But ACOs could pave the way for more significant cost-cutting based on competition.
By KEN TERRY
The Medicare Shared Savings Program (MSSP), it was revealed recently, achieved a net savings of $314 million in 2017. Although laudable, this victory represents a rounding error on what Medicare spent in 2017 and is far less than the growth in Medicare spending for that year. It also follows two years of net losses for the MSSP, so it’s clearly way too soon for anyone to claim that the program is a success.
The same is true of accountable care organizations (ACOs). About a third of the 472 ACOs in the MSSP received a total of $780 million in shared savings from the Centers for Medicare and Medicaid Services (CMS) in 2017 out of the program’s gross savings of nearly $1.1 billion. The other MSSP ACOs received nothing, either because they didn’t save money or because their savings were insufficient to qualify them for bonuses. It is not known how many of the 838 ACOs that contracted with CMS and/or commercial insurers in 2016 cut health spending or by how much. What is known is that organizations that take financial risk have a greater incentive to cut costs than those that don’t. Less than one in five MSSP participants are doing so today, but half of all ACOs have at least one contract that includes downside risk.
As ACOS gain more experience and expand into financial risk, it is possible they will have a bigger impact. In fact, the ACOs that received MSSP bonuses in 2017 tended to be those that had participated in the program longer—an indication that experience does make a difference.
However, ACOs on their own will never be the silver bullet that finally kills out-of-control health spending. To begin with, 58 percent of ACOs are led by or include hospitals, which have no real incentive to cut payers’ costs. Even if some hospitals receive a share of savings from the MSSP and/or private insurers, that’s still a drop in the bucket compared to the amount of revenue they can generate by filling beds instead of emptying them. So it’s not surprising that physician-led ACOs are usually more profitable than those helmed by hospitals.
When my co-founder Mat Kendall and I launched Aledade last June, I wrote that our mission was simple: empowering doctors on the front lines of medicine to put them back in control of health care—and rewarding them for the unique value they create. Today, a few days shy of our first birthday, we are announcing that we have raised $30 million in a funding round led by ARCH Venture Partners, and including our Series A funding partners at Venrock. This investment is a testament to the growing demand for our technology-enabled services, and to the rapid progress we have made in creating a platform for doctors to manage the new value-based healthcare economy. But most importantly, it’s a commitment to long-term thinking.
First, we have tapped into a huge unmet need and a growing demand for our healthcare technology services. We hand-picked and signed up 26 practices within weeks of starting the company, and have now established unique partnerships with over 100 primary care practices in 9 states.
Later this month – perhaps as early as this week – the Center for Medicare and Medicaid Services (CMS) is poised to release a proposed rule to update to the Medicare Shared Savings Program (MSSP). MSSP is the national program which allows providers to create ACOs, and it is the program under which Aledade ACOs operate. This will be the first update to the program in three years, and we expect there will be a great deal to unwrap once the rule is public (we also acknowledge that we are among the few who await publications of CMS rules with the anticipation of children on Christmas morning). I’m sure we’ll spend the day of the release tweeting our initial reactions — be sure to follow @Farzad_MD, @Travis_Broome, and @Aledade_ACO for those updates.
The new rule will contain a lot to unpack; but we believe that the decisions that CMS makes in 4 key areas will play a large role in whether participation in the program continues to be robust and whether the program succeeds in being the flag-bearer for new payment models.
Man looks into the Abyss, and there’s nothin’ staring back at him. At that moment, man finds his character, and that’s what keeps him out of the Abyss. – Lou Mannheim (Hal Holbrook) in the movie “Wall Street”
We hear reform ideas all the time: primary care physicians need to work at the top of license, physicians need to work in teams, healthcare must deliver top-notch customer service, the focus needs to be on creating strong physician/patient relationships, and physicians need to be paid for delivering value.
The question then becomes: how does the healthcare industry implement such ideas?
I believe it would be smart to apply the lessons from other industries.
A number of pundits are citing the systemic failure of ACOs, after additional Pioneer ACOs announced withdrawal from the program – Where do you weigh in on the prognosis for Medicare and Commercial ACOs over the next several years?”
Peter R. Kongstvedt
Whoever thought that by themselves, ACOs would successfully address the problem(s) of [cost] [care coordination] [outcomes] [scurvy] [Sonny Crockett’s mullet in Miami Vice Season 4]? The entire history of managed health care is a long parade of innovations that were going to be “the answer” to at least the first four choices above (Vitamin C can cure #5 but sadly there is no cure for #6). Highly praised by pundits who jump in front of the parade and declare themselves to be leaders, each ends up having a place, but only a place, in addressing our problematic health system.
The reasons that each new innovative “fix” end up helping a little but not occupying the center vary, but the one thing they all have in common is that the new thing must still compete with the old thing, and the old thing is there because we want it there, or at least some of us do. The old thing in the case of ACOs is the existing payment system in Medicare and by extension, our healthcare system overall because for all the organizational requirements, ACOs are a payment methodology.
Thanks for contacting me about my most recent blog post. I’m sorry to scare your administration about HIPAA information, but I am equally concerned about that and will always do my best to respect the privacy of my patients. At your request I hid even more of that information.
