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Hospital transitions to federally required ACO

January 30, 2013

Both as Chief Executive Officer and Chief Financial Officer, Northern Inyo Hospital Administrator John Halfen has his plate full with the upcoming Medicare recipient enrollment changes which are mandated by The Patient Protection and Affordable Healthcare Act. Photo by Marilyn Blake Philip

Owens Valley Medicare and Medi-Cal recipients, which comprise at least half of Northern Inyo Hospital’s patients, can expect changes in the near future – changes in the way their health care is managed and, consequently, provided.
Following federal mandate, NIH is in initial negotiations with Renown Health, a Reno-based Accountable Care Organization, which could result in reduced Medicare claims by initiating a new payment and managed care structure.
According to, Renown Health is a large, “nationally-recognized,” integrated health network and “healthcare leader” that serves Inyo and 16 other counties in northern Nevada and northeast California.
NIH Administrator John Halfen said that ACOs provide less expensive medical care coverage by paying hospitals, doctors and other healthcare providers less money and/or reducing patient-care volume.
The federal Centers for Medicare and Medicaid Services defines an ACO as a network of healthcare providers who agree to be accountable for the quality, cost and overall care of its Medicare patients who are enrolled in fee-for-service billing (when patients pay 100 percent of the fee for services they receive). Kaiser Permanente and HealthCare Partners Medical Group are two examples of ACOs.
According to Halfen, the Patient Protection and Affordable Care Act mandates that, initially, Medicare recipients will be enrolled in ACOs and, “clearly,” everyone is going to be enrolled in one eventually. “In 14 months, Bishop Medicare patients will get a letter that says, ‘You’re now in (this Accountable Care Organization) and there’s nothing they will be able to do about it … It’s not negotiable. In rural areas, patients will probably still be able to go to (their regular) doctor but there’s no guarantee of that,” Halfen said.
Currently, NIH patients fall into three fee categories:
• 50 percent are Medicare and Medi-Cal,
• 45 percent are fee-for-service, and
• 5 percent are Preferred Provider Organization. A PPO is a group of hospitals and providers who have contracted with an individual, insurance company, etc., to provide care at reduced rates.
ACOs “will initially deal only with Medicare but will end up taking over” other patient populations. Some HMOs, or Health Management Organizations, may also become part of these ACOs, Halfen added. Ultimately, the change will affect everyone, not just Medicare patients, because “somebody has to pay the higher costs” generated by these reduced fees. Since ACO management is starting with Medicare, the role of existing insurance companies and HMOs is not yet defined, he added. Insurance rates may go up. Again, somebody has to pay.
However, this is not a new concept. Halfen said that 85 percent of healthcare costs are generated by five percent of the population, most of whom are the elderly. Elderly people often have no care givers in the home to prevent injuries and ensure healthy lifestyle practices, he explained. Many times they don’t have money for proper, sufficient nutrition or “can’t get to the store” to shop for those foods. Often, they can’t get to the pharmacy or even afford to fill their prescriptions.
Meeting these and other needs would reduce the number of medical visits this population would make, and thereby “greatly reduce healthcare costs” across the board, Halfen said. In any event, healthcare services will be affected by the advent of ACO management. “It will reduce medicare claims by restricting payment to providers, so if giving care is cost prohibitive, they won’t be able to provide it.”
Sierra Crest Hospitals, a group of about 14 rural critical hospitals, including NIH, “are in the early stages of negotiation with Renown so we can be at the ACO table,” Halfen said, explaining that local healthcare providers want to be able to have a say in the changes that are coming. Currently, Sierra Crest Hospitals handles 10 percent of inpatient and 12 percent of outpatient Medicare cases for Renown.
NIH is already preparing technologically for these upcoming changes, with plans to implement an Health Information Exchange. Halfen said, “An HIE is basically a network” that allows patient healthcare information to be electronically stored on the Internet, where it can be shared by healthcare providers, whether they are located within a hospital system or across the world.
NIH has already received the one-time, lump-sum state portion of a federal grant, totalling $3 million to $3.5 million, to help establish the HIE, Halfen said. “Only a handful of HIEs in California are up and running. They aren’t (operating) in rural hospitals yet, maybe by 2015. Ours is on the way.”
According to the hosptial administrator, the balance of the grant, the Medicare portion, will be paid out over five years, the first installment of which NIH will receive by the end of 2013. “That’s how the feds got hospitals to put in HIE.”
The grant is part of The American Recovery and Reinvestment Act of 2009, also known as the Stimulus or The Recovery Act.

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