New Affordable Care US health plans will exclude top hospitals

By Stephanie Kirchgaessner in Washington for the Financial Times (link to original story)

December 8, 2013 5:51 pm

Americans who are buying insurance plans over online exchanges, under what is known as Obamacare, will have limited access to some of the nation’s leading hospitals, including two world-renowned cancer centres.

Amid a drive by insurers to limit costs, the majority of insurance plans being sold on the new healthcare exchanges in New York, Texas, and California, for example, will not offer patients’ access to Memorial Sloan Kettering in Manhattan or MD Anderson Cancer Center in Houston, two top cancer centres, or Cedars-Sinai in Los Angeles, one of the top research and teaching hospitals in the country.

Experts say the move by insurers to limit consumers’ choices and steer them away from hospitals that are considered too expensive, or even “inefficient”, reflects the new competitive landscape in the insurance industry since the passage of the Affordable Care Act, Barack Obama’s 2010 healthcare law.

It could become another source of political controversy for the Obama administration next year, when the plans take effect. Frustrated consumers could then begin to realise what is not always evident when buying a product as complicated as healthcare insurance: that their new plans do not cover many facilities or doctors “in network”. In other words, the facilities and doctors are not among the list of approved providers in a certain plan.

Under some US health insurance plans, consumers can elect to visit medical facilities that are “out of network”, but they would probably incur high out of pocket costs and may need referrals to prove that such care is medically necessary.  The development is worrying some hospital administrators who see the change as an unintended consequence of the ACA.

“We’re very concerned. [Insurers] know patients that are sick come to places like ours. What this is trying to do is redirect those patients elsewhere, but there is a reason why they come here. These patients need what it is that we are capable of providing,” says Thomas Priselac, president and chief executive officer of Cedars-Sinai Health System in California.

One of the biggest goals of “Obamacare” was to make subsidised healthcare plans that are being sold on the new exchanges as affordable as possible, while also mandating that certain benefits, like maternity care, were covered and that people with pre-existing medical conditions could not be denied access.

Amid these new regulatory restrictions, says Tim Jost, a health policy expert, insurance companies have had to come up with new ways to cut the cost of their products. In this new era, limiting the availability of certain facilities that are seen as too expensive – in part because they may attract the sickest patients or offer the most cutting edge medical care – is seen as the best way to control costs.

“It’s like buying a Mercedes-Benz or a Chevy. You have to decide whether you want to pay for the highest product out there, which is probably pretty good quality, or the less expensive product,” Mr Jost says. “Everyone is in favour of competition until they see what it looks like. Then they think, maybe it’s better for someone else just to pay for the whole thing.”

Kathleen Harrington, who heads government relations for the Mayo Clinic in Minnesota, says that access to the famous clinic was initially limited in the Rochester, Minnesota area until officials at the healthcare exchange board in the state encouraged insurers to expand their network options.

While the Mayo Clinic will now be available on seven different plans offered by two different insurance carriers in Rochester, Ms Harrington says the long-term concern for the hospital is that intense focus on bringing down costs will hurt “centres of excellence” like Mayo that attract the most complicated medical cases in the country.

“I don’t think there is any doubt that a significant portion of the Mayo base are very sick patients. You don’t come here for primary care. We do treat the sickest of the sick. We do experimental treatment. This is where you come for innovative treatments for life threatening illnesses,” she says.

“If healthcare, the full spectrum from primary to top speciality care, becomes commoditised, it becomes a concern for the American healthcare system,” she adds.

When the Obama administration was asked whether the new healthcare exchanges were offering adequate network options to new consumers, a spokeswoman for the Department of Health and Human Services (HHS) emphasised that the new exchanges would “vastly increase” the access to medical providers to millions of uninsured Americans.

“Decisions about which private health insurance plans cover which doctors is a decision currently made by insurers and providers and will continue that way,” said an HHS spokeswoman.

The top lobby group for US health insurance plans, America’s Health Insurance Plans, said the new healthcare law brought “new costs” to the industry and that selecting hospitals and physicians that meet “quality standards” was one way of making health plans more affordable for consumers.

But Mr Priselac at Cedars-Sinai in Los Angeles says the creation of ever more narrow provider networks by insurers is being driven by price alone, and not by quality. He says the hospitals that are being excluded are leaders in innovation, which saves billions of dollars for the healthcare system in the long run.

“There is confusion between price and efficiency,” he says. “The major teaching and research hospitals are more expensive not because they are inefficient but because of what they do.”

