Issues & Legislative Committee Report

May 12, 2006

JCAHO/Gainsharing Update

Gainsharing Agreements

In the Medical Device Manufacturers Association’s (MDMA) Hill Policy Paper, they request Congress to prohibit Device Contract Gainsharing which the MDMA states is an attempt to cut healthcare costs by offering financial incentives to doctors who reduce expenditures. The MDMA goes on to say that this type of arrangement may present grave concerns regarding quality of care if it provides doctors with a financial incentive that ultimately limits physician choice and modify’s patient treatment.

This appears to be a bit ironic that there are several device manufacturers currently under scrutiny for providing doctors with significant gifts and or payments that many say is an outright attempt to steer business to specific products.

Source: Medical Device Manufacturers Association

JCAHO

The Joint Commission issued a Sentinel Event Alert to more than 12,000 healthcare organizations that urges healthcare organizations to pay special attention to how tubes and catheters are connected to patients and challenges the manufacturers of these devices to redesign them in ways that will make dangerous misconnections much less possible. It appears that tubing and catheter misconnection errors occur frequently and may even lead to deadly consequences. This prompted the Joint Commission to issue a Sentinel Event Alert nationwide to create awareness of the problem and offer practical solutions to avoiding these occurrences.

Experience with the unannounced survey indicates that more than 1,371 organizations and more than 322 hospitals have been surveyed under the unannounced survey process in 2006. For hospital program surveys, the average number of Requirements for Improvement (RFIs) increased to 7.4 in 2006 compared with 5.8 in 2005. The Joint Commission recently hosted an audio conference in which representatives from three organizations spoke about their unannounced survey experience. All three indicated that the unannounced survey was better than they expected. Representatives indicated that fears of the unannounced survey or patient tracers being disruptive to providing care were unfounded and that the surveyors were flexible and unobtrusive.

Source: www.JCAHO.com

Disaster Preparedness Issue – Funding

Flu Pandemic

The Department of Homeland Security provides an extensive overview of the government’s National Strategy for Pandemic Influenza. It includes the full PDF document of the “U.S. Government Planning for a Pandemic.” This lengthy document emphasizes that local planning is key and that medical facilities need to coordinate with local planning agencies.

Source: www.ahanews.com, April 3, 2006.

Local Disaster Preparedness

In a recent article, Health and Human Services Secretary Mike Leavitt is quoted as saying: “Local preparedness is the foundation of pandemic readiness…any community, that fails to prepare with the expectation that the federal government will at the last moment be able to come to the rescue, will be tragically wrong.”The article also highlights preparation approaches that some hospitals have taken as part of a broader strategy for disaster preparedness.

eCommerce and Bar Coding

Continuing along the lines of online auctions, Centurion Service Group was recently reviewed by the Committee. The Centurion Service Group are pioneers of the medical equipment auction business and have experts in surplus consignment sales and hospital closures.

• They create General Asset Recover (GAR) in 1995 in response to the needs of the medical industry. GAR specializes in the consolidation and liquidation of medial equipment through warehouse consignments auctions.
• They acreate Inter and Intra Hospital IXP. This permits postings to locate and trade surplus, as well as trade and loan equipment between other facilities.
• They have a secure internet-based website and auction everything from capital medical equipment to gauze. Their most recent posting is due to the closing of Atec Hospital.  
• They conduct on site auctions as requested.  
• They currently contracted with 3 GPO's.

To start auto-receiving postings via email, visit www.centurionservice.com.

Quality, Medication Errors and Safety Issues

2006 National Patient Safety Goals - Required for Every JCAHO-
Accredited Hospital

Accuracy of Patient Identification: Correctly identify patient to avoid errors.

• Caregiver should always ask the patient: “What is your name & your date of birth” and compare with armband.
• If patient is unable to state their date of birth, check the medical record (MR) number.
• Two patient identifiers must be used, including name and birth date or name and MR number.

Effective Communication: Read back physician orders and eliminate using dangerous medical abbreviations which can cause errors.

• Read back physicians’ verbal or telephone orders to make sure they are correct.
• Read back critical lab results to be sure they are correct.
• SwedishAmerican Hospital posts a list of “DO NOT USE” abbreviations which can be found in Meditech & in the front of the medical record.
• Implement a standardized approach to “hand-off” communications, including an opportunity to ask and respond to questions.

