​ Minnesota health care roundtable

Consolidation in Health care

Examining cost and quality issues

Minnesota Physician Publishing’s 50th Minnesota Health Care Roundtable focused on the topic of Consolidation in Health Care: Examining cost and quality issues. Eight panelists and our moderator, Minnesota Physician Publisher Mike Starnes, met on Nov. 1, 2018, to discuss this topic.

The next roundtable, on Apr. 25, 2019, will address Social Disparities in Health Care: Correcting the curve.

Consolidation in health care is a necessary part of the evaluation of the industry. Just as with any microeconomic sector, there will be mergers, acquisitions, new partnerships, etc. Just as there is good cholesterol and bad cholesterol, there is good consolidation and bad consolidation. Let us start by explaining what we mean by health care consolidation. What should we think when we hear this term?

Ms. Quam: Collaboration is our future. Collaboration is a good idea, and maybe we should look at consolidation as a model of collaboration. There are combinations of every sort going on and more coming all the time. Physicians are consolidating in many ways. They are staying independent but then they are having a management company. They are becoming employees. They are changing who they consolidate with and maybe it is not just with family physicians, it is family physicians and another practice.

Dr. Jensen: You can try to define consolidation, but it is helpful to look at the motivation. Sometimes the motivation is survival. Sometimes it is greed. Sometimes it is power. We consolidate at many levels. Within a small office, you consolidate your efforts with your staff, and you do that for the good of the patient. One size does not fit all. In the world of consolidation, the patient frequently gets squeezed out in terms of what they want for medical care, and often the provider does as well.

Dr. Dowd: Consolidation can mean almost anything. A physician network might be just a loose affiliation of physicians, until it comes time to talk to the insurance company, and then some people begin to describe it as a pricing cartel. On the other end of the continuum, you have organizations or provider entities that are actually in a hierarchy of ownership of services.

What are some of the most important ways that health care is different from other industries?

Dr. Ketover: Everybody who goes into health care sees it as a higher calling. Even if you do not provide direct patient care, your work does make a difference to individuals, not just to systems. Consolidation is all about scale, bringing groups together so that you have more influence. That influence can be used economically to generate more revenue or to decrease expenses, but it should be used to create opportunities for what the collective group can do that individuals could not do: what types of services they can provide, what types of subspecialty areas, what types of additional customer service they can deliver. Much of the discussion about consolidation is about who is making more money out of consolidation, instead of the benefit of consolidation to the community and to patients at large.

Dr. Firkins Smith: There are probably not many industries where the government has such an incredible role in how we purchase a specific thing. When you go to Target or Best Buy, you do not look at a television set and wonder how much it will cost or how it will run. And you don’t have the government pay for it. Essentially, that is what happens with a lot of our health care. Patients do not always understand exactly what they are buying, what is going to happen on the tail end, and how it will be paid for.

Dr. Barthell: In intensive care or emergent care, we are dealing with life and death situations. People do not think about shopping around ahead of time, unlike primary care, where someone may ask a friend, “Do you have a referral for a good doctor?” I always tell families in the newborn intensive care unit that no one ever plans to have a baby in the NICU. It always catches people by surprise, and they are locked into the most convenient place to go.

Dr. Dowd: Cindy gave us a nice list of the features that distinguish health care from other products: market failures, poor information, restricted entry, and distorted prices. There are two views you can take on that. One is to say that, yes, that is right and there is nothing we can do about it. Markets cannot work and so we need to bring in the government to run the health care system. The other point of view is to say that, yes, it is true, but we could fix a lot of those problems if we had the will to do so.

Dr. Hernandez: When I started practicing, we were pretty much a cottage industry. You hung your shingle and you opened your door. Now we see the effect of third-party payers, not just in the government realm, but also in the commercial world, with the development of narrow networks which you can get boxed out of, depending on how those contracts are arranged and what sorts of promises are made by different provider groups and systems. It puts a lot of pressure on those of us in independent practice.

Can anyone cite examples of things that have worked really well because of consolidation?

Dr. Firkins Smith: In rural Minnesota, we have a number of very small clinics and very highly stressed critical access hospitals. These health care providers or institutions are struggling on a day-to-day basis just to survive and to serve people. If they cease to exist, we will have a whole slew of rural Minnesotans who will not get health care or will not get health care close to home. We are endeavoring to work together or collaborate with the small health care facilities, critical access hospitals, individual or independent physician-owned clinics, and figure out the best collaborative model to sustain them and keep care close to home. The goal is, whenever possible, to keep the right care at the right place at the right time for the right sustainable cost. That is a prime example of the way consolidation needs to work.

