The Users' Guide to the Health Reform Galaxy

Health Reformer's Lexicon: Federally Qualified Health Centers

The Health Reformer's Lexicon is a weekly feature that will examine key words, terms and phrases in health reform and explore their meaning and orbit.

The term: Federally Qualified Health Centers (FQHCs)

The Centers for Medicare & Medicaid Services provides the following definition:

FQHCs are “safety net” providers such as community health centers, public housing centers, outpatient health programs funded by the Indian Health Service, and programs serving migrants and the homeless.

Under the supervision of certified medical professionals, like doctors and psychologists, FQHCs offer primary care and preventive services, such as screenings for cholesterol, visual acuity and hearing; prenatal care; immunizations; and mental and nutritional evaluations.

Funded through the Health Centers Consolidation Act, FQHCs must be public or private nonprofit organizations. To receive the designation and qualify for grant funding, they must meet a number of other requirements.

Care can be provided in a number of settings: at health centers, at patients’ homes or elsewhere in the community, and must be provided to all patients regardless of their ability to pay for it.

FQHCs Payments are determined using a sliding fee scale. And as our Health Reform GPS also notes,

… because of their location and high level of treatment of the uninsured, FQHCs receive special payment rates from Medicare, Medicaid and CHIP and are eligible for special supplemental payments from exchange-participating health insurance plans. 

Why it matters: Federally qualified health centers provide care to millions of uninsured, underinsured and non U.S. citizen populations. As access to care expands through health reform, so too will the need for safety net providers. To do so, the federal government will need to work closely with the states to connect people to services and address the primary care workforce shortage.

According to a Health Affairs article, it is estimated that FQHCs will provide care for twenty million people in 2010, about 40 percent of whom will be uninsured. 

Roots: The Economic Opportunity Act of 1964 called for “neighborhood health centers,” which spurred the creation of the first two centers–one in the Mississippi Delta and the other in Boston–in 1965. These early models were based on similar ones in South Africa and also inspired by the American civil rights movement and a growing need to address national poverty issues.

The federal government continued to increase its support for health centers, and eventually created a reimbursement designation–the Federally Qualified Health Center benefit, in 1991. 

More recently, thanks to the support of President Bush’s Health Center Initiative, federal grants for FQHCs increased from $1.1 billion in 2001 to $2.2 billion by 2009, and the number of patients who received care doubled in number. 

Where the term appears: The Patient Protection and Affordable Care Act calls for the establishment of “Teaching Health Centers,” which include FQHCs; it also calls for support to help address the primary care workforce shortage, especially in rural and underserved areas.

The bill also contains $11 billion in funding for health centers, over a period of five years, starting in 2011. According to the National Association of Community Health Centers,

$9.5 billion of this funding will allow health centers to expand their operational capacity to serve nearly 20 million new patients and to enhance their medical, oral, and behavioral health services. $1.5 billion of this funding will allow health centers to begin to meet their extraordinary capital needs, by expanding and improving existing facilities and constructing new sites.
 
Previous Lexicon entries include:
- Value-Based Purchasing
- High-Risk Pools
- Bundled Payments

Health Reformer's Lexicon: Bundled Payments

The Health Reformer's Lexicon is a weekly feature that will examine key words, terms and phrases in health reform and explore their meaning and orbit.

The term: Bundled payments

The RAND Corporation defines bundled payments—also known as “episode-base payments”—as “a single payment for all services related to a specific treatment or condition … possibly spanning multiple providers in multiple settings. Providers would assume financial risk for the cost of services for a particular treatment or condition as well as costs associated with preventable complications.”

The Robert Wood Johnson Foundation and George Washington University’s Health Reform GPS project adds: “In contrast to fee-for-service payments, which can encourage a high volume of treatment, ‘bundling’ is thought to encourage more cost-effective care.”

(Bundling payments first requires categorizing different types of medical cases. These categories are known as diagnosis-related groups, or DRGs, which Medicare uses to bundle reimbursements to hospitals for inpatient care.)

