A Courageous First Step

Farzad MostashariEarlier today, Health and Human Services (HHS) Secretary Sylvia Mathews Burwell announced that HHS is doubling down on the historic shift taking place across the health care industry towards value-based care, and is setting a target of having 50 percent of Medicare payments under value-based care arrangements by 2018.

 This would mean that in less than three years, around a quarter of a trillion dollars of health care spending would be made to providers who are being compensated not for ordering more tests and more procedures, but for delivering better outcomes – keeping patients healthier, keeping them out of the hospital, and keeping their chronic conditions in check.

This shift will address a central problem of the US health care system, one that lawmakers and policy experts on all sides of the issue agree is a key contributor to runaway medical inflation.

The logic is straightforward: by simply paying for the volume of services delivered, every provider has a strong incentive to do more — more tests, more procedures, more surgeries. And under this system, there is no financial incentive to maintain a comprehensive overview of patient care – to succeed by keeping the patient healthy, and health care costs down.

In making this announcement, Secretary Burwell took a step that many within HHS had been advocating quietly for years, and which many outside it have advocated more loudly.

Skeptics may ask: what does this accomplish? And why announce it now, when health care costs are already rising at the slowest rate in decades?

As someone who has served on the frontlines of the policy and the practice of this transformation, the answer is clear: because dispelling disbelief and uncertainty about this shift “from volume to value” among decision-makers in the health care industry will be key to sustaining progress.

Part of the reason for the spending slowdown is the fear among some health care executives that their “build-it-and-they-will-come” fee-for-service model may not last. According to the  Federal Reserve Bank of St. Louis, health care construction, on a continuous upwards trajectory for years, dropped sharply in 2009, and even as the rest of the construction industry rebounded, dropped again in 2013. The ubiquitous cranes building new hospital wings and proton beam pavilions have paused ever so slightly as uncertainty reigns.

But imagine if this announcement by the world’s largest payor is joined by private sector leaders, signaling urgency and determination. The skeptics and the straddlers will have a definitive answer, and it will accelerate the transformation already underway. Innovation in how healthcare is delivered can succeed only if there is a sustained commitment to change to go along with the technological advances in data and analytics that have revolutionized other sectors.

This is doubly important. There are still too many organizations deeply embedded in today’s payment models, who have chosen to wait and see if this value-based care movement is a passing fad.

Many have dipped a timid toe, or hedged their bets with low-regret moves like buying up practices and forming organizations that are Accountable Care Organizations (ACOs) in name only. These actions consolidate a health system’s referral base, but administrators have no intention of reducing costs, which are their revenues. Put differently, these “ACO squatters” say there are embracing new payment models, but remain stuck in the mentality of the do-more, get-paid-more system.

Unfortunately, this strategy is already too widespread, and likely to grow as long as large organizations are allowed to continue in “one-sided” (upside only) shared savings models, as recently proposed by CMS. It’s also a major reason why so few hospital-sponsored ACOs have actually achieved savings bonuses. Defensive moves by hospital systems provide a veneer of action, while consolidating regulator-blessed market dominance that can raise local prices without improving quality at all.

Without a doubt, the goal announced today by HHS will motivate widespread, real change across both the public and private health care sphere. But in order to achieve the spirit of the transformation – and not simply check the box of meeting numerical goals – I would suggest an additional metric to accompany the headline number.

In addition to tracking all dollars paid out under value-based systems (like the “fee for service” revenue generated by hospitals with an ACO contract), HHS should also separately count how much money was actually awarded or taken away as part of value-based contracts. The headline number will give a picture of how many providers are participating in value-based care programs; the second number will give a clearer policy goal of increasing the number of providers that are actually succeeding in these arrangement. This additional objective would discourage the “ACO squatting” described above, and challenge participant providers to embrace not simply the letter of the regulations, but the spirit of the program.

“You can give them a big number and you can give them a date, but don’t give them both.”

That was the sly advice on target setting given by a career bureaucrat to a newly appointed agency head. Bureaucracies protect themselves against embarrassment and deflect scrutiny, especially when they feel attacked, and the leadership of the Department of Health and Human Services (HHS) has felt intense scrutiny since the earliest days of the Obama Administration. In that light, HHS Secretary Sylvia Mathews Burwell’s announcement today of a target for reforming healthcare payments is both astonishing and courageous.

