We recently participated in a program at Columbia Business School’s Healthcare Program on whether ACOs (Accountable Care Organizations) will fail. For those of you that don’t know, ACOs are one of the structures promulgated by PPACA (aka Obamacare) designed to encourage better cost control and quality improvement in the healthcare system.
The current zeitgeist among the commentariat is that ACOs will fail (examples: here and here). We think the reason for the one-sided nature of the question is that those of us who lived through the healthcare upheaval in the early and mid “90s” saw first hand the failure of PHOs, PPMs and IDNs (and all of the other acronyms now relegated to the dustbin of history). When ACOs are touted as a saving grace for the system, you can almost hear the collective groan of the industry veterans.
Ever the contrarian, however, we took the side of the debate that said ACOs will NOT fail. The premise of our argument was that since we already have a good idea of why the structure will fail, we can, a priori, fix the shortcomings, and though likely, ACO failure is not inevitable.
There is an extensive list of why list of why ACOs will fail. We put them into four general buckets.
Infrastructure: The system has mis-allocated resources so we have too many of some things and not enough of others leading to inefficiencies.
Technological/telecommunication: For a number reasons the healthcare system has not adopted technology as fast as other industries.
Cultural: Providers are habituated to fee-for-service payment mechanisms and patients aren’t likely to change their own healthcare behaviors.
Inertia: The well known system problems (e.g. asymmetry of information, the Pareto nature of patient demand, unexplained variation of care, counterproductive incentives) have been around forever and are difficult to overcome.
Because we spend most of our time identifying private healthcare companies with investment potential, we often get a view into what is happening in the entrepreneurial space under the punditry radar.
Continue reading “The ACO Failure Hypothesis: Likely But Not Inevitable”
Filed Under: OP-ED, THCB, The Business of Health Care
Tagged: ACOs, Asymmetry of Information, Columbia Business School, Les Funtleyder, Obamacare, PPACA
Apr 28, 2013
It was one of the most notorious quotes that emerged from the battle over the Affordable Care Act.
We have to pass the bill so you can find out what is in it. – House Speaker Nancy Pelosi, March 9, 2010.
The line was taken out-of-context, as Pelosi’s office has continued to protest. But more than three years after her quote — and nearly three years after the ACA passed Congress — Pelosi’s accidental gaffe seems pretty apropos.
The law continues to delight supporters with what they see as positive surprises; for example, some backers say Obamacare deserves credit for the unexpected slowdown in national health spending. But critics warn that the law’s perverse effects on premiums are just beginning to be felt.
And there still are “vast parts of the bill you never hear about,” notes Timothy Jost, a law professor at Washington & Lee. “I wonder if they’re [even] being implemented.”
Jost and a half-dozen other health policy experts spoke with me, ahead of Obamacare’s third birthday on Saturday, to discuss how the law’s been implemented and what lawmakers could have done better.
Continue reading “Five Things Obamacare Got Right-and What Experts Would Fix”
Filed Under: THCB, The Business of Health Care
Tagged: Affordable Care Act, Costs, Dan Diamond, Health Reform, HHS, Obamacare, PPACA, Preventive care, Universal coverage
Mar 20, 2013
It is as natural for doctors, hospitals, health plans and others to aggressively affirm their “patient-centeredness” as it is for politicians to loudly proclaim their fealty to the hard-working American middle class. Like the politicians, the health care professionals no doubt believe every word they say.
The most accurate measure of “patient-centered” care, however, lies not in intentions but implementation. Ask one simple question – what effect does this policy have on patients’ ability to control their own lives? – and you start to separate the revolutionary from the repackaged. “A reform is a correction of abuses,” the 19th-century British Parliament member Edward Bulwer-Lytton noted. “A revolution is a transfer of power.”
With that in mind, which purportedly patient-centric policy proposals portend a true power shift, and which are flying a false flag?
Falling Short Of Shifting Power
The two most prominent examples of initiatives whose names suggest power sharing but whose reality is quite different are so-called “consumer-driven health plans” (CDHP) and the “patient-centered medical home” (PCMH). Both may be worthy policies on their merits, but their names are public relations spin designed to put a more attractive public face on “defined contribution health insurance” and “increased primary-care reimbursement.