Safety High Alert Medications: Eliminate potential medication errors to our patients.

• Label all medications, medication containers (syringes, medicine cups, basins), or other solutions on & off the sterile field in perioperative & procedural settings.

Reduce Risk of Healthcare-Acquired Infections: Prevent the spread of infection.

• Adhere to Center for Disease Control Handwashing Guidelines & use hand sanitizers, as appropriate.
• Promote “Cover your Cough” to minimize potential exposures.

Reconcile Medications: Insure our patients are on the correct medications at all times.

• Accurately and completely reconcile medications from admission
  to discharge.
• Communicate a complete list of patient’s medications to next provider
  of care.

Reduce Risk of Falls: Minimize patient falls.

• Assess and reassess the patient’s risk for falling & implement specific measures of prevention.

Consumer Driven Healthcare

BCBS of Massachusetts’ Pay-for-Performance Actions Sparks Debate

BCBS has earmarked $189 million for Pay-for-Performance incentives which equals 4% of last year’s reimbursements.Physicians who meet a “standard-of-care” are eligible for the incentive bonus. BCBS is considering linking provider’s annual reimbursement adjustment for inflation to provider’s performance.Issues include the following questions:

• Will incentives replace annual inflation adjustments?
• No national accepted standards for assessing healthcare quality?
• No common measure across health plans for providers to aim for?

Source: Advisory Board Daily Briefing, May 10, 2006.

The Factors Fueling Rising Healthcare Costs

Insurance premiums increased between 2004 and 2005 by 8.8% which is lower than the 13.7% increase which occurred in 2002.Of this increase, 27% was from inflation, 43% was from increased utilization, and 30% was for issues like broader access health plans, increased cost of labor and higher priced technology. The number of new state and federal mandates decreased during this period and was not a major contributor to the premium increases. In2002, a Juran Institute study said the cost of poor quality accounts for 30% of all direct spending as a result of overuse, misuse and waste.

Widespread adoption of multi-tiered pharmaceutical benefits and generic drugs has slowed the rate of increase in prescription drugs.Breakdown of a premium dollar:

• $0.86 directly towards paying for medical service.
• $0.05 other customer services like prevention and disease management.
• $0.06 government payment, regulation and administration.
• $0.03 health plan profits.

Between 1993 and 2003, health plan premiums have grown at an annual rate of 7.3%, while healthcare costs grew at a rate of 7.2%.

Source:Price Waterhouse Coopers, January 2, 2006.

White House Fact Sheet on Expanding HSAs

HSAs create a system where the consumer of the service is actually the purchaser of the service being consumed. HSAs have two components, low-cost catastrophic insurance and a tax-free savings plan. This combination lowers the total cost of health insurance for the employer and employee, therefore healthcare coverage is more affordable. An issue that needs to be addressed is how to make an employee’s HAS portable from one employer to another and one area of the country to another.

Source: United States White House at www.Healthdecision.org, May 4, 2006.

Monies in Health Savings Accounts Almost Double in First Months of 2006

HSA custodial deposits reached $2.1 billion at the end of March, 2006, up from $1.1 billion at the end of 2005. The number of custodial accounts at the end of March was 1.5 million, an increase of 400,000 from the end of 2005.

Source: PRWeb, www.Healthdecision.org, May 9, 2006.

Calculus of Care

There are two facts that seem to be in conflict with each other when it comes to calculus of care:

• There has been an increase in the number of workers eligible for employer sponsored health insurance.
• The number of employers declining employer sponsored health insurance has increased.

The issue is cost. Between 1998 and 2003 premiums for health insurance have risen 40.6%. This is just the raw cost and does not include the increases in deductibles and decreases benefit coverage.

Source: Andy Atwater, The Wichita Eagle, May 7, 2006.

Federal Pressure: Payer Actions Signal Advent of Price Transparency

The goal of the Bush administration is to use price transparency to inform consumers and reduce healthcare cost. Allan Hubbard, director of National Economic Council, is the president’s point person for healthcare and wants a nationwide price reporting system. Hubbard uses LASIK eye surgery as the example of how “informed consumers” can drive down healthcare costs. Critics of the administration’s price transparency policy say the process to gather the details is too simplistic for a highly regulated economic segment where the payer for services and the consumer of the services are two different people. Where states have legislation and where the consumer can obtain pricing information from a provider make up only a handful requested. The key to obtaining price transparency is when payers require transparency and are able to link transparency to reimbursement.

