T. Watson Jernigan, MD MA
Chairman and Professor
Department of Obstetrics and Gynecology
Associate Dean of Clinical Affairs

DO NOT have a financial interest/arrangement or affiliation with one or more organizations that could be perceived as a real or apparent conflict of interest in the context of the subject of this presentation.

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To describe the development of the present health care system
To demonstrate an understanding of the
Triple Aim in the ongoing Health Care
Reform
To understand the passage of the Patient
Protection and Affordable Care Act
To appreciate the impact of the ANEW
Accountable Care Organization on health care in the Tri Cities starting July 2012

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Prior to the creation of Johns Hopkins
University and subsequent medical school, the health care of American Citizens was unregulated by any governmental agency.
Following the Flexner Report of 1910, the regulation of graduate medical education commenced, but not the health care received by individual patients.
Though the AMA was established in 1840s, there was no oversight to physician-patient compensation until the creation of
Medicare/Medicaid.

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During the 1920s, there was no insurance available for costs of hospitalization
Most families financed hospital bills out of current income and past savings
In Dallas, Texas, Baylor University
Hospital administrator, Dr. Justin Ford
Kimball, thought something should be done

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Dr. Kimball decided to proceed with something new
He contracted with the Dallas Schoolteachers
Union for a prepayment plan for hospitalization costs
1,250 schoolteachers joined a prepayment plan of $.50/month
For this plan, they were entitled to receive 21 days of semiprivate room (including use of the OR and various ancillary tests including anesthesia)

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August 4, 1935, Social Security was signed but the bill did not include any health insurance
Originally, the bill had a provision for a
“Social Insurance Board” to authorize a study of health insurance
President Roosevelt indicated “that health insurance should not be injected into the debate at this point, nor should the final report on health be made public as long as the social security bill was still on legislative hill.”

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With the start of world conflict in 1939, the GNP of America rose from $91 billion to $211 billion
Unemployment for the nation dropped from 17.2% in 1939 to 1.2% in 1944
Personal income after taxes for American workers rose from $70 billion to $147 billion

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During the war years, the wages of laborers and prices for goods were frozen by the War Labor Board
To supplement the workers pay, employers began paying their health insurance premiums
On October 23, 1943, the IRS declared that employees would not be taxed on health care premiums paid on their behalf by their employers

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With the ruling, the IRS made the health care benefits tax free
The War Labor Board permitted management and labor to negotiate changes in employment benefits including prepaid health insurance
In essence, a dollar contributed to health insurance from employers reduced the employer’s federal income tax but did not increase the employee’s taxes

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In 1900, the life expectancy of an
American citizen was 47; by 1965, it was age 70
Total population was 197 million in USA; of which 19 million was now older than 65
108 million Americans had no insurance for drug costs (61.0%) and 24 million had no hospital insurance (13.3%)

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During the State of the Union Address in
1965, President Johnson informed the
American public that the anticipated cost of the first year of Medicare would be
$900 million
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The actual cost of the first year of
Medicare for covering 20 million
Americans was $4.5 BILLION in 1965 dollars

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HEALTH MAINTENANCE ORGANIZATION
(HMO) ACT OF 1973
HMO Act mandated employers with 25 or more employees to also offer a federally qualified HMO plan if they offered group health insurance to their staff.
Law provided governmental subsidies to
HMOs.

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Concept of HMOs was to provide quality services to patients at lower cost with an emphasis on PCP to direct and to manage the care of the patient (“Gatekeeper”)
During 1980s and 1990s, preventive care visits were not usually covered by employers’ standard health insurance plans.
Hospital side of care: Big emphasis on control of number of hospital days

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Alternatives to HMOs: Preferred Provider
Organization (PPO) and Point of Service
(POS)
PPO offers limited preventive care coverage and requires small copayments
BUT can see any MD they choose.
POS is a plan to offer managed care at a reasonable price with limited network benefits which providing some choices to patients.

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1983 United States Government introduced Prospective Payment Systems
(PPS) for Medicare hospitalizations.
PPS in essence was the establishment of
Diagnosis Related Groups (DRGs).
Concept of DRGs was that hospital was paid a flat rate for the specific DRG regardless of the actual costs provided.

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1989 Congress passed the Omnibus
Budget Reconciliation Act of 1989.
A portion of that act in 1992 Medicare introduced the Resource-Based Relative
Value Scale (RBRVUs).
Work RVUs have become the basis for physician productivity and thus physician compensation in some models.

