Issue Brief

Health Reforms Cost Impact:

Can More be Done to Bend the Cost Curve? December 2010

The leading advocate for Northeast Ohio hospitals.

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All of these countries except the United States have a so-called universal healthcare system and yet they all have lower public expenditures per capita than the United States.

Health Reforms Cost Impact: Can More be Done to Bend the Cost Curve?
Cost is a tricky issue when it comes to healthcare. All nations, including the United States, struggle to balance issues of cost with access and quality when it comes to healthcare delivery. Though it would be ideal for a healthcare system to deliver low cost care in conjunction with unfettered access and high quality, this is simply not realistic. In other words, all nations must make compromises with cost, access and quality to achieve a healthcare system that balances these elements. That is not to say that this state of perfect balance is always achieved. In fact, every nation falls a little bit short, including the United States. Though theres no denying that the U.S. gets it right in a lot of ways, it simply cant be said that the U.S. has figured out the cost side of the equation yet. In 2006, the United States spent $2.1 trillion on healthcare, or 16 percent of its gross domestic product (GDP).1 Spending per person per year now exceeds $7,500.2 The level of U.S. healthcare spending is even more startling when compared to that of other wealthy nations. As of 2008, the United States spent $7,538 per person on healthcare. The next highest-spending countries, Norway, Switzerland and Canada, still have thousands of dollars per person to go before they reach the spending equivalent of the United States. Perhaps even more remarkable is that all of these countries except the United States have a so-called universal healthcare system and yet they all have lower public expenditures per capita than the United States (with the exception of Norway).3

Oftentimes the terms cost and spending are used interchangeably but there are important differences. The cost of a healthcare service typically denotes its price. Spending, on the other hand, is influenced not just by changes in cost, but also the type and amount of care being provided.

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The Center for Health Affairs

The leading advocate for Northeast Ohio hospitals.

These provisions are important not only because they will expand access to 32 million people but also because they are projected to make a significant fiscal impact.

Per Capita Spending in Select Countries, 2008

$8,000 $7,000 $4,627 $6,000 $5,000 $3,507 $4,000 $3,000 $2,000 $1,000 $0 U.S. Norway Switzerland Per capita Canada France Germany Public expenditure per capita United Kingdom $5,003 $7,538 $9,000

$4,213

$4,079

$3,696

$3,737

$2,875

$2,736

$2,863

$2,869

$3,129

Compiled from: Organisation for Economic Co-operation and Development, OECD Health Data 2010. http://www.oecd.org/document/16/0,3343,en_2649_34631_2085200_1_1_1_1,00.html

Earlier this year, as a result of the many challenges facing the U.S. healthcare system, including its high cost, Congress passed the Patient Protection and Affordable Care Act (ACA). In an attempt to bring more balance to the cost, access and quality of American healthcare delivery this legislation contains many provisions intended to bend the cost curve. This issue brief considers some of those provisions and asks the question: Does health reform go far enough to reduce healthcare costs and if not, what else could be done?

The ACA and Cost: What is the Impact?

The ACA contains close to 165 provisions that affect the Medicare program through cost reduction, increased revenues, improved benefits, additional fraud and abuse safeguards, development of new provider payment mechanisms, and other changes intended to improve quality or reduce costs.4 These provisions are important not only because they will expand access to 32 million people but also because they are projected to make a significant fiscal impact. One indicator of the fiscal health of our nations healthcare delivery is the state of the Medicare Hospital Insurance (HI) trust fund, or the money set aside to pay for specific Medicare beneficiary services such as hospital inpatient care, skilled nursing care, home health care and hospice. Every year the Medicare Board of Trustees provides a report to Congress that details the financial and actuarial status of the HI trust fund. According to the 2010 report, the health reform provisions enacted through the Affordable Care Act substantially improved the state of the Medicare Trust Fund. Under prior law, the HI trust fund assets were projected to be exhausted by 2017; however, the provisions of the ACA have extended the life of the fund until 2029.5

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$2,585

The Congressional Budget Office projects that the ACA will create a net reduction of $143 billion in the federal deficit between 2010 and 2019.

In addition to extending the solvency of the Medicare trust fund, the ACA is also expected to have a positive impact on the federal deficit. The Congressional Budget Office (CBO), the organization that estimates the cost of virtually every bill considered by Congress, projects that the ACA will create a net reduction of $143 billion in the federal deficit between 2010 and 2019. In the following decade, the CBO estimates that cost savings from the ACA will result in reductions in the federal deficit of one-quarter to one-half of one percent.6 Clearly, the cost-savings impact of the ACA is significant but just how are these savings achieved? While there are numerous measures that contribute to the savings, most of them come from reduced payments to providers. For instance, hospitals update factor, or the amount by which Medicare reimbursement increases each year, is reduced, as are payments to Medicare Advantage plans.7 Other savings accrue from reduction of fraud and abuse and healthcare delivery reform.8 Despite these cost-savings measures, many argue that the legislation does not go far enough. Healthcare spending as a percentage of the gross domestic product (GDP) is expected to continue growing and will account for 19.6 percent of the total market value of all goods and services produced in the U.S. by 2019.9 It is also important to remember that the CBOs estimates are merely projections and not indisputable fact. Further, since the CBO is charged with estimating legislation as written, without consideration of the political environment or potential future changes to the legislation, some people argue that the CBOs estimates do not offer a realistic projection.