Source: Advisory Board Financial Watch, Vol. 7 No. 8, April 14, 2006.

Wal-Mart Relaxes Health Coverage Requirements for Part-time Workers

Wal-Mart is expanding enrollment eligibility for its part-times workers, a move that could add over 150,000 to their health plan.Employees become eligible to enroll after one year.Wal-Mart now pays a 19% increase to be able to film this product.

Source: Advisory Board Daily Briefing, April 18, 2006. 

What to do About the Cost of Healthcare?

The Wisconsin Health Plan is a bipartisan plan to provide health insurance to all state residents, stabilize cost, and use purchasing pools to lower prices. Twelve billion dollars is needed to finance the plan, and sources for the funding are unclear. One funding mechanize is a 12% increase in the state’s payroll tax and a 2% contribution from employees. Included in the plan are HSAs for all residents between 18 and 65 by seeding HSAs $500 per year. The Plan includes a cap on out-of pocket expenses and includes co-pays and deductibles. Other provisions in the Wisconsin Plan include tax-free health savings accounts, better transparency in healthcare cost, and incentives for healthcare providers and consumers to make cost-effective decisions. The Plan is a three-tier system with rules and incentives for companies to qualify at Tier 1, which means companies compete based upon rules and not set up a large bureaucracy.

Source: Dustin Block, Journal Times, May 6, 2006.

Radio Frequency Identification (RFID)

Benefits of RFID Spending in Healthcare

News articles are forecasting huge spending for RFID in healthcare. Most discuss the spending involved and largely focus on patient safety issues driving this increase. It is clear that there are many benefits coming from this. Just a few are listed below:

• Drug Anti-counterfeiting - Original manufacturer tagging drugs to insure authenticity.
• Real Time Locating Systems – Asset management.
• Error Prevention – Tagging blood products, drugs, etc.
• Privacy Issues – Patient ID access without hunting for armbands with visible confidential information.

Where these huge investment dollars will come from is not mentioned and sources of revenue to cover them are not as clear.

RFID in Healthcare 2006-2016

RFID is an enabling technology that saves lives, prevents errors, saves costs and increases security. It removes tedious procedures and provides patients with more freedom and dignity (i.e. it reduces the amount of personal intervention by staff because it automates procedures such as protecting the disoriented elderly from danger and matching patient to treatment). In addition, RFID is now used in smart packaging that records when patients take medication and how much they take and provides prompts to help them comply with instructions.

All of this information has recently been pulled together in a new report, “RFID in Healthcare 2006-2016” by IDTechEx. This report gives 72 case studies, extensive supplier profiles, technology analysis, and detailed ten-year forecasts. For complete information, go to http://www.idtechex.com/products/en/articles/00000470.asp.

Group Purchasing Organizations (GPOs)/Code of
Conduct Principles

Pre-trial Ruling in Favor of Guidant Sales Corporation

In a recent Minnesota Federal District Court Decision, a pre-trial ruling held in favor of Guidant Sales Corporation. In its ruling, the court interpreted the confidentiality terms in the Guidant contracts with hospitals as precluding hospitals from sharing their Guidant contract details with any “third party” without Guidant’s express, written permission. Guidant’s position is that their confidentiality clauses prohibit hospitals from sharing pricing information with all non-bona fide employees including accountants, attorneys, consultants, physicians and patients. Under Guidant’s rationale, even hospitals in the same system are also prohibited from sharing pricing information. 

Health Industry Group Purchasing Association (HIGPA) Chairman, Al LoBiondo, spoke out on the recent court decision. LoBiondo is concerned that Guidant may now claim the court’s ruling also sets the extent of control that a hospital has over the data residing in its own information systems and data bases.

Source: http://www.higpa.org/pressroom/2006/03-27-2006.asp

ECRI sues Guidant over Price Transparency: Nonprofit Agency Cites First Amendment Rights

Nonprofit ECRI, an independent medical products testing organization, has sued the Guidant Corporation, a manufacturer of cardiac rhythm devices, in Federal District Court in Pennsylvania. ECRI asserts First Amendment rights to publish comparisons of prices paid by hospitals for medical devices.