UC Ponders New On-Line Revenue Stream

Timothy Hampton
Professor of French and
Bernie H. Williams Professor of Comparative Literature
U.C. Berkeley

This just in. . .


Dateline, Oakland, CA. Officials of the University of California are reacting cautiously to a new proposal floated by advisors to the campaign of Republican Gubernatorial Candidate Meg Whitman. The proposal aims to help close the Budget Deficit of the struggling ten-campus system. Whitman,
whose development of the eBay on-line auction site has made her a billionaire, has long been a critic of the size of the California Government, and has vowed, if elected, to cut thousands of jobs from the public sector, including UC and CSU. However, advisors close to the Whitman camp have recently advanced a new approach for funding public education that would harness the power of the Internet to reduce the size of UC.

The program, provisionally dubbed uBay, would enable citizens to place on-line bids to purchase pieces of the vast ten-campus system, from parcels of land, to buildings, to campus furniture. “Let’s face it, UC is as bloated as the rest of the public sector,” announced Helmut Sitzbad, an official close to the Whitman Campaign. “This innovative program would enable the average taxpayer, people like you and me, to help slim down some of the fat. Just log on, select your item, and click. Presto, UC will be smaller and you will own a piece of California history.” Sitzbad noted that buildings all across the System could easily attract wealthy developers looking for investment opportunities in a slack real estate market. “But the beauty of this idea is that everyone can own a piece of UC,“ he added. “We’ve got classrooms on all ten campuses with too many chairs, tables, and desks—not to mention chalkboards that don't get written on and windows that don't get closed. With the coming of recycling even the waste baskets are under-utilized. Through our plan Californians could purchase these appealing items with a simple click of their mouse. The University would shrink, its budget would grow, and the citizenry would feel itself linked to UC in an entirely new way. Some might complain that this is a form of privatization. However, at the end of the day, we see this as a way of putting the University literally back in the hands of the taxpayers.”

UC officials have been cautiously optimistic about the new uBay proposal. University spokesperson Bob Furlong noted that the plan could help alleviate some of the logistical problems on campus. “Cuts to teaching budgets mean that we’ve already got overcrowded classrooms all across the System,” he
said in an e-mail. “By eliminating desks and tables we should be able to create more space in some of our bigger lecture halls, thereby increasing standing-room capacity. The sale of windows and doors would bring knowledge to students unable to squeeze into the rooms where lectures and seminars are held.” He added that, while selling off entire buildings might seem like a big step, small departments could conduct some of their business outside during nice weather and faculty could “bunk” with each other by sharing offices during the rainy season. “We’re always promoting collaborative research, and this might well further our efforts in that direction,” he noted.

UC officials plan to solicit faculty input on the uBay initiative, but the University is confident that the pushback will be minimal. “These days UC is all about moving on-line,” noted C. Johnson Hacker, Assistant Director of Administrative Obfuscation for UC’s President’s Office. “We are moving at warp speed toward on-line courses, and next month we’ll be unveiling two exciting new initiatives to market the UC name over the Web. Our innovative digital advisement program, ‘Download-a-Dean,’ and our live-chat teaching program, ‘The Tweeting Tutor,’ both hold enormous promise for filling UC’s
coffers while engaging with the public in exciting new ways. In our view, it’s part of the University’s public mission to make UC available to everyone with a Paypal account.”

Officials close to the Whitman campaign caution that the fledgling uBay project is still on the drawing board, and they are undecided as to the extent of its reach into the often arcane world of Academe. “We’re excited about the idea of reducing bloat by selling off buildings, land, and perhaps a few professors,” noted spokesperson Sitzbad. “We’re less clear on things like bacteria, which have enormous revenue potential because they reproduce like crazy, but could, in the wrong hands, be dangerous. We’re very concerned to keep the great treasure that is the University of California
away from people who might behave irresponsibly."