At the request of Congressman Paul Ryan, the CBO provided an additional analysis of the Affordable Care Act, which considered the impact on the federal deficit should certain politically vulnerable aspects of the legislation be modified down the road. This analysis did not show a reduction in the federal deficit in the decade beyond 2019 as the initial analysis did and, in fact, showed that the federal deficit would increase by around one-quarter percent of GDP.10

Additional Opportunities for Bending the Cost Curve

To be sure, the ACA takes some significant steps toward reining in healthcare costs; however, there is still more that can be accomplished. Without additional steps, healthcare costs are likely to consume an increasing portion of the nations gross domestic product and may compromise the ability of our healthcare system to provide high-quality care. In a system that spends $2.5 trillion on healthcare each year, it stands to reason that there are ample opportunities to bend the cost curve even post health reform. And its true. There are literally hundreds of ways our healthcare system could spend less money and rein in costs. In order to truly appreciate the many possible cost-curve bending strategies, it is helpful to think about them in terms of the cost-access-quality triangle. This concept considers the interrelated nature of cost, access and quality and how they interact with one another to impact the delivery of healthcare. For instance, reducing spending is an obvious way to reign in cost, and likely the first that comes to mind; however, barriers to access may drive up the cost of care. As a result, strategies that ensure adequate access to care may actually also help control cost. Likewise, poor quality care can lead to poor outQUALITY comes, which in turn leads to the need for costly care

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Issue Brief

The Center for Health Affairs

The leading advocate for Northeast Ohio hospitals.

Providers must navigate a system in which there are multiple payers, each with their own set of rules and requirements.

down the road that might have otherwise been avoided. As such, strategies that promote high-quality care also have the potential to mitigate cost growth. It follows then, that the best way to control cost is to find the best way to balance the elements of the healthcare triangle. Needless to say, a full analysis of the hundreds of cost-controlling strategies that remain after enactment of health reform is outside the scope of this white paper. Instead, this publication examines one example from each side of the cost-accessquality triangle to evaluate the types of cost-saving opportunities that still remain.

Further Reducing Administrative Waste

Cost
The administrative process associated with healthcare delivery in the United States is extremely complex. Payment for services is not paid or only partially paid by the person receiving services. Providers must navigate a system in which there are multiple payers, each with their own set of rules and requirements. Health plans are complex themselves, requiring administrative support for underwriting, claims processing and negotiations with providers. It should come as no surprise that administration of this complex system comes with a high price tag. Some experts argue that unnecessary administrative expenses account for 15 percent of medical spending.11 In fact, some even argue that administrative simplification could yield annual savings of up to $300 billion.12

Administrative Waste: the Role of the ACA

Several provisions within the Affordable Care Act will help to address some of the excess costs associated with administrative waste. State-based insurance exchanges, which will begin in 2014, are one way the ACA will reduce administrative waste, but to understand how, you must first understand the current system. In the past, people who attempted to buy insurance in the individual market ended up paying a high price for the administrative portion of their health plan. Unlike large employers who can purchase group policies for a large number of people and spread risk across the group, individuals buy policies one at a time. Not only does that eliminate the ability to spread risk, it also means that the proportion of paperwork and marketing and other administrative expenses per individual policy is much greater. In addition, because there is no way to spread risk when selling individual policies, insurance companies tend to spend a great deal of administrative time and effort qualifying these individuals for policies in a process known as underwriting.

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From 2014 through 2019, these savings may be even higher up to $7.2 billion

State-based exchanges created as part of the Affordable Care Act will provide a lever for spreading risk across a group. In addition, the ACA created new rules for health insurance plans that will also serve to reduce administrative costs such as one which requires insurance exchanges to offer coverage at a uniform rate to all applicants, regardless health status. This rule will eliminate the need for insurers to engage in the burdensome practice of underwriting. The $1.3 billion in annual savings expected from these measures are substantial and stand to make a real difference in annual healthcare spending. From 2014 through 2019, these savings may be even higher up to $7.2 billion as the 5 million individuals who currently have insurance from the individual market move to the more efficient state-based exchanges.13 In addition to the reduced administrative costs that are expected to arise from state-based insurance exchanges, the Affordable Care Act also contained new rules for the insurance industry specifically aimed at reducing the administrative complexity that results in excess healthcare costs. These rules are outlined in the table below.

The ACA Requires Health Insurers to Simplify Rule Takes Effect by Adopting a Single Set of Operating Rules for:
Eligibility Verification Claims Status Electronic Funds Transfers Healthcare Payments and Remittance Healthcare Claims or Equivalent Encounter Information Enrollment or Disenrollment in Health Plan Health Plan Premium Payments Referral Certification and Authorization January 1, 2011 January 1, 2011 January 1, 2014 January 1, 2014 January 1, 2016 January 1, 2016 January 1, 2016 January 1, 2016

Source: Kaiser Family Foundation, Focus on Health Reform: Summary of New Health Reform Law, http://www.kff.org/healthreform/upload/8061.pdf (accessed November 1, 2010).