Dr Mostashari is the Founder and CEO of Aledade, a company that helps create and operate primary care-led ACOs. He was the National Coordinator for Health IT from 2011 to 2013. Dr Kocher is a Partner at the Venrock venture capital firm–which is an investor in Aledade–and a former special assistant to President Obama on the National Economic Council.

25 replies »

  1. Farzad, as a practicing physician who has listen to your pitch first hand (twice), shame on you. We are a thriving private practice physician group with over 300 providers, a well functioning Epic deployment, and our choice of MSSP, full risk contracts, and ACO choices. Your value proposition was week and quite frankly your hubris and utter lack of insight into the challenges facing providers in the field is just shocking. Your shameless self promotion and condescension towards your colleagues never ceases to amaze me. As you know, your presentation was first shot down by our office manager, then you came back and our business manager shut you down. The providers in the room couldn’t even ask a question because you and your team were so thrown off by some VERY basic questions…where is the technology, where is the actual ROI, where is the business model….and your bow tie has become a running joke in our office.

    For those members of the THCB that might not be as familiar with you and your ‘hype’ let’s set the record straight. You did just enough time at AMC’s to punch your card. When you and my peers overlapped at MGH you were considered a ‘dangerous provider’ and a relentless suck up. Anyone who doubts this…reach out to the folks at MGH (don’t bother reaching out to Yale, Farzad’s medical school…nobody there remembers him). Your time at CDC, and HHS showed your true colors…shameless self promotion and great politicking. For all your bragging about ACOs, the efforts you launched were largely considered a failure. Most organizations opted out of Pioneer…the data presented on this very site from Jeff Goldsmith and others show that the very efforts that you touted in the ACA have led to nothing other than price increases….and you call yourself a success?

    So now…you follow in Bob’s footsteps to Venrock. Is this going to be the same hype cycle as Castlight? THCB readers, please note Bob Kocher (another member of the AMC-government-VC revolving door club) and Brian Roberts, both of Venrock our now facing class action suits for their pump and dump scheme around the Castlight IPO. Farzan will no doubt try the same thing here…at your expense.

    Farzad, you BRAG that you have raised $30MM…we both know the only way you can sustain that is through an increasingly aggressive hype cycle (hence your frequent posts). For all the providers out there, take it from a provider who knows this industry inside and out…AVOID FARZAD AND HIS ILK. THEY ARE TRYING TO GET RICH OFF YOUR HARD WORK. There is little value to what they are pitching and if you simply optimize your EMR yourself and use the Co-Op mechanism in the ACA, you can do everything that Farzad and his organization are pitching. ABOVE ALL DO NOT TRUST FARZAD HE IS A SHAMELESS SELF PROMOTER AND CARES FOR NOBODY BUT HIMSELF.

    Matthew, shame on you. You let Farzad post these things…it should be paid advertising. I am really disappointed. He isn’t informing this community he is simply promoting himself.

    A.Flexner MD
    Little Rock, AR

  2. Still chearleading. What evidence? Where does he buy his bow ties? So Ivy League!

    UI: severity of illness is exagerated to make the outcomes look better; and the truly sick are not wanted by the health care professionals, or, they go to hospice.

  3. Clearly the FFS model was flawed but I agree with your assessment Jeff that the goals of the ACOS are to little to late and I also question ACO’S who’s new stakeholder are venture capitalist who expect a very high rate of return on their investments instead of the patients.

    I don’t however follow the Medicare Advantage (which account for 30% of the market already)at the National level . Do they provide high quality services at lower cost and improve the patient experience?

    Humana one of the largest players came into WA state last year and undercut the largest integrated system (Group Health – which has some of the highest quality and best patient and provider satisfaction scores) by offering a “free policy” to acquire market share.

    The integrated system (GHC which by definition assumes all of the risk) lost 20,000 member and had to lay off 40 doctors so we still haven’t found the solution and are often playing inside the boundaries of the wrong game with the same players we always have.

    The only nuance is that it has now become a profitable segment for the same guys who ran Enron.

  4. Whenever we change payment styles and especially when payment is forthcoming for NOT doing something, or for beating an historical cost benchmark, we must be sure the quality remains good. Not doing something leaves no audit trail, no paperwork and no accountability. It leaves unrecognized illnesses and undiagnosed problems and buries mistakes.

    We have found only a few quality indices. Eg using beta blockers in CHF and pnemovax for seniors, et al. These markers change with the science or are disputed occassionaly by experts and are highly individualized; sometimes it is not good medicine to use beta blockers in CHF. These measures are hard to find, causing quality to be a difficult thing to quantitate.

