Category Archives: Health Care

Can We Afford to Let Rural Hospitals Die?

Pioneer Community Hospital in Patrick county before it closed.

By Beth O’Connor

In the January 24th edition of Bacon’s Rebellion, author James A. Bacon poses the question; “Are Broke Rural Hospitals Worth Saving?” He acknowledges that many of Virginia’s rural hospitals are in trouble, but wonders if it makes financial sense to let them die.

The problem with his question is that he is only considering the issue in terms of healthcare dollars and outcomes. The reality is that a small rural hospital means much more to the local community and taxpayers than just a place to go when you have a heart attack.

The National Rural Health Association (NRHA) has published extensive information regarding the distress of rural hospitals and the importance of those facilities to small towns across the country. Since 2010, seventy-nine rural hospitals have closed. 673 additional facilities are vulnerable and could close, representing more than one-third of rural hospitals in the U.S. The rate of closures in rural areas is five times higher in 2016 compared to rates in 2010.

NRHA notes that losing access to healthcare is only one of the negative outcomes.  When a rural hospital closes, the rural economy suffers:

  • In rural America, the hospital is often one of the largest employers in the community. Healthcare in rural areas can represent up to 20 percent of the community’s employment and income.
  • The average critical access hospital — the hospital in Patrick County alluded to in Mr. Bacon’s column was a CAH facility — creates 170 jobs and generates $7.1 million in salaries, wages, and benefits annually.
  • The recession in rural America continues, with 90 percent of all job growth since 2008 occurring in metropolitan areas. If a hospital closes in a rural community, health providers relocate, and the town withers.
  • If a rural provider is forced to close, the community erodes.

That’s right, if a hospital dies the whole town dies. Patrick’s closure is recent, but a quick look at Lee County predicts the future for Patrick. Lee Regional Medical Center closed in 2013; it supported 190 full time equivalent positions.  These were not low-paying, entry-level jobs; these were doctors, nurses, anesthesiologists, therapists. The hospital had been the fourth largest employer in the county; it pumped $11.5 million in labor costs into the local economy every year.

Once those jobs left, other jobs followed. Local clinics as well as ancillary services such as food service and cleaning services struggle without a hospital serving as an anchor. After the hospital closed, the community’s only day care center closed too. Virginia’s elected officials have spent untold hours trying to lure businesses to the Commonwealth, but a town without a stable healthcare system will not land the next business enterprise.

Additionally, when a rural hospital closes the taxpayer suffers:

  • Rural hospitals provide cost-effective primary care. It is 2.5 percent less expensive to provide identical Medicare services in a rural setting than in an urban or suburban setting. The focus on primary care, as opposed to specialty care, saves Medicare $1.5 billion/year. Quality performance measurements in rural areas are on par with if not superior to urban facilities.
  • Critical Access Hospitals represent nearly 30 percent of acute care hospitals but receive less than 5 percent of total Federal Medicare payments.

A ‘bigger is better’ mindset suggests that sending patients to Martinsville or Roanoke would be more efficient and have better outcomes, but the data suggests otherwise.  The healthcare analytics group iVantage has documented that hospitals in rural areas have significantly higher ratings on Hospital Consumer Assessment of Healthcare Providers than those located in urban areas.  This includes:

  • Lower risk-adjusted rates of potential safety-related events.
  • Significantly lower adverse event rates than urban counterparts.
  • Significantly lower rates of post-op hip fracture, hemorrhage, & hematoma.

Mr. Bacon refers to Medicaid expansion as “blunderbuss legislation.” I call it a lifeline. Since 2010, seventy-nine hospitals in rural America have closed. Two-thirds of those were in states that have refused to expand Medicaid, including two in Virginia.

By not expanding Medicaid, Virginia loses $142 million in federal funding every month. Since 2014, the Commonwealth has forfeited over $10 billion in federal funds — our own tax dollars that should have been used to help uninsured adults, hospitals, and businesses.