Finally, to ensure that insurance dollars are being spent on healthcare and not on excessive insurance administration, the ACA included a provision requiring health plans to report the proportion of premium dollars being spent on clinical services, quality and other healthcare related costs. The proportion of premium dollars spent on healthcare-related services as opposed to administrative costs is known as the medical loss ratio a number that many experts believe has been much too low in the past. The ACA attempted to put an end to these types of concerns by requiring insurers to report their medical loss ratio to the Department of Health and Human Services each year. Plans that report a medical loss ratio of less than 85 percent in the large group market or less than 80 percent in the small group market, must distribute refunds to enrollees.14

Issue Brief

The Center for Health Affairs

The leading advocate for Northeast Ohio hospitals.

The role that primary care plays in the provision of quality care is undeniable; however, its significant impact on cost containment is sometimes overlooked.

Administrative Waste: What More Could Still Be Done?

Despite these significant improvements, the $1.3 billion in projected yearly savings resulting from state-based exchanges is a far cry from the estimated $300 billion that some believe could be trimmed. One reason is that even in light of the administrative simplification ushered in by health reform, the system is still tremendously complex. Employers offer benefit programs with a wide variety of nonstandard, sometimes complicated, plans including formularies and cost-sharing arrangements. Patients often visit a number of different providers for a single episode of care, leaving payers with the tedious task of parsing out which provider is paid how much. Payers negotiate different rates for the same service among a group of providers while providers negotiate different rates for the same service among payers.15 Considering even these few examples leaves no doubt that the complexity of the system itself is still contributing to high administrative costs. Clearly, opportunities to reduce administrative waste in healthcare delivery still exist. A continued effort to standardize payment systems across payers is one way to maximize the administrative cost savings, as is simplifying administrative coordination among providers by reducing regulatory hurdles. Encouraging payers to communicate administrative best practices to providers could also contribute to improved administrative efficiency.16 These kinds of changes are important because over time, the gains that accrue from improved administrative efficiency could add up to significant savings and ultimately impact how much of our healthcare dollars are actually spent on healthcare.

Increasing Access to Primary Care

Access
Primary care is the foundation upon which healthcare delivery is built. It represents the first contact for care, provides continuity of care over time, considers the patient as a whole and coordinates care among various elements of the healthcare system.17 The role that primary care plays in the provision of quality care is undeniable; however, its significant impact on cost containment is sometimes overlooked. There are a number of reasons for the correlation between primary care and lower costs. First, primary care is simply less expensive than other healthcare alternatives. Hospitalization and treatment in the emergency department are expensive ways to deliver routine healthcare and yet, all too often these are the venues where care is sought. A recent retrospective review of emergency room cases revealed as many as 50 percent of all visits could have been avoided if care had been received in another setting.19 In addition, routine visits to a primary care physician (PCP) may actually help patients remain healthy; preventing an expensive hospital stay they would have otherwise needed. Specialists another healthcare alternative also tend to be more expensive than primary care physicians. Whats more, visits to specialists can sometimes lead to unnecessary and costly tests and procedures that might have been avoided altogether in the PCPs office.

Overall, countries with more physicians that practice primary care have lower per capita health expenditures than those with more specialists.18

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As a result, by 2025 a shortage of between 35,000 and 44,000 primary care practitioners is expected.

There is considerable research to back up the notion that a strong primary care infrastructure plays an important role in overall healthcare cost reduction. One study that examined this phenomenon found that areas where the ratio of PCPs to patients was high experienced lower hospitalization rates for several diagnoses than areas where the ratio was low. Particularly striking was the impact of the PCP on the Medicare patient population. Areas with a shortage of PCPs saw hospitalization rates 80 percent higher than areas where an adequate number of PCPs practiced.20 Unfortunately, in the U.S., many of the advantages associated with a strong primary care system are not realized, partly because there is an insufficient number of primary care physicians to meet the need. For years, the primary care workforce has been in decline. The long hours and lower pay of primary care physicians have deterred many new graduates who understandably prefer the more favorable schedule and higher pay of specialty medicine from entering the field. In a 2007 survey, only 7 percent of fourth-year medical students planned a career in primary care. One result is that the adult primary care workforce is only expected to grow by between 2 and 7 percent from 2005 to 2025. At the same time, as the population grows and ages, the workload of adult primary care is estimated to increase by 29 percent. With health reform ushering 32 million more people into the ranks of the insured by 2014, pent-up demand for healthcare services is also likely to increase demand for primary care providers. As a result, by 2025 a shortage of between 35,000 and 44,000 primary care practitioners is expected.21

In 2000, 52 percent of doctors visits were to primary care physicians yet only 35 percent of U.S. physicians practiced primary care at the time. Compounding this situation is that fewer U.S. medical school graduates are choosing a career in primary care. From 1997 to 2005, the number of residents entering a family medicine residency dropped by half.22

