Cost Archives

Effects of the Affordable Care Act on the Health Care Safety Net in Detroit

Since its passage in 2010, the Affordable Care Act (ACA) has introduced a series of health care financing and delivery reforms to expand coverage, invest in health care infrastructure, and implement changes to improve quality and costs. In 2014, the ACA’s coverage expansion began in Michigan through the launches of the health insurance marketplaces on January 1 and the Healthy Michigan Plan (Michigan’s Medicaid expansion program) on April 1. These programs have contributed to sharp reductions in the number of uninsured Michigan residents.

The ACA coverage expansion has also had outsized effects on the health care safety net, particularly for federally qualified health centers (FQHCs). These centers are supported through federal grants to deliver services in impoverished and high-need areas, and have traditionally been a major source of medical services for the uninsured. FQHCs have been expected to financially benefit under the ACA from serving more patients with health insurance. In addition, the ACA supported grants to local organizations to bolster the safety net, the health care workforce, public health infrastructure, and other quality improvement programs. This brief will describe the effects of the ACA on the safety net in Detroit, with a focus on the experiences of the city’s FQHC providers.

Key findings include:

Detroit-based organizations have received more than $100 million in federal grant funding supported by the ACA and subsequent legislation to expand delivery capacity, train new health care workers, and develop other programs.
The number of patients and patient visits at FQHCs in Detroit increased by over 6% from 2013 to 2014, and the number of uninsured patients decreased by over 30% as the ACA’s coverage expansion took effect.
Detroit FQHC patients tend to be poorer and are more likely to be racial minorities than other FQHC patients in Michigan. The characteristics of FQHC patients in Detroit were relatively stable from 2013 to 2014.
The number of health care providers (physicians, nurses, physician assistants, etc.) employed directly by FQHCs grew by over 21% from 2013 to 2014 as FQHCs prepared to serve more patients. As FQHCs adjust to the new environment under the ACA, many are working to develop new strategies to serve unmet patient needs, particularly in areas related to behavioral health, oral health, substance use, and transportation.

These CHRT reports were produced for the Altarum Institute’s Center for Sustainable Health Spending, which received funding from the National Institute for Health Care Reform to examine strategies for improving the health of the people of Detroit, and the related economic consequences.

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Acute care readmission reduction initiatives: An update on major programs in Michigan

Inpatient hospitalizations account for 32 percent of the total $2.9 trillion spent on health care in the United States. In the majority of cases, it is necessary and appropriate to admit a patient to the hospital. However, patients returning to the hospital soon (e.g., within 30 days) after their previous stay account for a substantial percentage of admissions. Research has shown that many factors—including a patient’s socioeconomic status, clinical conditions, and their communities’ characteristics—can influence acute care hospital readmissions.

In 2013, CHRT published an issue brief on the major programs aimed at reducing hospital readmissions, including the Hospital Readmissions Reduction Program (HRRP) established under the Affordable Care Act (ACA). This paper is an update on the HRRP and other programs previously highlighted.

The HRRP has spurred a significant amount of activity to curb acute care hospital readmissions. In 2013, CHRT identified 10 readmissions initiatives used by hospitals and health plans nationally. Six of these initiatives have been implemented in Michigan (Appendix A provides an update on the other four programs). Those programs implemented in Michigan included:

Care Transitions Intervention® (CTI): Transitions Coaches® (e.g. advance practice nurses, registered nurses, and social workers), trained through the CTI program, review a patient’s discharge plans at the hospital, visit the patient at home within 48 to 72 hours of discharge, and call the patient three times within the first 28 days after discharge.
Project Re-Engineered Discharge (RED): Nurses coordinate patients’ transitions home, while pharmacists call patients after discharge to review medications and communicate any problems to the primary care provider.
Transitional Care Model (TCM): Advanced practice nurses provide home visits to high-risk elderly patients for three months, and are available by phone seven days a week.
Hospital to Home (H2H): A central clearinghouse provides hospitals and cardiovascular care providers with information and tools for improving care transitions and reducing readmission rates among patients who experienced heart failure or a heart attack.
Project BOOST (Better Outcomes for Older adults through Safe Transitions): A toolkit that offers hospitals and primary care providers evidence-based clinical intervention tools for improving care transitions.
State Action on Avoidable Readmissions (STAAR): A pilot program that focuses on building community-based and state-based partnerships to improve care transitions.

