Nearly a year ago President Obama signed the Medicare Access and CHIP Reauthorization Act (MACRA) into law. MACRA, among other things, repeals the 1997 Balanced Budget Act’s Sustainable Growth Rate (SGR) formula for calculating annual updates to Medicare Part B physician and other eligible professionals’ payment rates.1 The bill received overwhelming support in both the House and Senate, only 45 out of 529 total votes cast opposed the bill despite the fact the legislation is estimated to add $141 billion to the federal deficit by 2025.2 Support for the legislation can, in part, be attributed to the Congress having grown tired of rescinding SGR mandated payment cuts or passing nearly 20 “doc fix” “patches,” over 18 years. Presently, Medicare physicians are awaiting CMS’s proposed rule that will define how the agency intends to implement the six sections of MACRA Title I, or how the agency will annually update physician performance beginning in 2019 based on the use of the law’s Merit-Based Incentive Payment System (MIPS) and its Alternative Payment Models (APMs) pathway. The proposed rule, expected to be published in the next few weeks, is highly anticipated because the rewards and penalties under either MIPS and APMs can be significant.
This is the third essay in a three-part series in which I explore the answer to that question. In the first installment I blamed this problem on the flimsy definition of “ACO.” ACO proponents “defined” the ACO in terms of their hopes for it, not in terms of the mechanisms ACOs would use to accomplish those hopes.
In the second installment I reviewed a paper published by the Center for Health Care Strategies (CHCS) to document my statement that we have no useful information on ACOs and to illustrate the quandary the hope-based “definition” of “ACO” creates for researchers. I criticized the CHCS paper as well for its cavalier attitude about evidence. The paper relied heavily on press releases and anonymous sources, and ignored the costs providers and insurers incur to set up and maintain ACOs.
In this last installment, I explore the role that culture – the culture of the managed care movement and the larger health policy community – played in elevating the ACO to the status of national health policy and, at the same time, thwarting the production of useful research on what it is ACOs do for patients.
The ACO isn’t the only example of hope-based health policy
If the ACO were the only example of an undocumented and poorly defined health care “reform” that was flogged from obscurity to fame by a few well-placed health policy entrepreneurs, we might dismiss the problems created by the flabby definition of the ACO as an aberration. But the ACO is not the only example of such “reforms.”
To the contrary, the ACO illustrates the norm, not the exception. It is an excellent illustration of how health policy has been made in America since the modern health care reform debate began circa 1970. Over the last half-century, every managed care “reform” that was eventually unleashed on all or large portions of the American populace followed the trajectory of the ACO:
Because hospitals are expensive and often cause harm, there has been a big focus on reducing hospital use. This focus has been the underpinning for numerous policy interventions, most notable of which is the Affordable Care Act’s Hospital Readmissions Reduction Program (HRRP), which penalizes hospitals for higher than expected readmission rates. The motivation behind HRRP is simple: the readmission rate, the proportion of discharged patients who return to the hospital within 30 days, had been more or less flat for years and reducing this rate would save money and potentially improve care. So it was big news when, as the HRRP penalties kicked in, government officials started reporting that the national readmission rate for Medicare patients was declining.
Rising Use of Observation Status
But during this time, another phenomenon was coming into focus: increasing use of observation status. When a patient needs hospital services, there are two options: that patient can be admitted for inpatient care or can be “admitted to observation”. When patients are “admitted to observation” they essentially still get inpatient care, but technically, they are outpatients. For a variety of reasons, we’ve seen a decline in patients admitted to “inpatient” status and a rise in those going to observation status. These two phenomena – a drop in readmissions and an increase in observation – seemed related.
Silicon Valley wants to love healthcare. The industry is enormous and full of inefficiency, which is to say, perfect for technology investment. So it comes as no surprise that venture money in healthcare technology startups has quadrupled since 2011 to $4.5BN in 2015. Moreover, the government wants to invite Silicon Valley-style innovation in healthcare. In January, CMS leaders stated that the next wave of EHR policy will focus on promoting startup innovation in healthcare by incentivizing open APIs and interoperability. Everyone agrees—so let’s just get going, right?
Here’s an important truth to recognize on the eve of what some like to call the “disruption of healthcare”: Silicon Valley and healthcare are fundamentally at odds.
In technology we fail fast, launch and iterate, proudly make mistakes and learn from them. In medicine, the first principle is “do no harm.” Entrepreneurs are obsessed with growth–exponential growth, hypergrowth, 10X growth–and the faster the better. Conversely, in healthcare organizations, progress is measured in months and years. My company is currently in Y Combinator, a three-month accelerator program. I have had phone calls with healthcare organizations that took longer than that to schedule.
“The pessimist complains about the wind; the optimist expects it to change; the realist adjusts the sails.” —William Arthur Ward
Looking confidently past the skeletons of drowned state and federal healthcare experiments, America’s health insurance exchanges set sail in January 2014. Disregarding the rough seas ahead, healthcare reform pundits and legislators applauded the Affordable Care Act’s signature public expansion vehicle as an impenetrable solution for achieving affordable coverage and competition.
Less than two years later, the exchanges are taking on water.
In November, United Healthcare lowered earnings projections, a move driven primarily by its hesitancy to commit to enrolling new exchange members until risks are better understood. While other insurers were quick to reassure investors that the public exchange market remains a viable means for organic growth, a low-pressure system of doubt is already building over the nascent public exchanges.
Initial enrollment projections for 2016 are fewer than 10 million members—about half of the 20 million target estimated by the Congressional Budget Office. In their rush to expand coverage to the uninsured and under insured, many public officials and industry neophytes failed to consult with those who have firsthand experience with the difficulties of underwriting those who are obtaining insurance for the first time.
Enrollment projections for 2016 are fewer than 10 million members—about half the Congressional Budget Office target of 20 million.
The rush to participate in public exchanges has attracted inexperienced players seeking a piece of a $300 billion premium opportunity.
Investors want desperately to believe healthcare is ripe for transformational disruption.
Suppose there were: (1) a widely held but false perception that gays had lower productivity and higher healthcare costs than straights; (2) false literature that companies with gay conversion programs outperformed the stock market; and (3) a mandate that companies disclose to shareholders the percentage of gays they employ.
Obviously, many corporate CEOs would stop hiring gays, de facto require gay conversion among current employees, and fire gays who failed the program, in order to maximize stock price and hence their own net worth.
Preposterous? Of course, but if Johnson & Johnson (J&J), Vitality Group and a few pharmaceutical companies get their way, this exact same scenario will befall overweight employees. Indeed, two-thirds of this dystopian scenario is already in place: