige) to analyze our processes, reduce costs and eliminate errors. We engage our physicians to find and use high value drugs, implants, and medical supplies throughout our facilities -- without compromising the quality of care.
We have negotiated fair reimbursements from managed care organizations to ensure our financial viability. By the way, with over two-thirds of our reimbursement set by public programs (Medicare and Medicaid) that do not cover the full cost of care, this is vital. Our foundations have been generously supported by our community and have enabled us to maintain cutting-edge technology, facilities, and other services.
Finally, with respect to quality, we and our physicians have consistently been recognized for our results. We have invested in information technology and professional staff to provide the infrastructure to understand and continue to improve our quality. We know we fall short at times, but remain committed to providing the best in medical care anywhere. In fact, Consumer Reports has recently announced a Web site using Medicare data to compare hospital quality -- and we compare very favorably -- tied with Duke for 8th (out of 100 hospitals in North Carolina).
Optimistic About Future
And we could go on and on. So, why am I optimistic about the future and whatever health reform brings?
-- First of all, FirstHealth and its physicians are already committed to addressing the goals of health reform. We expect to keep our quality high, costs reasonable and care accessible. And, as you can see, we have had some success in tackling these issues and will continue to do so.
-- Second, any major change out of Washington will very likely be phased in over time (parts of some proposals call for an eight-year timeframe) or piloted -- this gives those of us in the field the ability to understand expectations and plan accordingly.
-- Third, our experience is that the federal government can and will address unacceptable consequences from passed legislation with either technical adjustments or major revisions.
While sometimes done at the agency level, the Congress has shown a willingness to address unintended inequities that may arise.
-- Finally, FirstHealth has demonstrated clinical and managerial expertise to respond effectively to external requirements, whatever they are likely to be.
What could cause us problems? Well, there are two big areas being considered that could create major challenges if not adequately handled in reform legislation.
-- Public plan: If there is a new government-sponsored plan or health insurance exchange established, it is critical that reimbursement not be tied to Medicare rates.
As mentioned earlier, Medicare pays us less than costs.
We already have a delicate balancing act to weigh commercial reimbursement (which our local businesses ultimately pay) against public (Medicare or Medicaid) reimbursement to yield a modest 3 percent margin. Shifting this balance of reimbursement significantly, which could happen over time, could have major repercussions for FirstHealth.
-- Penalizing the efficient: The hospital industry, recognizing the need to share the sacrifices and the benefit of full coverage, has promised to support $155 billion in lower rate increases over 10 years to support reform.
If the same percentage reductions are applied to all, we lose.
As so eloquently outlined in Dr. Atul Gawande's article in the June 1 New Yorker magazine, some areas in the country are reimbursed by Medicare twice as much as other, similar areas because of unnecessary utilization.
Moore County's utilization patterns are 15 percent less than the national average and 5 percent less than the state average, while our quality is well above average.
Don't penalize us when other hospitals have significant opportunities to improve their cost and utilization patterns.
So far, there has been no discussion in Congress about tort reform, or medical malpractice. Until there is meaningful reform in this area -- and an end to the need for doctors to practice defensive medicine -- we will never achieve the cost efficiencies our physicians and hospitals are capable of providing.
The debate over health-care reform is raging. There will be endless debates over how much the rich should subsidize the poor, the well subsidize the sick, the young subsidize our seniors, and so on.
Whatever happens, and I do believe at the end of the day significant reform legislation will be passed, rest assured the physicians and staff of FirstHealth are committed to delivering what you have always expected from us -- high-quality care at an affordable cost available to all.
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