A buoyant tour of health-care reform greeted radiologists who gathered at the annual American Roentgen Ray Society meeting for the Caldwell Lecture, delivered by Benjamin K. Chu, MD, on May 3, 2010, in San Diego, California. If Chu seemed unusually upbeat, for a physician, about health-care reform, it might have been because the internist also is president of the Southern California region of Kaiser Permanente (Pasadena), a system that embodies many of the goals of the Patient Protection and Affordable Care Act. Benjamin K. Chu, MDDuring his talk, “Health Care Reform: Implications for the Health Care Delivery System,” Chu focused on three essential elements of reform: health-insurance market reform and coverage expansion, financing of reform, and payment/delivery reform and cost containment. Characterizing the reform law as unprecedented in its potential to allow swift payment-policy changes without congressional action, Chu concluded his talk with a strong caveat for radiologists: If you prefer that the new Independent Payment Advisory Board (IPAB) not dictate rates, get involved now in devising new ideas for sharing the health-care dollar.Insurance Reform Begins NowWithout cost containment, health care is on track to account for nearly 50% of the gross domestic product by 2082, Chu notes, underscoring the case for change with data from a 2007 Government Accountability Office report. In moving the insurance market toward guaranteed-issue policies, rating bands, and standard packages with ranges, reform aims to broaden the risk pool. “A lot of these insurance-market reforms are actually contrived to level the playing field, to make sure that we get as many people in the pool as possible and then share the overall cost, as opposed to trying to risk-segment the population and target products toward certain people,” he says. Table. Health-reform Taxes and Penalties Contribute $597 Billion in Revenue Through 20192 Health-insurance exchanges (debuting in 2014), the individual mandate to buy health insurance, and employer incentives in the form of tax credits are key tools that will be used to leverage participation, but Chu questions whether the penalties for nonparticipation are high enough. “With the typical family plan costing $12,000 or $13,000 a year, some employers might elect to drop coverage and pay the penalty to let their employees go through the exchange,” he notes, “but that hasn’t happened in Massachusetts. In fact, the percentage of employers covering employees in Massachusetts has actually risen.” Further insurance regulatory changes, such as rate review and minimum loss ratios (the percentage of the insurance premium that goes to health care) are expected to provide a greater level of transparency in the insurance marketplace. Insurers in the large-group market will be required, in 2011, to use 85% of premium dollars for health care; in small markets, where the cost to market the products is greater, the minimum loss ratio will be 80%. Insurers must publish their minimum loss ratios this year (Figure 1). “UnitedHealth just reported that its loss ratio was 79%,” Chu notes. “It’s a way to dampen health-premium rises, going forward.” Figure 1. Major insurance reforms contained in the health-care law will be phased in through 2014. Of the 32 million newly covered people, half will come from Medicaid expansion (to include everyone with an income of up to 133% of the federal poverty level), and the other half will come from individuals heeding the mandate, leaving approximately 16 to 18 million uninsured. “It’s a complicated piece of legislation that phases in over a three-year period,” Chu says. “Some things happened almost immediately, like a lot of the insurance-market reform, but the big bang is going to happen in 2014.” Transforming Care DeliveryThe Congressional Budget Office estimates that the new law will cost $940 billion over 10 years. In addition to measures that will broaden coverage, the law includes significant funding for community wellness programs, preventive health care, and health-workforce development. The funding package includes a series of taxes and new fees (see table) and an equivalent amount of cuts to Medicare and Medicaid funding (Figure 2). Figure 2. Health-reform Medicare and Medicaid cuts add up to $597 billion in savings through 2019.²Chu reports surprise at seeing specific care-delivery demonstration projects actually named in the legislation. He notes a prevailing interest in encouraging the health-care system to develop into more integrated models, as well as in finding ways to get the payment system to drive that change. “When I say integrated model, I mean having physicians, hospitals, nursing homes, and home health, the whole continuum, melded together to work more closely and in a much more coordinated way: something we do a little better at Kaiser Permanente,” he believes. Demonstration projects are planned in three areas. Accountable-care organizations: A great deal of flexibility is built into this project to include group practices, hospitals, or joint ventures, with partial capitation or some other form of payment. Participants must have at least 5,000 beneficiaries and must be responsible for quality, coordination, and cost of care. Bonus payments will be earned if a participant cuts average expenditures. Chu thinks that multispecialty academic practices are well positioned to participate. This project begins in 2012. Medicare bundled payments: This five-year pilot will test bundled payments for episodes of care for up to 10 conditions. The bundled payments will include three days of care prior to admission, acute care (hospitals and physicians), and 30 days of postacute care. The pilot will be evaluated for improved quality, better access to care, and reduced spending. This project begins in 2013. Medicare value-based purchasing: This project is partially voluntary and is intended to be budget neutral: 1% of payments will be withheld in 2013, phasing to 2% in 2018. Hospitals delivering subpar care on hundreds of