Dr. Ketover: In our practice, consolidation occurred in 1997 when three groups came together. Since that time we have grown organically, from 30 physicians to our current 80 gastroenterologists. Our motivation for consolidating and growing our practice is that there are many sub-subspecialties in gastroenterology to which a group of four, five, six, or 10 cannot devote the appropriate resources, because they are under-reimbursed. We have, throughout our history, been able to make choices to have some of our partners invest a significant amount of time providing clinical services, performing activities that are under-reimbursed for the amount of cognitive effort and skill that they put into them, but we as a collective partnership can subsidize those kinds of activities for the benefit of the population we serve.

Dr. Jensen: When Medicare and Medical Assistance came about in 1965, many physicians were in their own independent clinics. At that time, you might have a chart for this patient and I might have a chart for this patient and, if we consolidated, we would have just one chart. We could collate the information and be less likely to duplicate tests. The motivation was truly noneconomic. After 1965, we had some pent-up demand that gave the whole system a jolt. Some people call those the golden years, because there were lots of services being provided, lots of business, and the payment was there. Then in the 1970s we saw runaway inflation in price and utilization, and we said that we cannot keep doing this. We tried the HMOs and other things. I went into medicine in 1970 and saw first-hand the catastrophic results of what a capitated system could do to the motivation to take care of a patient. All of a sudden you were told that if you provide less care, you get more dollars.

Can we look at a couple of ways that consolidation has created negative results?

Ms. Quam: There are good studies that show that costs have gone up. As the costs go up, it makes our whole system solution more difficult.

Dr. Hernandez: In the past, referrals were based on relationships. That is not always the best way or the most data-driven way to make referrals, but it had some value in terms of being able to engender trust. Now, as you get into various contractual arrangements, you are forced to use certain subspecialists and hospitals. Our group has always prided itself on trying to be low cost and high value. The larger consolidated groups form narrow networks with payers that we are boxed out of unless we agree to become closer, which usually means, at minimum, professional service arrangements or just plain acquisition. There are a number of threats to those of us in independent practice now. Consolidation has brought decision-making up to such a high level that it is out of our hands and there is not a lot that we can do about it.

Dr. Ketover: As the hospital systems have grown in size and influence, they have become more concerned with controlling leakage than with quality and patient outcomes. It has become important for those systems to keep that patient, service, and revenue within the system instead of looking around the community and asking, where is the best-qualified place for my particular patient to get care?

Dr. Barthell: In vertical consolidation, when physicians are reporting to administrators, it potentially can interfere with their loyalty to the patient. Independent providers can more easily focus their attention on the best quality care for their patients than they could if things were being dictated by people outside of that relationship.

From a provider and patient level, are there problems that lead to a dehumanization of medical care?

Dr. Jensen: We order tests that patients cannot afford. We do not bother to check in with them, and by the time we are done ordering tests we have often damaged them physically or damaged them emotionally. That dehumanization of the relationship between patient and physician does not do our patients any good.

Dr. Firkins Smith: Our physicians are really struggling, and unhappy physicians take bad care of patients and the relationship is dehumanized. One of the disruptors right now in medicine is a lot of virtual care, e-medicine. It is hard to have a humanistic relationship when you are doing so on your iPhone. Virtual medicine will probably be really good for select people under select circumstances at select times, but it can potentially dehumanize that relationship. It is very important that we maintain it and make sure that, when we collaborate and/or integrate, those relationships are at the core of everything we do.

Dr. Dowd: The Robert Wood Johnson Foundation studied 11 hospital mergers, and found that prices went up in eight of them. Prices did not go down in the other three, they just did not go up. We have to remember that when you have concentration of supply in any industry, the prices do not just go up for the consolidating industries. When the industry itself becomes more consolidated, the prices go up for everybody, so this would be true for hospital mergers. It would be true of hospitals buying physician practices. Every time a hospital buys another practice, it is not enough money to warrant the attention of the FTC or the Justice Department, but if you have enough hospitals buying enough practices, then you end up with a very consolidated hospital industry and a very consolidated physician industry.

Ms. Quam: I would like to talk about trust. As a health system gets larger, patients feel more locked in. They cannot go someplace else, because the physician inside the health system says, “If you go to this therapist or this imaging provider, your records will not be a part of your medical record here in our system.” That might lead to duplicate tests or other duplicate care, and it also causes an erosion of trust. The patient goes home and Aunt Polly says the very best medical specialist is so-and-so, but the patient cannot get to that specialist. How do we allow patients to have second opinions?

Whether knowingly or unknowingly, federal reforms have contributed significantly to health care consolidation. Can anyone talk about how that has played out?