Each of the six initiatives target one of three levels for intervention—patient, system, and community levels—and are supported by varying degrees of evidence. The following is a summary of their implementation in Michigan, and an introduction to BCBSM’s new initiative to help reduce hospital readmissions in the state.

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Price transparency in health care: Federal and state initiatives, ongoing challenges, and opportunities for the future

This brief provides an overview of price transparency initiatives in health care by federal and state governments and private entities; discusses the challenges associated with achieving the current goals of price transparency efforts; and highlights opportunities for moving forward to effectively achieve such goals.

In recent years, consumers have assumed an increasing share of health care spending through high deductible plans. For example, the average deductible for family coverage in Michigan more than doubled from 2002 to 2012, rising from $810 to $1,877, respectively. Deductibles for individual coverage in Michigan grew by 162 percent over the same period of time, increasing from $375 to $982, respectively.

In order to control rising health spending and provide more information on the cost of care to consumers, policymakers have increasingly focused on publishing data about payments to providers. As a result of these trends, the topic of “price transparency” has gained momentum in the United States.

For the purpose of this brief, price transparency in health care is defined as “the availability of provider-specific information on the price for a specific health care service or set of services to consumers and other interested parties.”

The opportunities we discuss include providing price information to consumers, providing price information to providers, and federal and state databases.

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Michigan Physician Survey: Primary care physician perspectives on innovative compensation models

One goal of the Affordable Care Act (ACA) is to “reduce the growth of health care costs while promoting high-value, effective care.” Provisions of the ACA encourage providers to engage in innovative alternatives to traditional fee-for-service compensation models with a focus on value-based purchasing through a variety of mechanisms.

The U.S. Department of Health and Human Services also recently announced the goal of directing 30 percent of fee-for-service Medicare payments to these kinds of models by 2016 and 50 percent by 2018, up from 20 percent in 2015.

In order to understand how physicians in Michigan see the trajectory for change in compensation, the Center for Healthcare Research & Transformation (CHRT) collaborated with the University of Michigan faculty to survey primary care physicians statewide about their practices and innovative compensation models. The survey findings show that physicians across the state are actively anticipating significant changes in approaches to compensation and are already participating in many initiatives that begin the shift from straight fee-for-service payment to other models.

Key findings include:

28 percent of Michigan primary care physicians reported participation in at least one innovative compensation model.
41 percent of physicians reported expecting fee-for-service payments to decline, while 44 percent and 42 percent reported expecting fee-for-service with incentives and bundled payments (respectively) to increase as a percentage of their practice revenue over the next 1–3 years.
The Michigan Primary Care Transformation Project (MiPCT) was the value-based payment initiative that physicians in Michigan reported participating in most frequently in 2014.
Bundled payments were uncommon at the time of the survey: on average, physicians reported that only 3 percent of their practice revenue came from bundled payments, and only 5 percent of physicians reported participation in the Bundled Payments for Care Improvement initiative.

Suggested Citation: Smiley, Mary L.; Ndukwe, Ezinne G.; Riba, Melissa; Udow-Phillips, Marianne. Primary Care Physician Perspectives on Innovative Compensation Models. 2014 Michigan Physician Survey (Ann Arbor, MI: Center for Healthcare Research and Transformation, 2015).

Acknowledgements: The staff at the Center for Healthcare Research & Transformation would like to thank Thomas Buchmueller, Matthew M. Davis, Robert Goodman, Helen Levy, Renuka Tipirneni, and the staff of the Institute for Public Policy and Social Research (IPPSR) at Michigan State University for their assistance with the design and analysis of the survey.

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A tale of three cities: Hospital and health system costs in the Midwest

There is tremendous variation in health care spending by geographic region in the United States. To better understand this variation, CHRT analyzed health care markets, state-level regulation, and hospital cost variation in three Midwestern states, focusing on the largest city in each state: Detroit, Michigan; Indianapolis, Indiana; and Milwaukee, Wisconsin. These states were chosen for their diverse health care policies and market conditions. This brief describes trends in state-level health spending and factors that may contribute to the differences in spending among the three states.

Key findings include:

From 2001 to 2009, Michigan had the lowest overall health care cost per capita among the three Midwestern states in this analysis, while Wisconsin had the highest. Michigan also had the lowest average annual growth in spending per capita from 1991 to 2009, and Wisconsin had the highest. Many complex factors contributed to these differences, and likely included market conditions and regulations that varied by state.
In fiscal year 2013, Michigan had the lowest and Wisconsin had the highest per capita hospital spending among the three states in this analysis.
Market conditions and policies affecting the size of hospitals’ profit margins varied by state. See our report for details for Indiana, Michigan, and Wisconsin.
In fiscal year 2013, health system operating cost and total profit margins varied greatly in the three cities of the Midwestern states in this analysis. See our report for details for Detroit, Indianapolis, and Milwaukee.

