NJ Spotlight

The Affordable Care Act: Prescription For Change In NJ Healthcare

Even if the Supreme Court votes down the ACA, the law has already profoundly changed healthcare in New Jersey

NJ Spotlight — Monday, June 18, 2012

By Beth Fitzgerald

Healthcare in New Jersey is being profoundly altered by the 2010 Affordable Care Act, and no matter how the Supreme Court rules on its constitutionality, pilot programs to rein in spending and improve patient care will continue to roll.

Chief among those programs is the Medicare Accountable Care Organization, or ACO, in which hospitals partner with doctors to improve healthcare and keep people out of hospitals. If the healthcare providers succeed in keeping patients healthy, they share in some of the money Medicare saves. Three New Jersey ACOs were launched in April and several more are in the works. The court's decision is expected by the end of June.

Another key initiative is the push to turn primary care offices into patient-centered medical homes, where the doctors and their staffs get paid to coordinate care, avoid wasteful duplication of services, and pay more attention to the very sick and the chronically ill. Both ACOs and PCMHs predate the ACA, but they were accelerated by the law.

It will take several years for the ACA's pilot programs to pay dividends, in the form of less inflation in healthcare costs and healthier people. But New Jersey has already reaped several benefits. The law has directed more than $700 million to New Jersey, according to an estimate by the Kaiser Family Foundation. That includes more than $100 million in prescription drug rebates, discounts for nearly 250,000 seniors on Medicare, and more than $300 million in grants to employers to help them pay for early retiree health benefits — a diverse list of about 90 public and private employers that includes the state of New Jersey, Princeton University, and Johnson & Johnson.

Extending Coverage

According to the federal Department of Health and Human Services, more than 68,000 young adults have health coverage today because the ACA requires insurance companies to keep dependents on their parent's policies until age 26. More than 1.7 million New Jerseyans have benefitted from the ACA's rule that private health providers can't charge co-pays for certain preventive services, and nearly a million New Jersey Medicare members also are getting free preventive screenings. What's more, the state has received more than $13 million in grants under the ACA, mostly to help the plan for an online health insurance marketplace, or exchange, where small businesses and consumers will purchase coverage in 2014, when the ACA's "individual mandate"— whose constitutionality is being decided by the Supreme Court — will require most American to either get health coverage or pay a fine.

Other healthcare changes already under way before the law went into effect got a powerful push from it, including the move to digitize patient medical records to reduce errors and waste, and the flurry of mergers and partnerships among hospitals that were forced to cut costs as the government and employers balked at double-digit increases in healthcare costs.

Joel Cantor, director of the Rutgers Center for State Health Policy, said there are probably a dozen initiatives throughout New Jersey that would not be happening absent the ACA. "All of this should show a return on investment: a reduction in the number of hospital readmissions, patients having their chronic illnesses better managed so they are not in the hospital as often." He said major investments are being made in changes to the healthcare.

One New Jersey ACO that long predates the ACA and has achieved an impressive track record for health system improvement, is the Camden Coalition of Health Care Providers. Founded in 2002 by Dr. Jeffrey Brenner, who is the director of the Institute for Urban Health at Cooper University Hospital, the coalition brought together Camden's three hospitals, its physicians, and its social services providers. It implemented digital patient records to keep track of very sick and typically poor and uninsured Camden residents who seemed almost to live in the city's hospitals, driving up the city's medical bills while failing to get well.

By working closely with the sickest and most expensive patients, the Coalition has been able to both lower spending and improve outcomes. On Friday Brenner learned that a $14.4 million grant from the ACA will enable him to work with Rutgers to replicate the Camden model in four U.S. cities. That is in addition to a $2.8 million grant he received in May, also via the ACA, to expand the work of the coalition. And Brenner is planning to launch a "Medicaid ACO" that will enable the coalition to share in the money it saves for Medicaid, which would provide a sustainable revenue model for the group's work.

Brenner said the ACA "has utterly and completely changed the dialogue" about how to fix healthcare. "Five years ago, I felt like I was speaking in the wilderness and nobody understood the language I was talking — that there was no recognition that the system needed to change. The ACA sent a signal out to the entire healthcare industry that something was broken and the future was going to be different."

Coverage and Costs

Seton Hall Law School Professor John Jacobi said the ACA is more about getting people covered than trying to lower healthcare costs — with the exception of the ACO, which "creates new incentives for healthcare providers to coordinate care, to care for people with multiple chronic illnesses at the right time and the right place with the right specialties, so there is a reduction in the duplication of services. It is a great step to take — to think about how we can actually save money."

Hospitals have been at the center of the changes wrought by the ACA so far. As part of the budget compromise that helped get the law passed, the hospital industry agreed to accept $155 billion in Medicare cuts over ten years, including $4.5 billion for New Jersey's 72 acute care hospitals — cuts that began in 2011. Betsy Ryan, president of the New Jersey Hospital Association, said to cope with lower Medicare funding, "we have been squeezing out inefficiencies. We try to move patients where appropriate to outpatient settings where it's less expensive to care for them. We are reducing costs where we can. But Ryan said sometimes a hospital that is on the edge financially has to reduce services.