Continue reading “The Patient-Centered Practice, Revisited”
Filed Under: Hospitals, The Business of Health Care
Tagged: CDHP, Helen Haskell, Hospitals, Hugo Campos, Michael Millenson, OpenNotes, patient engagement, Patient Safety, Patient-Activated Rapid Response Team, patient-centered policy, PCMH, PPACA
Mar 2, 2013
On Christmas Eve, I took care of a patient who had just undergone surgery for an infected artificial shoulder. He was to be discharged on intravenous antibiotics three times a day for six weeks. This is a pretty common treatment. Patients are generally able to give themselves this medication with the help of a home care nurse who visits once a week. The total cost of this is approximately $7000 for nursing visits, antibiotics and supplies ($120 per visit for eight nursing visits plus $143 per day for antibiotics)
The social worker informed him that Medicare would not pay for home care nurse visits or supplies. BUT, Medicare pays for inpatient rehabilitation, which he would be eligible for to receive these antibiotics. Given the choice of paying $7000 for home administration versus $0 for inpatient rehabilitation, naturally he chose inpatient rehabilitation.
The problem is, is that his inpatient stay costs taxpayers approximately $21,000. $350 for room and board plus additional costs for antibiotics and supplies, totaling approximately $500 a day. Furthermore, although he was well enough to be discharged home before Christmas, he needed to stay until he could be placed in rehab. Because of holiday scheduling, most rehabilitation facilities were not accepting admissions. Thus, he had to stay in the hospital an extra four days in the hospital over the weekend and holidays. Given that the average cost of a hospital stay is $2338 in Maryland that added an additional $9352 or so of unnecessary expenses.
In sum, because financial incentives encouraged my patient to spend $0 rather than $7000 out of pocket, Medicare spent an unnecessary added $30,000 on his hospitalization and care.
Continue reading “How Much are Misaligned Incentives in Health Care Costing Tax Payers?”
Filed Under: OP-ED, THCB
Tagged: Costs, Elizabeth Dzeng, hospitalization, Incentives, Medicare, PPACA
Feb 23, 2013
Over the past decade, there has been yet another debate about whether pay-for-performance, the notion that the amount you get paid is tied to some measure of how you perform, “works” or not. It’s a silly debate, with proponents pointing to the logic that “you get what you pay for” and critics arguing that the evidence is not very encouraging. Both sides are right.
In really simple terms, pay-for-performance, or P4P, can be thought about in two buckets: the “pay” part (how much money is at stake) and the “performance” part (what are we paying for?). So, in this light, the proponents of P4P are right: you get what you pay for. The U.S. healthcare system has had a grand experiment with P4P: we currently pay based on volume of care and guess what? We get a lot of volume. Or, thinking about those two buckets, the current fee-for-service structure puts essentially 100% of the payments at risk (pay) and the performance part is simple: how much stuff can you do? When you put 100% of payments at risk and the performance measure is “stuff”, we end up with a healthcare system that does a tremendous amount of stuff to patients, whether they need it or not.
Against these incentives, new P4P programs have come in to alter the landscape. They suggest putting as much as 1% (though functionally much less than that) on a series of process measures. So, in this new world, 99%+ of the incentives are to do “stuff” to patients and a little less than 1% of the incentives are focused on adherence to “evidence-based care” (though the measures are often not very evidence-based, but let’s not get caught up in trivial details). There are other efforts that are even weaker. None of them seem to be working and the critics of P4P have seized on their failure, calling the entire approach of tying incentives to performance misguided.
The debate has been heightened by the new national “value-based purchasing” program that Congress authorized as part of the Affordable Care Act. Based on the best of intentions, Congress asked Medicare to run a program where 1% of a hospital’s payments (rising to 2% over several years) is tied to a series of process measures, patient experience measures, and eventually, mortality rates and efficiency measures. We tried a version of this for six years (the Premier Hospital Quality Incentives Demonstration) and it didn’t work. We will try again, with modest tweaks and changes. I really hope it improves patient outcomes, though one can understand why the skeptics aren’t convinced. Continue reading “Getting Pay-For-Performance Right”
Filed Under: Hospitals, THCB
Tagged: Ashish Jha, Hospitals, Incentives, JAMA, Medicare, Outcomes, Pay for Performance, PPACA, Quality, Transparency, Value-based Purchasing
Feb 4, 2013
Suppose I throw a rock through a store owner’s window. You admonish me for this act of vandalism. But I reply that I have actually done a good deed.