Memo From UCPB on Problems with UCOP Restructuring (2008)

NOTE: President Yudof and others continue to use the restructuring of the Office of the President as evidence both of effective cost-cutting and of their capacity to plan for the future. About half of the $67 million in alleged savings were in fact offloads of costs to other units. But the larger point is whether Though this memo was not endorsed by Academic Council, it reflects long study and deliberation by UCPB, and addresses an important planning issue for the University of California

Re: UCOP Restructuring
Fr. UC Systemwide Academic Senate Committee on Planning and Budget (UCPB)
Dt: Spring 2008

Summary

This memo seeks to make the case that Academic Council should articulate its own expectations for the outcome of the epochal transformation of UC’s Office of the President that is genreally known as “restructuring.” Over the course of this year, UCPB has repeatedly reviewed a range of restructuring documents, and has consulted on many occasions with a range of principal architects that includes Dan Greenstein, Rory Hume, Katie Lapp, and Michael Reese. Our lead finding is that the restructuring process, though generally positive, has strayed from its framing principles as outlined in three major documents, “The Blum Memo,” the “Monitor Report,” and the “Roles Report.” Our recommendation is that the Senate formally request that the President insure that OP restructuring reflects the careful and systematic implementation of the principles embodied in those guiding documents, defined as follows:

Academic Council should request that the Senate Chair communicate to the President our views on UCOP restructuring as follows (note that all “Principles” are defined in the text that follows this list of recommendations):

1. Council endorses the three documents’ emphasis on making UC planning and management more proactive, communicative, well coordinated, and long-term (Principles I and II).

2. Council endorses the general spirit of improved effectiveness behind the restructuring, including reorganization by function (Principle V). But it also believes that restructuring will succeed only if UCOP’s culture moves in the direction of “open collaboration” with various constituencies, including campus administrations and all levels of the Academic Senate (Principle IV).

3. Restructuring planning should not be driven by short-term budgeting. While quantitative measures are crucial benchmarks, they cannot substitute for functional analysis and design. In addition, care should be taken to support UCOP employees during the transition, and to support UCOP’s human resources in keeping with the values of humane treatment that universities generally espouse.

4. UCOP should recognize that “Systemwide Support Functions” are at least as important to the campuses as are “Presidential Support Functions.” Council recommends that UCOP see these functions as often intertwined. Council thus does not endorse Principles VI and VII, which put systemwide support in a subordinate position. UCOP should consider retaining and improving these, in keeping with much of the language of the Roles Report.

5. Prior to final decisions about service restructuring, UCOP should solicit systematic advice from a broad cross-section of the service-users of the campuses (and not only from their senior managers) as to which services should or should not be devolved, and how, and to what extent. Systemwide support should be devolved, cancelled, spun-off, downsized, or outsourced only in careful consultation with the current users of those services.

6. UCOP should not direct academic planning, but should focus on finding and developing resources to support the specific goals and the common ambitions of the campuses, and to coordinate and synthesize bottom-up goals across campuses. Given UCOP’s recent difficulties with playing constructive, supportive, coordinating roles with its academic programs, it should consider devolving all academic affairs to campuses, with UCOP’s role being taken over by a designated lead campus.

Definition of the Issue

The UCOP restructuring process began as an effort to reduce administrative costs by around $20-30 million a year while also improving operations. For many reasons, restructuring escalated into a rethinking of the entire function and status of UCOP, has resulted in operational cuts, a voluntary separation program, and layoffs, and is in the process of spinning off what had long been regarded as core service functions such as pension and benefits administration to third-party vendors or to individual campuses.

Many, perhaps most, of the restructuring changes are highly desirable. Examples of good changes are the consolidation of business support functions such as accounting and computing support, and the redesigning of the capital projects operation to reflect a streamlined, modernized capital projects approval process. Every campus has a long litany of complaints about the ineffectiveness and obtuseness of the old OP, and UCPB endorses the general practice of intelligent redesign of UCOP operation, as well as its timely implementation. We have also made every effort to offer “real-time” feedback to UCOP as part of our role in shared governance. In general we affirm the overall goals of UCOP restructuring, and see the dark clouds surrounding the University as having a silver lining of enabling new economies, new effectiveness, and new thinking in UC’s central administration.

But other aspects of the change have not been so obviously positive. As noted above, UCOP has issued a Request for Proposals to farm out Benefits to a 3rd-party vendor, and we have been unable to obtain any indications of service complaints or major operating problems that would justify the RFP: to the contrary, Benefits is an OP success story, highly popular with faculty and staff. It is not clear to us why UCOP would keep Human Resources – which gets less favorable reviews – while getting rid of Benefits. Similarly, sending Continuing Education at the Bar to Berkeley Law School gets 197 staff FTE off UCOP’s books but saves no money for the UC system through a program that was in any case financially self-sustaining; the change was not accompanied by any academic rationale or operations analysis that we know of. To take another example, UCOP is sending its own HR operations to UCSF, again with little obvious opportunity for cost saving or new efficiencies.