Why it matters: A root cause of many of the U.S. health care system’s most profound problems—including soaring costs and uneven quality—is the fee-for-service payment system, which encourages overuse of health care services and fails to reward value. Among the alternative options, bundled payment schemes are attractive because they give hospitals and physicians incentives to coordinate care and to provide it more efficiently. Tied to evidence-based medical practice, bundling also promises to increase the value of our health care system—producing better outcomes for patients—in a fair and equitable way.

Roots: Physicians at the Texas Heart Institute introduced bundled payments in 1984 for cardiovascular surgical procedures. A 1987 study found that the Health Care Finance Administration could decrease its costs by more than $192 million (13 percent) under Texas’ payment plan. Since then, as U.S. health care expenditures have ballooned, health reformers have continued to advance the idea of bundling as a way to reform the fee-for-service payment system. The Balanced Budget Act of 1997 established new payment systems for most types of post–acute care services; independent initiatives such as PROMETHEUS Payment have worked on the practical design and implementation of evidence-informed case rates; and President Obama championed bundling in the recent health care reform debate.

Where the term appears: The final health reform bill calls for the creation of a national Medicare pilot program by the beginning of 2013, which will develop and evaluate bundled payment systems for acute inpatient hospital services, physician services, outpatient hospital services and post–acute care services for episodes of care that begin three days prior to hospitalizations and last an additional 30 days following discharge.
 
Under the new law, the government must also set up Medicaid pilot projects by 2012 that will use bundled payments to pay for episodes of care that include hospitalizations.

The Centers for Medicare & Medicaid Services is already experimenting with bundled payments through its Acute Care Episode demonstration, with sites in Texas, Oklahoma, Colorado and New Mexico.

And recently, several major health care providers in California announced plans to use bundled payments to pay for hip and knee replacements beginning in August. The lump-sum fee will cover a full range of medical treatments from surgery to 90 days of recovery.
 
Previous Lexicon entries include:
- Flexible Spending Accounts
- Value-Based Purchasing
- High-Risk Pools

Wrapping up the week with a shout-out and a few words

As this week’s host of Health Wonk Review, Brady Augustine at medicaidfirstaid.com suggests that “watching politics right now is like watching the intimate moments of a dysfunctional relationship. One person groping for the other in a very awkward way and the other disengaged with their back turned and suffering from the imaginary headache.” Noting the need for a “relationship rescue,” the latest edition features posts that support efforts to rebuild and repair reform. Included as a “formula for success” is Bruce Siegel’s post about the Aligning Forces for Quality initiative in Maine and its push for high-value health care.

And now, for something completely different.... 

With this next bit, we launch The Health Reformer’s Lexicon, a new weekly feature that will examine key words, terms and phrases in health reform and explore their meaning and orbit.

The term: Sustainable growth rate (SGR)

The sustainable growth rate is Medicare’s formula for setting total payments to physicians. It was designed essentially to hold growth in physician spending in line with economic growth.

While the Medicare program pays individual doctors based on a fee schedule, the Congressional Research Service (CRS) notes that,

“The SGR system was established because of the concern that the Medicare fee schedule itself would not adequately constrain overall increases in spending for physicians’ services.”

And here is how CRS explains how it was supposed to work:

“… If expenditures over a period are less than the cumulative spending target for the period, the update is increased. However, if spending exceeds the cumulative spending target over a certain period, the update for a future year is reduced, with the goal to bring spending back in line with the target.”

Why it matters:  The SGR is often mentioned in association with another phrase widely used on Capitol Hill – the “doc fix” – so named because Congress each year votes to “fix” the payments to doctors instead of cutting them. Since 2002, Congress has voted not to follow the SGR formula because it has not wanted to cut physicians’ payments.

As a result, there is a growing gap between what physicians are actually paid and what the formula calls for, so much so that Congress would have to cut physician payments by more than 21 percent this year to bring spending in line with the formula. This politically dicey proposition created uproar on Capitol Hill, where a decision on the cut must be made before the end of this month, since cuts are scheduled to take effect March 1.

To address this upcoming deadline, both the Senate and the House recently passed a pay-as-you-go law, which would require the government to offset any new spending with cuts in existing spending or with revenue increases.  But with an eye toward the SGR issue, this measure also contains an exemption for new spending for doctors’ pay, at a cost of $82 billion, enough to avoid cutting the doctors’ payments for another five years.