The store owner will now have to employ someone to haul the broken glass away and someone else, perhaps, to clean up afterward. Then, the order of a new glass pane will create work and wages for the glassmaker. Plus, someone will have to install it. In short, my act of vandalism created jobs and income for others.
The French economist, Frédéric Bastiat called this type of reasoning the “fallacy of the broken window.” All the resources employed to remove the broken glass and install a new pane, he said, could have been employed to produce something else. Now they will not be. So society is not better off from my act of vandalism. It is worse off — by one pane of glass.
But there is a new type of Keynesian (to be distinguished from Keynes himself) that rejects the economist’s answer. Wasteful spending can actually be good, they argue. If so, they will love what happens in health care.
By some estimates one of every three dollars spent on health care is unnecessary and therefore wasteful. ObamaCare’s “wellness exams” for Medicare enrollees — so touted during the last election — is an example. Millions of taxpayer dollars will be spent on this service, yet there is no known medical benefit. Similarly, ObamaCare is encouraging all manner of preventive care — by requiring no deductibles or copayments — which is not cost effective.
Continue reading “Could Wasteful Healthcare Spending Be Good for the Economy?”
Filed Under: OP-ED, THCB
Tagged: fallacy of the broken window, fiscal stimulus, Frederic Bastiat, Health care spending, Johannes Wieland, John Cochrane, John Goodman, Medicare wellness exams, Obamacare, Paul Krugman, PPACA, Preventive care
Jan 31, 2013
In 2009, Rick Scott founded Conservatives for Patients’ Rights, a health care pressure group opposed to President Obama’s health reforms.
In 2010, Scott ran for governor of Florida on a mission to repeal Obamacare.
In 2012, Scott … will work to implement Obamacare.
For some conservatives, it’s a shocking reversal. Leaders of Americans for Prosperity, the conservative organization backed by the influential Koch brothers, were publicly disappointed in the Florida governor — who not so long ago said the Affordable Care Act was “the biggest job killer in the history of the country.”
Now, it will be Scott’s job to help implement it.
Given his prominence, Scott’s move from Obamacare opponent to grudging supporter may be the biggest symbolic shift on the law since its passage.
The Florida governor was reportedly pressured by state legislators to negotiate with federal officials over the ACA, once November’s election made clear that Obamacare was here to stay.
But Scott won’t be the last GOP official to change his tune. More health care groups in other Republican-led states are putting similar pressure on their leaders to opt into the ACA’s Medicaid expansion, in hopes of securing additional dollars for providers.
Continue reading “What the Rick Scott Decision Says About the Future of Health Care in the U.S.”
Filed Under: THCB
Tagged: 2012 Election, Dan Diamond, Florida, GAO, GOP, Kaiser Family Foundation, Medicaid, Medicaid Expansion, Medicare, Obamacare, PPACA, Rick Scott
Nov 29, 2012
So I read an article the other day about a new company called Rap Genius. The company consists primarily of a website that relies on crowdsourcing to explain rap lyrics to the masses who are not down with the urban vibe (aka, people over 30). The company takes lyrics such as these from Kanye West’s Gold Digger….
“She was supposed to buy your shorty Tyco with your money
She went to the doctor got lipo with your money
She walking around looking like Michael with your money.”
…and explains that they mean, to wit: The ex-wife was supposed to buy your baby some toys with the child support money but instead spent it all on so much plastic surgery that she looks like Michael Jackson (presumably before he died―my edit).
Here’s another example: Nelly’s song Grillz gets explained thusly: “Got 30 down at the bottom, 30 more at the top, all invisible set in little ice cube blocks” refers to the fact that Nelly is wearing “grillz” aka jewelry worn over the teeth, which are worth $30,000 on the top and another $30,000 on the bottom, with diamonds set right into the gold. So now you know.