Others may be content to allow their tax dollars to go to Washington, D.C. and stay there.  I am not.  Virginia taxes should be spent on Virginia people and Virginia healthcare providers.

Because the question is not, “Are Broke Rural Hospitals Worth Saving?”, the question is, “Can We Afford to Let Rural Hospitals Die?”

Beth O’Connor is executive director of the Virginia Rural Health Association.

The Promise of Personalized Medicine

If all you want is a doctor who will prescribe you pills, Dr. Neal Carl is not the man for you. If you want to understand the metabolic pathways of your medication, he’ll take the time to explain.

Personalized medicine is the new frontier of healthcare. DNA testing has become so inexpensive that it is now practical to develop wellness regimes tailored to peoples’ individual genomes. Virginia’s biggest endeavor in this field is taking place in Northern Virginia under the auspices of Inova Health System’s Center for Personalized Health. But another approach to health care delivery is taking place here in Richmond. My friend Linda Nash has launched a next-generation concierge medicine business, WellcomeMD, whose physicians treat their patients based on an in-depth analysis of their DNA, gut biome, and a full-battery blood test.

To get a feel for how personalized medicine works, I took up Linda on an offer to have my DNA tested and then meet with WellcomeMD’s Dr. Neal Carl for a consultation. Except in rare instances, genes are not medical destiny. But they do influence our health in many ways, and knowing our genetic proclivities is helpful in crafting an approach to fitness and nutrition.

The testing process is absurdly easy. Visit the WellcomeMD office, take a cheek swab, send it off, and wait ten days for the results. Interpreting the findings, however, requires a background in genetics, proteomics, and metabolic pathways — subjects that few primary care physicians studied closely in medical school. But Carl has immersed himself in these disciplines and how they relate to wellness. After poring through the data on some 20 to 30 “actionable” genes — that is, genes that provide information that can inform us about individual fitness and nutrition — he sat down with me to go through the findings.

I never made it past Introductory Biology in college, so a lot of it was over my head. But here’s what I gleaned from the consultation: Like most people, my genes confer both strengths and weaknesses in the 21st-century struggle for health and wellness.

My genetic profile indicated that my power/endurance response is weighted in favor of endurance. I was never destined to develop a weight-lifter’s physique. I wasn’t genetically predisposed to become the fabled 90-pound weakling, but I was never going to become a Charles Atlas either. Lifting weights could increase my strength, but I’d never develop bulky muscles. Conversely, my body is genetically suited to moving oxygen to body tissues and metabolizing it efficiently. Practically speaking, I’m far better suited to fitness regimes that emphasize endurance over strength.

The genetic test also measures for the body’s ability to detoxify muscles after exertion. I fall in the middle range, suggesting that I needed a day’s break between intense workouts. I also have a proclivity for injury of tendons and ligaments, with special concern for the Achilles tendon.

All this rang true. While I was never a great athlete, I devoted 14 years of my life to serious study of Tae Kwon Do, the Korean martial art. On the side, I ran, lifted weights, and did aerobics. I was never the strongest, certainly not the fastest (Carl confirmed that I lack the fast-twitch genes), nor the most flexible, but I did have the capacity to finish grueling hour-and-a-half workouts while others were hugging the floor. If I could survive the first 45 minutes of a fight, I could definitely kick the other guy’s ass!

Without the benefit of medical coaching, I have fallen into a fitness regime consistent with what my body was telling me. These days, I sporadically lift light weights and do one or two bouts a week of intense half-hour cardio. My efforts at consistency are bedeviled on and off by minor problems with rotator cuffs, pulled muscles and once, in an ill-fated fling with barefoot running, a pulled tendon in my foot that left me limping for weeks. All of these traits were consistent with my genetic profile.