Dr. Ketover: One word is overhead. Hardly six months goes by where there is not another federal regulation requiring another form, another thing that has to be checked off in the electronic medical record, or another task that has to be performed in order to see the patient. The cumulative effect of all of this is that most providers spend more time in front of the electronic medical record than they do in front of the patient. The government has contributed to this by creating policies that layer one on top of the other. That creates a tremendous administrative expense for any organization, whether you are for profit, not-for-profit, consolidated or not. It takes a lot of time and support to get through all of those requirements and to do them correctly.

Dr. Hernandez: I think about ACOs and their requirements. To win or lose in an ACO, you have to consolidate or at least collaborate at a high level. The positive thing for those of us that are independent, single-specialty groups is that it has forced more structured conversations. Years and years ago, during those capitation days, we tried to do some very loose arrangements. We spoke with specialists about trying to manage populations from a cost standpoint, but the incentives were not built-in, the payment was not built-in, and it was pretty much all based on relationships. As great as that may be, it did not go very far. You can argue about whether the ACO structure and form has been a good or a bad thing, but it has forced those consolidations. It forces primary to work with specialty, hospitalist to work with ambulatory, and everyone to play in the same sandbox.

Dr. Jensen: If you are going to refer your patient for an MRI under your own roof, it is going to increase your gross revenues, potentially decreasing your overhead and increasing the number of dollars that are going to come to your wallet. At some level, that is fee splitting. We have said that is okay in ACOs. We have said that monopolization and some of these consolidation moves are okay. We never used to say that. To me, the ACO is sort of a retooled HMO product that did not work very well a long time ago, but we are right back at it.

Are there elements of health care delivery such as health insurance, PBMs, hospital and clinic systems, or pharmaceutical manufacturers that need to be kept apart as separate entities?

Dr. Firkins Smith: Doesn’t it depend on their motivation? I do not know that you can make a blanket statement. If all of the organizations are going to consolidate for the purpose of cutting out other entities or increasing their profit, whatever their motives are, that is obviously bad. For instance, the Mayo Clinic is trying to create a pharmaceutical company, and that is a consolidation. But their motivation is not to corner the market on pharmaceuticals. Their consolidation is to reduce costs. Isn’t that a good idea? If the motivation is to provide the right care and to reduce cost and increase quality, I would be interested in hearing about that consolidation.

What accountability should the big systems have? Who should they be accountable to?

Dr. Ketover: They should be accountable to everyone: patients, stakeholders, people who work for them, and the community at large. Our charge master, what we charge for our services, has been on our website for more than five years. I cannot find another institution in the United States that does that. That would be one place to start. You would at least have a chance of understanding what different institutions charge for the same service. The challenge is that the payer for the product is rarely the patient. They do pay out-of-pocket, but mostly it is third-party payment, either an employer or the government. Those institutions do not really care about transparency. The big insurance companies do not want transparency because that gets into how they contract with providers, but we should be able to discover how much a knee replacement costs in St. Paul versus Owatonna.

Dr. Barthell: We also need transparency with outcomes. Anyone ought to be able to look online and figure out which NICU has the best survival rate for infants born at certain gestational ages. People go to U.S. News and World Report and say, “Okay, this hospital is listed here, so this must be the best care,” but that is not really telling the picture that matters to families and that affects everyday life. The outcome measures for neonatology in the U.S. News and World Report rankings are blistering central line-associated infections, accidental extubations, babies who got the wrong breast milk, and babies who go home on breast milk. Those are important, but there is nothing about chronic lung disease of infancy, necrotizing enterocolitis, or retinopathy of prematurity. These are real diseases that affect long-term neurodevelopment of children. Someone who walks into a hospital and delivers a 26-weeker is going to have no insight on that and really can go nowhere online to find the best institution to take care of their baby at gestation.

Dr. Hernandez: When MN Community Measurement develops their quality metrics and cost metrics, they bring a wide variety of stakeholders to a neutral table: consumers or patients, employers, providers, payers, the Department of Health and Human Services, and the Minnesota Department of Health. We do not necessarily come up with perfect solutions, but we do come up with proposals that at least have some consensus. That may be a model for trying to drive some of these accountabilities, or at least to help us determine how to measure the success or failure of consolidation efforts.

Dr. Dowd: A lot of our discussion has been about being accountable to consumers. If you are not accountable to your consumers, your consumers might go someplace else to get their care. But there is a substantial number of very influential politicians and other people in the country who have not bought into that model at all. The model they have bought into views health care as a public utility that is run by the government.

