OP-ED

The Road to Wellville: Pilots and Demos?

As might be expected of reform legislation, the Patient Protection and Affordable Care Act places a lot of emphasis on innovation. Reasonably enough, most of the potential changes—at least in Medicare—are to be preceded by pilot or demonstration projects designed to test their feasibility. In fact, according to one health care blogger with time on his hands, PPACA includes no less than 312 mentions of demonstrations and 80 mentions of pilots.

Just how important are all these pilots and demos? Harvard’s David Cutler, who served as a key advisor to the Obama administration in developing the reform strategy, clearly believes they are vital. Writing in the June Health Affairs, he stresses the need for rapid implementation of the pilots and demonstrations in order to help achieve eventual savings of “enormous amounts of money while simultaneously improving the quality of care.”

How realistic are Professor Cutler’s expectations?

CMS’ Medicare chronic care demonstrations provide some clues. With data showing that the costliest 25 percent of beneficiaries account for 85 percent of total Medicare spending and that 75 percent of the high-cost beneficiaries have one or more major chronic conditions, the demonstrations were expected to show big benefits from care coordination—the major theme of PPACA’s proposed demos.

The outcomes were decidedly discouraging, as noted by MedPac’s 2009 report to Congress:

“Results suggest that some of these programs may have modest effects on the quality of care and mixed impacts on Medicare costs, with most programs costing Medicare more than would have been spent had they not been implemented….In almost all cases, the cost to Medicare of the intervention exceeded the savings generated by reduced use of inpatient hospitalizations and other medical services.”

What went wrong with such a promising effort? And what are the implications for PPACA’s pilots and demos?

The simple answer is that few providers will participate in a pilot or demonstration if it’s likely to cause their income to drop. As a result, CMS must attract “volunteers” with generous promises of shared savings or payments for additional services –essentially, bribes to compensate for lost revenue and the time-consuming process of dealing with CMS bureaucracy. So far, the bribes have outweighed the savings in almost every case. Worse still, and often overlooked in evaluations of pilots, participating providers are likely to be those most able to achieve savings—the “good guys,” rather than the typical—with resultant optimistic skewing of the results.

Will the PPACA projects be more successful? Even assuming that the heavy hand of government can be lightened to speed up project implementation and minimize the oversight burden, the picture is gloomy. PPACA includes four main categories of pilot and demonstration projects: bundling, accountable care organizations, pay-for-performance, and coordinated care. Of these, only some aspects of pay-for-performance avoid the problems of trying to tie together activities of multiple providers—exactly the problems that sank the chronic care demos.

While new IT systems might facilitate care coordination, the jealously guarded independence of providers (and their jealously protected incomes) will continue to be a huge obstacle. Theoretically, the Independent Payment Advisory Board (IPAB) could recommend implementation of some changes (for example, bundling) without the PPACA pilots and demos, but this could leave IPAB without the required actuarial justification for such recommendations.

The bottom line? Trying to fix our fragmented and unorganized health care system from the bottom up, through pilots and demos, probably isn’t going to work, at least in any acceptable timeframe—and almost certainly isn’t going to lead to Professor Cutler’s hoped-for savings of enormous amounts of money.

Roger Collier was formerly CEO of a national health care consulting firm. His experience includes the design and implementation of innovative health care programs for HMOs, health insurers, and state and federal agencies. He is editor of Health Care REFORM UPDATE [reformupdate.blogspot.com].

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Bill Gustafsondavidjames walkerLesjeuxsontfaitMargalit Gur-Arie Recent comment authors
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Bill Gustafson
Guest

There are a wealth of possiblities in the medical world with many leads from the older systems that have not had the advantage of technology generally a high cost component. However, to assume there will be success and cost reduction is a premature step. Truely objective non-bias studies and pilots would add to our knowledge and only then give us an idea of potential savings. Even in that moment people may need to change to fully use a different model and that could take years or generations.

david
Guest
david

innovation shminnovation-we still have a top down universal design medicocentric health care system that continues tragic anti-patterns because essentially doctors care more about their autonomy then anything else. Innovations have been going on for quite some time in health care-with quality of health care remaining poor and the incidence of arthritis, diabetes, obesity and breast cancer rising in prevalence. We dont need more innovation- we need fundamental transformation of the whole health care system

james walker
Guest

Could the Patient-centered Medical Home concept melded with the small-scale outpatient ACO – overlying a fully interoperable HIT infrastructure governed by community HIEs – be the answer to these above dilemmas? As a rural family physician practicing in a rural hospital, I realize it is impossible for us here to deliver the real standard of care in our traditional delivery model practically isolated from the rest of the world; yet the medical-home-like model we are using (with our paper charts still) does an impressive job in the interim, I feel. What I need is access to EMR that is fully-integrated… Read more »