According to the article about the $15m investment that venture fund Andreesen Horowitz put into Rap Genius, the company’s goal is to “annotate the Internet” and, beyond rap music, “the company is slowly spreading to other categories such as literature, political speeches, and science papers.” Let me just digress for a moment and say that the website I would love to see is the one that turns political speeches into rap lyrics―wouldn’t it be sublime to see Joe Biden and Paul Ryan speak jive?
Continue reading “Health Care Reform Gangnam Style”
Filed Under: THCB
Tagged: ACOs, Andreesen Horowitz, Lisa Suennen, market opportunity, Medical jargon, PPACA, Rap Genius
Nov 25, 2012
This November, voters weighed in on an array of state ballot initiatives on health issues from medical marijuana to health care reform. Ballot outcomes by state are listed below (more after the jump).
Voters in Alabama, Montana, and Wyoming passed initiatives expressing disapproval of the Affordable Care Act, while a similar initiative in Florida garnered a majority of the vote but failed to pass under the state’s supermajority voting requirement. Missouri voters passed a ballot initiative prohibiting the state executive branch from establishing a health insurance exchange, leaving this task to the federal government or state legislature.
Florida voters defeated a measure that would have prohibited the use of state funds for abortions, while Montana voters passed a parental notification requirement for minors seeking abortions (with a judicial waiver provision).
Perhaps surprisingly, California voters failed to pass a law requiring mandatory labeling of genetically engineered food. Several states legalized medical marijuana, while Arkansas voters struck down a medical marijuana initiative and Montana voters made existing medical marijuana laws more restrictive.
Colorado and Washington legalized all marijuana use, while a similar measure failed in Oregon.
Physician-assisted suicide was barely defeated in Massachusetts (51% to 49%), while North Dakotans banned smoking in indoor workplaces. Michigan voters failed to pass an initiative increasing the regulation of home health workers, while Louisiana voters prohibited the appropriation of state Medicaid trust funds for other purposes.
Continue reading “Roundup of State Ballot Initiatives on Health Issues”
Filed Under: THCB
Tagged: 2012 Election, Abortion, Bill of Health, California, Colorado, Florida, Genetically Modified Food, Home Health Care, Katie Booth, Louisiana, Massachusetts, Medicaid, Medical Marijuana, Michigan, Oregon, Petrie-Flom Center, Physician-Assisted Suicide, PPACA, Smoking Ban, State Ballot Initiatives, The States, Washington, Wyoming
Nov 15, 2012
Now that the healthcare industry can work with clarity on care coordination strategies and programs, a new expansion of ACO models, trends in patient behavior and the companion issue of provider scope of practice have quickly emerged as critically-relevant spotlights. Historical perspective helps.
Simply put, even with the political tumult this fall, there is strong bipartisan support for aligning payment and care delivery models with improving quality to create a smarter and sustainable healthcare system, backed by historical precedent.
For me and my colleagues in the trenches of pursuing fiscally sound care delivery nearly a decade ago, it is well remembered that the origins of accountable care reside within a 2004 HHS document entitled “The Decade of Health Information Technology: Delivering Consumer-centric and Information-rich Health Care.” This “Framework for Strategic Action” (as it is also known) was delivered to then-HHS Secretary and GOP-appointee Tommy Thompson. And it was delivered by the nation’s first National Coordinator for Health Information Technology, Dr. David Brailer.
The document’s goals of introducing health IT solutions to clinical practices, electronically connecting clinicians, using “information tools” to personalize care and advance population health reporting followed an executive order calling for widespread adoption of interoperable EHRs within 10 years.
Continue reading “The Eight-Year Journey to Accountable Care”
Filed Under: THCB
Tagged: ACCoP, ACOs, CHCS, CMS Innovation Center, Dartmouth Medical School, David Brailer, Elliott Fisher, Greenway Medical Technologies, HHS, HIT, Justin Barnes, Medicare, Medicare Shared Savings Program, MedPAC, Physician Group Practice, PPACA, SCOTUS, The States, Tommy Thompson
Nov 6, 2012