measures will be penalized up to 3% of payments, while hospitals that exceed care standards will receive bonus payments. Two sections of the project focus on 30-day readmissions and on hospital-acquired conditions. This project begins in 2013. Figure 3. CT scans per 1,000 enrollees for Kaiser Permanente Southern California (KPSC) in 2009, compared with 2007 data from the Organisation for Economic Co-operation and Development (Paris). The KPSC Radiation Utilization Action Team brings diverse parties together to develop utilization guidelines for radiological services that are now embedded in the computerized provider order entry system. Figure 4. MRI scans per 1,000 enrollees for Kaiser Permanente Southern California in 2009, compared with 2007 data from the Organisation for Economic Co-operation and Development (Paris). Chu advises health-care providers to pay close attention to communications from the secretary of HHS because the legislation gives the secretary wide discretion in defining project parameters, as well as in implementing three new centers to evaluate innovations and coordinate care: the Center for Medicare and Medicaid Innovation, the Patient-centered Outcomes Research Institute, and the Federal Coordinated Health Care Office. “These centers are created for the express intent of developing the evidence base for better understanding of what the payment system should be, as well as for putting in pilots to test the efforts to get the system into a much more coordinated state,” Chu explains. Significantly, the legislation gives the HHS secretary the power to turn a pilot into policy. “As soon as there is any indication that it might work, the secretary has the authority to expand it and spread it very quickly,” Chu says. “It is really quite unprecedented for Congress to give that type of authority to the executive branch.” Congress does have the ability to amend a recommendation from the HHS secretary, and the president has veto power over Congress, but Congress must muster a three-fifths majority to overturn the veto. The Cost UltimatumThe reason that Chu is so insistent on encouraging provider participation in the demonstration projects is this: If they do not succeed in lowering the cost of care, the IPAB has been given the authority to cut reimbursement. “This is a 15-member board that will make decisions,” Chu says. “This is the most amazing thing, when you think about it.” The IPAB has been charged with making recommendations to reduce the difference between the consumer price index and the medical inflation rate, which has been trending 3% to 5% higher over the past several years. In its first year (2015), the IPAB must cut the difference by half a percentage point, bringing it down to a 1.5% difference over a couple of years. Congress can dissolve the IPAB and, in fact, is supposed to do so by 2019, but it must do so with a three-fifths vote. In the final segment of his talk, Chu turned homeward, sharing a quote from President Obama that appeared in Time magazine: “ . . . if we could actually get our health-care system across the board to hit the efficiency levels of a Kaiser Permanente or a Cleveland Clinic or a Mayo or a Geisinger, we actually would have solved our problems.”¹ He can’t vouch for that statement, but Chu does draw some parallels between the ambitions of the reform law and the results of Kaiser Permanente’s integrated-care approach, fueled by IT. “What they are driving at is the kind of integration we have,” Chu explains. “This is actually how we do things now, particularly since we put in IT that allows that coordination on a real-time basis. Not only is it coordination at the point of care, but we have tools that allow me to look at my 3.3 million people and tell you how they are doing, relative to some evidence-based care protocols.” He continues, “For example, I have 600,000 members who are diagnosed with hypertension. I can tell you, at this time, that 83% have their hypertension under control. I can actually drill down and tell you which ones don’t, where they are being taken care of, whether they are being seen on a regular basis, and whether they are compliant with their medications, based on their refill rates. If you can build those tools, you can see how you can change the delivery system to be much more proactive, to get at better outcomes overall.” In working with Kaiser Permanente radiologists since 2006 to develop radiology-utilization actions and then embed them into the computerized provider order entry system, Kaiser Permanente Southern California has achieved utilization rates for CT (Figure 3) and MRI (Figure 4) that are less than half the US average. “We have less than half the rate of the rest of the country for CTs, and as you can see, the rest of the world actually uses it less as well,” Chu notes. “The key will be if the outcomes are just as good, if not better. Similarly for MRIs, we are at 43.7 per 1,000, and the rest of the country is at 91.²” He adds, “Since we have patients who have been with us for 15 or 20 years, we can actually start to track outcomes, such as a failure to diagnose something because we didn’t order a certain test. We actually can track and feed that back to the physicians: That is something that you don’t often have outside a system like Kaiser Permanente or Group Health.” In conclusion, Chu encourages radiologists to begin working with hospitals, physician groups, and other providers to improve care coordination, to use the evidence base to drive decision making, and to implement feedback loops. The door is open to accountable-care organizations willing to experiment with taking a fixed pot of health care dollars and redistributing it in better ways, Chu says. “Cost containment may come in the form of better coordination and evidence-based utilization of services,” Chu notes. “Let’s hope that’s true, or in the end, the IPAB will resort to price or rate regulations.” Cheryl Proval is editor of Radiology Business Journal and vice president, publishing, ImagingBiz, Tustin, California.