Margalit Gur-Arie
Guest

Roger, For every McAllen, there is an El Passo, and I’m not sure consolidation is the difference. What I am sure of is that the larger the entity, the more negotiating power it is yielding and the more likely it is that profits are the driving concern. The (non-profit) hospital chains in the rural areas of my state are driving the independent community and private small hospitals into oblivion. As you write, consolidated physician groups are commanding very favorable contracts. So either I didn’t quite understand what you meant in your original post, or I have to respectfully disagree that… Read more »

Roger Collier
Guest

Margalit – I think your analogies miss the mark. The old time independent bakery is in no way comparable to the independent community hospital whose monopoly allows it to dictate its rates, nor to the independent big city hospitals who have to have multi-million dollar high tech cardiac units because their competitors have them, nor to the independent radiologists and orthopedists who form group practices in order to control their local markets (and allow their members to earn incomes of a half-million a year and up). And if the bakery were as casual about use of flour as independent specialists… Read more »

Lesjeuxsontfait
Guest

I only wish that there were more realistic suggestions for actual solutions to our health care crisis. Why not keep it simple. What do health care providers want? 1. Patients; 2. To be paid fairly and promptly; 3. The freedom to treat patients appropriately without insurer (private or public) interference; 4. Freedom from the burdon of a constant malpractice threat. As a society, can we not give them that? Is that too hard? If our health care system gave providers those four benefits, and asked only in return that they voluntarily limit care to that which is appropriate (eliminate unnecessary… Read more »

Margalit Gur-Arie
Guest

Are we absolutely certain that hundreds of thousands of independent providers are such a bad thing? Certainly food at supermarkets is cheaper and more convenient, but is it better quality than the corner deli? Is the cheaper day old white bread in a plastic bag (which people used to feed to pigs) better for you than freshly baked coarse bread from the old time bakery? Is getting a loan from the national bank easier than getting a loan from the small town Savings & Loan? Are Walmart’s Made in China clothes better for us than the stuff we used to… Read more »

Roger Collier
Guest

Three responses to comments: First, to Bev MD: I’m not averse to new ideas. The problem is that PPACA proposes to try to implement approaches that work in an organized delivery structure in the unorganized fragmented structure that dominates our American health care system. ACOs are a prime example: the concept works at Kaiser and HealthPartners and so on, but it’s going to be a nightmare trying to export it to the hundreds of thousands of other independent providers, each jealously protecting their income. (There are reasons why Boeing does not build airplanes by subcontracting to ten thousand machine shops.)… Read more »

Barry Carol
Guest
Barry Carol

In the same issue of Health Affairs to which Mr. Collier referred, Susan Dentzer interviewed Geisinger Health System CEO, Glenn Steele. In talking about the various strategies Geisinger implemented to improve care quality and reduce both cost and variation in quality across their system, he proudly noted that, for their more complex elderly patients, they were able to bend the cost curve by 7% from what it would have otherwise been. While 7% is not nothing, it’s a far cry from the 30%-50% of healthcare system costs widely considered to be “waste.” If Geisinger, with its salaried doctors, electronic records,… Read more »

tcoyote
Guest
tcoyote

Big problem, my angry MD friend, is that there is no central committee. The beast has no brain. It’s like an amoeba with lots of pseudopods and no memory. . .

MD as HELL
Guest
MD as HELL

The Central Committee should be dismantled while it still can be.

tcoyote
Guest
tcoyote

There are lots of good ideas in the legislation to be tested out. Cutler’s comment about doing it a year was, however, laughable, particularly since CMS currently only spends about $80 million a year on “R+D” (and $50 million of that are for surveys and for HEDIS) and has about ten people in the section of the agency doing it. The first scale up challenge is the Center itself. The $10 billion will be a HUGE patronage temptation. There will also be a temptation to test these ideas in places where they’ve already worked, and not gauge accurately whether they… Read more »

Adam Griff
Guest

Mr. Collier,
According to a quick review of the report, the vast majority of the demonstration projects focused on continuing care in the home, but there is evidence that chronic care management produces significant cost savings and better outcomes when conducted in center and community settings such as adult day care.
Even with the “Medicare Adult Day Care Services Act of 2009” under consideration, this is a potential solution that has received little attention.

bev M.D.
Guest
bev M.D.

Mr. Collier;
I am far from a defender of the government, but this is your second negative post on a new idea in the health care industry in the last few weeks. (ACO’s recently also.) Rather than criticize, perhaps you could tell us what YOUR ideas are to improve the system,and how they could be tested and implemented? It’s easy to throw stones,but solutions are what we need.

Steve Jacob
Guest
Steve Jacob

Please fix the link to the MedPac 2009 report.