Never Say Never Event: New Healthcare Risks and How They Are Managed

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Never Say Never EventNew Healthcare Risks
andHow They Are Managed
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Never Say Never Event

• MODERATOR
• Sanford Elsass, President CEO, Uni-Ter Group
• PANELISTS
• Chad C. Karls, FCAS, MAAA, Principal, Consulting
  Actuary, Milliman
• Katherine M. Keefe, Esq., Partner, Marshall,
  Dennehey, Warner, Coleman Goggin
• Nancy Rehkamp, Principal, LarsonAllen LLP

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Overview

• Definition of Never Events
• Emergence of Value-Based Purchasing" (VBP) and
  "Never Events"
• Legal Basis of "Never Events
• Changing Demographics
• Potential Impact on Insurance Industry
• Key Learning Points
• QA

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Definition of Never Events

• A misnomer
• Adverse health events medical errors that are
  never supposed to happen to patients receiving
  care in hospitals other healthcare facilities.
• Examples
• Surgery on the wrong body part
• Stage 3 or 4 pressure ulcers acquired after
  admission
• Injury resulting from misuse or malfunction of a
  device used in patient care

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Emergence of Value Based Purchasing

• Current Medicare payment system consumption and
  quantity of care
• Center of Medicare and Medicaid Services (CMS)
• transforming Medicare from passive to active
  purchaser
• Goal increase quality, avoid unnecessary costs
• VBP drivers Congress, MedPAC and IOM reports,
  private sector
• Medicare Trust Fund solvency

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Emergence of Value Based Purchasing

• Emergence of Value-Based Purchasing
• Value-Based Purchasing Initiatives
• Hospital Pay for Reporting
• Hospital VBP Plan
• VBP Nursing Home Demonstration
• VBP programs will affect home health, physicians
  other providers
• Against VBP backdrop, "Never Events" emerge

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Legal Basis of "Never Events"

• Deficit Reduction Act of 2005, Section 5001(c)
• Required CMS to select at least two conditions
• High cost, high volume, or both
• Assigned to higher-paying DRG if present as
  secondary diagnosis
• Reasonably prevented through using evidence-based
  guidelines

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Legal Basis of "Never Events"

• Deficit Reduction Act
• October 1, 2007 Hospitals required to submit
  claims data indicating whether diagnoses are
  "present on admission"
• October 1, 2008 No payment for care associated
  with Hospital Acquired Condition unless
  identified as present on admission
• Medicare hospital payment regulations specified
  Hospital Acquired Conditions and include "Never
  Events"

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Hospital Acquired Conditions and "Never Events"

• Object left in surgery
• Air embolism
• Blood incompatibility
• Cathether-associated urinary tract infection
• Decubitus ulcers
• Vascular catheter-associated infection
• "Never Events

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Hospital Acquired Conditions and "Never Events"

• Surgical site infection-mediastinitis after CABG
• Falls-specific trauma codes
• Extreme manifestations of poor glycemic control
• Surgical infection post certain ortho, bariatric
  surgeries
• DVT/PE post hip, knee replacement surgeries

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"Never Events" It's not just hospitals and it's
not just Medicare

• Medicare to expand "Never Events" approach to
  other care settings, providers
• Medicaid has instituted Never Events
  non-payment policy
• Private payers have instituted "Never Events"
  non-payment policies
• Aetna, Wellpoint Cigna, the Blues
• Many states enacting laws, policies regarding
  non-payment of "Never Events" ME, MA, NY and PA

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Medical Malpractice Impacts of "Never Events"

• CMS-selected Hospital Acquired Conditions and
  "Never Events" based, in part, on whether
  condition could reasonably be prevented through
  application of evidence-based guidelines
• Regulations now contain evidence-based
  guidelines!
• Potential impact on standard of care issues

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Medical Malpractice Impacts of "Never Events"

• Coming from plaintiffs' bar near you
• "It's negligence per se the hospital did not
  follow CMS' approved evidence-based guidelines."
• Discovery requests and deposition questions
  regarding payment (or lack thereof)
• Arguments over role of medical expert
• CMS has specified preventable error
• Blessed specific prevention guidelines

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Explosive Health Growth - Key Drivers

• Health care utilization changes from, among
  others
• Dramatic growth in older adults
• Earlier diagnoses and treatment
• Substitution of levels of care
• Workforce availability
• Changing customer expectations
• Changes in health status (obesity, Alzheimer's)

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The Aging Services Field Is Evolving
Spectrum of Services
Need Driven
Want Driven
Preventative
Hospital
Long Term Care
Active Adult Communities
Continuing Care Retirement Communities/Multi-Level
Campus
Intentional Community
Acute Hospitalization
Geriatric Assessment
Assisted Living
Board Care Intermediate Care
Outpatient Therapies
Health Wellness Centers
Telehealth Home Technologies
Senior Membership
Subacute Rehab
Respite Care
Palliative Care
Wellness Programs
Independent Living
Day Care
Home Health
Long Term Acute Hospitalization
Hospice
Community Based Services
Dementia Assisted Living
Case/Disease Management
Personal Care Assistance
Skilled Nursing Care
Diagnostic Treatment Center
Medical Social
Skilled LTC
Source Greystone Communities Continuum of Care
Chart adapted by LarsonAllen LLP
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Financial Stress Changing Economics
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Epidemic of Diagnoses or Technology Advances?

