Obamacare’s Payment Pilots Are Struggling To Prove They Work. Here’s Why It’s OK.

When Barack Obama was merely a senator running for the White House, he told one physician association, “I support the concept of a patient-centered medical home” and would encourage the model if he ever became president.

Six years later: Mission accomplished.

Nearly 7,000 primary care practices have officially been accredited as PCMHs, and thousands of other providers have adopted some features of medical homes, which use a team-based approach to coordinated care. And while the movement toward medical homes might have evolved without Obama, his health reforms clearly laid the groundwork for rapid adoption.

The only problem? There’s still no clear evidence that the model even works.

A prominent Journal of the American Medical Association study last month found that after three years, one of the nation’s largest medical home pilots didn’t lead to lower costs or significantly higher care quality.

“There are folks who believe the medical home is a proven intervention that doesn’t even need to be tested or refined,” lead study author Mark Friedberg told the Wall Street Journal‘s Melinda Beck. “Our findings will hopefully change those views.”

An accompanying editorial also sounded caution. “It is time to replace enthusiasm and promotion with scientific rigor and prudence,” Thomas Schwenk wrote, “and to better understand what the PCMH is and is not.”

How Obamacare’s Authors Wanted To Reform Payment

The medical home model is just one of a passel of payment and delivery reforms either encouraged by the Affordable Care Act or directly included in the law. Some of them aren’t new concepts; the PCMH was first conceived nearly 50 years ago, and Medicare’s bundled payment program draws on a successful pilot from the mid-1990s. Others were newer innovations, like the accountable care organization model first articulated by Dartmouth’s Elliot Fisher in 2006.

The kitchen-sink approach to cutting costs heartened economists and would-be reformers. (“Everything is in here,” economist Jon Gruber said in 2009, remarking on a protean version of the ACA. “I can’t think of anything I’d do that they are not doing in the bill.”)

But to accomplish this feat — given that lawmakers historically have resisted plans to reform health payment — many of these reforms had less bite. Participation in Medicare’s bundled payment programs, for example, is optional. An independent panel to reform Medicare spending, the IPAB, may never live to see the light of day.

Yet hope remained that these pilot programs could lead to significant cost savings.

Harvard’s David Cutler was among three authors who wrote at the Commonwealth Fund in 2010 that if the ACA delivered expected cost savings, the pace of national health expenditures growth would fall from 6.3% to 5.7%.

“The new health reform law introduces a range of payment and delivery system changes likely to result in a significant slowing of health care cost growth,” they concluded.

How Obamacare’s Payment Reforms Are Playing Out

Four years later, health spending has slowed; NHE is now projected to grow at 5.8% through 2022.

And in some cases, researchers do credit Obamacare — whether through its interventions or merely its looming presence.

For example, bundled payments appear to be lowering the cost of devices and surgical supplies. And the ACA’s program to reduce hospital readmissions is leading to real change, experts say.

“We’re learning that providers seem to be extremely responsive to the prices they receive,” Harvard’s Cutler tells me, pointing to plummeting readmissions at hospitals after new penalties took effect.

But many researchers agree that it’s too soon to give the ACA the lion’s share of credit.

Especially because after a much-anticipated launch, several pilots are failing to stick their landing.

“For each method, there’s a glimmer of hope,” says Suzanne Delbanco of the Catalyst for Payment Reform, “but not a substantial body of evidence” that they’re actually working.

For example:

  • Medical homes: The JAMA analysis found that the medical home pilot only improved patients’ health on one of 11 measures and didn’t cut visits to hospitals or emergency departments.
  • Pioneer ACOs: Thirty-two organizations opted for this much-anticipated program run by Medicare’s innovation center, but by last summer, nearly one-third of participants had dropped out. And while 13 pioneers did qualify for bonuses, most were relatively meager: just four pioneers generated about two-thirds of the savings.
  • Medicare Shared Savings Program ACOs: CMS released data last month that found most of the 114 ACOs in this program didn’t beat their payment targets. In fact, only one-quarter performed strongly enough to take home a slice of savings.

Why Failure Is OK

These mixed results are to be expected, say experts. Researchers need to develop a library of evidence — through some success and perhaps many failures — to determine which practices are best and export them across the industry

For example, Cutler says he’s optimistic that the new JAMA study on medical homes contains nuggets of wisdom. Rather than focus on what didn’t work, “what is it that successful medical homes did?” he muses. “And is there something we can learn that can help us to do this better” at other organizations?

Early results from the ACO program, too, have cheered some supporters. They say you can truly look at it as a glass half-full, glass half-empty scenario: Nearly 50% of participants did achieve savings, which offers evidence that the model can achieve lawmakers’ broader goals.

And an independent evaluation — released several months after CMS’ initial report last summer — found that Pioneer ACOs cut Medicare spending by $147 million in their first year, ahead of officials’ initial estimates.

“From the standpoint of CMS, these results suggest great potential for ACOs to bend the overall cost growth curve,” former National Coordinator for Health IT Farzad Mostashari and two other researchers wrote at the Brookings Institution.

