Face Challenges Confidently

Working Collaboratively With Hospitals

Thursday, June 7th, 2018

By: Jeffrey S. Baird, Esq.

In a June 16, 2017 article in the Harvard Business Review entitled “Value-Based Care Alone Won’t Reduce Health Spending and Improve Patient Outcomes,” David J. Bailey, M.D. (President/CEO of Nemours Children’s Health System) stated: “Despite spending twice what other developed nations spend on a per capita basis for health care, the United States has a longstanding trend of having lower life expectancy, greater prevalence of chronic disease, and overall poorer health outcomes. One proposed solution for this it to change the payment model of our health care system from the predominant fee-for-service (FFS) model, which reimburses services regardless of outcome, to a value-based model in which outcomes are reimbursed.”

In a July 25, 2017 blog, Walter McClure, Alain Enthoven and Tim McDonald said: “Sickness is costly, it shrinks the workforce and makes it less productive. Good health, like education, expands the workforce and makes it more productive. One reason other countries have better health than the United States at substantially less cost is because they cover everyone starting at birth. Good, inexpensive prenatal and infant care make healthy children, and healthy children make healthier, less costly adults … [Medicare. Obamacare and private insurance markets] lack serious incentives on providers to focus on the long-term, reducing cost while raising quality and keeping people healthy; indeed, the incentives are to raise cost no matter the quality. In particular, all three totally lack either means or incentives for patients to identify and choose providers who are better for less over those who are more costly. That is why American health care has suffered outsized runaway cost beyond all other advanced countries for 50 years. Despite such a high price tag, our health, including the health of our workforce, has fallen well behind these other countries; Americans live shorter lives and bear more chronic disease…[This problem] is due [to] a malstructured health care system that severely misdirects effort….[This] system greatly rewards excessive medical services but impedes and penalizes efficient care that maximizes health … We have a broken, bloated health care system, eating up all other social dollars, starving programs that would produce far more health and wellbeing than most superfluous medical care.”

The issue with the current health care system

So what does this have to do with the pharmacy profession and, more specifically, with collaborative arrangements between pharmacies and hospitals? The simple answer is this: There is a sea change taking place pertaining to paying for health care services … and pharmacies have the opportunity to be part of, and benefit from, this sea change.

Our nation’s health care delivery system is based on the “fee-for-service silo” (“FFS/silo”) model in which (i) providers (physicians, hospitals, therapists, etc.) are paid for what they do (not for the results that are achieved) and (ii) providers do not coordinate with each other … ”they do their own thing.” Said another way, providers operate in a “silo.” The more complicated the service or product, the more the provider is reimbursed … even if a good result is not achieved. An uncomplicated service or product, even it if achieves a great result, is not reimbursed well. And so our health care system (i) motivates providers to render complicated (often inefficient) care and (ii) provides a disincentive to provide less costly, but ultimately more effective, care.

Payors have taken notice and are shifting their emphasis on results of the health care service rather than the simple delivery of the service itself. An example is the Hospital Readmissions Reduction Program that states that if a Medicare patient is treated in the hospital for one of six conditions (e.g., congestive heart failure, pneumonia, COPD) and is discharged, then if the patient is readmitted within 30 days for that some condition, the hospital will be subjected to future payment reductions by Medicare. CMS recently released records identifying 2573 hospitals nationwide that will have their Medicare payments reduced by up to 3% for the fiscal year beginning 10/1/17 as a result of high readmission rates.

CMS data shows that readmissions following medical procedures are problematic because they can increase a patient’s risk for complications, such as infections, and can significantly increase costs. Almost one in five Medicare patients are readmitted within 30 days, which costs about $15 billion a year, according to the Agency for Healthcare Research and Quality, an arm of DHHS. For example, CMS examined the readmission rates at 32 Utah hospitals. 17 were penalized. At St. Mark’s, Medicare payments will be reduced for the second year in a row (2.81% up from 1.13% in the current year). In response to inquiries from the press, St. Mark’s noted that it has improved its post-discharge procedure by “partnering with local skilled nursing facilities to make sure patients are following physicians’ orders and ensuring that follow-up appointments are scheduled and kept.” Also in response to inquiries from the press, University of Utah Hospitals and Clinics stated that “fewer people are readmitted to the hospital when they are discharged to their own home instead of a nursing home.”

Changing the relationship between hospitals and pharmacies

A hospital can partner with a number of providers and suppliers to help keep recently discharged patients healthy: SNFs, home health agencies, pharmacies, and DME suppliers. It is a good idea for the pharmacy to think outside the box and ask: “Why not me?” There is an opportunity for the pharmacy to approach the hospital and ask to be the hospital’s “preferred pharmacy.” In return, the pharmacy will offer to provide value-added services for the recently discharged patients. These services can be as mundane as calling the patient and caregiver to remind the patient to take his medication as prescribed … or to see his physician as scheduled … or to take his breathing treatments as directed … or to drink plenty of water. Though these services may be mundane, they are effective in keeping patients from being readmitted. The pharmacy can coordinate its services with a home health agency, therapy clinic, and/or a DME supplier.

In rendering these value-added services, it will be important for the pharmacy to collect data (i) describing the services that the pharmacy is rendering and (ii) describing the outcome of the services. The pharmacy can use this data to (i) justify, in the hospital’s eyes, the “preferred provider” arrangement and (ii) pitch the same type of arrangement to other hospitals. The hospital can use the pharmacy’s data to show to payors that the hospital is providing cost-efficient care.

I anticipate that a similar type of program (i.e., similar to Medicare’s Hospital Readmissions Reduction Program) will be imposed by commercial insurers on hospitals … meaning that the post-discharge services offered by the pharmacy will become even more important to hospitals. Over time, similar programs will likely be imposed on physicians: if a patient keeps returning to the physician’s office, then the physician will see a reduction in future Medicare and/or commercial insurance payments. If the pharmacy has an established track record of reducing readmissions to hospitals, then the pharmacy should be able to pitch “preferred provider” services to physicians.

Jeffrey S. Baird, Esq. is Chairman of the Health Care Group at Brown & Fortunato, P.C., a law firm based in Amarillo, Texas. He represents pharmacies, home medical equipment companies, and other health care providers throughout the United States. Mr. Baird is Board Certified in Health Law by the Texas Board of Legal Specialization. He can be reached at (806) 345-6320 or jbaird@bf-law.com.