As for nutrition, my genes don’t put me at risk for obesity, but just gaining 10 to 12 pounds over my ideal weight does put me at risk for pre-diabetes. I have a metabolism that makes me gain weight more readily by consuming carbs than fat. I’m salt sensitive (which may help explain my hypertension), and I have a heightened cancer risk from eating charred meat — which is a major bummer, because half the meals I eat consist of grilled beef or chicken. This information is useful because, evidently, I have not naturally gravitated in life to a nutritional regime consistent with my genetic endowment. Things must change. There will be more broccoli and brussel sprouts in my future.

The body is an incredibly complex organism, and a handful of genes don’t tell the whole story. To get a full, rounded picture of my health, Carl also would test my gut biome. Intestines are a “second brain” loaded with neurotransmitters, he says. When your intestinal bacteria aren’t happy, you aren’t happy. If I were a patient, he also would get an in-depth blood panel looking at dozens of markers — far more than the normal primary care physicians would track. And he would integrate all that data into a holistic understanding of my health that encompasses exercise, nutrition, stress and sleep.

New medical model. Managing a patient’s wellness at this level of understanding is time-consuming, and primary care physicians, who typically have a roster of 3,000 patients, cannot do it. The business model of WellcomeMD calls for Carl to oversee only 300 patients.

Nash founded PartnerMD, a successful concierge medicine practice, before leaving the company selling out her interest several years ago. As soon as her non-compete clause expired, she was ready to roll out what she calls “concierge 2.0.” The old model allows doctors to spend more time with patients and give them more holistic care. But WellcomeMD pushes the envelope of medical practice.

“Genetics testing has to be part of concierge medicine going forward,” says Nash. “It really is a different model. For people who want to delve deeper into their genetics, their stress, their sleep, we’ll have more time and more advanced tools. Under the traditional model of medicine, there is no possible way to do this.”

Carl, who practiced general medicine at Chippenham Hospital, found the traditional medical model frustrating and unsatisfying. He saw on average about 25 to 30 patients a day, whom he had to move through in an assembly-line process. He focused on getting their “numbers” to look good — numbers for blood pressure, cholesterol, blood sugar, and the like.

“As it played out, a percentage of the patients didn’t feel that well. Many were on several. Even with good numbers, they still had bad events,” he says. By way of comparison, he notes that television broadcaster Tim Russert had a “normal” cholesterol panel, but he had an underlying cardiovascular disease that his doctors didn’t catch until he had a fatal heart attack.

“We were putting Band-Aids on things and not getting root causes,” Carl says of his former practice. “There had to be a better way to practice medicine.” Continue reading

Asking the Tough Questions: Are Broke Rural Hospitals Worth Saving?

Shuttered: Pioneer Community Hospital. Photo credit: The Enterprise

I have posted frequently on the high level of profitability — and the lack of accountability for that profitability — among Virginia’s nonprofit hospitals. The Virginia Hospital and Healthcare Association (VHHA) responds that, while the hospital industry as a whole may be profitable, many individual hospitals are not.

A case in point is the Pioneer Community Hospital in Patrick County, which closed in September due to financial difficulties. The Virginia House of Delegates voted unanimously Monday, in the words of the Richmond Times-Dispatch, to extend the license of the shuttered hospital in the hope of speeding the process of finding a new operator and reopening the facility.

The VHHA has a point: Many of Virginia’s rural hospitals are in trouble. When a hospital like Pioneer Community shuts down, thousands of people find it far more difficult to access health care.

The question is: what do we do about it? Do we enact blunderbuss legislation (such as Medicaid expansion) under the pretext of helping rural hospitals even though most Medicaid dollars will go to urban and suburban hospitals? Do we craft a narrow-bore approach that focuses scarce public resources on rural hospitals, or, more specifically, ailing rural hospitals?

Or, to really think outside the box, do we acknowledge that a “hospital” is simply a bundle of diverse, often unrelated, medical services served under one roof, and that perhaps it makes economic sense to de-bundle those services and provide them in the format of free-standing urgent care clinics, ambulatory surgery centers, and other outpatient facilities? Do we acknowledge that, even though it may require Patrick County residents to drive to a hospital in Martinsville or Roanoke or Winston-Salem for a few more procedures than otherwise, some procedures are more efficiently handled, and have better outcomes, when performed on a volume basis in a larger, urban hospital? Shouldn’t we allow medical services in Patrick County restructure in a way that is more financially self sustaining?