• A NY Times article outlined the epidemic of
  diagnoses occurring
• What is normal?
• The ability to identify and diagnose conditions
  before they occur
• Result Greater health care utilization
• Source NY Times, 1/2/07 What is making Us
  Sick Is an Epidemic of Diagnosis H. Gilbert
  Welch, Lisa Schwartz Steve Woloshin.

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Demand Predictors Influencers
Environmental Factors
Public Policy Factors
DEMAND
Lifestyle and Consumer Choice Factors
Income and Wealth Factors
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Demand Predictors Influencers - Acute

• Environmental
• Factors

Provider Practice Patterns
DEMAND
Regulatory Reimbursement Policies
Access to Health Care Services
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Medicare Discharges Increase with Age
Medicare discharges per 1000 grow significantly
as an individual ages. The rapid growth in the
population 75 and older may result in higher
numbers of Medicare admissions and more
individuals requiring post-acute services.
Source The Chart Book 2007, CDC published 1/08
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Doctor Visits Increase with Age
Total physician/provider visits have increased
over the lasts five year for most age groups, but
particularly for those over 55. The growth in
the eldest of older adults will exacerbate the
physician and physician extender shortages.
Currently about 33 of primary care physicians
are age 55 or older. Source
The Chart Book 2007, CDC published 1/08
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Population Growth of 85 - 2010
The 85 cohort is growing most significantly in
the West.
Source US Census Bureau Estimated Population
Growth based on 4/05 Interim Projections
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Population Growth in 85 - 2020
Growth will continue across the country with many
Southern states growing faster.
Source US Census Bureau interim estimates 4/05
accessed via the web 12/07
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Age Distribution Changes Will Challenge Us
The rapid growth in older adults with
significantly lower growth in younger populations
will create challenges to informal caregiving,
workforce availability, and other
issues. Source US Census Bureau Statistics
accessed 12/07

• The above states with the exception of
  Massachusetts represent the 15 largest
  increases in the 65 population. Massachusetts
  is 37th on the list.

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Decreasing Role of Family Pushes up Demand

• Percentage of Family Caregiving
• 1988 1995 2001 2010 2030
• 97
• 95
• 91
• National Ratios
• Caregiver Ratio 7.51 6.78 4.34
• Elderly Dependency Ratio 4.75 4.61
  2.76

The Caregiver Ratio is a comparison of the
number of elders 85 to women aged 45 to 64. The
Elderly Dependency Ratio is the number of elders
65 compared to workers aged 20 to 64. The lower
the ratio the fewer the number of caregivers or
workers. The expected decline in available
caregivers and available workers will be over 40

Each 1 drop in family care giving requires
approximately 30M in additional public funds for
Minnesota and every 5 change increases Medicaid
50 in New York. Source National
Caregivers Association US Census Population
Projections by Age Sex
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The Changing Customer
Source The McKinsey Quarterly, Nov/Dec 2007
Serving the Aging Baby Boomers McKinsey Global
Institute
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Medicare Advantage Plans Impact Care
DCs per 1000 65 have declined to 302 in Florida
and to 301 in Minnesota by 2007.
Enrollment in Medicare Advantage plans and
Special Needs managed care plans have increased.
The use of acute and post-acute services by these
plans is not clear yet. The use of SNF
following an acute stay is about 15 in Florida
and 22 in Minnesota. The use of Home Health is
about 13 in Florida and about 12 in Minnesota.
Source Kaiser Family Foundation,
Statehealthfacts.com accessed 2/08 MHA FHA
Hospital DC Reports, 2006
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Customer Satisfaction as a Predictor
Hospital quality managers think quality is
improving, but believe there is greater
opportunity to improve customer satisfaction.
Customer satisfaction ha long been considered a
predictor of liability risk. Source Health
Research Education Trust, in partnership with
the AHA,, Hospital Improvement Activities A
Snapshot of the State of the Art, 2008
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The RN Workforce is Aging

• The RN shortage is estimated to be 1,000,000 by
  2020 even assuming a 2 per year decline in
  hospitalizations.
• RNs are growing older and are not being replaced
  by new graduates.
• RNs typically leave the nursing profession in
  mid-50s for other fields or retirement.
• Source Florida Dept. of Health, 2008 Nurse
  Workforce Demand Report 2000 2020, HRSA, US
  Department of Health Human Services,

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Estimating the Demand for Physicians