ECRI has asked the court to rule on whether ECRI is within its rights to reject Guidant’s claim that ECRI’s publication of prices paid by hospitals is forbidden. ECRI believes that there is a pressing national interest in allowing the healthcare community to engage in comparative shopping based on the safety, performance, and cost of medical products.

Keeping this information secret is not acceptable in other industries, and Guidant’s policy comes at a time when there is a growing belief that transparency in prices can make a strong contribution toward permitting patients, physicians, and hospitals to assess the value of the products and services they purchase. ECRI believes that if Guidant succeeds in enforcing its policy, other manufacturers will follow its lead, and that this strikes at the heart of efforts to hold down costs and ensure the safety and performance of medical products.

“No matter where you sit on the political spectrum,” said ECRI President and Chief Executive Officer Jeffrey C. Lerner, Ph.D., “you know that the ability to compare products, whether it is cars or lifesaving technologies, is fundamental to an efficient marketplace. In our opinion, Guidant’s actions would give far too much power to manufacturers.”

There is no reasonable rationale for limiting the ability of a competitive market to function in healthcare. Simply put, ECRI believes that patients, along with their implanting physicians, have the right to know the cost of the pacemakers that are implanted in their chests. ECRI obtains and publishes pricing data on single-use medical products, including disposables, implants, and consumables, from information provided voluntarily by hospitals. ECRI standardizes the vendor names and item descriptions and organizes the information in an online database. ECRI’s system, PriceGuide, has been in operation since 1996. The information in PriceGuide is used by member hospitals to benchmark supply costs.

Source: http://www.hpnonline.com/dailyupdates/May_06.html

Health Industry Group Purchasing Association ExpressesConcern over Court Decision

Health Industry Group Purchasing Association (HIGPA) Chairman, Al LoBiondo, spoke out today on the recent St. Paul Minnesota court decision that entered a pre-trial ruling in favor of Guidant Sales Corporation’s claim that Aspen Healthcare Metrics had tortuously interfered with Guidant’s contracts with its hospital clients. LoBiondo is concerned that Guidant may now claim the court’s ruling also sets the extent of control that a hospital has over the data residing in its own information systems and databases.

In its ruling, the court interpreted the confidentiality terms, standard in Guidant CRM contracts with its hospital customers, as precluding those hospitals from sharing their Guidant contracts with any “third party” without the company’s expressed, written permission. The court ruled that because Aspen was a contractor to the hospital it was a “third party” under Guidant’s confidentially terms, despite the provisions in Aspen’s contracts with the hospitals that expressly state Aspen is acting as the hospital’s agent.

In response to the ruling, LoBiondo said: “Any event or action which has the potential to disrupt the present system that helps lower the costs to hospitals and the American healthcare system must be taken seriously. HIGPA is currently gathering and analyzing information related to the lawsuit. If contract confidentiality is being used to hinder healthcare provider access to pricing information, it would have a negative impact on the American healthcare system. This decision unfortunately does just that.”

Guidant’s position appears to be that its contract confidentiality provisions prohibit hospitals from disclosing, in an otherwise legally acceptable format, the prices of the devices they buy to consultants and other service providers without their expressed permission. Furthermore, Guidant contends that their confidentiality clauses prohibit hospitals from sharing pricing information with independent contractor physicians who use the devices and the patients who receive them. In essence, meaning that hospitals in the same system would be prohibited from sharing pricing information.

LoBiondo went on to say, “The ultimate effect of the position that Guidant has taken is to isolate hospitals that agree to such confidentiality provisions from any information regarding fair pricing for devices that are currently available in the marketplace. And, unfortunately, that will hurt the American healthcare system and its patients.”

The Health Industry Group Purchasing Association (HIGPA) is a broad-based trade association that represents 31 purchasing organizations (Industry Members) and over 120 of their trading partners (Affiliate Members). HIGPA's group purchasing industry members include for-profit and not-for-profit corporations, purchasing groups, associations, multi-hospital systems and healthcare provider alliances. Trading partner members span the range of the supply system, including all types of manufacturers, as well as distributors, wholesalers, and organizations involved with e-commerce.

Source: http://www.higpa.org/pressroom/2006/03-27-2006.asp