Dr. Jensen: MN Community Measurement says that to do a good job of treating depression, you have to get a PHQ-9 above such and such a number at time zero. At three to six months you have to do another PHQ-9. If the number isn’t better or the patient does not follow up, you get a black mark. We spend so much time trying to tabulate this data. We spent $14,000 last year to try to come up with the correct data so we could submit on whether or not we had done MN Community Measurement depression things. You are telling me that that is how we should hold accountability? I would think that maybe we could let the patient trust and decide, “Gee, Jensen, when I come to your clinic I always feel worse than I did before and I want to commit suicide.” Maybe they will find someone else. With this idea of having government take over one more layer, we are more and more distancing the patient.

One of the issues when you are dealing with contracts that send the patient to preferred providers and narrow networks with restrictive formularies is that they might counteract good clinical practice. What do you do as a provider when you are looking down the barrel at that?

Dr. Hernandez: We could spend two or three days talking about formularies and prior approvals. The contractual obligations and the hoops that we have to run through and the systems that we have to build to work through them and around them are so significant that sometimes you wonder, wouldn’t it be nice to have just one master and just one way of doing it? That gets us down a whole trail of single payer that I do not necessarily advocate, but there are some huge bureaucratic barriers that would be broken down. When I prescribe Suboxone or buprenorphine, it is not unusual to have the insurance company say, “Nope, we are not going to pay for that.” So we try like crazy to find out which pill they will pay for and which pharmacies they will be able to get it at. In the meantime patients suffer.

How do we differentiate between good and bad consolidation?

Dr. Barthell: That gets back to motivation. You cannot argue that consolidating in a rural area, where there is risk to some provider’s survival, is a bad thing. When you look in bigger areas where there is more choice and you see bigger institutions taking over more market power, then you start to question whether consolidation is the right thing.

Dr. Jensen: If consolidation is occurring in an effort to create more openness, that would be a good thing. If consolidation is occurring to cause more opacity, that would be a bad thing. It does not take a rocket scientist to see when it is being done with the primary motivation being power, control, and increased revenues. We used to have the FTC ferreting out monopolies, and we had CMS concerned about self-referring and fee-splitting, but those have been sort of waived. In a lot of ways, it is the legislatures that have failed the system. We are the ones who maybe bought it hook, line, and sinker. Now we have narrow networks, patients displaced from the decision-making process, and patients who do not have a clue whether their first day in the hospital is going to cost $10,000 or $1,000. We need to start taking steps to stop this.

Ms. Quam: We need measurement and transparency. There is no other way to identify motivations. We need measurement and transparency on how much the health system’s top executives are being paid and on health outcomes. It is both measurement and then it is transparency on that measurement.

Who can be an advocate for the interests of patients and physicians in an increasingly consolidated health care delivery system?

Dr. Firkins Smith: Patients and physicians. That is the answer. When it comes to these health systems, it is imperative that you have physician leadership or strong clinician leadership throughout the entire organization. There is data that suggests that physician-led organizations have higher quality and better outcomes, and I am all for having patient advocacy in there as well. We need to have a patient voice throughout the entire organization.

Ms. Quam: A year or so ago there was a small bill in Jefferson City, Missouri, that stated that an order to deny a prior authorization request required a health care physician licensed in the state of Missouri. That is all it said. We had one lobbyist for all of the physician organizations, and there were 18 health plan lobbyists in the room. It is not dissimilar here in Minnesota, where there might not be that many bodies sitting in the health committee meetings, but there is this army of law firms behind the insurance lobbyists. It becomes overwhelming, even when you are doing your best and you know you are on high ground with whatever the issue is for patients or physicians, because we are distorted in how advocacy happens under our current system.

Dr. Jensen: During the last two weeks of the 2017 session, there was one health system that wanted extra hospital beds. Throughout the entire legislative session, we had never had any level of intensity like that. Twenty to 25 people descended, spent the whole day there. They were pulling us off the senate floor to talk to us over and over again about why they had to have these hospital beds. Tony Lourey, a Democrat from Moose Lake, said we should get an opinion from the Department of Health. The opinion from the Department of Health said we could not justify it. Still the tug-of-war went on. It was in the 11th hour and in the end a compromise was hammered out. What the systems, payers, and pharmaceuticals can unleash in terms of lobbying power is intimidating.

Dr. Firkins Smith: I agree with that, but if we walk away and say, “Oh, they’ve got all the money, they’ve got all the power, they’ve got all the people, we can’t do anything,” that is a useless attitude. I refuse to accept it. It took me 11 years to get tanning booth legislation passed in this state. Eleven years. It is up to us to be pit bulls when it comes to getting this stuff done. If the problem is the lobbyists and money, then change the law. Why do they get to have 100 lobbyists in the Capitol pulling on everybody’s ears? Why do they get to donate $100 million to the people who are running for office in order to have that kind of influence? Let’s change it.

