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What’s Needed to Make Healthcare More Efficient and Effective in NJ?

Experts say shift in focus to health outcomes is key – and that state needs to play greater role in gathering data to help target resources and efforts

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Improving diet and encouraging exercise. Relying on primary care more than hospital-based care. Making sure healthcare providers communicate effectively with each other and with patients.

These are among the major ways to improve New Jersey residents’ health, say healthcare leaders.

But they also represent a major challenge to how healthcare is currently delivered in the state, and are bound to upset many of the major players at the center of how New Jersey healthcare operates – with spending that’s among the highest in the country due to the large amount of healthcare that residents receive.

Healthcare executives and analysts from diverse backgrounds have returned repeatedly to those goals, and say that current delivery-system changes will contribute toward addressing them.

These changes include an increased focus on paying based on healthcare measurements rather than on the volume of services.

But there are major impediments to achieving these goals, such as a lack of good measurements to accurately gauge health outcomes, according to healthcare data experts.

And one healthcare analyst said the state government must take a more active role in ensuring that initiatives from health systems and insurers serve public health.

An example of why New Jersey’s healthcare needs improvement: The state’s spending on healthcare is among the highest in the nation – without the health outcomes to match.

New Jersey is fifth in the country in the amount it spends per person on healthcare, according to David Newman, the executive director of the Health Care Cost Institute, a Washington, D.C.,-based nonprofit that has access to health claims data from several major insurers. The institute is releasing state-level spending data for the first time today as part of an annual report on healthcare costs.

Newman said New Jersey’s high spending isn’t primarily due to excessive costs, but rather is driven by high utilization – simply put, New Jerseyans receive more healthcare than residents in other states.

But experts say New Jerseyans could become healthier while consuming less medical care if they received more preventive care from their primary providers, and improved their diet and physical fitness.

He noted that any attempt to save money across the healthcare system would prompt a response from those who see it as a threat to their income.

For example, any attempt to reduce the amount of healthcare services that New Jerseyans receive at hospitals could meet resistance from some hospitals, Newman said.

“Hospitals need a certain amount of fixed revenue to stay in business,” he said.

Newman’s point was reinforced by Shannon Brownlee, senior vice president of the Lown Institute, a Massachusetts-based organization that studies healthcare nationally.

Both Newman and Brownlee spoke yesterday in Newark at a conference on the future of healthcare sponsored by The Atlantic magazine.

“It’s got a lot of beds, got a lot of ICU units, got a lot of specialists,” Brownlee said of New Jersey. “We’ve invested in infrastructure, but it’s very much technology-based, hospital-based, specialist-based, and not invested in the kind of infrastructure we need to do really good primary care.”

But others say that at least some New Jersey providers are making progress.

Barry Ostrowsky, president and CEO of Barnabas Health, said the quality of clinical care in the state is second to none. But he said that there is room to lower healthcare spending – particularly by encouraging people to make healthier lifestyle decisions.

He said he hopes to someday be able to give employers information showing how encouraging employees to live more healthy lives can recent healthcare spending by 20 percent.

“Some of that consumption is unnecessary,” he said.

Ostrowsky said it’s going to be a challenge to make the necessary changes.

“It’s going to be a difficult cultural transition,” he said.

He recalled the years of public-service messages that raised awareness of littering. He said it will take a much greater effort to change fundamental factors that affect people’s health, such as their diets.

“What’s it going to take to teach each other to eat broccoli instead of beef jerky?” he said.

Summit Medical Group Chairman and CEO Dr. Jeffrey Le Benger pointed to his own organization as an example of the investment in improved primary care that’s occurring in New Jersey. He said Summit – the state’s largest doctor-owned medical practice – has succeed in lowering costs while improving patients’ health.

“Saying that nothing is really moving in New Jersey is not true – New Jersey has been a mover, and we have shown that,” Le Benger said.

Ostrowsky sees steps like the OMNIA Health Alliance sponsored by Horizon Blue Cross Blue Shield of New Jersey as a move in the right direction, by paying healthcare providers based on various measurements aimed at improving health.

