PCORI announces $6.5 million in grants to implement ‘shared decision making’

The Patient-Centered Outcomes Research Institute (PCORI) will release of $6.5 million in grant funding to organizations willing to implement shared decision making strategies for patients and care providers. According to the institute, the funding is designed to address concerns by doctors and other care providers that implementing the programs will cost too much time or “interfere with their routine clinical workflow.”

Shared decision making, research around which PCORI has provided nearly $200 million in funding, is an umbrella term for strategies that help patients better understand their treatment options in a given healthcare situation, particularly when the right choice is not clear or could be impacted by a patient’s preferences.

“PCORI recognizes that for many clinical situations, patients and clinicians need to work together to consider all available treatment options, informed by the patients’ preferences,” PCORI Executive Director Joe Selby said in a statement. “For a variety of reasons, shared decision making isn’t as widely used in practice as it should be.”

Examples of the research conducted includes a $1.6 million research project out of the Mayo Clinic, highlighted by PCORI in January of this year, looking at the implementation of “Chest Pain Choice.” The materials were developed in light of concerns that patients at a low-risk for heart attacks who reported chest pain in an emergency room were suffering unnecessary anxiety, as well as possibly increasing healthcare costs, after being transferred to the hospital for further testing. Another $1.4 million project from the University of Texas MD Anderson Cancer Center looked at the development of a video to help heavy smokers between the ages of 55 and 77 understand the risks and benefits of the CT lung cancer screenings, which were recently authorized by Medicare.

Grants are currently available only to those institutions that have served as past recipients of PCORI grants for shared decision making project, which they have completed, or new applicants working closely with one of those institutions to implement one of the research-based strategies. Clinicians have until October 2 of this year to submit their letters of intent for consideration, with an implementation start date of October 2018, at the earliest.

PCORI said it had funded $164 million in research on shared decision making projects as of September 2016. The initial funding comes with a commitment to authorize another $6.5 million to $8 million per cycle, with up to two cycles per year, for continued implementation.

Group purchasing organizations reduce costs while reducing the risk of fraud

A study funded by the Healthcare Supply Chain Association has found that Group Purchasing Organizations (GPOs) operate competitively and reduce health care costs. The vendor fee mechanism allows for negotiation of lower prices thereby reducing transaction costs compared to other funding models. The data reviewed did not support the inference that GPO funding raises any heightened risk of fraud.

Background

Group purchasing organizations (GPOs) are companies that negotiate prices for drugs, devices, and other medical products and services on behalf of health care providers, including hospitals, ambulatory care facilities, physician practices, nursing homes, and home health agencies. GPOs are often owned by their member providers, and they do not take title to or possession of medical products, but rather enhance the quality of the services delivered and lower their members’ operating costs by reducing transaction costs and negotiating lower prices for supplies than providers might otherwise obtain on their own. As part of improving efficiency in the supply chain, GPOs also provide a range of additional services to health care providers that may lower costs or improve operations.

The GPO Safe Harbor

A review of federal policy regarding GPO administrative fees shows that policy makers have long recognized that GPOs create substantial efficiencies and should be permitted to operate based on their traditional vendor-funding model. Both Congress and HHS recognized the need for efficient pricing institutions in order to constrain health care costs. The statutory clarification for GPOs (GPO Statutory Clarification) enacted by Congress and the subsequent codification of the provision in the HHS safe harbor provisions (GPO Regulatory Safe Harbor) clarified the legality of administrative fees paid by vendors to GPOs.

The GPO Statutory Clarification, 42 U.S.C. § 1320a-7b(b)(3)(C)—also referred to as a “safe harbor” provision—specifically excluded vendor fees paid to a GPO from the definition of a kickback in the Anti-kickback Statute (AKS.) In fact, at the time the GPO Statutory Clarification was enacted, no court had ever found that vendor fees paid to a GPO constituted a kickback under the AKS.

