When Will Medicare Part E Transform Healthcare?

What is Medicare Part E?

Medicare Part E is care that improves patient outcomes, drives shared savings and is not reimbursed by Medicare or other health insurers.  Medicare and most health insurers reimburse providers for services or products in Medicare A, B, C, & D as follows:

  • Part A = Hospital, Skilled Nursing Facility, Hospice and Home Health Services
  • Part B = Physician and ambulatory services, durable medical equipment and mental health
  • Part C = Medicare Advantage Health Plans
  • Part D = Prescription drug coverage

Medicare Part E is addressing patient needs (clinical, social, behavioral, basic needs, coordinated care and care decision making) determined to be critical for patient recovery and to reduce unnecessary hospital readmissions and emergency room visits.  Without Medicare Part E, we end up with patients like Dr. Jeffrey Brenner found in Camden, NJ that visited the hospital 113 times in one year.  With Medicare Part E, St. Charles Medical Center in Bend, Oregon was able to save $1.6M in 6 months by addressing the needs of just 141 patients.  One of those patients was Jeremie Seals who reduced his hospital visits when they provided him boots, a pillow and a sub-zero sleeping bag (Power of Patient-Centric Care).  St. Charles Medical Center is part of the State of Oregon program initiated by Gov. Kitzhaber after complaining “Medicare will pay $50,000 to stabilize a 90 year old heart failure patient, yet will not pay $200 for a window air conditioner that would keep her home”.

Our physicians and hospitals are providing some amazing care, yet they are not reimbursed nor equipped to address the care patients need outside their four walls (Medicare Part E).  For most of the population, a healthcare system that reimburses for only Medicare Part A-D may be frustrating and dangerous at times.  For 5% of the population that use 50% of all health care spending, they may require Medicare Part E to address social, behavioral and basic needs before they can recover from their clinical conditions.

How is Medicare introducing Medicare Part E today?  Carrots, Sticks and Flashlights

Carrots (Shared Savings) – Medicare (CMS) is offering “shared savings” in the form of Accountable Care Organizations, Bundled Payments and Medicaid waiver programs that enabled Governor Kitzhaber to establish Oregon’s Coordinated Care Organizations (CCOs). Participating organizations share some of the savings generated by lower cost of care that Medicare Part E interventions help to generate. While many ACOs have yet to generate significant shared savings, organizations that use many Medicare Part E interventions have done well. Montefiore’s ACO was able to get a gain share check of $14M from Medicare in their first year.

Sticks (Penalties) – Medicare penalizes hospitals with high readmission rates (up to 3% beginning October 2014) within 30 days of discharge and with the Value-Based Purchasing program (up to 1.5% beginning October 2014). The VBP program includes measures such as mortality rate and Medicare Spending Per Beneficiary within thirty days after the patient leaves the hospital.  Again, hospitals are not equipped to monitor and coordinate care once the patient leaves the hospital.

Flashlights (Transparency) – Medicare is shining light on provider performance by sharing the new statistics it is collecting. This includes quality measures, clinical process measures, patient satisfaction, clinical outcomes, readmission rates and cost of care 1-3 days before, during and 1-30 days after a hospital visit.  It has released how much it spends on each hospital for each service and it will soon release how much it spends on each doctor.

When will Medicare Part E become part of the standard of care?

Prior to 1983, hospitals could bill separately for every aspirin, meal, patient day in hospital and other services provided.   In 1983, Medicare introduced a single per-case rate Diagnosis Related Group (DRG) prospective payment system.  This means hospitals receive the same payment based on a patient diagnosis no matter how many services they provide.

This single combined payment is expanding to Bundled Payments and ACOs. Bundled Payments will replace many separate payments with a single reimbursement baseline amount. The single combined amount will include the hospital stay, physician services and what Medicare would normally spend on beneficiaries within 90 days after leaving the hospital.  Medicare will likely introduce incentives (lower Part B premiums, co-payments, deductibles) to beneficiaries that agree to having an ACO manage their healthcare.  The proposed Medicare Essential would force providers to adopt the ACO model or risk losing their patients.

We have many Medicare Part A, B, C, and D interventions that are supported by extensive research and patient outcome studies. We know much less about the efficacy of Part E interventions. The emerging new reimbursement models will shift health care dollars away from traditional Part A-D interventions into Part E interventions. We will then learn which Medicare Part E interventions improve patient recovery and are cost-effective. This will provide insight into when Medicare Part E will transform our healthcare system.

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