The fact that evidence is constantly evolving is one reason why Delbanco cautions against rushing to judgment. “It takes years to get these programs off the ground, and we’re still at an early stage in many cases,” she says. “Time and time again, we might see results in year 1 [of a pilot] that aren’t sustained in year 2 or year 3.”

“We need to be patient on these pilots,” agrees Ashish Jha of the Harvard School of Public Health. “They were never going to be the magic bullet that so many people hyped them up to be.”

Meanwhile, some participants in these programs are stuck at an odd transitional point, says David Muhlestein of Leavitt Partners, who’s tracked ACO adoption rates across the industry. Between Medicare’s programs and private sector initiatives, “there are now 620 ACOs,” Muhlestein told me, although many are relatively small and cover less than 10,000 lives. For many providers, these ACOs represent a tentative foray from long-held fee-for-service payment models into the emerging world of value-based payment.

It’s like Cinderella at the ball, Muhlestein says. Providers are inching toward the door — they know they can’t stay where they are — but they’re not quite ready to leave.

What would get them to move forward? “They want to see a viable model,” Muhlestein. “They want to see a model from a similar organization.”

The Challenges Ahead

There’s a chance that some of these pilots could lead to unintended consequences. ACOs, for example, could concentrate market power in the hands of large providers. To take advantage of bundled payments, hospitals are buying up physician practices — an expensive proposition.

And that plays into a broader conundrum: To cut health spending in the future, the federal government and providers must spend money chasing efforts that may ultimately be wasteful, too.

It’s worth the risk, experts say. Although with several years of experience, they’re adopting an ever-savvier way of thinking about payment reforms now.

After Catalyst for Payment Reform was founded in 2010, Delbanco says, leaders set a goal for the industry: to get 20% of provider payments based on value by 2020. More than three years later, that goal hasn’t changed — but there’s been a telling shift in how she talks about it. “We still want 20% of payments to doctors and hospitals [to] flow through methods of payment that are proven to improve the value,” Delbanco now says.

“Because it would be terrible if we woke up in six years to realize that 85% of payments are flowing through value-oriented methods,” she adds, “and they’re not producing the results we hoped they would.”

Dan Diamond (@ddiamond) is Managing Editor of the Daily Briefing, a California Healthline columnist, and a Forbes contributor. This  post originally appeared in California Healthline.

4 replies »

  1. I suppose if you trust the premise that decisions about “what works” will be evidence based, you’d be comfortable with the process. If evidence matters, why did they put 90% of their eggs in the Medical Shared Savings basket, when they had evidence from the Physicians Group Practice demo glaring them in the face that suggested serious problems with the concept.

    The PGP demo was a failure: two participants got 70% of the savings, and managed care veterans like Park Nicollet and Geisinger had great difficulty making it work. It was clear afterwards that aggressive upcoding of patient acuity was the key to a lot of the savings that were achieved.

    The first year of the Pioneers was a serious embarrassment: badly run- bad data,bad feedback loops with the agency and bad results- the same highly concentrated success rate and nine dropouts. The first year of regular MSSP was apparently not much better, except no dropouts.

    It is clear already this idea isn’t going to scale to the entire industry. It is not a fit “total replacement” for regular fee for service Medicare. And the best signal that they’ve got a turkey on their hands- all they’ ve shared with the public and the industry are two skimpy press releases. There’s no data on the individual participants’ performance. If this idea were viable, they wouldn’t be managing it like it was a problem.

    For an administration that talks all the time about transparency, it sure hasn’t been very transparent about their biggest payment reform initiative. It’s going to be hard to trust this process. . .

  2. Exactly. What makes these experiments especially interesting are the stakes: billions of dollars — and likely, some large number of lives — are at play, if the nation can figure out which delivery reforms are effective and scalable.

    Unfortunately, the political pressure and scrutiny has a distorting effect on expectations; most experiments don’t play out on the nation’s biggest stage.

  3. “The fact that evidence is constantly evolving….”

    That is correct. Of many things (drugs and technology) but particularly impact of policy and change in structure.

    Trial and error is necessary in laboratory science, unavoidable policy but should be minimized.

    It would have been nice if the framers had given a confidence interval for the likelihood of success of elements of the ACA and pointed out which elements had robust evidence for its implementation and which elements were merely hypothesis awaiting implementation, or what seemed plausible to highly accomplished economists.

    The fact that some parts of ACA have not quite lived up to their expectation is nothing unusual about the ACA. But the contrast with the initial certainty of success….Well, you don’t get the luxury of saying “I told you”.

    Senator Pelosi summarized it best “we need to pass the bill to see what’s in it”. Refreshingly honest observation that was the most scientific I heard.

    And yes evidence does take time to accrue. But how long should one allow before getting impatient? I suppose the answer to that question depends on how one feels about the ACA.

  4. The ACO plan was not well thought out. There is considerable evidence that market consolidation is bad for patients and health spending. For example, it leads to higher prices for patients. But the authors of PPACA not only pushed hospitals and doctors together, they relaxed the rules that for good reason kept them apart. Unreal.