Effects of vendor funding

Because most GPOs are funded by vendor-paid administrative fees that are a percentage of the sales made pursuant to GPO contracts, the study was undertaken in an effort to analyze how this funding mechanism affects health care supply procurement costs. While a few critics have suggested that vendor fees contribute to higher health care costs and have therefore suggested that such fees should be prohibited, the study’s analysis suggested otherwise based on a finding by the authors that GPOs operate in a highly competitive market, and that many national, regional, and local GPOs compete with each other in the provision of GPO services. Also, many GPOs are owned by their provider members, which have strong incentives to direct GPOs to offer them competitive services. Furthermore, providers can choose to buy through a competing GPO with whom they have contractual arrangements, or they can choose to negotiate directly with vendors. These factors combine to make the market for GPO services significantly more competitive than it would be without customer ownership and opportunities for self-supply. The study found evidence that the GPO market operates with a level of competition equivalent to what one would expect from an un-concentrated market with more than 10 independent competitors of equal size.

Conclusions

Among the findings of the study were the following:

  • Health care executives state that GPOs reduce their costs of procuring health care supplies and services by 10–18 percent. Cost savings arise from reductions in transaction costs (such as eliminating thousands of negotiations) and lower prices for health care supplies and services.
  • The cost savings created by GPOs are consistent with economic theory, which yields several mechanisms through which GPOs reduce costs and pass cost savings on to health care providers, reducing the cost of health care for patients and taxpayers.
  • The market for GPO services is intensely competitive. Two factors make GPO markets significantly more competitive than one would infer from traditional measures of concentration alone: (1) Many GPOs are owned by their members, who have strong incentives to direct their GPOs to reduce transaction costs and negotiate lower prices; and, (2) GPO member providers can, and frequently do, purchase supplies and services on their own instead of through their GPOs. An estimate of the competitive performance of the market for GPO services using the numbers equivalent confirms that this market is highly competitive.
  • A fundamental principle in the economics of taxation—the neutrality principle—implies that there is likely nothing to gain and potentially much to lose from mandating a shift from vendor-paid to provider-funded fees. The most likely result of such a shift would be to increase transaction costs, raise the costs of entry into health care supply markets, raise the prices paid by health care providers for products and services, and raise health care costs for patients and taxpayers.

The analysis showed that the GPO market is performing well for providers, patients, and taxpayers under its current funding regime, and they found no empirical, economic, or policy basis for forcing GPOs to shift to an alternate funding mechanism.

Wolters Kluwer Announces White Paper Series on Healthcare Legislation

As federal lawmakers grapple with sweeping healthcare reform, Wolters Kluwer provides resources to help professionals stay ahead of reimbursement and compliance requirements

Wolters Kluwer Legal & Regulatory U.S. today announced the launch of an authoritative and timely white paper series to track updates and provide analysis on the American Health Care Act (AHCA) and Better Care Reconciliation Act (BCRA), the proposed replacements for the Affordable Care Act (ACA) under consideration in Congress.

The AHCA passed in the House of Representatives by a slim majority in May. A discussion draft of the BCRA was released in late June but the Senate has delayed any votes on the legislation until July. The first white paper in the series, entitled “How the AHCA Directly Impact Significant Parts of the ACA,” identifies and explains aspects of the ACA that are directly impacted by the AHCA. Wolters Kluwer’s white paper series will track the legislation as new versions of the bill become available.

“Considering the impending changes proposed by lawmakers, healthcare, legal and compliance professionals need to understand the evolving regulatory landscape,” said Paul Clark, Health Law Analyst for Wolters Kluwer’s Healthcare group. “Our series of white papers will help healthcare professionals to track changes in the legislation as they occur, measure the impacts, and manage compliance and reimbursement practices more efficiently.”

Download a free electronic copy of “How the AHCA Directly Impact Significant Parts of the ACA”

For those interested in daily, comprehensive coverage of the latest health law developments, Wolters Kluwer offers Health Law Daily providing in-depth analysis on new developments delivered directly to users’ device of choice every day. To learn more visit The Health Law Daily.

