In 1980, while working at the University of Chicago Pritzker School of Medicine, I wrote an article for the Harvard Business Review entitled “The Health Care Market: Can Hospitals Survive?”. This article, and the book which followed, argued that hospitals faced a tripartite existential threat:
1) ambulatory technologies that would enable physicians to compete successfully with hospitals at lower cost in their offices or freestanding settings, 2) post-acute technologies that would enable presently hospitalized patients to be managed at home and 3) rapidly growing managed care plans that would “ration” inpatient care and bargain aggressively to pay less for the care actually provided.
I predicted a significant decline in inpatient care in the future, and urged hospitals to diversify aggressively into ambulatory and post acute services. Many did so. A smaller number, led by organizations like Henry Ford Health System of Detroit and Utah’s Intermountain Health Care, also sponsored health insurance plans and became what are called today “Integrated Delivery Networks” (IDN’s).
In the ensuing thirty years, US hospital inpatient census fell more than 30%, despite ninety million more Americans. However, hospitals’ ambulatory services volume more than tripled, more than offsetting the inpatient losses; the hospital industry’s total revenues grew almost ten fold.
Ironically, this ambulatory care explosion is now the main reason why healthcare in the US costs so much more than in other countries. We use far fewer days of inpatient care than any other country in the world. But as the McKinsey Global Institute showed in 2008 ambulatory spending accounts for two thirds of the difference between what the US spends on healthcare and what other countries spend, far outstripping the contribution of higher drug prices or our multi-payer health financing system.
Continue reading “Can Hospitals Survive? Part II”
Filed Under: Economics, THCB, The Business of Health Care, The Vault
Tagged: ACA, ACOs, health reform, Hospital Revenues, Hospitals, Lean Care, Readmissions, Virginia Mason
Mar 14, 2014
Last month, the Center for Medicare and Medicaid Services (CMS) reported first-year results from the Medicare Shared Saving Accountable Care Organization Program (MSSP).
As noted in a previous post, shifting to an accountable care model is a long-term, multi-year transition that requires major overhauls to care delivery processes, technology systems, operations, and governance, as well as coordinating efforts with new partners and payers.
Participants in the MSSP program are also taking much more responsibility and risk when it comes to the effectiveness and quality of care delivered.
Given these complexities, it is no surprise that MSSP’s first year results (released January 30, 2014) were mixed. The good news? Of the 114 ACOs in the program, 54 of the ACOs saved money and 29 saved enough money to receive bonus payments.
The 54 ACOs that saved money produced shared net savings of $126 million, while Medicare will see $128 million in total trust fund savings.
At the time, CMS did not provide additional information about the ACOs with savings versus those without.
While a more complete understanding of their characteristics and actions will be necessary to understand what drives ACO success, the recent disclosure of the 29 ACOs that received bonus payments allows us to offer some preliminary interpretations.
Continue reading “The ACO Hypothesis: What We’re Learning”
Filed Under: Economics, Physicians, THCB
Tagged: ACOs, CMS, Costs, Farzad Mostashari, Medicare Shared Savings Program, Ross White, The States
Mar 12, 2014
Since CMS’s Center for Medicare and Medicaid Innovation launched three years ago, its staff have been frequently hailed for undertaking an ambitious research agenda.
But a New York Times story this week was eye-catching for a different reason: author Gina Kolata mostly assailed Medicare’s researchers for how they’re choosing to do that research.
“Experts say the center is now squandering a crucial opportunity,” Kolata wrote in a front-page article. ”Many researchers and economists are disturbed that [CMMI] is not using randomized clinical trials, the rigorous method that is widely considered the gold standard in medical and social science research.”
But many researchers and economists that I talked to at this week’s Academy Health conference say that’s not the case at all. (And some were disturbed to learn that they were supposed to be disturbed.)
“RCTs are helpful in answering narrowly tailored questions,” Harvard’s Ashish Jha told me. “Something like—does aspirin reduce 30-day mortality rates for heart attack patients.”
“However, for many interventions, RCTs may be either not feasible or practical.”