Ryan worries that the court will leave the Medicare cuts in place, but strike down the individual mandate, which is supposed to provide hospitals with more revenue by decreasing the number of uninsured patients. (Hospitals are required by law to care for patients who arrive via the emergency room, regardless of their ability to pay.) Chet Kaletkowski , chief executive of South Jersey Healthcare, said the organization had to figure out how to deliver care in a more efficient way, and has invested in outpatient services — urgent care, dialysis imaging, same-day surgery.

Starting October 1, the ACA will reduce Medicare reimbursements to hospitals with an unusually high number of patients who are readmitted within 30 days of being discharged. To reduce readmissions, hospitals, for several years, have been exploring ways to keep discharged patients at home. Pilots under way include sending coaches to visit patients at home to teach them how to use their medications. "Reducing avoidable readmissions is the right thing to do for the patients, but it's a complex issue," Ryan said. "You have patients who are homeless, who can't afford the prescription medications they need to stay out of the hospital, and who choose not to have follow-up medical care."

Lynette Newkirk is a registered nurse and administrative director for case management at South Jersey Healthcare. She has led a program since 2010 that employs coaches to visit former patients in their homes, helping them with medication and nutrition problems that can land them back in the hospital. There are now three coaches, the program has counseled 500 patients, and it has reduced readmissions by 18 percent. "These programs are popping up everywhere," she said. The ACA has motivated hospitals "to reach beyond their walls and into the community. We build relationships with our patients; when they leave the hospital, there is constant follow-up."

A Stake in the Ground

Dr. David Shulkin, who runs Morristown Medical Center and in April launched an ACO with six hospitals, 2,400 doctors, and 50,000 Medicare patients, said the ACA "was really a stake in the ground that healthcare had to change and had to reform." The marketplace was already driving healthcare toward reform prior to the ACA, because employers who provide health coverage to their workers "cannot continue to pay double-digit increases in healthcare costs — they can't be competitive and continue to do that."

If the ACO can save Medicare money, it gets a share of the saving. The result is that doctors are now "actually taking a look at the care they are providing across the whole health system, not just their little piece of it," said Shulkin, "and there is an economic incentive to achieve better results. We have groups of doctors meeting every night of the week" to figure out better ways to organize care.

Shulkin said healthcare spending will probably continue to rise in the U.S., but the rate of growth will decline as reforms like ACOs take hold. He also is talking to commercial insurers about joining Medicare in the ACO, and said they at the table "because the market is asking them to provide an insurance product that is lower cost, with better outcomes, and everyone believes you can't do that without involving the physicians in this way." He sees a future for ACOs, regardless of the Supreme Court ruling. "I would be very surprised and disappointed if they restricted Medicare from making decisions on how to better purchase healthcare, which is really what the ACO is."

Promises to Keep

But there are some important things the ACA has not been able to do yet. Chief among them: make any real dent in the number of New Jerseyans without health coverage, estimated as high as 1.3 million, or reduce the high cost of health plans purchased by employers, their workers, and individuals. If the law is upheld by the Supreme Court, in 2014 federal subsidies to help low- and moderate-income New Jerseyans buy coverage, and a major expansion of Medicaid eligibility, could reduce the ranks of the uninsured by 444,000, according to an estimate by the Rutgers Center for State Health Policy. Among health insurance stakeholders, there is a mixture of hope and skepticism about whether the plans that are sold on the exchange in 2014 will be more affordable than those plans now offered in New Jersey's state-regulated small-employer and individuals market.

In the meanwhile, keeping abreast of the ACA and trying to figure out whether to continue offering heath coverage in 2014 or let employees purchase their own coverage on the exchange, has been an administrative burden for employers, according to Christine Stearns, vice president of the New Jersey Business & Industry Association. "The key concern for our employers has been the affordability of health insurance ,and certainly the ACA has done nothing to help affordability." Stearns said healthcare premiums for small employer rose 10 percent last year and 20 percent the year before.

Jeff Brown, health care campaign coordinator for New Jersey Citizen Action, pointed out that the money that New Jersey has gotten already via the ACA includes $31 million to help expand federally qualified health centers, which improves access to healthcare for the poor by caring for Medicaid members and the uninsured. That, along with the ACA's rule that health plans keep children on until age 26 "has had a profoundly positive impact" on New Jersey.

Mark Manigan, a healthcare attorney with Brach Eichler, said the ACA is driving a lot of consolidation in healthcare "But if Obamacare goes away, I don't see this stuff abating at all. And in five years we'll know how it all worked out."

Manigan is negotiating deals for hospitals to acquire physician groups, imaging centers, and surgery centers, and representing physician practices that want to merge into hospitals or combine with other practices. "They figure, 'If I'm bigger, I have a better chance of dealing with a vertically integrated hospital, and with insurance carriers.'" The Supreme Court's decision won't alter this trend because "the pressure to lower healthcare costs and improve quality will continue."

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