About Wolters Kluwer Legal & Regulatory U.S.

Wolters Kluwer Legal & Regulatory U.S. is part of Wolters Kluwer N.V. (AEX: WKL), a global leader in information services and solutions for professionals in the health, tax and accounting, risk and compliance, finance and legal sectors. We help our customers make critical decisions every day by providing expert solutions that combine deep domain knowledge with specialized technology and services.

Wolters Kluwer reported 2016 annual revenues of €4.3 billion. The company, headquartered in Alphen aan den Rijn, the Netherlands, serves customers in over 180 countries, maintains operations in over 40 countries and employs 19,000 people worldwide.

For more information about Wolters Kluwer Legal & Regulatory U.S., visit www.WoltersKluwerLR.com, follow us on FacebookTwitterand LinkedIn.

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Linda Gharib
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Wolters Kluwer Legal & Regulatory U.S.
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Proposed American Health Care Act could have negative financial impact on safety-net hospitals

A study by the Commonwealth Fund suggests that beginning in 2020, safety-net hospitals will see a reduction in revenue and margins as a result of cuts and spending caps by the federal government under the American Health Care Act (AHCA). Although the study believes that safety-net hospitals in rural areas of states that previously expanded Medicare coverage under the Patient Protection and Affordable Care Act (ACA) (P.L. 111-148) will be hit the hardest, it suggests that all safety-net hospitals will be affected by this proposed law.

The study reviewed 660 safety-net hospitals (hospitals that receive Medicaid disproportionate share hospital (DSH) payments) to determine the impact of the proposed AHCA. These hospitals provided 30 percent of all uncompensated hospital care in 2015. The ACA had previously allowed states to expand Medicare coverage to individuals under the age of 65 with incomes up to 138 percent of poverty, and the federal government provided enhanced federal funding for these newly eligible Medicare members. Thirty-one states and the District of Columbia had expanded under the law.

Changes

The AHCA would eliminate the enhanced federal matching rate and the individual mandate requirement of the ACA, and beginning on December 31, 2019, the enhanced matching rate would only be given for individuals that had been enrolled by December 31 and have not lapsed coverage for more than a month. A standard federal matching rate would be provided for those enrollees after the cut-off date. Additionally, the AHCA would eliminate the ACA hospital presumptive eligibility benefit which allowed a hospital to enroll low-income patients in Medicaid and receive Medicaid payment for the services provided to these patients up to three months prior their enrollment. The study also noted that the ACHA would impose federal per-capita limits on Medicaid spending. Some changes would not be cuts or caps, such as the restoration of previous DSH cuts made by the ACA to states that did not expand Medicare, and safety net funding to non-expansion states that would supplement payments to safety-net Medicaid providers.

The study assumes that with these changes, the safety-net hospitals will see a decrease in revenue and margins, especially those safety-net hospitals in rural expansion states. It estimates that the elimination of the individual mandate will result in lower Medicaid enrollment and less individuals seeking hospital care due to lack of coverage, and assumes that this would result in revenue reduction for the safety-net hospitals. Additionally, the hospital preventive presumption and retroactive eligibility elimination could cause a loss in Medicaid revenue and hospitals could be subject to rising levels of uncompensated care. The caps on spending would also reduce the revenues and net income because the caps would reduce the federal Medicaid spending and the study assumes that the states will reduce overall spending and reduce provider payment levels. The study does note, however, that safety-net to non-expansion states and the restoration of DSH payments would increase revenues for safety-net hospitals.

The fund believes that although some of the measures may increase the revenue for the safety-net hospitals, the ACHA would overall negatively impact safety-net hospitals, with hospitals located in rural areas most affected. The study suggests that this regulation would cause these hospital margins to drop from 2.9 percent to 0.5 percent by 2026. Safety-net hospitals in states that expanded Medicaid may see uncompensated care costs double by 2016, and hospitals in rural areas of these states which have a high amount of Medicaid payers would be most negatively affected.