Dr. Dowd: One study shows that in 2021, the average health insurance premium will cross 50 percent of average household wage income. In 2033, it will cross the entire household wage income. That just cannot happen. The optimism is that we won’t let it happen. The somewhat cynical viewpoint is that every household that the health care industry prices out of the health care market is another point on the demand curve for really disruptive innovation, and there are hungry people in the tech world who are working on disruptive innovation in health care. They are not thinking about innovative payment reform. They are thinking about innovative bypasses to the U.S. health care system.

Part of the problem here is that there is a trust that health care organizations are altruistic in looking out for the best interest of consumers, but this may not always be the case. How do we address that?

Mr. Kaiser: There has to be a way to measure and create accountability for what is being said or what they are trying to do. When I think about the consolidations that happen within the market, I think about the statements that are made about the benefits that consolidation will create for the community. I never see any follow-up on how those benefits are actually achieved or how they have demonstrated the value of the consolidation. Having more follow-up after the consolidations and holding accountability around whether they follow up on the promises that they make when they get together and form these larger systems would be important.

Ms. Quam: You could start with the hospitals. Look at their charter, their nonprofit charter, and make sure that they are meeting it back to measurement and transparency, especially as it relates to Medicaid.

U.S. antitrust laws prevent collusive practices that restrain trade, restrict mergers, lessen competition, and prohibit the creation of a monopoly and the abuse of monopoly power. These seem to be being run roughshod over. Who is going to enforce those?

Dr. Dowd: Most health economists would say they believe the Justice Department has been asleep at the switch for the last 20 years. I think that is a little too harsh. The federal government has a limited budget, and so does the Justice Department. When they are going after Microsoft, that is a big deal. The health care industry is a big deal too, but they have got to make choices. I am not a lawyer, and so I am not able to say if there is some technical legal impediment to enforcement of the antitrust laws, but I sure hope someone could explain that to me, because otherwise I have got to conclude that the judges are just approaching gullible from the other side.

Bigger and larger health systems have clearly not produced lower consumer costs or higher quality care. What needs to happen for this to be made clear and to effect change?

Dr. Jensen: Over the last 50 years, we have taken the patient out of the equation, and I think many patients feel inadequate to being their own best champion. Somehow we have got to get patients to understand that they can say “no” to that angiogram. Almost 30 percent of our expenditures are related to low-value services that do not need to be done in order for us to optimize patient care. If you look at the data from the top 15 first-world countries, we perform more MRIs, CT scans, and coronary artery bypass grafts than anyone else. Price has certainly escalated, but utilization has inflated with some of these big-buck procedures that are easy to do, and they play on the fears of the people.

Dr. Ketover: It starts with the goals. All health care organizations say “patients first.” But how many times do they ask how the decisions they make will affect the delivery and outcome of patient care? One big thing that is missing in this whole debate is the patient’s responsibility in their health. The best thing that I can do for a patient is to say, “I’m going to reach in my toolbox and recommend these three tools for you. But I cannot make you use them. You have to be motivated and believe that this is going to help you.” There has to be an environment in which a physician can say to a patient, “I understand your anxiety and concern about your symptoms, but I do not think you need the MRI today. Let’s wait two weeks and see what happens.” Our system has evolved to the point where providers who do that are under-reimbursed relative to providers who just check the box for the MRI.

Dr. Firkins Smith: People often do not understand what real quality is. I may have a patient who just had a knee replacement come in for skin disease. They rate the quality of their knee replacement on the appearance of their scar: “The surgeon did a really good job, look at that scar.” It is great to have a good scar, but the real quality is how does your knee work, how can you get around, are you having a good quality of life, is it functioning, is it going to get infected, is it going to work for five years, those kinds of things. I just read an article that said people do not actually search out health care for quality. They are far more likely to search based on a relationship or a recommendation, either by their physician or their next-door neighbor.

If some of this needs to be addressed through legislation, what kind of data do we need to bring to the legislatures to make them aware of these issues?

Mr. Kaiser: There is a challenge with trying to get good data and agreement on what is good data. From a cost standpoint, we as an organization are constantly trying to find information about the high-value partners that we should be working with. Who provides low cost and high quality? We get contradicting data from pretty much everybody, so it would be nice to have consistency.

Dr. Jensen: We have a lot of services ordered because some studies indicate that one out of every four dollars spent in health care is based on some form of defensive medicine intended to avoid litigation. I do not think this will be solved by trying to get legislators to understand the data, because they will be influenced by the biggest category of lobbyists in the 11th hour. We need to have people like this audience who are well-spoken and understand the system to keep hammering. You need to hold your legislators accountable. You are the stakeholders.