I know it’s kind of embarrassing to have that kind of thing made public, and I am overall grateful that you did not take it personally that I put the “transition of care” documents for all to see. My goal was not to embarrass or ridicule, it was to point out what our healthcare system is driving us all toward: replacing patient care with documentation. You are being encouraged by the system to produce those ridiculous documents, as they are part of the deal you accepted when you became “ACO General” in the first place.
One of the big questions since the inception of the Medicare Shared Savings Program has been whether the model would only work in regions with extremely high baseline costs. Farzad’s state-level analysis of earlier MSSP results suggested that ACOs in higher-cost areas were more likely to receive shared savings. It’s one of the questions that Bob Kocher and Farzad received in the wake of the op-ed on Rio Grande Valley Health Providers last week.
So we decided to dig into the data.
We’re still waiting for CMS to make baseline costs for ACOs – and the local areas they serve – public. But in the meantime, we linked each ACO to a Hospital Referral Region using the main ACO address provided by CMS – and took a look at the region’s per capita Medicare costs as a predictor of ACO success.
Last week, Dr. Bob Kocher and I took to the pages of the New York Times to detail a health care success story in Southern Texas. In a region once featured for its extreme health care costs and poor health outcomes, a group of physicians motivated by new incentives in the Affordable Care Act has started to change the equation. The Rio Grande Valley ACO Health Providers achieved eye-popping savings in their first year – coming in $20 million below its Medicare baseline and receiving reimbursements totaling over $11 million while also achieving better health outcomes for its patient population.
The savings number made for an impressive headline.
But as is often the case, other information had to be left on the cutting room floor. We dive a little deeper into the RGV ACO below:
The Central Role of Information Technology
Dr. Jose Pena, Chief Medical Director of the Rio Grande Valley ACO, emphasizes that one of the first and most difficult tasks for the newly-formed organization was developing an IT infrastructure that would serve their needs. “Using what was there wasn’t really an option,” says Dr. Pena, “so we built our own infrastructure.”
Forgoing a single EHR solution, the Rio Grande Valley now operates on a mix of cloud and office-based systems. The ACO developed software to identify metrics from various EHR systems, migrate that information to the cloud, and view real-time performance of providers. “IT accounted for 40% of our costs,” says Dr. Pena, “but the importance of proper reporting – to our leadership team, and to CMS – was at the top of our list.” The ACO identifies its customized IT system as foundational to its success.
Judging by its nearly invisible public presence, you’d never know that this is prime time for HCA, the nation’s largest hospital chain. A former HCA regional VP, Marilyn Tavenner, runs the nation’s Medicare and Medicaid programs. Former CMS Head and Obama White House health policy chief Nancy Ann DeParle, sits on the HCA Board. Its longtime investor relations chief, Vic Campbell, is immediate past Chair of the highly effective trade group, the Federation of American Hospitals. And its Chief Medical Officer, Jonathan Perlin, MD, is Chair Elect of the American Hospital Association.
This astonishing industry leadership presence is something most health systems would be trumpeting, perhaps even placing ads in Modern Healthcare. But not HCA, the bashful giant of American healthcare. Most hospital systems make a show of “branding” their hospitals with the company logo. Yet in its corporate home, Nashville, and the surrounding multi-state region, HCA’s 15 hospital network is called TriStar. Everyone in Nashville’s tight knit healthcare community knows who owns their hospitals, but you have to read TriStar’s home page closely to find the elliptical acknowledgement of HCA’s ownership.
Despite a nationwide merger and acquisition boom, HCA hasn’t done a major deal in twelve years (Health Midwest in Kansas City joined HCA in 2002). The company has not participated in the post-reform feeding frenzy, continuing a long-standing and admirable tradition of refusing to overpay for assets. For the moment, owning 160 hospitals is plenty.
Everywhere we turn these days it seems “Big Data” is being touted as a solution for physicians and physician groups who want to participate in Accountable Care Organizations, (ACOs) and/or accountable care-like contracts with payers.
We disagree, and think the accumulated experience about what works and what doesn’t work for care management suggests that a “Small Data” approach might be good enough for many medical groups, while being more immediately implementable and a lot less costly. We’re not convinced, in other words, that the problem for ACOs is a scarcity of data or second rate analytics. Rather, the problem is that we are not taking advantage of, and using more intelligently, the data and analytics already in place, or nearly in place.
For those of you who are interested in the concept of Big Data, Steve Lohr recently wrote a good overview in his column in the New York Times, in which he said:
“Big Data is a shorthand label that typically means applying the tools of artificial intelligence, like machine learning, to vast new troves of data beyond that captured in standard databases. The new data sources include Web-browsing data trails, social network communications, sensor data and surveillance data.”
Applied to health care and ACOs, the proponents of Big Data suggest that some version of IBM’s now-famous Watson, teamed up with arrays of sensors and a very large clinical data repository containing virtually every known fact about all of the patients seen by the medical group, is a needed investment. Of course, many of these data are not currently available in structured, that is computable, format. So one of the costly requirements that Big Data may impose on us results from the need to convert large amounts of unstructured or poorly structured data to structured data. But when that is accomplished, so advocates tell us, Big Data is not only good for quality care, but is “absolutely essential” for attaining the cost efficiency needed by doctors and nurses to have a positive and money-making experience with accountable care shared-savings, gain-share, or risk contracts.