In addition, the process itself has posed problems for the Academic Senate. The changes noted above were announced as accomplished facts prior to any feedback from the relevant Senate standing committees. The possibility that changes in Institutional Research will reduce information for Senate standing committees’ below current levels was not carefully considered. UCPB is also very concerned about the loss of highly-experienced and well-qualified personnel, and about widespread reports of the lowered morale of the OP workforce that has resulted not simply from organizational change, but from a change process that has often appeared non-consultative and political. We have noted further than any problems with spin-offs and push-downs that are discovered later will be very difficult to reverse: these include the outsourcing of Human Resources and Benefits, and the delegation of a not-yet-clarified bundle of systemwide services to the campuses with possible new cost burdens for campus budgets. In keeping with the absence of advance notice, UCOP has not solicited formal review from the Academic Senate on the rationales, the processes, or the outcomes of the elements of an epochal transformation of the University’s structure. Academic Council has not yet offered a formal comment. Since UCPB has considered this issue in virtually every meeting this year, we now offer our overview of the process.

Analysis of the Restructuring Framework

The structuring process was defined by in three major documents, “The Blum Memo,” the “Monitor Report,” and the “Roles Report.” In what follows, we identify a series of principles that were articulated by these documents as a group.

The Blum Memo

The first document was Regent Blum’s memo on making UC “Strategically Dynamic” (August 2007). Its most critical points are the following:

I. Planning and budgeting need to be more systematic, proactive, and oriented toward multi-year time horizons.
II. Decision-making needs to be removed from its organizational “silos.” Chains of command need to be more clearly defined, while communication and coordination among them are rapidly improved.

These two principles were signaled by the memo’s key phrase, “strategically dynamic,” in which “strategic” means “undertaking clear, multi-year, and integrated planning,” and “dynamic” means ensuring an administrative infrastructure that is lean, nimble, and results-oriented, and . . . able quickly to adapt to changing circumstances.”

Over the years, UCPB and other Senate agencies have called for exactly these things (as have faculty and administrators around the UC system). In our view, these principles form a solid foundation for important administrative improvements.

Regent Blum made various specific suggestions, identified a process for discussion and implementation, and reserved his most direct criticism for the capital projects process - the arena of his sole outsourcing proposal. He also made another suggestion of particular relevance to the Senate:

III. The Academic Senate [should] undertake a parallel examination of its practices to see whether there are possible efficiency gains to be made in fulfilling the governance responsibilities delegated to them by the Regents.

This is also a valuable suggestion, and UCPB takes this up in a separate memorandum.

The Monitor Report

The first two principles reappeared in somewhat different form in the “Monitor Group Report to the Regents: University of California Organizational Restructuring Effort” (September 2007). This Report’s dominant theme was as follows:

The persistent underperformance of UCOP on several key dimensions has led to a broad lack of confidence on the part of the Regents and the campuses. As a result, both groups end up working around rather than through the central management structures of UCOP.

The Monitor Report itemized three aspects of this underperformance:

• Decision-making in UCOP is “not transparent”;
• UCOP “acts as gatekeeper rather than as partner”;
• “UCOP tends to impose solutions that do not meet campus needs and that add to their costs.”

This diagnosis led to a recommendation that was pervasive but implicit, and which we translate in this way:

IV. UCOP needs to move rapidly towards more flexible, “bottom-up” coordination of the system as a whole. This entails a major transformation of UCOP culture towards an organizational model that could be called “open collaboration.”

The Monitor Report’s comments on organizational culture, both explicit and implicit, get at the heart of both UCOP’s operational weaknesses and at the UC system’s worrisome “fragility” as an overall institution, as President Emeritus Robert Dynes put it in a recent meeting. It is hard for us to imagine UC recovering systemic strength and purpose without the kind of cultural change the Monitor Report invokes.

The Report describes a UCOP reorganization in 3 waves, and there are many specific suggestions with which we agree. Overall, the Report’s guiding conceptual principle is simply stated.

V. Reorganize UCOP by function, not by department.

It appears that UCOP has taken this latter principle seriously. We would emphasize, however, our conviction that little will be accomplished through functional restructuring without cultural change - change that will enable greatly improved circulation of information, higher levels of trust, and interactive forms of collaborative governance in a decentralized and complex university system. In other words, Principle 5’s success depends on the implementation of Principle 4.

The Roles Report

The third major document was written by a Working Group sponsored by the Regents’ Governance Committee, and appeared under the title of the “Report of the Working Group on the Roles of the Office of the President” (January 2008). Membership consisted of Senior Managers, Regents, one Senate representative, and members of the Monitor Group, and the report were produced without consultation with Academic Council or with the Senate’s standing committees.