Dr. Dowd: Walt McClure once said that the best way to improve measurements systems is to implement measurement systems. If you do that, you will immediately hear what all the problems are with them. But with MN Community Measurement and the all-payer claims database, we are further ahead than any other state in the country. If we cannot do something on the consumer path of health care reform, nobody else can do it.

Antitrust laws use the word “cartel” to describe an entity that controls manufacturer supply and access to a market sector and limits or removes competition. Over time we have steadily enacted policies that effectively, if not intentionally, exempt health care delivery from these public protections. What needs to happen for this to change?

Ms. Quam: There was an article in the Wall Street Journal about “secret deals” involving an agreement for the insurer not to steer away from a health plan because the health plan took a 1 percent inpatient rate reduction. The insurer might be promoting something to the self-insured clients, but actually there is a “secret deal” between a health system and the insurer. Those kinds of arrangements need to be transparent, too. It is not just the pricing for each individual patient. If this is the nonprofit sector, and most hospitals are, then is there something we should be doing even with those contracts where there are certain specific things that they have to reveal?

Dr. Dowd: The good news from the industrial organizations literature is that the same greed that forms the cartel also gives the efficient members an incentive to break the cartel. We just have to give them a reason, make it worth their while, and pay them to break the cartel.

Is there some irony in the fact that laws that were made to prevent physicians from colluding with each other have allowed payers to do just that?

Dr. Ketover: In the process of renegotiating one of our contracts with a commercial payer, they asked us to justify our request. They said, “Why don’t you share with us what you are being reimbursed by other payers?” I thought to myself, “You already have access to a lot of that information.” The insurers have each other’s information, but we do not. In another state, a provider group went on Craigslist and advertised that they would pay for the EOBs from patients for various procedures so that they could see how things were getting paid for by different payers. As a provider organization it is rare to have extensive knowledge of reimbursement differences in your market, so your only leverage in dealing with insurance companies is either to accept the contract or be out-of-network.

Dr. Firkins Smith: That is a significant problem for those of us in rural areas. When patients are out-of-network in urban areas, they can go down the street. When we are out-of-network, where do they go? They either pay huge increases for their care, or they drive to the Twin Cities.

Ms. Quam: Sometimes it is called out-of-network, sometimes called “surprise billing,” which is causing even more problems. We have a really decent bill in Minnesota, but at the federal level, Senator Cassidy is offering a bill that the insurers are trying to hijack so that if you are out-of-network, you are only paid a percentage of Medicare. In California, I believe it is 120 percent of Medicare.

Increasing health care consolidation is contributing directly to a serious public health issue, specifically the rising number of individuals with health care disparities. Let’s talk about this a little bit and ways that this can be addressed.

Dr. Firkins Smith: I would need to know why we think that consolidation is increasing health care disparities. One of the reasons that we consolidated in rural Minnesota is that our population is well over 50 percent Medicare and Medicaid, and a lot of our population is very poor, under-represented, and has a lot of social disparities. Our concern was that if we did not come together as a larger organization and create some scale and address these problems, we were going to have to abandon those patients, and we were unwilling to do that. For us, consolidation was an answer to address and deal with social disparities.

You are completely right. There is good consolidation and bad consolidation. Liz, you cited an example of this being a chain reaction: when one organization owns the insurance and can price the product out of reach of a certain number of individuals, it has downstream effects. How does that work?

Ms. Quam: Trust is a really big thing, especially for some populations, and if you already do not trust the health care system, going into a big white sterile hospital setting is not a good thing. You just stay away. Studies show that across the country. We want multiple options for access, especially for vulnerable populations of all different kinds. If we only have one big hospital door every 50 miles, we contribute to that disparity.

Dr. Jensen: Social disparities do occur in the consolidation movement when facility fees are all of a sudden a new part of the plan. Patients do not see it coming, and people who suffer the adverse consequences of social disparities often do not have the skill set to negotiate or push back. I had a patient who brought in an EOB and his bill was $70,000. By the time the insurance company had adjudicated it, the $70,000 list price had been brought down to $12,000, and the patient had to pay $40. He said, “Doc, how can a bill be $70,000 and be brought down to $12,000?” I said, “I think it happens with some frequency.” But if there is anybody who does not get that advantage, it is a person without insurance and with no advocate, nobody negotiating on their behalf, and they are stuck with a $70,000 bill. They go to the hospital and they plead, beg, borrow, get on their knees, and they finally get a reduction from $70,000 to $65,000. This is the way social disparity affects us so profoundly.