Access to Primary Care: the Role of the ACA

Its potential for cost containment made strengthening primary care a key policy initiative of the ACA. Included within the legislation are several provisions which will bolster primary care throughout the United States. First, Medicaid reimbursement rates for primary care services provided by PCPs are set to increase to the higher rate paid for Medicare beneficiaries in 2013 and 2014. Primary care physicians who treat Medicare beneficiaries will receive a 10 percent bonus payment in 2011 through 2015.23 In addition to reimbursement increases for those practicing primary care, the ACA also authorized a number of initiatives to increase the primary care workforce including the creation of a multistakeholder Workforce Advisory Committee to develop a plan for national workforce issues. The law also addressed unused Graduate Medical Education (GME) training positions by redistributing open slots, which in the past had typically just gone unfilled. Under this provision, priority is given to primary care and general surgery and to states with the lowest physician-to-population ratio. In addition, the ACA relaxed regulations to allow GME funding to promote training in outpatient settings. Additional grants and funding for education of the primary care workforce was another key strategy of the health

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The Center for Health Affairs

The leading advocate for Northeast Ohio hospitals.
Ohio is one of the states that puts restrictions on APN scope of practice. While APNs are permitted to prescribe certain medications, there are restrictions. In Ohio, Schedule II drugs, or those that have a high potential for abuse such as fentanyl and oxycodone, can only be prescribed by an APN for a 24-hour supply for terminally ill patients after an initial prescription has been written by a physician. Thirty-three states currently have less restrictive regulations on APN prescriptive authority than Ohio.27
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In this case, it is not a question of whether the ACA went far enough but rather whether states will pick up the baton and finish the race.

reform law in this area. Support for the development of primary care models such as the medical home and team management of chronic disease authorized by the law are also expected to bolster primary care.24

Access to Primary Care: What More Could Still Be Done?

Promoting access to a strong primary care sector is a key piece of any strategy aimed at reigning in healthcare costs. Yet, even with ACA policies intended to strengthen this sector, questions about whether these efforts will go far enough, still remain. The most critical and obvious next step in shoring up primary care in the U.S. is increasing the number of primary care physicians. Redistributing GME slots and providing reimbursement incentives are good first steps but if there are simply not enough primary care physicians being trained, no amount of shuffling is going to solve the problem. Ensuring adequate access to primary care (as well as the cost savings that go with it) can only be accomplished by ensuring an adequate supply of PCPs. Ensuring an adequate supply of PCPs, in turn, can only be accomplished by training additional physicians. Despite this rather obvious first step, Congress did not include any provisions in the ACA to increase the number of medical residencies, the three-year training period in a hospital or clinic required of new medical graduates. Instead, funding for medical residencies remained the same, severely limiting the ability of hospitals and clinics to pay for additional training slots.25 This is clearly an area where the ACA could have done more to address cost. Advanced practice nurses (APNs) registered nurses (RNs) who have received a Masters or Doctoral degree and provide advanced clinical care offer an alternative strategy for addressing the shortage of primary care providers. These highly trained care providers can provide primary care services and expand the number of providers available to meet the growing demand; however, the scope of care they are legally allowed to provide varies from state to state. In some states, for instance, APNs are prohibited from prescribing controlled substances while in others there are no restrictions on prescriptive authority. In some states physician supervision is required while in others this is not the case. Other states fall somewhere in between.26 Expanding APN scope of practice would enable these competent medical professionals to play an even more important role in healthcare delivery and could go a long way toward mitigating the primary care workforce shortage; however, scope of practice issues, such as prescriptive authority, are governed not by the federal government or the ACA but by state boards of nursing. As a result, any effort to shore up the primary care workforce by expanding APN scope of practice would need to be made at the state level through the legislature. In other words, while expanding the scope of practice may very well contribute to efforts intended to mitigate the primary care workforce shortage, thereby further reducing healthcares cost curve, it was not within the scope of the ACA to do so. In this case, it is not a question of whether the ACA went far enough but rather whether states will pick up the baton and finish the race.

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Each year, the U.S. spends $30 billion treating these infections, which could have been avoided altogether with the right interventions including diligent hand hygiene.

Enhancing Quality
Quality
Few would disagree that there is inherent value in delivering healthcare of the highest possible quality. Defined by the Institute of Medicine as, the degree to which health services for individuals and populations increase the likelihood of desired health outcomes and are consistent with current professional knowledge,29 high-quality healthcare is the standard to which American healthcare providers aspire. To be sure, the value of quality for qualitys sake is an easy concept to understand; however, the value of enhancing quality because of its capacity to drive down costs is also undeniable. The nations healthcare system is renowned for its many achievements. It is known for its technological innovation and cutting-edge medical care. Patients travel from across the globe to the United States in order to receive care from some of the most skilled and highly trained medical practitioners in the world. Yet, there is also a growing awareness that in many ways, the nations healthcare system has fallen short of consistently providing care of the highest quality. The system itself, in many ways, is not set up to promote quality, which has led to unfortunate, unintended quality consequences. Some areas that may benefit from quality improvement initiatives include those related to adverse events and medical errors, unnecessary care that has little or no value for patients, and processes that lead to the need for future care that may have otherwise been avoided. All of these quality shortcomings are troubling not only for what they imply in terms of patient outcomes but also because they result in increased spending and higher costs. Preventable hospital-acquired infections are only one type of quality concern and yet they provide a salient example of the interplay of cost and quality. Each year, the U.S. spends $30 billion treating these infections, which could have been avoided altogether with the right interventions including diligent hand hygiene.30 Considering that avoiding hospital-acquired infections is only one small piece of the quality puzzle, it stands to reason that improving quality is a pivotal strategy to reducing cost.