    We need a more generic measure of quality, easier to apply. Specifically, we need to know that when money is saved, is morbidity increasing? And, when money is spent, is morbidity decreasing enough to be worth it?

    The number of patient encounters in a given time period is easy to measure and might be a good way to measure morbidity. By encounters, we should also measure emails and phone calls as well as doctor visits, hospitalizations and visits to other provider offices. Encounters are akin to re-admissions to the hospital. A patient undergoing a bundled intervention may have two outcomes: One might be quiet with almost no encounters afterwards. The other might be noisey with many encounters suggesting complications or co-morbidities popping up for many months. The first surely suggests a higher quality intervention.

    Im sure there are exceptions to #encounters/time = 1/quality. But are they enough to invalidate the idea?

  5. and thus would begin the game of endlessly trying to ‘game’ — through deceit, lobbying, huge donations (e.g. Judy Faulkner), lawsuits — because it would never be about the patient…

    it would be about who controls what the definitions for value are… all the while costs to real people will go up faster than inflation, they’ll be told they are getting such a better deal — and to ignore what they see with their own two eyes…

    like most public education… and the airlines…

    is anyone considering rules about mandatory 100% risk based consulting fees?

  6. But Matthew, the ACO isn’t real risk. It’s almost unanimous that neither the Pioneers nor the regular MSSP folks feel they can move beyond “on the come” so-called one sided risk, where you get to keep your fee for service winnings but share some of savings if you can “bend the trend”.

    That’s why all those Pioneers, including managed care veterans like Presbyterian in ABQ and Health Partners, fled the Pioneer program. They were fleeing a risk game that was rigged against them and that they couldn’t win.

    This is “payment reform as an end in itself”. And a huge boondoggle for the consulting industry that’s grown up around it (Sorry, Bob and Farzad). It ought to be evidence based and broadly supported by the industry, that can win if it accomplishes social goals.

    Fee for “checking the box” isn’t value based payment.

  7. hmm…in 1997 roughly 25% of physician’s income was “managed care” but only about 10% of that 25% was global capitation. And of course that was very unevenly spread across the nation.

    The end result? Not much, and over the past 15 years (despite the huge bribes paid to Medicare Advantage plans) FFS has basically increased (after non-Kaiser capitation imploded in the late 1990s).

    So maybe Medicare goes to real risk sharing and real value payments for a really significant amount of its dollars, but more likely it wont or if it does Congress will beat up CMS for trying. In any event my guess is that even if “value based” represents 50% of arrangements and even patients, it will represent a much much smaller percentage of the dollars.

    Which means that we should be trying to grow those arrangements which mean all the dollars and all the patients are at risk (Jeff Goldmsiths’ Medicare Advantage & MSSP programs) and as he says, get the ACOs into them.

    I hope that Farzad & Aledale are heading that way.Or we may well see 2001-2006 all over again

  8. You mean the same book that ghostwritten and which any serious JFK scholar acknowledges he essentially did none of the writing or research for?

  9. Jeff Goldsmith is right (as usual) — up to a point.

    However, we won’t see real Medicare payment reform until there are real incentives in place that encourage patients, providers, and payers to make cost-effective decisions. And that means a much more “Courageous” First Step than even Jeff is proposing.

    For an alternative, take a look at http://www.rational-healthcare.com (with “Courageous” proposals for Medicaid and private coverage, too).

  10. A quote from Nortin Hadler’s Citizen Patient seems relevant:

    Medicine is subsumed, “taking marching orders from lay organizations as to how the clinic is to be organized, how clinical judgment is to be utilized, how all is underwritten, who is eminent, and who leads….reflecting the agendas of multiple nongovernmental and governmental organizations.”

    and one more comment including Hadler’s in quotes:
    all of the players have “mastered the language of altruism”, speaking as if they were genuinely looking for reform, all the while being most attentive to protecting their groups’ place at the immense funding trough representing nearly 15% of the total economy.

  11. CMS better fix some of the major glitches in the set up of the ACO program or they may see a large number of ACOs drop out in the future. The ACO that I ran had 2/3 of its primary care docs have their practices purchased during the first 2 years of the program. The problem is that their patients were still assigned to our ACO for up to 11 months after these docs left the ACO. How is an ACO supposed to manage care quality and reporting when it’s stuck with thousands of patients whose docs aren’t in the ACO?