Just asking the questions no one else dares to ask….

Nonprofit Hospital Profits and Medicaid Expansion

Every year Virginia’s hospitals cry poverty as justification for expanding Medicaid, and every year their profits just grow bigger.

Admittedly, hospital profits did decline 0.6% in 2015. But hospitals more than made up the difference in 2016. According to an annual update on Virginia hospital profitability by the Thomas Jefferson Institute for Public Policy (TJI), hospital profits increased 13.9% that year. Over the past four years, Virginia hospital profits have increased 36%. 

Some hospitals are more profitable than others, of course, and it’s true, as the Virginia Hospital Association reminds us, that some hospitals lose money. Twenty-eight Virginia hospitals ran deficits in 2016 compared to 42 in 2012, reports TJI, but that’s not the problem it might seem. Some money-losing hospitals are new, and their losses are temporary as they build market share. Other hospitals, typically rural, are part of larger health systems; while they may operate at a deficit, they funnel patients to larger tertiary-care hospitals where the real money is made. And at least one, Sheltering Arms in the Richmond area, has a business model that relies heavily upon philanthropy.

Remarkably, most of the industry’s $2.15 billion in profits come from the non-profit sector. For-profit Hospital Corporation of America (HCA) accounts for $244 million of the industry’s profit. Other for-profits have a negligible market presence in Virginia. The vast majority of profit comes from the non-profits. Here are the top earners:

Let’s be clear: I’m not attacking hospital profitability. We want our hospitals to be financially healthy. Who wants to have surgery in an institution that’s always cutting corners, can’t hire competent staff, and lacks the capital to reinvest in new technology and best practices?

But it is a legitimate question to ask, especially of nonprofit hospitals, how much profit is enough? The state grants nonprofits exemption from property taxes, corporate income taxes, and other taxes worth hundreds of millions of dollars to support their public mission. What is that public mission, if not providing medical care to the community at large — and especially to the poor?

The Virginia Hospital Association, I hear, will propose to finance Medicaid expansion by means of a hospital bed tax. That gambit will have the political virtue of avoiding a highly visible general tax increase, such as the state income tax or the sales tax, and embed the tax all-but-invisibly in your hospital bill where you likely will never take notice of it because hospital bills are indecipherable and your insurance company is covering most of it anyway. The proposal also will have the practical effect of transferring wealth from paying patients to nonpaying patients. Paying patients are being dunned already through opaque hospital bookkeeping to support the existing Medicaid program, which notoriously pays less than Medicare or private insurance. With a bed tax, paying patients will be dunned again.

But hospitals will retain their revenue surpluses to spend as they please.

Democrats feel terrible that some 240,000 low-income Virginians are stuck in what the center-left Commonwealth Institute think tank calls the health care coverage gap: States a recent paper: “They are unable to get quality, affordable coverage through the federal insurance marketplace because they don’t make enough money, and they can’t qualify for Medicaid because they make too much.”

We’ll see how Democrats propose funding the Medicaid expansion, but the money has to come from somewhere — either from taxpayers generally or the hospital bed tax. If past is prelude, Dems will have few qualms about shifting the burden to either one. After all, as Governor Ralph Northam opined yesterday, Medicaid expansion is “a matter of basic economic justice.” Unfortunately, economic justice, as we have learned from years of experience, is for the poor, not for middle class taxpayers and insurance payers.

In my taxpayer-friendly view of economic justice, perhaps we should be asking Virginia’s hospitals what the public is getting for nearly $2 billion in nonprofit profits. The press doesn’t cover hospital board meetings to report on how that money is disposed of. It doesn’t have the resources to do so. Perhaps the Joint Legislative Audit and Review Commission could determine how much nonprofit hospitals are getting in state and federal tax breaks and how hospitals are redirecting the money. I’d sure like to know before Governor Northam and his friends in the legislature salve their social-justice consciences by sticking it again to the middle class.