In the first half, we mentioned the tiered system. Let’s talk about that a little bit.

Dr. Dowd: Minnesota state employees choose a primary care clinic placed by the state into one of four cost-sharing tiers. The primary care clinics then serve as gatekeepers and direct your referrals to hospitals and to specialists. That system gives both the providers and the consumers an incentive to choose efficient providers. If you just stick the consumer in a high-deductible health plan, they cut back on the care they should get. If you just give them information but no incentive to act on it, then nothing happens. One study that just came out in the American Journal of Health Economics involved Safeway. They gave consumers information about quality of care. Nothing happened. Then they tacked on reference pricing, and they started getting 29 percent savings on their total health insurance cost with no difference in quality. You have got to give both the consumers and the providers an incentive to be more efficient.

To address the issues in the rural setting, would it be possible for the clinics to negotiate directly with employers?

Dr. Firkins Smith: We would like to do a lot with employers. They are the lifeblood of our community. People and employers are what allow people to live in the community. Providing good health care does nothing for the people in our community if we bankrupt them in the process, and I would say the same for the employers in the community. Part of the disruption in rural health care will be working directly with the payers. By that I mean the employers, because nongovernmental payers are primarily employers.

Also in the rural setting, there are not a lot of other choices that the community has to go for care.

Dr. Firkins Smith: Certainly people can drive, and other organizations might come in. There is not a lot of profit in doing that because the vast majority of our patients, well more than 50 percent, are government paid, low reimbursed. One of my concerns is that when disruptors hit our market they are going to go after people that have money, and we now use people that can pay for health insurance and employers that can pay for health insurance to cost-share those that cannot. So when they start siphoning off the ones that have the better reimbursement, how are we going to be able to cost-share those costs for the people that have very low reimbursement?

Dr. Ketover: There are maybe a handful of organizations in the country that could survive on 100 percent Medicare rates. That is a fallacy when we talk about Medicare for all. There are many institutions here in the Twin Cities that would disappear if all they were paid was Medicare rates. We need to address that. It is the commercial insurance reimbursement that subsidizes the insufficient payments from Medicare and Medicaid.

Dr. Jensen: Consider the concept of direct primary care, especially if you had a core package of catastrophic coverage that linked in direct primary care. You really do not have the clinic and physicians being exposed to loss. At the worst, they would be out time, but they are generally going to be inclined to be very efficient. They will do whatever they can to get that patient plugged into an ideal setting. The direct primary care model has some bugs in it, but I think it is a good idea, and it could be good for out-state Minnesota.

Dr. Firkins Smith: One of the problems with direct primary care is that it has generally been offered for people that can afford that extra monthly payment. A lot of our patients just do not have it. We need to find a way to implement that kind of model for the people that do not have that additional money.

What are the most important things we need to do to stop consolidation in health care that does not benefit patients and ensure consolidation practices that do benefit patients?

Mr. Kaiser: To ensure appropriate consolidation, we need to identify the value when consolidation is occurring. If there is consolidation that is ongoing, what does it do? We are almost to a point now where consolidation is not a value add, it is more a response to current systems failing. How do we create and support the established existing systems that we have today to make sure that groups that are not part of large systems, who want to remain independent and viable, have those resources and support in order to stay viable in the long term?

Dr. Barthell: To keep consolidation where it is most helpful, we should acknowledge that studies in psychology, sociology, and economics show that people’s best engagement and best performance happens when there is self-direction. Autonomy, mastery, and sense of purpose are what drive human behavior. Choice is also part of what engages patients. Someone who can make a choice is going to be more engaged than someone who is told exactly what to do. It is the same with providers. When providers can direct what they think is the best care for their patients, they are going to be more invested.

Dr. Ketover: We have to bring the patient back into this, and be an active part of the transition to value-based care. When assessing the value of future consolidation, we need to understand the motivation driving the potential consolidation. What is the goal of the consolidation? Is it reactionary to a market where you need to have scale to survive? Is it proactive in a market where you want to have scale so you can control the market? I do not know that we can legislate good intent, nor can we go back and have penalties if the good intent does not produce a community benefit, but it certainly should be more of the discussion. When organizations, especially large organizations, are talking about consolidation, they ought to at least be challenged by having the community ask, “How will this benefit us? We know how it will decrease your expenses and maybe increase revenue, but how will the community benefit from this consolidation?