“While RCTs may be the gold standard for testing some hypotheses, it is not necessarily the most effective or desirable model for testing all hypotheses,” agrees Piper Su, the Advisory Board’s vice president of health policy.
CMMI’s ambitious goals
On its surface, Kolata’s article is built around a reasonable conclusion: RCTs offer plenty of value in health care, and we’d benefit from more of them.
- As Jha alludes to, think of a double-blinded pharmaceutical study where half the participants randomly get a new drug and the other half get a placebo; that’s an RCT.
- The famous RAND study that found having health insurance changes patients’ behavior: An RCT.
- The ongoing Oregon Health Insurance Experiment: Also, an RCT.
And it’s fair to examine how CMMI is pursuing its research, too.
Continue reading “What the New York Times Got Wrong about Medicare’s Innovation Center”
Filed Under: THCB
Tagged: ACOs, Center for Medicare and Medicaid Innovation, CMS, Dan Diamond, health care delivery, health reform, NYT, randomized clinical trials
Feb 5, 2014
More than 55 percent of the U.S. population now lives in a local area with an accountable care organization (ACO), in which a group of providers is held accountable by a payer for the total cost and quality of care for a defined set of patients. The spread of ACOs, however, by no means ensures their success.
Significant questions remain about whether the goals of the model—better care at lower costs—will be achieved.
There are some signs that the ACO model—by rewarding provider organizations for implementing high quality mechanisms for care delivery that lower overall costs—is driving innovation in the marketplace. For example, the Montefiore ACO in New York City is using special scales in the homes of patients with congestive heart failure to monitor for changes in weight that could indicate trouble.
Walgreens has formed three ACOs and is using its retail pharmacies as low-cost care centers. In addition, the Beth Israel Deaconess Care Organization created a high-touch care management system in which nurse practitioners visit the ACO’s sickest patients at home to reduce the number of hospital readmissions.
Yet, there are also challenges inherent in the adoption and implementation of the ACO model. There have been several wide-ranging proposals on how to enhance accountable care, especially in Medicare, but we believe that developing policies to standardize measurement is an important first step.
First, we need to promote adoption of a core set of effective measures across payers. Current measures, such as screening for high blood pressure, are limited in scope and fail to incorporate important dimensions, including health outcomes meaningful to patients and the total cost of care for those within the ACO. Proposals for more advanced measures have been developed but not yet adopted, in part because of provider concerns about being held accountable for aspects of performance they do not fully control.
These issues could be addressed by operationalizing the concept of “shared accountability” through patient engagement and partnerships, as with local, multistakeholder community health coalitions, and embracing a core set of more challenging and meaningful metrics, such as functional health and total costs per capita.
Continue reading “Measuring What Matters for ACOs”
Filed Under: THCB, The Business of Health Care
Tagged: ACOs, Elliot Fisher, Janet M. Corrigan, Medicare Shared Savings Program, Outcomes, performance metrics, The Dartmouth Atlas Project, Transparency, William L. Schpero
Feb 4, 2014
As he ascends to the Chair of the Senate Finance Committee, Senator Ron Wyden’s recent proposal to reform Medicare by improving care for the chronically ill has garnered significant attention and support. Its topline goal of incentivizing integration of care for high-risk patients is resonating with stakeholders across the health care continuum.
In light of its momentum and Senator Wyden’s imminently expanding authority over Federal healthcare programs, we thought it wise to take a closer look at his plan – the “Better Care, Lower Cost Act” (BCLA). What we found is more interesting, ambitious and – potentially - complex than the headlines suggest.
In essence, the BCLA would allow providers (and health plans) to form new entities – labeled Better Care Programs (BCPs) – that receive capitated payments for all Medicare-covered services delivered to their enrollees. The initiative would initially focus on regions of the country with disproportionately high rates of chronic illness and only medically complex patients would be allowed to enroll.
There are a variety of medical protocols that BCPs would be required to adopt, including development of personalized chronic care plans for each enrollee.