As another alternative to temporarily address the problem, the Senate considered including a patch in its jobs bill to address the rate cuts; but recently removed the provision.

Roots: The SGR was created by the Balanced Budget Act of 1997. It replaced another formula called the Medicare Volume Performance Standard that set payment targets that were also exceeded.

Usage: Patches created under laws like pay-go only temporarily address SGR pay cut issues. When it comes to more permanent solutions, perhaps one of the more prominent uses of SGR is in H.R. 3961, which passed the House last November. The measure would resolve the “doc fix” permanently by changing the formula, at a cost of about $210 billion over 10 years, according to this Congressional Budget Office estimate.

The high cost of health care: getting past denial

      

Jonathan S. Skinner, Elliott S. Fisher, and Jonathan Sutherland of the Dartmouth Atlas Project at the Dartmouth Institute for Health Policy and Clinical Practice at Dartmouth College write about the opportunities to pay for health care reform by reducing unnecessary spending.

The President’s recent speech called on Congress to move forward with much needed health care reform.  He wisely argued that reducing the waste in our current health care system can help provide the savings needed to cover the costs of expanding coverage to the uninsured.  This might appear to be obvious – many studies (including this one from the Commonwealth Fund) have shown the U.S. spends twice as much as other countries on health care, yet often lags behind in quality.  Furthermore, a number of studies from the Dartmouth Atlas group (here and here) have pointed to the dramatic differences in both levels of health care spending -- $16,351 per Medicare beneficiary during 2006 in Miami, compared to $6,604 in Richmond Virginia – and the apparent lack of better outcomes in these higher cost regions.

But not everyone is convinced.  One recent critic today even claimed that all regional variations in spending can be justified by medical need and poverty: The reason why Medicare spends so much more for patients in Newark, N.J. than it does for patients at the Mayo Clinic in Minnesota is because people in Newark are poorer and sicker.   In a recent article published online in the New England Journal of Medicine, we test this hypothesis rigorously using a large nationally representative sample of more than 15,000 Medicare enrollees.  By using individual data reporting income, health status, price-adjusted Medicare expenditures (to account for the fact that cost-of-living in New York is greater than in Oklahoma City), and other factors, we sought to gain the most accurate picture of what explains regional variations in spending – and more importantly, what doesn’t.

Regulations and health care reform: the devil's in the details

Peter V. Lee, co-chairman of the Consumer Purchaser Disclosure Project (CPDP) and executive director for national policy of the Pacific Business Group on Health, writes about how current efforts to regulate physician reimbursement for Medicare shed light on the importance of the regulatory process that would follow any health reform legislation.

Organizations interested in promoting better, more affordable and accessible health care are not only weighing on the national reform debate – last week, many of these organizations weighed in as a group on regulatory proposals to change how the Centers for Medicare and Medicaid Services (CMS) reimburses doctors.  

“Many of the proposed changes represent steps in the right direction,” the group said in a letter to acting centers Administrator Charlene Frizzera, “but they are incremental and marginal improvements where bold changes are required.”

Close the revolving door at our hospitals

Bruce Siegel, director of RWJF's Aligning Forces for Quality, a national effort to improve health care quality in targeted communities, writes about reducing readmission rates.

Many of our hospitals, we were reminded last week, aren’t very good at following up in order to make sure that heart attack and heart failure patients won’t have to be admitted again shortly after being discharged.

The reminder came from a new study based on data from the Centers for Medicare and Medicaid Services that found that one in four heart attack patients and one in five heart failure patients are back in the hospital within 30 days of their discharge. The study confirms what people in medicine know: avoidable hospital readmissions are a serious and widespread problem. And as the health reform debate continues to unfold in Washington, it is a powerful reminder of how poor quality health care robs the system of precious resources that could be used to expand access to care. As a study reported earlier this year in the New England Journal of Medicine found, unplanned rehospitalizations cost Medicare alone more than $17 billion in 2004 – one reason why Congress and the Obama administration are weighing incentives to induce hospitals to lower readmission rates.