Update: The Virginia Hospital and Healthcare Association objects to TJI’s methodology for calculating profits. Says spokesman Julian Walker:

“In past studies of this sort, the Thomas Jefferson Institute has miscounted, included non-hospitals in its tabulation, evaluated total margins rather than operating margins which are a truer measure of fiscal condition, factored in investments and other assets in its calculations of profit, among other calculations that have resulted in a skewed and imbalanced impression of what the actual data from VHI shows. …

From 2008-2016, the annual rate of Virginia acute care hospitals with negative operating margins has ranged from 38 percent to 23 percent. Among rural acute care hospitals, the range is 63 percent to 40 percent.”

The Doctor Is In. And He Wants to Expand Medicaid.

Ralph Northam as physician

With a near 50/50 balance of power between Republicans and Democrats in the General Assembly, Governor-elect Ralph Northam will be in a much better position than his predecessor Terry McAuliffe to enact Democratic priorities. And what are those priorities? As he told NBC 4, Medicaid expansion tops the list.

Said Northam: “No family in Virginia should be one medical illness away from financial demise so, Medicaid expansion is very important and I will do everything I can to make that happen.”

We can all agree on the desirability of making health care affordable and accessible for all Virginians. It’s not so clear that expanding Medicaid is the best way to accomplish that goal. I have blogged in the past about the inadequacies of the Medicaid model, which has not demonstrated an ability to substantially improve medical outcomes. Among the more obvious problems: While Medicaid expansion provides coverage to the uninsured, it does not increase the supply of primary care physicians willing to take on Medicaid patients for whom they are paid 30% to 60% less than privately insured patients.

Despite below-market reimbursement rates, the cost of Medicaid expansion is considerably higher per patient than anticipated when the Affordable Care Act was enacted several years ago. The table below, taken from an article in the “Handbook on Healthcare Reform” published by the Thomas Jefferson Institute for Public Policy (TJI) last month, shows how Medicaid actuaries have consistently revised upward their cost projections since FY 2013.

The 2013 report projected that newly eligible adult Medicaid patients would cost $3,625 on average. By 2016, the figure had risen to $5,926 — a 63% jump. If Medicaid expansion was unaffordable four years ago, it’s even more unaffordable now. Despite their political setbacks, Republicans are highly unlikely to roll over on this issue.

It’s not as if states have no other options to improve affordability and access. The TJI report discusses several. They include eliminating mandated benefits so insurance companies can offer bare bones policies; removing barriers to healthcare technology innovation; rolling back onerous Maintenance of Certification requirements that encourage physicians to retire early; reforming the medical liability system that prompts physicians to practice defensive medicine; encouraging transparency in pricing so consumers can push back against expensive providers; abolishing the Certificate of Public Need process so physicians can provide high-quality, lower-cost outpatient surgery; promoting telemedicine; enabling Direct Primary Care that strips out third-party-payer middlemen and administrative costs; and repairing the broken Medicaid delivery model.

Most of the TJI essays were generic, not specific to the Old Dominion. As it happens, Virginia has taken limited steps toward implementing some of the ideas in the report, but much remains to be done.

The health care sector is a dense jungle of special interests, however. Hospitals, insurers, pharmaceutical companies, employers, physicians, and a welter of allied health professionals work doggedly to shape legislation to their benefit. Sadly, ordinary patients have no organized group representing their interests.

As a physician, Northam has a keener understanding of the issues confronting the health care sector than most lawmakers. He enjoys a unique opportunity to reshape Virginia’s health care sector in a way that lowers costs and improves outcomes for all Virginians. It would be a shame if he expends all his political capital to capture the dubious benefit of Medicaid expansion when so many alternatives lie fallow.