To ease these restrictions, in the most recent legislative session the Ohio House of Representatives passed House Bill 206, a bill that would allow APNs to prescribe Schedule II drugs. The bill moved to the Senate and was assigned to the Health, Human Services and Aging Committee but has not advanced since May 2010.28 If it is not passed by the end of the year, it will die in committee at the end of 2010 and have to be reintroduced during the next legislative session.

Enhancing Quality: The Role of the ACA

With the value of quality improvement efforts clear, it is not surprising that they are a major component of the ACA. Though there are numerous quality initiatives included in the law, perhaps some of the most important are those that use reimbursement as a lever to impact quality. For instance, starting in 2012, reimbursement rates for hospitals that have a high rate of readmissions for certain conditions will see reduced Medicare reimbursement rates a first step in reducing the $15 billion spent each year on readmissions.31 The maximum reduction in payment in 2013 will be 1 percent, but will grow to 2 percent in 2014 and to 3 percent in 2015 and beyond.32

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The Center for Health Affairs

The leading advocate for Northeast Ohio hospitals.

Another reimbursement lever is the value-based purchasing initiative, which transitions the current CMS pay-for-reporting initiative to a pay-for-performance initiative. As it stands, hospitals that do not report on certain quality measures see a reduction in their overall reimbursement rates through the pay-for-reporting initiative. Value-based purchasing, which begins in 2013, goes one step further and reduces payments to hospitals that have certain less-than-ideal outcome measures. Conversely, hospitals that meet performance benchmarks will receive add-on payments, thereby incentivizing high-quality care while penalizing low-quality care.33 At the same time, another reimbursement reduction was put in place to reduce the number of certain common, high-cost hospital-acquired conditions. Specifically, hospitals with rates of these conditions in the top 25th percentile will see a 1 percent reduction of total payments beginning in 2015.34 With these reductions hospitals have a strong financial incentive to improve quality in order to avoid hospital-acquired conditions. Both of these payment reductions are expected to improve quality while at the same time avoiding the high costs associated with the additional treatment that might be needed in their absence.

Ten Categories of Hospital-Acquired Conditions

1. Foreign Object Retained After Surgery 2. Air Embolism 3. Blood Incompatibility 4. Stage III and IV Pressure Ulcers 5. Falls and Trauma 6. Manifestations of Poor Glycemic Control 7. Catheter-Associated Urinary Tract Infection 8. Vascular Catheter-Associated Infection 9. Surgical Site Infection 10. Deep Vein Thrombosis/ Pulmonary Embolism
Source: Centers for Medicare and Medicaid Services, Hospital-Acquired Conditions, https://www.cms.gov/HospitalAcqCond/06_Hospital-Acquired_Conditions.asp (accessed November 24, 2010).

Although both of the reimbursement changes mentioned above will have a notable impact on cost and quality, the authors of the ACA realized that these two steps were just a beginning. To ensure that Medicare and Medicaid payment strategies continued to evolve so as to support reduced cost and improved quality, the ACA established the Innovation Center within the Centers for Medicare and Medicaid Services. That means additional payment reforms could still be yet to come.35 In addition to these quality-focused payment reforms, the ACA also included support for comparative effectiveness research (CER) in its establishment of the nonprofit Patient-Centered Outcomes Research Institute. This organization is charged with identifying research priorities and conducting research to compare the clinical effectiveness of medical treatments.36 Even before the ACA established this

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A majority of the responsibility for quality improvement rests on their shoulders; however, this equation leaves out one very crucial component of the equation: the patient.

organization, work on comparative effectiveness was already underway as a result of provisions within the American Reinvestment and Recovery Act, which allocated $1.1 billion to pursue better evidence regarding health interventions.37 These efforts are important because understanding which medical interventions are the most effective will improve the quality of care providers are able to offer their patients. This portion of the legislation is likely to reduce the cost of care simply because patients that receive the most effective treatment will have better outcomes and need less costly care down the road.

Enhancing Quality: What More Could Still Be Done?

Prioritizing high-quality healthcare delivery as a part of the health reform legislation makes sense. The value of higher quality care in and of itself needs no further explanation; however, higher quality care can also lower costs a benefit that is sometimes underappreciated. Considering this potential, it is natural to question whether health reform goes far enough toward achieving the highest possible quality in care delivery. While the ACA does make significant strides toward promoting high-quality care, still more could be done. One method of multiplying the impact of quality improvement initiatives involves expanding the traditional understanding of who is responsible for care delivery. Of course, healthcare providers play a central role in healthcare delivery for their patients, and as a result, a majority of the responsibility for quality improvement rests on their shoulders; however, this equation leaves out one very crucial component of the equation: the patient. Though there are seemingly countless initiatives aimed at improving quality by aligning incentives and payment penalties for caregivers, patients themselves have remained largely uninvolved in this movement. Under health reform, patients will most likely seek care in the same way that they always have and while they may receive the highest caliber care during their hospital stay, they can still return home to fall into the same poor health habits (e.g. smoking, poor diet, low medication adherence) that led them to the hospital in the first place. Initiatives that provide ample education and support for patients who want to change these behaviors could change this pattern and ultimately contribute to quality-related cost savings. Comparative effectiveness research, though addressed to some degree in the legislation as mentioned above, is another avenue to pursue in quality-related attempts to bend the cost curve. The newly created Patient-Centered Outcomes Research Institute is charged with identifying research priorities and conducting research that compares the clinical effectiveness of medical treatments. This is a good first step; however, the legislation explicitly states that comparative effectiveness research may not be construed as mandates, guidelines or recommendations for payment, coverage, or treatment or used to deny coverage.39 This language is paradoxical at the same time rational and counterintuitive. Even though it is expressly prohibited, one would think that the main purpose of CER would be to create guidelines and recommendations for treatment. After all,
One large employer became frustrated with the high cost of treating employees with diabetes that did not adhere to their prescribed medications. To encourage better adherence, the employer adjusted the design of its insurance plan such that all drugs for treating diabetes, asthma and hypertension were moved to the same tier as generic medication, making them less expensive, and therefore, easier to maintain.
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The leading advocate for Northeast Ohio hospitals.