If you are hearing echoes of the Accountable Care “movement,” then you are in the right concert hall but listening to a very different symphony. While BCPs share some characteristics with ACOs, they would differ in important ways. A limited number of ACOs in Medicare currently take full(ish) financial risk, but all BCPs would do so, with some risk corridors instituted in the first few years.
Unlike most ACO programs, control groups would be established for purposes of measuring BCP performance. Also - and this is pivotal - BCPs would be required to proactively enroll Medicare beneficiaries, while patients are typically passively attributed to ACOs.
By taking a giant step down the shared savings path, which it travels alongside ACO programs, the BCLA further blurs the line between traditional fee for service and managed care. BCPs would actually be compensated in the same manner as Medicare Advantage plans, the private insurance option in Medicare.
Continue reading “Unpacking the Wyden Chronic Care Bill”
Filed Under: THCB
Tagged: ACOs, Better Care, Better Care Programs (BCPs), Billy Wynne, chronic care, Lower Cost Act (BCLA), Medicare Reform, Ron Wyden
Jan 30, 2014
With the beginning of 2014 comes another year of the great accountable care organization (ACO) debate.
Is it a model to deliver high-quality, cost-effective care and improve population health management (PHM)? Or, just a passing fad, similar to the HMOs of decades ago?
Many opinions exist, and they’ll continue to be debated, especially during an election year. One thing most of us can agree on about ACOs is they are a work in progress.
We can say with some certainty that ACOs are taking hold; look no further than their growth, which now exceeds 600 public and private ACOs nationwide with the recent addition of 123 ACOs to the Medicare Shared Savings Program. But they still beg more questions than answers. What types and sizes of hospitals are forming ACOs, and where are they located? What does the pipeline of emerging ACOs look like, and how long will their journey take? And what capabilities, investments and partnerships are essential to ACO participation? What is the longer term performance?
Who better to ask than the decision makers running the organizations that participate in an ACO?
In August of 2013 we surveyed 115 C-suite executives– primarily CEOs (43.5%), chief financial officers (17.4%) and chief operating officers (16.5%) – across 35 states to collect data on their perspectives on ACO and PHM.
Survey results support the increase in ACO popularity. According to respondents, ACO participation has almost quadrupled since spring 2012: More than 18% say their hospitals currently participate in an ACO, up from 4.8% in spring 2012. This growth is projected to accelerate, with about 50% of respondents suggesting their hospitals will participate in an ACO by the end of 2014. Overall, 3 out of 4 senior executives surveyed say their hospitals have ACO participation plans.
Since survey respondents also represent hospitals of different locations, sizes and types, we are able to obtain a broader look at current and future ACO participation and found that:
- Non-rural hospitals (82.1%) are most likely to participate in an ACO overall, followed by hospitals in an integrated delivery network (81.1%).
- The lowest rates of projected participation are among rural hospitals (70.7%) and standalone hospitals (72.6%).
- Large hospitals are moving more quickly, as 30.8% said they’d be part of an ACO by the end of 2013.
- And though they’re equally as likely as large hospitals to ultimately participate in an ACO, small hospitals say they require additional time, with 48.6% planning to join in 2014 or 2015.
But some providers have been more deliberate and cautious about when they start their ACO journey. The pace of ACO adoption has been slower than originally anticipated 18 months ago, when more than half of executives predicted their systems would create or join an ACO by the end of 2013. Current survey results show that about 1 out of 4 will meet that projection.
Continue reading “The Great ACO Debate: 2014 Edition”
Filed Under: THCB, The Business of Health Care
Tagged: ACOs, bundled payments, Costs, Hospitals, Joseph Damore, Population Health Management, Premier Healthcare Alliance, Wes Champion
Jan 19, 2014
I first posed the question, “Could Mobile Health Become Addictive?” on August 20th. Since then I’ve done more thinking and I’m warming to the concept.
To start with, addiction is a word laden with negative meaning. When we hear the word, we think of opiates, street drugs, cigarettes, or possibly gambling. In fact, Wikipedia defines addiction as, “the continued repetition of a behavior despite adverse consequences.” So, with that definition as backdrop, is there any way health can really be addictive? Probably not.