Before Expanding Medicaid, Examine the Program’s Outcomes

When Virginia lawmakers start cranking up the old Medicaid-expansion jalopy in January, they would be well advised to pay attention to a new study out of California — not exactly your reddest of red states, so this is not Republican propaganda.

The study, published in the Journal of the American Medical Association Oncology, used a California data registry to compare cancer survival outcomes of insurance over two decades (1997–2014). Summarizes the Federalist: “Improvements in survival rates during the time period the survey examined came almost exclusively from individuals with private insurance or Medicare. “[F]or patients with other public [i.e., Medicaid] or no insurance, survival was often stubbornly unchanged, or, in some cancers, declining.”

While survival falls short of that achieved by patients with private insurance, public insurance such as Medicaid does confer a survival benefit over no insurance for breast, prostate, and lung cancer. However, there was little or no benefit of public insurance over no insurance for colorectal cancer or melanoma, and the lack of improvement in survival is a concern. These findings suggest that the health care provided to publically [sic] insured patients with cancer in California is not adequately meeting their needs.

Got that? Medicaid is somewhat better than zero insurance for some cancers but no better for others. And in some cases, the study implies, it’s worse.

Meanwhile, debates are raging over whether Medicaid expansion has led to an increase in opioid addiction, and whether or not emergency-room usage has declined, as envisioned by the architects of the Affordable Care Act.

The assumption behind Medicaid expansion is that any health coverage, no matter how crappy, is better than none at all. But Medicaid reimburses physicians far less than private insurance and Medicare do, with the result that (a) many physicians don’t take Medicaid patients, and (b) some physicians may not provide the same quality of treatment. Also, one must consider the nature of Medicaid patients. By definition, they are poor, and poor people may interact with the health care system differently than the non-poor.

The California study inevitably will be cited by Virginia opponents to Medicaid expansion. And just as inevitably, supporters will find reasons to criticize it. Here’s how it works in early 21st-century America: Pick your desired political outcome, choose the study to justify it, and then shoot holes in opposing studies. Medical science becomes politicized just like everything else in our society that is mediated by the political class — but, of course, it’s all the other side’s fault.

Albemarle County’s Unfortunate Distinction

Image credit: Wall Street Journal

So much to blog about. I don’t know if I can get to it all this morning. Let’s start with this…

Albemarle County will have the distinction of having the highest cost in the nation in 2018 for people on the Affordable Care Act exchange. The Wall Street Journal cites the plight of Ian Dixon, as 38-year-old app developer, whose premiums for a family of four will jump from $988 a month to $3,158 a month. The article did not mention the size of the policy’s deductible, but in my observation of other health plans, it could be significant.

Insane. Just insane.

As the WSJ notes, other health plans have fled the ACA market in Charlottesville and Albemarle. The sole remaining provider, Optima Health, wanted out as well, but decided to stay in the market rather than leave citizens with zero alternatives.

Bacon’s bottom line: The company says the uncertainty created by the GOP push to repeal Obamacare and a Trump administration decision to end subsidies to insurers contributed to the rise in premiums. That uncertainty undoubtedly has accelerated the ACA market meltdown, but the health exchanges were in a downward spiral before Trump took office. The system is collapsing next year instead of two or three years from now.

This is what happens when a country is locked in 50-50 gridlock, neither has the political power to fully implement its healthcare vision. We get total dysfunction, and people like Ian Dixon are paying the price. Adding insult to injury, unless Congress repeals the mandate requiring people to purchase health insurance, Dixon will be dunned a tax (really a penalty, but the Supreme Court called it a tax) if he refuses to sign up for a plan that could soak up 100% of an average person’s income.

Medicaid Reforms Could Save Tens of Millions

Massey Whorley, policy adviser to Governor McAuliffe

A new forecast of Virginia’s $10 billion Medicaid program supposes that the implementation of managed-care reforms will slow runaway costs, reducing growth in spending to 2.5% in the first year and 3.4% the second year, down from an 7.8% increase in the current fiscal year. While the program still will cost an additional $670.6 million over three years, that’s a lot less than it would have been, reports the Richmond Times-Dispatch.