In other words, opportunity still exists for researchers to conduct comparative effectiveness studies that include cost-effectiveness analysis.

After three years the number of diabetes-related ER visits had decreased by 28 percent and the number of asthma readmissions had decreased by 62 percent. Extrapolating these results to the rest of the Unites States suggest that programs that support the patients role in medication adherence can result in annual savings of $29 million for diabetes ER visits and $404 million in asthma hospital readmissions.38

the intent of CER is to uncover the best, most effective treatments, or the ones that allow providers to offer the highest quality medical alternatives. It follows then, that policies that encourage the use of scientifically validated medical interventions would not only improve quality but would also ultimately save money. Intuitively, one would think that policymakers would encourage providers to adopt the more effective medical treatments found through CER using policy that aligns payment with higher quality care. In this way, it seems counterintuitive that health reform explicitly prohibits CER from being used as a means of determining which treatments should serve as guidelines for payment or treatment. The intent of this language; however, is not meant to deter caretakers from adopting the most effective treatment regimens for their patients. It is, instead, recognition that scientific research rarely holds a definitive answer. While one study may show that a certain treatment is more effective than another, there is often a competing study suggesting the opposite. Or, the initial study may find that one treatment is better than another but only marginally so. The truth is that while one treatment may work best in general, as determined by CER, some patients may not tolerate the preferred treatment well. Making treatment decisions or payment decisions solely on the basis of clinical research results means limiting providers flexibility in best meeting the needs of their patients. For some, the concerns about linking cost effectiveness to CER even go beyond limiting a caretakers treatment options. During the healthcare debate that preceded passage of the ACA, intense opposition arose to using cost as a part of comparative effectiveness research for several reasons. Some argued that research findings could be used to ration care, or selectively provide a limited variety of care to a select patient population. Others believed that allowing research findings to guide clinical practice would equate to the government dictating patient care. The charged political environment that ensued made it too difficult to include cost in the comparative effectiveness equation and in the end, the exclusion of cost was explicitly spelled out.40 That said these restrictions were not placed on all research, just that funded through the Patient-Centered Outcomes Research Institute. In other words, opportunity still exists for researchers to conduct comparative effectiveness studies that include cost-effectiveness analysis. From a cost-savings standpoint, it would be ideal if policy could encourage CER research findings to be used as guides to the most effective and cost-effective care. Though it may not be something that can be realistically pursued in the policy arena today, including cost-effectiveness analysis as a part of CER does hold some potential for bending the cost curve. Since the types of treatments that researchers will study and the results of that research are unknown, its hard to estimate the total cost impact CER may have. It is generally accepted, however, that with the right incentives for the highest value care, savings could be significant.41

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The ACA, while most assuredly a landmark piece of legislation, must be considered only a beginning.

Conclusion
There is no arguing that the Affordable Care Act calls for vast changes in the way the United States delivers healthcare. Provisions impacting every aspect of care are included in the legislation. In fact, its arguable that the changes brought about by the ACA are so vast that a true understanding of the new healthcare landscape will be years in the making. Though there were many reasons the 111th Congress undertook health reform, one of the most important was to address soaring healthcare costs. Toward that end, the Affordable Care Act contains more than 150 provisions aimed at lowering healthcare costs or reducing spending. The impact of these policy changes are estimated to be substantial, extending the solvency of the Medicare Hospital Insurance Trust Fund by 12 years and reducing the federal deficit by $143 billion from 2010 to 2019.42,43 Yet, even with these changes, additional work remains. As comprehensive a law as the ACA is, no one piece of legislation can address every potential cost-saving measure. Clearly, a country that is projected to spend nearly 20 percent of its gross domestic product on healthcare by 2019 (even after health reform)44 still has ample opportunities for bending the cost curve. Some of those opportunities take the form of simply spending less money while others are related to increased access and higher quality. Though the U.S. healthcare system is in the process of better balancing the three sides of the costaccess-quality triangle under the ACA, achieving a system that affords equal access and high-quality care without burdensome costs will still require concerted effort. The ACA, while most assuredly a landmark piece of legislation, must be considered only a beginning. Otherwise, the growing cost of healthcare is likely to further distort the healthcare triangle, threatening the success of the American healthcare system.

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The leading advocate for Northeast Ohio hospitals.

