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Health care reform: Minnesota style

This post is sponsored by UST Health Care. By: Brian Osberg and Joseph White The process of reforming health care has already begun, and will continue to evolve, even before the fate of the federal Affordable Care Act (ACA) is determined by the U.S. Supreme Court (likely sometime next year). What form this evolution takes […]

This post is sponsored by UST Health Care.

By: Brian Osberg and Joseph White

The process of reforming health care has already begun, and will continue to evolve, even before the fate of the federal Affordable Care Act (ACA) is determined by the U.S. Supreme Court (likely sometime next year). What form this evolution takes will vary by state and perhaps by local region. The way this plays out in Minnesota will be unique, based on the dynamics of this market, including state health policy and the private sector activities of payers and providers. How all of the health care reform components ultimately come together remains to be seen, but they are starting to take shape.

The key elements of reform include reengineering the delivery of health care services, restructuring the payment for those services, and redesigning the way health care benefits are covered. There is not a grand design to make this all happen, but new initiatives are currently being implemented, driven in part by recent changes in government policy and by actions being taken in the private health care market. The following is a summary of those initiatives:

Reengineering Health Care Services

  • Patient-Centered Health Care Home: Also known as Medical Home, this program was part of the 2008 Minnesota Health Care Reform Act, providing for the certification of primary care practices to coordinate the delivery of health care services. Medicare has joined this program to form the Advance Primary Care Practice Demonstration, paying certified practices a monthly care coordination fee.
  • Care Transitions: In an effort to reduce the number of inpatient readmissions as well as health acquired complications for high-risk Medicare patients, federal grants are available to organizations that are in the position to manage the transition of care services from the hospital to the post acute care setting. This is part of Medicare’s new Partnership for Patients initiative to improve patient safety.
  • Accountable Care Organizations: As part of the federal ACA law, Medicare is promoting the coming together of providers to manage health care services for a defined population and to be held accountable for overall costs and quality outcomes. The Center for Medicare and Medicaid Services (CMS) is in the process of selecting more advanced “pioneer” ACOs and will soon be releasing the final rules for the operation of other Medicare ACOs.

Restructuring Payment Methods

  • Total Cost of Care: In order to align financial incentives with desired outcomes, the private and public payer markets are developing payment models that are based on the overall, total cost of care (TCOC) provided to a defined population. Currently, the major Minnesota health plans are creating these incentive-based arrangements with the larger integrated care systems, e.g., Allina, which provides for financial savings and, in some cases, financial risk. Minnesota Medicaid is also in the process of developing this model with what it calls Health Care Delivery Systems. Medicare will do likewise with the developing ACOs.
  • Payment for Performance: As these TCOC arrangements fully develop, there will continue to be payment models that reward providers for following proven clinical processes or for achieving good clinical outcomes. These payment for performance (P4P) arrangements include the Bridges to Excellence (BTE) program that was created by the large, self-funded employers and adopted by Minnesota Medicaid. This program provides incentive payments to providers that achieve optimal results for patients with diabetes and cardiovascular disease. Other P4P efforts include provider payments for the meaningful use of electronic health records and for reporting certain quality measures.
  • Bundled Payment: As a way to structure incentives for providers to more effectively coordinate the health care provided to an individual patient, Medicare has created a new method that bundles payment to a group of providers for a clinical episode. For example, a hospital and attending physicians would share a fixed payment to provide services during an inpatient stay. The 2008 Minnesota Health Care Reform Act also provides a method for bundling payments for certain “baskets of care,” e.g., knee surgery, though there appears to be little use of this model in the Minnesota market.

Redesigning Health Benefit Coverage

  • Expanded Insurance Coverage: Perhaps the most significant feature of the federal ACA law was the expansion of insurance coverage to more than 30 million Americans. This was done by expanding eligibility for the Medicaid program and by providing federal subsidies to low-income individuals receiving coverage through state health insurance exchanges. A preliminary projection suggests that there will be somewhere between 1.5 million and 2 million Minnesotans enrolled in Medicaid and the Insurance Exchange by 2016.
  • Value-Based Benefit Design: In order to provide incentives for patients to properly utilize health care resources and to stay healthy, health plans and self-funded employers are redesigning covered benefits. This includes the tiering of employee cost sharing based on provider performance and the selective application of copayments based on the type of health service provided. This also involves the exclusive use of “centers of excellence” for specialized services, e.g., gastric bypass surgery.
  • Defined Contribution: As employers struggle to finance health insurance benefits for their employees, more are expected to adopt a defined contribution approach not unlike what has happened in the area of retirement pensions. The creation of state health insurance exchanges is expected to expedite that transition, allowing employers to direct their employees to the exchange along with a fixed financial contribution.

For various reasons, Minnesota is further along on the road to health care reform than the rest of the country. This is due in large part to self-funded employers’ sophisticated approach to buying health care in this market, the presence of large integrated care systems, the passage of significant state health care reform legislation in 2008, and the advanced capabilities of the major health plans. How reform will ultimately play out may not be known, but it is clearly taking its own course in Minnesota—and that is probably how it should be.

Brian Osberg, Director of Health Reform Consulting at LarsonAllen LLP, and Joseph White, Principal at LarsonAllen LLP, specialize in helping health care systems navigate emerging health legislation, payment models, and market trends. To learn more about Minnesota’s implementation of health care reform, attend the UST Executive Conference on the Future of Health Care on Friday, October 28 at the University of St. Thomas Minneapolis, MN campus.

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