Suggested citation: Dreyer, Theresa; Koss, Joseph; and Udow-Phillips, Marianne. A Tale of Three Cities: Hospital and Health System Costs in the Midwest. April 2015. Center for Healthcare Research & Transformation. Ann Arbor, MI.

Special thanks to Dean G. Smith, PhD, for guidance on the financial analysis.

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Affordable Care Act funding: An analysis of grant programs under health care reform

The Patient Protection and Affordable Care Act (ACA) was signed into law on March 23, 2010, and funds were appropriated to expand access to care, implement broad private insurance reforms, and enhance the public health infrastructure. In order to administer these new grant programs, the ACA created a number of new funding sources in the following categories:

Community-based prevention: Includes a series of programs to increase investment in the public health infrastructure. The primary source of funding for these programs is from the Prevention and Public Health Fund (PPHF).
Health Centers and National Health Service Corps: Includes funding for federally qualified health centers (FQHCs), the National Health Service Corps (NHSC), and school-based health centers.
Health workforce: Includes a series of programs to enhance the capacity of the primary care workforce.
Long-term care: Includes grant programs to support coordinated long-term care services.
Market reform: Includes a series of grants that helped states reform their private insurance markets and prepare for the 2014 coverage expansion.
Maternal and child health: Includes multiple grant programs targeted to serve at-risk families and prevent teenage pregnancy.
Medicaid & CHIP: Includes grant programs focused on the health of enrollees in Medicaid and the Children’s Health Insurance Program (CHIP).
Medicare: Includes a series of programs funded by the ACA to boost the effectiveness and efficiency of the Medicare program. This issue brief updates an earlier CHRT brief and examines how grants funded by the ACA have been distributed to states and local organizations since the law’s passage, with a focus on funds awarded during fiscal year (FY) 2014. This brief also includes a detailed analysis of ACA funding in Michigan.

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Suggested citation: Lausch, Kersten; Fangmeier, Joshua; Udow-Phillips, Marianne. Affordable Care Act Funding: An Analysis of Grant Programs under Health Care Reform — FY2010–FY2014. February 2015. Center for Healthcare Research & Transformation. Ann Arbor, MI.

Health care spending for chronic conditions in Michigan

Chronic conditions affect millions of Americans and have a major impact on U.S. health care spending each year, accounting for seven out of every ten deaths in the United States annually. It is estimated that more than 75 percent of all health care costs are associated with chronic diseases. Approximately 45 percent of Americans nationwide are affected by at least one chronic condition, and 60 percent of adults in Michigan suffer from a chronic condition.

In 2010, roughly 30 percent of total national health care spending—$347 billion—was associated with the following chronic conditions: heart conditions, cancer, chronic obstructive pulmonary disease, asthma, diabetes, and hypertension. The largest contributing factors to the increase in the prevalence of such conditions include physical inactivity, tobacco use, and poor diet. Currently, over 95 percent of Michigan adults report at least one behavior that may increase their risk for chronic conditions.

This issue brief summarizes health care spending in Michigan for five common chronic conditions for Blue Cross and Blue Shield of Michigan members:

Coronary artery disease
Congestive heart failure
Chronic obstructive pulmonary disease
Depression
Diabetes

Suggested citation: A. Hammoud and M. Udow-Phillips. 2014. Healthcare Spending for Chronic Conditions in Michigan. Center for Healthcare Research & Transformation, Ann Arbor, MI.

Special thanks to Robyn Rontal and team.

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Premium cost changes attributable to the Affordable Care Act

The Affordable Care Act (ACA) expands health insurance coverage to millions of uninsured Americans and introduces several reforms to the health insurance market, particularly for people who purchase coverage on their own or receive it through employment at a small business. These reforms standardize benefits, limit insurance rating practices, prohibit coverage denials, limit out-of-pocket costs, and levy new taxes on health plans. These reforms primarily apply to non-grandfathered qualified health plans, sold on and off the marketplace, beginning in 2014. Combined with other ACA provisions already in effect, these reforms mean that some people in the individual and small group insurance markets looking for coverage on the new health insurance marketplaces will experience significant increases in premium costs for coverage and others will experience significant reductions.