Suggestions for Stakeholders

Continued efforts to slow the growth of costs in healthcare are crucial. Many of the provisions within the ACA were directed toward cost control. While these measures are certainly a good start, included below are some opportunities to further the goal of cost reduction. Support efforts to increase administrative efficiency in healthcare such as encouraging payers to work together to achieve more standardized payment systems across payers. Urge policymakers to do more to increase the number of primary care physicians such as allocating additional money for graduate medical education. Ask your state of Ohio representative or senator to bolster Ohios primary care workforce by reintroducing legislation to remove restrictions on Advanced Practice Nurse prescriptive authority.

Include patients as part of the quality equation. Patients who have the right educational resources and support for managing their health after a hospitalization will be more active participants in their care, leading to better outcomes and reduced spending on follow-up care. Understand that exclusion of cost-effective analysis in comparative effectiveness research through the Patient-Centered Outcomes Research Institute does not negate the value of these types of studies. Studies that evaluate not just the effectiveness of care but its value can add to our knowledge about which treatment to choose when all else is equal.

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The Center for Health Affairs is the leading advocate for Northeast Ohio hospitals, serving those organizations and others through a variety of advocacy and business management services. The Center also works to inform the public about issues that affect the delivery of healthcare. Formed by a visionary group of hospital leaders 94 years ago, The Center continues to operate on the principle that by working together hospitals can ensure the availability and accessibility of healthcare services. For more on The Center and to download additional copies of this brief, go to www.chanet.org.

Acknowledgements
This issue brief was written by Deanna Moore, Manager, Public Policy Development, and Michele Egan Fancher, Vice President, Corporate Communications. Bill Ryan, President and CEO provided invaluable insight and comments. Special thanks are also extended to the staff of The Center for Health Affairs: Julie Cox, Administrator, Marketing; Jordana Revella, Director, Marketing; Earnest Law, Assistant Manager, Facilities; Chris Nortz, Director, Facilities; and Bernie Paschal, Receptionist.

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The Center for Health Affairs

The leading advocate for Northeast Ohio hospitals.

Endnotes
1. Paul B. Ginsburg, High and Rising Health Care Costs: Demystifying U.S. Health Care Spending, Robert Wood Johnson Foundation, Research Synthesis Report No. 16, October 2008 http://www. rwjf.org/files/research/101508.policysynthesis.costdrivers.rpt.pdf (accessed October 1, 2010). Organisation for Economic Co-operation and Development, OECD Health Data 2010 http://www. oecd.org/document/16/0,3343,en_2649_34631_2085200_1_1_1_1,00.html (accessed October 1, 2010). Ibid. 2010 Annual Report of the Boards of Trustees of the Federal Hospital Insurance and Federal Supplementary Medical Insurance Trust Funds, Letter of Transmittal, https://www.cms.gov/ ReportsTrustFunds/downloads/tr2010.pdf (accessed October 15, 2010). 2010 Annual Report of the Boards of Trustees of the Federal Hospital Insurance and Federal Supplementary Medical Insurance Trust Funds, Letter of Transmittal, https://www.cms.gov/ ReportsTrustFunds/downloads/tr2010.pdf (accessed October 15, 2010). U.S. Congressional Budget Office, letter to Nancy Pelosi regarding estimated budgetary impact of H.R. 3590 in conjunction with the Reconciliation Act (H.R. 4872), March 20 ,2010, http://www.cbo. gov/ftpdocs/113xx/doc11379/AmendReconProp.pdf (accessed October 14, 2010). David Cutler, How Health Care Reform Must Bend the Cost Curve, Health Affairs 29, no. 6 (2010): 1131-1135. Ibid. Andrea Sisko, et. al., National Health Spending Projections: The Estimated Impact of Reform Through 2019, Health Affairs 29, no. 10 (2010): 1-9.

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10. Congressional Budget Office, The Effects of Health Reform on the Federal Budget, Presentation to the World Health Care Congress, April 12, 2010, http://www.cbo.gov/ftpdocs/114xx/doc11439/ WHCC_Presentation-4-12-10.pdf. 11. David Cutler, How Health Care Reform Must Bend the Cost Curve, Health Affairs 29, no. 6 (2010): 1131-1135. 12. Thomson Reuters, Where Can $700 Billion in Waste Be Cut Annually from the U.S. Healthcare System? October 2009, http://www.ncrponline.org/PDFs/2009/Thomson_Reuters_White_Paper_ on_Healthcare_Waste.pdf. 13. Sonia Sekhar, Repealing Health Reform Would Mean Billions More in Administrative Costs, Center for American Progress, August 2010, www.americanprogress.org/issues/2010/08/admincosts. pdf. 14. The Kaiser Family Foundation, Focus on Health Reform: Summary of the New Health Reform Law, http://www.kff.org/healthreform/upload/8061.pdf (accessed October 5, 2010). 15. Thomson Reuters, A Path to Eliminating $3.6 Trillion in Wasteful Healthcare Spending, June 2010, http://img.en25.com/Web/ThomsonReuters/TR-8173%20Full%20Length%20PhaseII%20 WP_6_15_10.pdf. 16. Ibid. 17. Thomas Bodenheimer and Hoangmai H. Pham, Primary Care: Current Problems and Proposed Solutions, Health Affairs 29, no. 5 (2010): 799-805. 18. Martin-J. Sepulveda, Thomas Bodenheimer and Paul Grundy, Primary Care: Can it Solve Employers Health Care Dilemma? Health Affairs 27, no. 1 (2008): 151-158. 19. Thomson Reuters, A Path to Eliminating $3.6 Trillion in Wasteful Healthcare Spending, June 2010, http://img.en25.com/Web/ThomsonReuters/TR-8173%20Full%20Length%20PhaseII%20 WP_6_15_10.pdf. 20. Martin-J. Sepulveda, Thomas Bodenheimer and Paul Grundy, Primary Care: Can it Solve Employers Health Care Dilemma? Health Affairs 27, no. 1 (2008): 151-158. 21. Thomas Bodenheimer and Hoangmai H. Pham, Primary Care: Current Problems and Proposed Solutions, Health Affairs 29, no. 5 (2010): 799-805.