The McAuliffe administration is expanding the number of people, primarily elderly and disabled, who will receive services through managed-care contracts with private insurers.

“A huge part of [the reduction] is the effect of reforms and the amount of money being moved from fee-for-service to managed care,” said McAuliffe policy adviser Massey S.J. Whorley. The number will swell from about 30,000 people under managed care to almost 200,000. Explains the T-D:

Fee-for-service has been the traditional way of reimbursing providers for services to Medicaid patients in an uncoordinated fashion. Managed care allows the state to shift the risks of serving patients to insurers who are paid a fixed amount per person, per month to coordinate their care. 

“The plans are taking a very substantial risk,” said Doug Gray, executive director of the Virginia Association of Health Plans, which includes five of the six companies that are providing managed care to more than 216,000 elderly and disabled Virginians. “These are very sick people who could have very high costs. The commonwealth has protected themselves from costs over and above the contract amount.”

The attraction for insurers is the potential to lower the cost of care and keep the difference, while saving the state money, but Gray cautioned against expecting an immediate windfall as the state expands managed care to riskier populations. “We are hopeful and optimistic there will be savings, but I wouldn’t want to be overly aggressive about promising,” he said.

House Appropriations Chairman S. Chris Jones, R-Suffolk, said the reforms are working, but he would hesitate to read too much into the initial forecast. “This is the right step to have taken. … There is no doubt the reforms are starting to have an impact.”

Bacon’s bottom line: Everybody cross your fingers and hope this works. Out-of-control Medicaid spending has soaked up a disproportionate share of new tax dollars generated by the state, forcing legislators to under-fund other critical priorities like K-12 schools and higher-ed. The shift to managed care may ease the fiscal pain for the next biennial budget.

Bringing Data Analytics to Virginia Healthcare

Beth Bortz, CEO of the Virginia Center for Health Innovation

A big reason the healthcare debate in Washington has gone nowhere is that it’s all about who pays for healthcare, not how to create better outcomes at lower cost. For every winner, there’s a loser, and that’s a recipe for gridlock. Meanwhile, medical costs continue climbing. Ultimately, everyone loses.

The business of figuring out how to improve outcomes and reduce costs gets a tiny fraction of the media attention, but if there’s ever going to be a solution to the healthcare crisis, it will come from stretching healthcare dollars, not redistributing them. As it happens, Virginia is taking the lead in an initiative that may help “bend the cost curve.”

Five Virginia health plans are taking part in a pilot program funded by private foundations and led by the Catalyst for Payment Reform (CPR), a nonprofit group that seeks to measure “which strategies are having the desired impact in the market,” reports Virginia Business magazine. Virginia will be one of only three states selected to participate, says Beth Bortz, CEO of the Virginia Center for Health Innovation, which coaxed Virginia’s five insurance companies into sharing their data. (Two other insurers have yet to commit.)

Each of the participating companies — Aetna, Anthem, Optima, UnitedHealthcare and Virginia Premier — possesses vast quantities of data on healthcare expenditures and outcomes. But data residing in five silos isn’t as valuable for analytical purposes as a database encompassing all five. Reports Virginia Business:

The key goal is to identify health-care payments in commercial and Medicaid sectors that are “value oriented,” which CPR defines as effective treatments combined with a reduction in unnecessary spending. That means the project’s intent isn’t just to find effective treatment. “We’ve been about advancing value,” Bortz says. “It’s not quality at any cost.” …

Involvement with CPR will help a project VHCI has already begun. It is a data-based measurement of health care called the Virginia Health Value Dashboard. Its purpose “is to prompt action for improving the value of health-care services,” says VHCI.

Examples of “low-value” care that the dashboard project is targeting include: avoidable emergency-room visits, hospital readmissions and the use of high-cost service sites when less expensive options are available. The “high-value” care examples include: up-to-date vaccinations, smoking cessation programs, better screening for cancer and improved management of chronic conditions such as diabetes.