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It was estimated that 45-46 million
American Citizens were without Health
Care and were either uninsured or underinsured
20% of American women of childbearing age (15-44) were uninsured
18% of the 95.3 American women age
18-64 were uninsured

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United States Health Care expenditures represented 17% of GDP (Gross Domestic
Product)
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Cost of Medicare alone was placed at
$500 billion and Medicaid was $361.8 billion (figures from 2010)

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U.S.A. ranked in the World Rankings:
◦ 31 st in overall life expectancy
◦ 28 th in male healthy life expectancy
◦ 29 th in female healthy life expectancy
◦ 36 th in infant mortality

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IMPROVING THE INDIVIDUAL
EXPERIENCE OF CARE
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IMPROVING THE HEALTH OF
POPULATIONS
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REDUCING THE PER CAPITA COSTS OF
CARE FOR POPULATIONS

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Hospital resources to be decreased going forward:
Change from Fee For Service to Pay For
Performance Reimbursement plan
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Aging Population
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Increased life span with Chronic Illness

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Standardized pharmacy formularies
Bulk Value Purchasing through cooperatives such as Premier
Collaborative Group
Standardization of evidence-based protocols especially for antibiotics
Electronic health records to facilitate electronic submission of bills
CPOE (Computerized Physician Order
Entry) with standardized protocols

For all your days prepare
And meet them ever alike:
When you are the anvil, bear—
When you are the hammer, strike.
Edwin Markham

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Health Care Exchanges mandated by the act which forces uninsured citizens to obtain health care insurance
Employer Health Care requirement extended to smaller businesses
Preexisting Conditions no longer allowed as exclusionary
Children under the age of 26 may remain on their parent’s health care insurance
Development of an organization to care for the health of the entire patient population

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Though passed in 2009 and signed into law in 2010, the PPACA does not take hold until January 1, 2014
No more pre-existing conditions
More patients will be eligible for
Medicaid….if state governments enact legislation to approve
“Working poor” will be eligible for subsidies to help pay for health insurance

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Small employers may or may not opt to continue health insurance benefit for their employees due to expense
State will have to create Health Care
Exchanges to create expansion of
Medicaid…these exchanges need to be up and running by 2013

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The PPACA outlines a new organization that will be held accountable for the health care of a population
The focus will be on not just the health of the single patient in the physician’s office but rather the entire population of the region
This organization can be made of a single physician group; multiple physician groups; or a hospital with multiple physician groups

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June 2010 Mountain States Health Alliance initiated meetings with medical staff to hear about changes in Health System Economics
In December 2010 they proceeded with another meeting entitled “Toward
Accountable Care”
During 2011 two developments: creation of
Mountain States-owned insurance corporation, Crestpoint which rolled out July
1 and initiation of discussions regarding an
ACO

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By end of 2011, Mountain States was ready to proceed with an ACO
There are ongoing discussions between Mountain
States and other entities (MEAC; HMG; and
SOFHA) concerning the details of the ACO
Mountain States submitted a request for establishment of an ACO…called ANEW
Accountable Care Organization for initiation 2012
They have also applied for MSSP with the CMS
(Center for Medicare and Medicaid Services) starting July 2012

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32 MILLION: Projected number of newly insured Americans
27 MILLION: Projected number of
Americans remaining uninsured
16 MILLION: Projected number of new
Medicaid Beneficiaries
$619 BILLION: Estimated 10-year cost for Medicaid Expansion

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3.1 MILLION: Number of young adults who have stayed on their parents’ health plan under the PPACA
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5.3 MILLION: Number of seniors and people with disabilities who have saved
$3.7 billion on prescription drugs

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105 MILLION: Number of American who no longer have a lifetime limit on their insurance coverage
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4 MILLION: Estimated number of
American who no longer will receive health insurance from their employers as a result of the law

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Fee-For-Service (FFS): The payment for services rendered. The structure encourages the use of more services, more procedures, and overall higher health care costs.
Medicare Shared Savings Program (MSSP):
The qualifying ACOs will be eligible for additional reimbursement as a result of a percentage of savings they realize through attainment of certain quality and savings threshold.

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Accountable Care Organization (ACO): An
ACO is a n integrated healthcare delivery system that contracts to provide a full continuum of services to a defined patient population with specific reimbursement
(financial) incentives established for meeting both quality and expense/cost targets.