Dr. Firkins Smith: We need to look to the future as well. A lot of consolidation has been done as a reaction to the changing health care environment, and a lot of people have bemoaned it, wishing for things to stay the same. The problem is that things cannot stay the same. We are going to have to change in order to ensure health care delivery with the best value, the best outcomes, and the lowest cost in the future. When people want to consolidate, check the motives, check the intent, and then ask them how they are going to address, in an innovative way, the change that needs to happen to deliver care and ensure future health care outcomes. And then I would hold people to the fire. I really like the idea of transparency. We are dreadfully lacking transparency in medicine.

Dr. Dowd: In the past I would have said to enforce the antitrust laws, but I think it may be too late for that. What I would say now is that we have to redesign the system so we reward efficiency instead of penalizing it.

Ms. Quam: I do not think we can get where we need to go without intraoperability as it relates to patients going through the health care mega system. I think there is a disruptor coming. If you take a look at Apple Health, see where that might go, you do not have to worry about HIPAA. It is the patient who is clicking on “send this record” wherever the patient wants it to go. That is an open API, and that is coming. Medtronic has a product called Bind that shows pricing, hopefully quality too, again on your phone through an API. They are talking about it in Washington. Everybody knows what a mess Washington is, but if you pay attention to that, I think it will give you hope because it may allow the patient to begin directing his or her care again.

Dr. Jensen: Determining whether consolidation is good or bad is a dicey proposition. If we can demonstrate that consolidation is truly for patient ease, patient quality, and patient understanding and there is no adverse price impact on this—that it is not being done to add facility fees on to things—then I think it is justifiable. I do not think we can give up on enforcing patient protection laws. We have government agencies already in existence that have the ability to discern whether or not this a monopoly, fee splitting, or self-referral. In the early 2000s, Mike Hatch took aim at Allina and Medica and said, “Break it up.” Do we have any systems in place around here today that mirror what he broke up in the early 2000s? I do not think anybody in this room would have too much difficulty coming up with a few examples. If we are going to selectively enforce the laws and make special exemptions, we are just going to have more and more problems. 

 

The Panelists

Jane Barthell, MD, MSEd

is a neonatologist with more than 10 years of experience at Minnesota Neonatal Physicians, PA. Board-certified in neonatal and perinatal medicine by the American Board of Pediatrics, she received her MD from the University of Minnesota Medical School and completed a general pediatrics residency and neonatal fellowship at the University of Minnesota Medical Center.

Bryan Dowd, PhD

is a professor in the Division of Health Policy and Management, School of Public Health, at the University of Minnesota. His research interests include markets for health insurance and health care services and econometric methods. His current research includes analysis of tiered clinic cost-sharing and evaluations of Next Generation and Vermont ACOs for CMS.

Cindy Firkins Smith, MD,

practices dermatology in Willmar. As clinical professor at the University of Minnesota and president of the Minnesota Medical Association, she advocated for collaboration across specialties, systems, and geographies. As president/CEO of ACMC Health, she led the independent system’s integration with Rice Memorial Hospital and CentraCare Health.

Scott M. Jensen, MD,

is a senator (District 47) at the Minnesota Legislature, where he serves as vice chair of the Health and Human Services Finance and Policy Committee; a family physician at Catalyst Medical Clinic; and clinical associate professor at the University of Minnesota Medical School. He was named 2016 Minnesota Family Physician of the Year by the Minnesota Academy of Family Physicians.

Scott R. Ketover, MD, AGAF

is president and CEO at Minnesota Gastroenterology, where he holds a leadership role with the Board of Directors. He is also the founding president and CEO of the Digestive Health Physicians Association. A Diplomate of the National Board of Medical Examiners, he is board-certified in internal medicine and gastroenterology.

Liz Quam

is the executive director of the CDI Quality Institute, a nonprofit entity affiliated with the Center for Diagnostic Imaging (CDI). After serving as an assistant state health commissioner during the Clinton era, she founded a nonprofit devoted to finding health care coverage solutions for entrepreneurs and small businesses. She continues to serve a leadership role in health policy discussions.

Publisher’s note:

Timothy Hernandez, MD, left midway through the panel discussion to deliver a baby. Len Kaiser, also of Entira Family Clinics, replaced him.

Timothy Hernandez, MD

is a family physician who has spent his career at Entira Family Clinics in West St. Paul. He is an adjunct associate professor at the University of Minnesota as well as medical director at Entira Family Clinics. He has served and continues to serve on many boards and committees, including the MN Community Measurement Board.

Len Kaiser

is the chief administrative officer for Entira Family Clinics, an independent family medicine organization serving the East Metro. He is also executive director for Community Health Network, an Accountable Care Organization that is a partnership between HealthEast Care System, Entira Family Clinics, and independent specialty providers. Prior to joining Entira he worked at HealthEast Care System.

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