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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15 replies »

  1. 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.

  2. 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

  3. 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 with other regional entities (labs, hospitals, radiology, public health, pharmacy), but also access to practice management protocols (evidence-based chronic care protocols, preventive protocols, standardized patient education). I agree with the above arguments about the weaknesses of both the large consolidation models (Wal-mart) and the inherent problems of micro-consolidation (specialty or even primary care monopolizing geographies to the detriment of quality and cost control). But the PCMH with small ACOs and widespread regional HIT interoperability where governance is truly shared – to me, that shows real promise. Any comments from people out there with some experience?

  4. 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 consolidation will somehow reduce costs to patients. Even the top notch examples you cite are unable to provide lower cost services. Not sure they are even trying.
    As to quality, I am sure that here and there you will see a Mayo, but by and large consolidation is more likely to look very much like WalMart.

  5. 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 in McAllen seem to be about utilization of medical resources, we’d all be breaking our teeth on eight-pound loaves.

  6. 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 care), what would health care look like in the U.S.? I suggest the following:
    1. Health care would cost 30 to 40 percent less than it does today (more than $600 billion in savings);
    2. Patients would receive appropriate, better care with the elimination of unnecessary treatment;
    3. Doctors would actually advise their children to enter medicine as a career;
    4. Medical practitioners would remain indedependent and free of government or insurer domination.
    Such a solution should be attractive to patients, providers, and payers. Patients get better treatment, providers have their needs met, and medical care costs less which benefits payers. Of course there would be some medical deflation as unnecessary care is wrung out of the system. But the income of medical professionals would actually rise on a per patient visit basis meaning that income is tied to the value of services and not how many patients can be run through an office in one hour. I think that the return of medicine to a pofessional service rather than a commodity would benefit all. Thoughts, contrary or otherwise are welcome.

  7. 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 order from the seamstress down the street? Is Starbucks coffee better than the privately owned little cafe?
    And how many supermarkets and Starbucks coffee shops do you run into in East St. Louis?
    No doubt all this consolidation brought some of us lots of convenience and sometimes even lower prices, but product quality went straight down the drain.
    Is this what we want for health care?
    Big chains of health care, running specials (buy one physical, get 2nd one free), staffed by “health care associates” who punch the clock in an out and have very little pride in their profession.
    Are you sure that income is the only thing doctors are jealously protecting?
    And who do you think is more guilty of overutilization, the solo country doc or the large Hospital corporation which is about to “consolidate” all solo country docs?

  8. 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.)
    Second, to Barry Carol: Giesinger’s failure to achieve more than a 7 percent cost savings is indeed a sad contradiction with the estimates of 30 percent waste in our overall system, but maybe not totally surprising. For all that they seem to be doing all the right things (at least, compared with the rest of the health care system), organizations like Kaiser, Group Health, and other centrally managed health plans haven’t yet produced the big savings needed to achieve market dominance—perhaps because their care is still influenced by their unorganized and overutilizing competitors.
    Back to Bev MD’s challenge to provide a solution (ah, if only the House and Senate had knocked at my door): I’m a great believer in the wisdom of Alain Enthoven. We need to have a competitive marketplace in which consumers choose among comparable benefit offerings on the basis of price. This means—among other things—a much simpler exchange structure than PPACA’s and the end of taxpayer subsidization of employee benefits. Only then will efficient, effective health plans start to dominate the market.

  9. 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, culture of collaboration, and payer status for at least 30% of its patients can’t provide high quality, low cost care, who can?
    More widespread use of electronic records should help to reduce duplicate testing and adverse drug interactions, especially in hospitals. More streamlined billing and other administrative processes should save some money on paperwork. More aggressive efforts to fight fraud should also be helpful. However, the cumulative positive effect of all three of those strategies combined is unlikely to get us very far toward bending the cost curve.
    What’s really needed and far more difficult to achieve, in my opinion, is a change in both our medical and societal culture. On the medical side, we need to change how good sound medical practice is defined and applied. On the societal side, people need to start to care more about costs even when someone else is paying and to accept that they can’t have everything they might want. Insurers, led by Medicare, and doctors need to say NO more often and we need to back doctors up with robust tort reform that will protect them from lawsuits if they follow evidence based guidelines where they exist and move dispute resolution out of the hand of juries in favor of specialized health courts.
    Redefining good sound medical practice would include the following if it were up to me:
    1. Patients with advanced dementia or Alzheimer’s would generally not receive surgical interventions under most circumstances.
    2. Everyone, especially the 65 and older population, would be strongly encouraged to execute a living will or advance medical directive and the information would be available on a registry so it is readily accessible to doctors and hospitals when needed. People who want everything possible done to keep them alive as long as possible should pay more for their insurance than people who don’t want heroics when the end is near or the disease or condition can’t be cured.
    3. If there is no living will, the default protocol would be one that allows doctors to apply common sense depending on circumstances without having to worry about being sued rather than feel compelled to “do everything” in the absence of instructions to the contrary.
    4. Patients with late stage cancer would routinely receive palliative care consultations to ensure that they understood their options and the quality of life implications of each. As the end nears, doctors should be prepared to say I’m sorry but there’s nothing more we can do for you other than keep you as comfortable as possible as opposed to fighting your disease is daunting but not hopeless.
    5. Congestive heart failure patients could probably benefit most from good care coordination and disease management programs to minimize the number of hospital admissions for fluid buildup and the like.
    6. Nursing home patients should have their care closely supervised by primary care doctors, who would be paid appropriately to do so, to ensure that useless services are not being provided just to drive revenue for the facility.

  10. 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. . .

  11. 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 are scalable or not. Do not share Roger’s pessimism. Trying to learn more about Tony Rodgers, the person they’ve hired to head the Center.

  12. 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.

  13. 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.