Prior to the ACA’s passage in 2010, the Congressional Budget Office estimated that the ACA’s effects on average premiums—before subsidies are considered—would be an increase of 10 to 13 percent in the individual market and a range between a 2 percent decrease and a 1 percent increase in the small group market. In practical terms, however, the ACA’s impact on premium rates varies so widely from individual to individual and from small group to small group that the average impact is largely irrelevant to case-by-case experiences and perceptions. Compared to the pre-ACA environment, older people and small firms with disproportionately older, unhealthy workers will generally see lower premiums under the ACA, while young people and firms with predominantly younger workers will experience higher premiums (before considering the subsidies that apply to many in the individual market).

This expectation led to concerns that the young and healthy will experience “rate shock” and financial strain from premium increases. This issue brief describes the ACA provisions most likely to affect premium costs in the individual and small group markets (summarized in Figure 2). In addition to premium cost changes, this brief comments on out-of-pocket health care spending because personal health care spending includes both premiums and out-of-pocket costs.

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Suggested citation: Fangmeier, Joshua; Udow-Phillips, Marianne. Premium Cost Changes Attributable to the Affordable Care Act. February 2014. Center for Healthcare Research & Transformation. Ann Arbor, MI.

Special thanks to Jon Linder and Yan Yang.

For more information please contact us at: chrt-info@umich.edu

Medicaid and Medicare Disproportionate Share Hospital programs

Congress created the Disproportionate Share Hospital (DSH) program in the early 1980s to help hospitals offset the costs of providing care to low-income individuals. Medicaid and Medicare each have a distinct DSH program, with a unique structure and financing mechanism.

In addition to giving a brief overview of the Medicaid and Medicare Disproportionate Share Hospital programs, this document will:

Discuss the role of the state and federal governments in running the Medicaid DSH program;
Explain how the Michigan Medicaid DSH program is financed and structured; and
Examine the changes to the Medicaid and Medicare DSH programs under the Patient Protection and Affordable Care Act (ACA).

Like the Medicaid program generally, the Medicaid DSH program is a federal-state partnership, which means that:

States have significant flexibility to structure their own DSH program;
State DSH programs vary widely throughout the country; and
The federal government reimburses each state for its share of DSH spending at the state’s regular Federal Medical Assistance Percentage (FMAP) rate.

Under federal law, states are required to make DSH payments to all hospitals that serve more than a certain percentage of Medicaid and low-income patients. In order to be eligible for state DSH payments, each hospital must meet minimum federal criteria.

The Michigan Medicaid DSH program is structured and partially financed by the state. All state DSH payments, up to Michigan’s annual federal limit, are matched by the federal government at Michigan’s normal FMAP rate (66.39 percent in FY2013).

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Suggested Citation: Hatch-Vallier, Leah; Udow-Phillips, Marianne. Medicaid and Medicare Disproportionate Share Hospital Programs. January 2014. Center for Healthcare Research & Transformation. Ann Arbor, MI.

Special thanks to Ellen Rabinowitz and Eileen Ellis.

Care transitions: Best practices and evidence-based programs

Poorly coordinated care transitions from the hospital to other care settings cost an estimated $12 billion to $44 billion per year. Poor transitions also often result in poor health outcomes. The most common adverse effects associated with poor transitions are injuries due to medication errors, complications from procedures, infections, and falls.

Providers are focused on improving transitions, due in part to reimbursement changes under the Affordable Care Act. In October 2012, the Centers for Medicare and Medicaid Services (CMS) instituted penalties for facilities with high readmission rates within 30 days of discharge for three conditions: myocardial infarction (heart attack), heart failure, and pneumonia. Hospitals face reimbursement reductions of up to one percent of annual Medicare payments. New payment models, including bundled payments and shared savings programs for Accountable Care Organizations , also create incentives to coordinate transitions and provide care in less intensive settings. CMS is also encouraging outpatient providers to focus on safe transitions through new reimbursement codes issued in 2013. Providers may bill for care transitions services if they see patients within 14 days of discharge from a hospital, skilled nursing facilities (SNF), or rehabilitation facility. Improving care transitions for complex patients moving from hospitals to SNFs, to their own home, or to another setting can result in significant savings while improving patient safety.

Many providers are focused on improving transitions, due in part to reimbursement changes under the Affordable Care Act. This paper summarizes best practices in care transitions, including:

comprehensive discharge planning,
sending discharge summaries to outpatient providers,
assessing financial barriers to filling prescriptions,
using a “teach back” method to ensure patient understanding,
following up with outpatient providers, and more.

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