The Roles Report differed from the other two documents in focusing on the structure and status of the executive authority of the President, the Regents, and the Chancellor. It established the following principles:

VI. UCOP’s first function is to “support the president in executive leadership of the university as a whole,” with emphasis on supporting the information needs of the Regents.
VII. UCOP’s “secondary function is to provide various services to the wider university community.”

This ranking of functions placed executive support ahead of systemwide service.

UCPB does not support this ranking: we believe, to the contrary, that the University as a system in fact rests on providing collaborative and effective systemwide services. The Roles Report appear on its face to be in some tension with the Blum Memo and the Monitor Report, for these clearly opposed a top-down approach to governance and called for UCOP to remake itself as an interactive collaborator with overall system.

In addition, the Roles Report does not streamline the President’s functions, but multiplies and solidifies four distinct functions, each of which is further divided into multiple activities.

These functions themselves deserve comment. Two of them are not controversial. “Guardian of the Public Trust” refers to legal responsibility for various kinds of regulatory compliance, ethical practice, and impartial public service. “Primary External Advocate” offers variations on the President’s obligation to represent the University’s interests and capabilities as a system.

But the two other functions identified in the Roles Report should be examined with particular care. “Chief Executive Officer” describes what could be mistaken for a centralized, top-down management command structure much like an old-style multidivisional corporation, and may sustain the unwieldy, authority-focused, risk-averse system that the Blum Memo and the Monitor Report criticized.

The fourth role is “Academic Leader of the Institution.” When elaborated in statements such as “the president defines and leads the execution of long-term plans for the university, following policies set by the Regents,” it appears to assimilate, with dubious propriety, the academic authority traditionally vested in the University’s faculty. The role of “Academic Leader” also lacks an empirical foundation. Historically, the University’s academic vision has been developed and implemented at the level of campus departments, divisions, colleges, and schools. The Roles Report offers no rationale for this idea of the President as a definer of academic missions. Nor does the idea appear to be practical, as it would place an impossible burden of intellectual invention and synthesis on the already-overtaxed top leadership of an enormous institution.

It is thus possible to read the Roles Report as contradicting the Blum Memo and the Monitor Report when it calls for a major augmentation of the President’s scope of action and “definitive decision-rights” exercised on behalf of the University. UCOP restructuring conflicts with an envisioned augmentation of executive authority, which could in turn lead to the concentration of UCOP resources on serving the President rather than serving the University.

At the same time, the Roles Report provides a useful categorization of UCOP’s administrative activity, and at several points (e.g. Figure 2) it affirms the continuing value of “Systemwide Support Functions.” Although the Roles Report puts systemwide support in a secondary position, it does call for UCOP to retain and enhance the latter under certain conditions, summarizable in this principle:

VIII. UCOP should retain service functions “for which there is a clear benefit to having one entity perform [them] on behalf of the entire system,” or when local functions “benefit from integration/coordination . . . across the system.”

Based on UCPB’s experience with UCOP, This principle implies that a high proportion of UCOP’s service functions should remain with UCOP, although in rationalized and streamlined form. Even the most obvious “bottom-up” exception – Academic Affairs, whose programs originate with individual faculty and programs – can benefit from multi-campus coordination where that coordination has become “flattened,” reciprocal, and interactive.

It is not clear to UCPB that the current implementation scheme is following this principle. To take one of our previous examples, Benefits administration would seem to be a paradigm of a function that serves the “entire system” in the same way, has not been found through functional analysis to be seriously flawed, and yet may be the first major function to experience outsourcing. UCPB believes that there is a real danger that the Presidential Support Functions could increasingly encroach on vital Systemwide Support Functions. This could have the unintended consequences of further damaging campus support for UCOP, and of reducing rather than improve the quality of service.

In sum, when it strays from the Blum Memo and the Monitor Report, the Roles Report has the potential to trap UCOP between the authority-focused executive, whose exertions of control are both costly and inefficient; and the minimalist service provider, in which campuses pay more to receive less service. UCOP could move towards a “worst of both worlds” scenario. This is certainly not inevitable, and is something that nobody wants. But it is an endpoint that is being made somewhat more likely by the haste of the restructuring process, the urgency granted to financial targets over functional redesign, and the Roles’ Report’s de-emphasis of UCOP’s systemwide service functions.

Our recommendations can be found at the top of this memo.