The goal is to have in place by January a dashboard tool for groups that provide, buy or fund health-care services to use in evaluating various costs. Being part of the CPR’s project is a big step toward that goal. “It costs money to get good data,” Bortz says.

Bacon’s bottom line: It would be great if Virginia could bend the cost curve. Households could find some relief from the relentless squeeze on their pocketbooks. More people could afford afford insurance coverage. And, to the extent that healthcare is a big chunk of employee compensation, Virginia businesses could gain a competitive advantage.

There is a gap, however, between knowing what the best practices are and actually putting them into place. The political economy of healthcare in Virginia is riddled with special interests that benefit from laws and regulations that stifle change. Many regulations — mandated benefits, medical licensure, the Certificate of Public Need process — create incentives for perverse behavior. The best data in the world won’t do much good if health care providers don’t do anything with it. So, while the CPR initiative is a positive development, Virginia has much work ahead to create the conditions where healthcare insights will be acted upon.

How Medicaid Is Cannibalizing Virginia’s Budget

Source: JLARC

Three big trends are worth noting from the Joint Legislative Audit and Review Commission 2017 state spending update, a review of state spending over the previous 10 years.

First, General Fund spending has been constrained by limited revenue growth resulting from Virginia’s weak economy. The increase in spending has averaged 2.0% per year. Adjusted for inflation and population growth, General Fund spending actually declined 1% over the decade.

Second, the Medicaid program has crowded out spending for other priorities. Medicaid hogged 60% of all General Fund revenue growth over the decade. Medicaid’s share of the General Fund pie increased by 73%.

Third, the healthy growth in non-General Fund spending was driven in large part by tuition increases at Virginia’s colleges and universities. In other words, when faced by stagnant revenue and untouchable Medicaid spending increases, legislators cut what was cuttable. They reduced state support for higher education knowing that colleges and universities could fall back upon the expedient of raising tuition.

Cheerful thought of the day: As Virginia’s population ages, Medicaid spending will go one way — up — and it will continue to squeeze other spending categories. Here’s the spin that Republican legislators put on the JLARC report:

House Speaker William J. Howell, R-Stafford: “Once again, this annual report from JLARC shows that the increasing cost of Virginia’s current Medicaid program is crowding out needed funding for our public schools, colleges and universities, roads, and law enforcement officers. We consistently argued that Virginia can barely afford its existing Medicaid program, let alone the massive cost of expansion, and this report vindicates that position.”

Speaker-designee Kirk Cox, R-Colonial Heights: “It’s a simple proposition: if you cannot afford your mortgage payment, you don’t build a new addition to your house. Virginia’s current Medicaid program covers around 1 in every 8 Virginians, and as this report shows, the costs are staggering and continue to climb, despite ongoing reform efforts. It would be financially irresponsible to ask taxpayers to fund the massive expansion contemplated under the Affordable Care Act.”

Del. S. Chris Jones, R-Suffolk: “Even as we instituted major reforms aimed at bending the cost curve, and controlled spending growth in other areas of state government, Medicaid costs continue to increase dramatically. This growth eats into funding that could be used for our teachers, law enforcement officers, and hard working state employees.”

Bacon’s bottom line: Yeah, the Republican leaders are stingy bastards for not expanding Medicaid. But the alternative is worse. Latest news on the Boomergeddon front: The state of Illinois, which expanded its Medicaid program in 2013, incidentally, and now has to cover 10% of the expanded costs not funded by the federal government, has $16.5 billion in unpaid bills. The state also has $200 billion in total liabilities, including pension debt. Meanwhile, pundits are asking if debt-ridden Chicago will become the next Detroit. One good recession, and it will be.

To see what it’s like to operate a government bordering on insolvency, watch Puerto Rico flail as it tries to recover from Hurricane Maria. It’s not a pretty picture. It’s easy to be compassionate when you’re paying with other peoples’ money. When other peoples’ money runs out, everything goes all to hell.