What I’m really talking about is the juxtaposition of motivational health messaging with some other addictive behavior, specifically checking your smartphone.
New evidence shows that people are in love with these devices, checking them more than 100 times per day! I’ve heard people are tapping in 110, even 150 times a day. Of course this varies, but let’s face it, we check our smartphones a lot and it’s hard to stop. A somewhat disturbing video makes the case well. It’s easy to build a case that smartphones are addictive.
Recent research shows that checking your phone results in a small release of the neurochemical dopamine. Dopamine release has long been associated with ingestion of addictive substances such as heroin and tobacco. In fact, once the pattern of ingestion and dopamine release is established, even thinking about the ingestion triggers the dopamine release, the biochemical explanation for cravings.
For this post and a series to follow, I choose not to question whether this compulsive relationship with smartphones is good or bad, but simply to acknowledge that it is common, almost universal among smartphone users and to ask if we can exploit it as tool to improve your health.
Continue reading “Making Health Addictive”
Filed Under: Tech
Tagged: ACOs, Center For Connected Health, Joseph Kvedar, mHealth, Smartphones, Tech
Oct 26, 2013
On July 16, the CMS Innovation Center reported the first-year results for the Pioneer Accountable Care Organization program: 13 Pioneers, or about 40 percent of the participants, earned bonuses. The program saved Medicare a gross $87.6 million before bonus distributions, cutting the rate of growth in Medicare spending by 0.5 percent, from 0.8 percent to 0.3 percent annually.
However, nine of the 32 members dropped out and press reports hinted at a contentious relationship between the Pioneers and a well meaning but green and overtaxed CMS staff. It was not an auspicious beginning for a program whose advocates believed would eventually replace regular Medicare’s present payment model. There immediately followed a blizzard of spin control from ACO “movement” advocates stressing the need for patience and highlighting first year achievements.
What was irritating about the Pioneer spin is it treated the ACO as if it were a brand new idea with growing pains. This studiously ignores a burned out Conestoga wagon pushed to the side of the trail: the Physician Group Practice demonstration CMS conducted from 2005-2010. The PGP demo tested essentially the same idea — provider bonuses for meeting spending reduction and quality improvement targets for attributed Medicare patients. The pattern of arrow holes and burn marks on the PGP wagon closely resemble those from the Pioneer’s first year, strongly suggesting more troubles ahead for the hardy, surviving Pioneers.
The PGP Precedent. Like the Pioneers, PGP participants were not ordinary community hospitals or freshly formed physician groups or IPA’s. Rather, most were “high functioning” organized clinical enterprises, some with decades of global risk contracting or health plan operating experience. Particularly in light of the degree of clinical integration and care management experience of its participants, the PGP results were extremely disappointing; only two of the ten participants were able to generate bonuses in each of the program’s five years, and one, Marshfield Clinic, earned half the total bonuses. Managed care veterans like Geisinger Clinic and Park Nicollet earned bonuses in only three of their ten program years. Two other high-quality multi-specialty clinics had even rougher sledding, with Everett Clinic getting one year of bonus ($126,000) and Billings Clinic completely shut out.
The pattern in the first Pioneer year is remarkably similar. While thirteen of the Pioneers earned bonuses, it appears from press reports that four of them generated 2/3 of the savings. It is likely not coincidental that three of those four participants (Massachusetts General, Beth Israel Deaconess’ physician organization, and New York’s Montefiore) either run or practice at some of the most expensive hospitals in the country, in two of the country’s highest per capita Medicare spending markets. Orchards full of low hanging fruit (e.g. very high levels of previously unexamined Medicare spending) appear to be an essential precondition of ACO success.