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22. Martin-J. Sepulveda, Thomas Bodenheimer and Paul Grundy, Primary Care: Can it Solve Employers Health Care Dilemma? Health Affairs 27, no. 1 (2008): 151-158. 23. The Kaiser Family Foundation, Focus on Health Reform: Summary of the New Health Reform Law, http://www.kff.org/healthreform/upload/8061.pdf (accessed October 5, 2010). 24. Ibid. 25. Suzanne Sataline and Shirley S. Wang, Medical Schools Cant Keep Up, The Wall Street Journal, April 12, 2010, http://online.wsj.com/article/SB10001424052702304506904575180331528424238. html. 26. Carla K. Johnson, The Associated Press, Facing Doctor Shortage, 28 States May Expand Nurses Role, USA Today, April 16, 2010, http://www.usatoday.com/news/health/2010-04-16-nursedoctors_N.htm. 27. Ohio Association of Advanced Practice Nursing, Examining House Bill 206, www.oaapn.org (accessed November 16, 2010). 28. Legislative Service Commission, HB 206, http://lsc.state.oh.us/coderev/hou128.nsf/House+Bill+Nu mber/0206?OpenDocument (accessed November 19, 2010). 29. Institute of Medicine, Crossing the Quality Chasm: A New Health System for the 21st Century, March 2001. 30. David Cutler, How Health Care Reform Must Bend the Cost Curve, Health Affairs 29, no. 6 (2010): 1131-1135. 31. HealthLeaders FACTFILE, Healthcare Reform: Readmissions http://www.healthleadersmedia. com/content/258722.pdf (accessed November 19, 2010). 32. Larry Goldberg and Larry Oday, An Update from Washington on Medicare & Affordable Health Care Act, Presentation Materials, October 6, 2010. 33. Ibid. 34. Ibid. 35. Kaiser Family Foundation, Focus on Health Reform: Summary of the New Health Reform Law, http://www.kff.org/healthreform/upload/8061.pdf (accessed October 5, 2010). 36. The Kaiser Family Foundation, Focus on Health Reform: Summary of the New Health Reform Law, http://www.kff.org/healthreform/upload/8061.pdf (accessed October 5, 2010). 37. Joshua S. Benner, et. al., An Evaluation of Recent Federal Spending on Comparative Effectiveness Research: Priorities, Gaps & Next Steps, Health Affairs 29, no. 10 (2010): 1768-1776. 38. Thomson Reuters, A Path to Eliminating $3.6 Trillion in Wasteful Healthcare Spending, June 2010, http://img.en25.com/Web/ThomsonReuters/TR-8173%20Full%20Length%20PhaseII%20 WP_6_15_10.pdf. 39. The Kaiser Family Foundation, Focus on Health Reform: Summary of the New Health Reform Law, http://www.kff.org/healthreform/upload/8061.pdf (accessed October 5, 2010). 40. Alan M. Garbar and Harold C. Sox, The Role of Costs in Comparative Effectiveness Research, Health Affairs 29, no. 10 (2010): 1805-1811. 41. Congressional Budget Office, Research on the Comparative Effectiveness of Medical Treatments, A CBO Paper, December 2007, http://www.cbo.gov/ftpdocs/88xx/doc8891/12-18ComparativeEffectiveness.pdf (accessed November 30, 2010.) 42. 2010 Annual Report of the Boards of Trustees of the Federal Hospital Insurance and Federal Supplementary Medical Insurance Trust Funds, Letter of Transmittal, https://www.cms.gov/ ReportsTrustFunds/downloads/tr2010.pdf (accessed October 15, 2010). 43. U.S. Congressional Budget Office, letter to Nancy Pelosi regarding estimated budgetary impact of H.R. 3590 in conjunction with the Reconciliation Act (H.R. 4872), March 20 ,2010, http://www.cbo. gov/ftpdocs/113xx/doc11379/AmendReconProp.pdf (accessed October 14, 2010). 44. Andrea Sisko, et. al., National Health Spending Projections: The Estimated Impact of Reform Through 2019, Health Affairs 29, no. 10 (2010): 1-9.

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The leading advocate for Northeast Ohio hospitals.

The Center for Health Affairs

2010 1226 Huron Road East Cleveland, Ohio 44115 216.696.6900 800.362.2628

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