• Current estimates of physician shortages are
  growing, particularly for primary care. Current
  studies show the following
• The number of Health Professional Shortage Areas
  has grown from 1,885 in 1997 to 3,814 in 2007.
• Currently 33 of active physicians are 55 years
  or older.
• International Medical Graduates currently make up
  25 of physicians practicing in the US and 26 of
  the physician residency slots in 2005. IMG
  currently hold the following residency slots
• 42 of Internal Medicine
• 37 of Family Practice
• 24 of Pediatric
• Federal Policy is encouraging physician group
  practices of seven or more.
• The HSRA estimates the primary care physician
  shortage will reach 250,000 by 2020.
• Sources What Works Healing the Workforce
  Shortages PricewaterhouseCoopers Health Research
  Institute 2007

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Estimating the Demand for Physicians

• Physician shortages growing, especially primary
  care
• HSRA estimate PCP shortage will reach 250,000
  by 2020.
• Current studies show
• The number of Health Professional Shortage Areas
  has grown from 1,885 in 1997 to 3,814 in 2007
• 33 of active physicians are 55 years or older.
• IMGs make up 25 of physicians practicing in the
  US and 26 of the physician residency slots in
  2005
• IMGs currently hold the following residency
  slots
• 42 Internal Medicine, 37 Family Practice, 24
  Pediatric
• Federal Policy encouraging larger physician group
  practices
• Sources What Works Healing the Workforce
  Shortages PricewaterhouseCoopers Health Research
  Institute 2007

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Regulatory Changes Are Evolving

• DRG recalibrations and reclassifications into 745
  MS-DRGs which became effective October, 2007.
• Recognition of hospital acquired health events or
  complications as non-covered services effective
  10/08.
• Medicare patient 24-hour advance discharge
  notice.
• Post-Acute Care Payment Reform Demonstration
  mandated by the DRA of 2005.
• Creation of Medical Home demonstrations effective
  10/08
• Note Many of the proposed changes will not
  impact payment to Critical Access Hospitals.

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Florida Demand Model Demonstrates Change
The Florida Demand Model demonstrates a
continuing shift to the least restrictive
environment.
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Florida Demand Model Demonstrates Growth
The increasing focus on funding at the lowest
level of services and a customer preference to
stay in their own homes will result in increased
demand for assisted and independent living across
the country.
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Florida Estimated Growth in Home Care
Medicare
Medicaid/State Funded
The total home care visits, Medicare
Medicaid/Florida State funded are expected to
grow rapidly. The growth nationally in private
duty home care from 2000 to 2005 has been over
200 and due is expected to continue growing
rapidly. The growth of home care will be
limited by the costs of travel (both gas and
time) and the availability of staff.
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Professional and General Liability Insurance

• Key Implications of Changing Demand
• The demand for services reflects
• a growing level of clinical complexity and
  intensity in all levels of care which may
  increase the liability risks.
• Dramatic growth in post-acute care and assisted
  living
• as a substitute for acute care and skilled
  nursing care may increase the professional and
  general liability risk for these providers.
• The substitute of one level of care for another
  without additional hours of care could increase
  care delivery risks
• SNF for acute, assisted living for long term care

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Professional and General Liability Insurance

• Key Implications of Changing Demand (continued)
• A shortage in available nursing staff to meet the
  growing demand could mean individuals elect to
  assume greater personal risk.
• Potential increases in risk may occur if
  providers do not clearly articulate the level of
  care available.
• Regulatory changes to reduce malpractice at a
  care delivery site that do not also cover the
  physician, nurse or other care giver may shift
  liability to those individuals.

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Underwriting Ramifications

• Healthcare provider shortages may lead to less
  qualified providers treating sicker patients
• An increase in IMG providers may lead to
  communication issues between providers and
  patients
• Increased vicarious exposures to employers caused
  by increased use of physician extenders
• Risk management needs to play a larger more
  visible role in the underwriting process

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Key Learning Points Implications to Leadership

• Greater shifts of care to post-acute venues
• Increased reliance on formal care
• Broader eligibility for public services
• Innovation in delivery and models of care
• Expanded options available for health, shelter
  and care
• Pioneering models of funding for services, i.e.,
  SNPs, Waivers
• Declining funding and demand for SNF services

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Key Learning Points Implications to Leadership

• Expanded options available for health, shelter
  and care
• Pioneering models of funding for services, i.e.,
  SNPs, Waivers
• Declining funding and demand for SNF services

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Key Learning Points Implications to Leadership

• The changes have occurred slowly over the last 25
  years with the implementation of the DRG system,
  managed care, population growth, increases in
  technology and changes in informal care giving.
• Mapping the Future allowed us to quantify the
  impact of the evolving and future changes on
  customer demand for aging services.

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Never Say Never Event New Healthcare Risks and
How They Are Managed

• Questions and Answers

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Many thanks to

• Sanford Elsass
• Chad Karls
• Katherine Keefe, Esq.
• Nancy Rehkamp