Continue reading “Pioneer ACO’s Disappointing First Year”
Filed Under: THCB, The Business of Health Care
Tagged: ACOs, CMS Innovation Center, Jeff Goldsmith, Medicare Advantage Program, Physician Group Practice, Pioneer ACO, the business of healthcare
Aug 16, 2013
Since 1973, when Jack Wennberg published his first paper describing geographic variations in health care, researchers have argued about both the magnitude and the causes of variation. The argument gained greater policy relevance as U.S. health care spending reached 18 percent of GDP and as evidence mounted, largely from researchers at Dartmouth, that higher spending regions were failing to achieve better outcomes. The possibility of substantial savings not only helped to motivate reform but also raised the stakes in what had been largely an academic argument. Some began to raise questions about the Dartmouth research.
Today, the prestigious Institute of Medicine released a committee report, led by Harvard’s Professor Joseph Newhouse and Provost Alan Garber, that weighs in on these issues.
The report, called for by the Affordable Care Act and entitled “Variation in Health Care Spending: Target Decision Making, Not Geography,” deserves a careful read. The committee of 19 distinguished academics and policy experts spent several years documenting the causes and consequences of regional variations and developing solid policy recommendations on what to do about them. (Disclosure: We helped write a background study for the committee).
But for those trying to make health care better and more affordable, whether in Washington or in communities around the country, there are a few areas where the headlines are likely to gloss over important details in the report.
And we believe that the Committee risks throwing out the baby with the bathwater by appearing, through its choice of title, to turn its back on regional initiatives to improve both health and health care.
What the committee found
The report confirmed three core findings of Dartmouth’s research.
First, geographic variations in spending are substantial, pervasive and persistent over time — the variations are not just random noise. Second, adjusting for individuals’ age, sex, income, race, and health status attenuates these variations, but there’s still plenty that remain. Third, there is little or no correlation between spending and health care quality. The report also effectively identifies the puzzling empirical patterns that don’t fit conveniently into the Dartmouth framework, such as a lack of association between spending in commercial insurance and Medicare populations.
Continue reading “Making Sense of Geographic Variations in Health Care: the New IOM Report”
Filed Under: Economics, OP-ED, THCB
Tagged: ACOs, Costs, Dartmouth Atlas Project, Economics, Elliot Fisher, Geographic variation, IOM, Jonathan Skinner, Medicare, Population Health, Quality, The ACA, Triple Aim
Jul 24, 2013
What’s behind the recent EHR public relations blitz and our passionate debate in The Health Care Blog? It’s fear for the Affordable Care Act’s future. Oh, the ACA can weather political challenge in the short term, but in the long run, only health cost containment will matter. EHRs are the ship that institutions are counting on to navigate payment reform and, from the institutional perspective, physicians and patients are just along for the ride. From the citizen perspective however, cost containment will be seen as rationing unless patients and physicians are appropriately engaged in the most costly decisions.
The impact of yet more regulations, such as Stage 3 Meaningful Use, could be too late to save the ACA. For now, the administration and those of us that hope the ACA succeeds must work to shift EHR vendors and their institutional customers toward patient engagement using the tools of policy guidance, public relations and federal procurement.
First, a crash course in health economics. If you have a few minutes, read Accountable Care Organizations: Can We Have Our Cake and Eat It Too? by Jessica L. Mantel. Otherwise, just struggle through the next two paragraphs summarizing why EHRs are the lynchpin of health reform via the ACA.
Cost containment requires either cost controls or a shift away from fee-for-service payment. The ACA is based on accountable care as an alternative to fee-for-service. Accountable Care Organization (ACO) is shorthand for the new health care payments regime. By paying ACO institutions instead of individual service providers, health insurance companies and Medicare provide direct economic incentives to reduce waste, lower costs and, if we’re not careful, withhold needed care. An ACO is by definition an organization or institutional construct.
The EHR is is not the Jedi knight’s lightsaber, it is an institutional tool designed to bind the individual service providers into the Federation’s collective. Not surprisingly, patient engagement is an afterthought.
Continue reading “The Affordable Care Act Will Fail Without Patient Engagement”
Filed Under: OP-ED, THCB
Tagged: ACOs, Adrian Gropper, Blue Button Plus, EHR, HIT, patient engagement, Patients, The ACA
Jul 22, 2013