Newman criticized currently available measurements for being too focused on the processes that healthcare providers use – such as whether hospitals provide certain tests and medications to patients when they arrive in the hospital -- rather than the health outcomes of their patients. He added that it will be expensive to gather the needed information, “but that is the only way that you can move the needle” in judging the value of healthcare.

Horizon’s OMNIA plans will charge lower monthly insurance premiums and allow consumers to pay less out-of-pocket if they visit providers at OMNIA’s “Tier 1” providers. These providers have agreed to accept lower payments per patient in return for an increased volume of patients. Along with the payment changes, Horizon and OMNIA Health Alliance members – which include both hospital systems and doctors, including those in Summit Medical Group – have committed to working together to share information and manage patient care.

OMNIA has been criticized by executives of hospitals left out of Tier 1, as well as legislators who represent parts of the state with no Tier 1 facilities. They’re concerned that Horizon didn’t choose the hospitals based on a transparent process, and that financially vulnerable hospitals could close if many consumers choose to switch from Tier 2 to Tier 1 providers. Horizon executives have responded that they’ve been more transparent than other insurers that have developed tiered health plans.

Barnabas, the state’s largest health system, is an OMNIA Health Alliance member.

“The OMNIA product is not going to close any hospitals,” Ostrowsky said, adding that having many hospitals doesn’t necessarily lead to good health.

Ostrowsky pointed to Newark as an example of a city that needs to have better health outcomes, despite having three hospitals.

“There will come a time, I think, where we’ll sit down and say, ‘What do the people need? Do they need more hospitals, or do they need more physicians, or do they need more clinics?’ ” Ostrowsky said. “How are we going to get to the real issue, which is: How are we going to raise the health status of the citizens of New Jersey?”

Ostrowsky’s remarks come at a time when the future of Saint Michael’s Medical Center is front and center in the city.

California-based Prime Healthcare is trying to buy the bankrupt hospital. Barnabas could pursue a bid at a sale process scheduled in bankruptcy court for early November, but Saint Michael’s supporters have said this could lead to the hospital closing. The state could also pursue control of the hospital.

Horizon executives said the OMNIA Health Alliance arose from a clear demand for change from the status quo.

“The fee-for-service model was not getting us where we wanted to be,” Horizon Senior Vice President Kevin P. Conlin said.

Horizon President and CEO Robert Marino said that the terms “Tier 1” and “Tier 2” might have hurt OMNIA’s reception.

“That’s industry nomenclature -- it’s actually used by the federal government,” Marino said. “This was never a statement about quality.”

However, in announcing the alliance, Horizon executives did highlight that the quality of the systems included in OMNIA was a factor in picking the members. Horizon has since emphasized that there were several other factors.

New Jersey Policy Perspective senior policy analyst Raymond J. Castro said that the benefits of OMNIA – particularly the potential to better manage patients’ healthcare – are difficult to convey to consumers. He noted that the federal health insurance marketplace focuses consumers’ attention on the price of health plans, with little information on the quality of coverage.

Castro raised a broader point about the significance of the changes rippling through New Jersey healthcare, from the expansion of tiered insurance plans to hospital consolidation. He said state government should be playing a bigger role.

During a recent state Senate hearing on OMNIA, Castro noted, state officials cited statutory limitations in their approach to the proposed plans, and there didn’t appear to be coordination across the three departments of state government that could be affected by the plans: the Health, Human Services, and Banking and Insurance departments.

“I don’t get the impression that all three of them are working together on a lot of the issues that were raised at the hearing,” Castro said, noting that state officials have said they’re limited in the amount of information that they can collect from insurers.

“I feel that we need much more state involvement. We need a lot more requirements in terms of transparency,” Castro said.

Castro also called on hospital systems to embrace his think tank’s agenda to decrease poverty in the state. He emphasized that poverty is an underlying factor in poor health outcomes.

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