  12. Standard propaganda from the usual obama sycophants.

    Doctors, you might want to look up the word “courageous” before applying it to the healthcare reimbursement model. I might be willing to use this adjective to describe someone willing to fight on the front lines against ISIS or Al Queda. I would certainly apply it those who volunteer to treat ebola in West Africa. I would even deem a politician who openly calls for government to actually spend within its means as “courageous.”

    We might as well put Scientologists in charge and let them decide on which doctors are to be paid more based on their number of thetans or whatever . . .

    As for the current administration, I have yet to see anyone in the last 6 years that I would view as “courageous.” Maybe they should spend more time reading JFK’s book and less time trying to remake our healthcare system into a carbon copy of the UK?

  13. “spending” …”for delivering better outcomes”

    What makes you think that delivering better outcomes necessarily means less testing or procedures?

    Of course the one in control of the definition of ‘better outcomes’ can prove anything they want. I remember the push for better care. ‘Doctors must prescribe beta blockers’ in cardiac patients for quality concerns. A nobel cause until the insurer refused to pay for the echocardiogram to determine if the patient could tolerate beta blockers.

  14. #ebolagate

    They missed it because of the impediment to safe and effective care caused by the EHR in the Dallas ER. These devices are horrific for communication of care.

  15. Peter you have pretty much nailed it as far as government programs go. No one cares what the real outcome is, as long as the paperwork is complete. Why do you think we miss Ebola? Too busy doing the $%^#&@* paperwork, not looking at the patient.

  16. Burwell and her ilk have no idea what “value” is. They will clown it to pieces as usual. The sick and elderly will be punished, the rest will make off like bandits.

  17. I agree that the current fee-for-service system is broken and that paying for a quality product will necessarily be part of a solution. I am much less enthusiastic that the current approach will work. Why am I skeptical? Because, all the 30,000 foot idealistic and theoretical talk not-withstanding, I see little evidence that we know how to measure (let alone incentivize) quality. I think this may be an example of a complex problem that will not respond to a simplistic approach.

    A ground level example may illustrate this.

    There is no doubt that screening for fall-risk over the age of 65, and then evaluating and treating those with a positive screen, improves outcomes. As a result of this, there is a quality incentive to screen for fall risk.

    Many institutions (including mine) are now screening for fall risk. No evaluation or treatment. Just document that the screening was done. They pass the quality metric but fail the common sense metric.

    This would be like thinking that checking the oil level in the car will make sure there is enough oil to drive safely.

  18. So sick Medicare patients need not plan on ever getting care from anyone.

  19. “Build it and they will come” is what I’ve long called the healthcare arms race.

    I’ll caution any and all who are looking at driving transformation, the Triple Aim, value-based care, or any other iteration of change management rodeo in healthcare to START WITH PATIENT LITERACY. Don’t start hammering and power-tooling on the system without inviting patients to help from the very start.

    Or, better yet, let savvy patients, those of us who’ve been there, done that, have the t-shirts *and* the surgical scars, to re-tool the system in a way that makes sense for patients as well as clinicians. All the earnest building from the inside-out has gotten us into the mess we’re mired in now. Time to build from the outside in.

  20. Boldly spoken by people who have a vested interest in the outcome.

    The Medicare ACO program (Pioneers/MSSP) was flawed in its design, botched in its execution and fundamentally mistimed and mistargeted. Slowing down the growth in Medicare spending, when per capita Medicare spending growth is essentially zero isn’t great policy targeting.

    We need to MARKEDLY reduce the unit cost of Medicare provider payment, and you don’t do that by targeting the growth rate. You also don’t do it without the Medicare beneficiary playing a meaningful role and getting some of the savings.

    Bundled payments on a reference priced basis accomplishes both objectives, but only if alternatives to the hospital can receive the bundle, and you redesign the benefit to funnel some of the cash savings to beneficiaries who choose less expensive/higher value care systems. And using bundling would qualify as “value based payment” under Burwell’s announcement.

    Plus, as those who have suffered through these demos, CMS has conclusively demonstrated that it lacks the staff capacity to manage a major shift in payment models. We already have a successful risk-sharing model in the Medicare program that works well. It’s called Medicare Advantage, and if we were serious about saving money, we’d work to get the small number of successful Medicare ACO Pioneers and MSSP folks to man up to real risk and contract thru MA.