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Tag: Accountable Care Organizations

Are Hospital Business Models on a Burning Platform? Not Yet, But It’s Inevitable.

From reading recent headlines, one might easily get the impression that hospitals are resistant — or at least ambivalent — in their pursuit and adoption of accountable care initiatives.

Are Hospitals Dragging their Feet on Accountable Care?

Commonwealth Fund: “only 13 percent of hospital respondents reported participating in an ACO or planning to participate within a year”

KPMG Survey: “(only) 27 percent of [health system] respondents said current business models were either not very or not at all sustainable over the next five years”

Health Affairs: “Medicare’s New Hospital Value-Based Purchasing Program Is Likely To Have Only A Small Impact On Hospital Payments”

The Bigger Picture

Do hospitals today perceive their current business model on the metaphorical “burning platform” — when the status quo is no longer an alternative?

The answer from the headlines above might suggest “no”, but I believe the correct answer is “not yet, but it’s inevitable”.  Hospitals are feeling the heat, but it’s just not yet hot enough to jump off the platform and abandon existing business models.

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Economics and Health Systems

Two of the largest healthcare systems in the Twin Cities have announced plans to merge – and if approved it will created the second largest hospital system in Minnesota in terms of revenue (Mayo Clinic is first).

For those non-Midwesterners – the geographical environs of the Twin Cities Metro area comprise a 50 mile circumference anchored by Minneapolis to the west and St. Paul to the east. At a high level, this move essentially links West (Park Nicollet) and East (HealthPartners) and according to news releases from both organizations, the combined health system will include more than 20,000 employees and 1,500 multispecialty physicians. However, there is a more compelling angle to this story.

On the surface the motivation for this move could be primarily economic: The average operating margin for a U.S. hospital is 2.5% — tough financial sledding in a disrupted and crowded market. Overly simplified, the economics of a hospital requires keeping beds full (aka “heads in beds”) … and as hospitals today strive to better align with physicians in order to get more than their fair share of referrals, a range of new business models and ways to engage consumers are emerging in the marketplace.
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The EHR “Final Rule” (Finally)

Six months to the day after the Centers for Medicare and Medicaid Services (CMS) released the “preliminary rules” for Meaningful Use, the final rules are in.  For clinicians and policymakers who want to see Electronic Health Records (EHRs) play a key role in driving improvements in the healthcare system, there’s a lot to like here.

For the Office of the National Coordinator (ONC), the agency that oversees the federal health information technology incentive program, the Meaningful Use rules are a balancing act. On one hand, ONC wants to get as many clinicians and hospitals on board with simply adopting EHRs (and thus, the need to set a low bar). On the other hand, they want to ensure that once people start using EHRs, they are using them in a “meaningful” way to drive improvements in care (and thus, the need to set a high bar).  I think ONC got that balance just about right.

Let me begin with a little background.  In 2009, Congress passed the Health Information Technology for Economic and Clinical Health (HITECH) Act, setting aside about $30 billion for incentives for ambulatory care providers and acute-care hospitals to adopt and “meaningfully use” EHRs.  Congress specified that the executive branch would define Meaningful Use (MU) and would do so in three stages.  The first stage was finalized in 2010 and its goals were simple – start getting doctors and hospitals on board with the use of EHRs.  By most metrics, stage 1 was quite successful.  The proportion of doctors and hospitals using EHRs jumped in 2011, and all signs suggested continued progress in 2012.  Through July 2012, approximately 117,000 eligible professionals and 3,600 hospitals have received some sort of incentive payment.

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All Hell Hath Broken Loose

I’ve never seen a week in health care policy like last week. The media reports have to be in the thousands, all trying to make sense of the furious debate between Obama and Romney over Medicare.

As someone who has studied this issue for more than 20 years, it has also been more than exasperating for me to watch each side trade claims and for the press to try to make sense of it.

This blog post is quite long because the subject matter is complicated. If you want to cut to the chase, see my conclusion and summary at the end of this post.

Allow me to list a few of the questions people are asking and give you my take on it.

Will current seniors suffer under the Romney-Ryan Medicare plan?

No. Let me start by saying something that will likely surprise you. If I could be king for a day, I would prohibit anyone over the age of 60 from voting in this election. This election is really about the future and the big decisions on the table are about the long-term government spending and entitlement issues that should be made by younger voters who will have to pay for them and will benefit or suffer from them.

Those in their 60s and older are almost surely going to cruise to the end with the benefits they now have.

Whether its Obama’s Medicare plan, based heavily on the Medicare cost control board imbedded in his health reform bill (which doesn’t begin to impact hospital costs until 2020), or the Romney/Ryan Medicare premium support plan (that has no effect on anyone now over the age of 55), today’s seniors’ benefits are insulated from this issue.

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Will Government-Directed Healthcare in Mass. Really Contain Costs?

Governor Patrick signed a new healthcare law today aimed at cost containment, and the rhetoric soared assuring all that Massachusetts has “cracked the code on healthcare costs.” Unfortunately, with no debate on the underlying bill in the House of Representatives and only little debate in the State Senate, the 349-page statute, which was released just 14 hours before the legislative final vote, is little understood and brimming with unintended consequences.

Real cost-containment is only possible when we encourage patients to reward low-cost, high-quality providers with their business.  We’ve said it over and over again throughout this process.

Instead, the law being signed today re-imagines and repackages so many failed top-down approaches from the past. The acronyms may have changed, but this bill looks a lot like past approaches that trusted government, not patients, to drive big, systematic changes in how we purchase healthcare. For some reason our state policymakers expect completely different results this time around.

Rather than provide financial incentives for individual patients to take charge of their own medical care, this legislation rearranges the system based on accountable care organizations (ACOs) and governmentally-imposed changes in payment methods.  Real-life evidence that these approaches contain costs is mixed at best; as a result, the law misses the mark by a long shot and will not lead to long-term, sustainable containment of health care costs.

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Monopoly Anyone? The Battle To Control Health Care

Like children gathered around a card table, America’s special interests are engaged in a high stakes game of Monopoly. But the winner of this game gets more than a day or two of bragging rights; this time the spoils are nothing less than control of our health care delivery system for the foreseeable future.

Let’s meet the players: on one side, Big Medicine; across the table, Big Insurance; and between them, Big Government. There’s room at the table for a 4th player…but we’ll get to that later.

Introducing Big Medicine

To compete in this high-stakes game, Big Medicine is reforming itself into large, multi-disciplinary organizations. Independent hospitals are merging into hospital systems. Hospitals and doctors are coming together as self-regulating Accountable Care Organizations (ACOs).

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The Beginning of the Next Healthcare

What a cliffhanger! It is an historic decision, found on the narrowest possible grounds, with a majority agreeing on the result, but not broadly on the reasoning.

Effects: The principal effects of the finding, from the point of view of the system: They have just avoided enormous chaos over the coming years. The system is chaotic enough already, at a tipping point into an unclear future, with the huge shift in underlying economic factors. These factors include especially the various ways of shifting some economic risk from the payers and employers to the providers and the patients/customers.

Stabilizing: The Supreme Court finding stabilizes the future of the system. The affirmation, combined with the fact that a gridlocked polity in Washington is unlikely to come up with any major change or repeal of the law, and that the major parts of the law are self-funding, means that everyone now knows at least the general outline of what the rules are for the foreseeable future.

Permanent: The law is now likely permanent. To overturn it, you would need President Romney with a filibuster-proof majority in the Senate and a majority in the House. The major parts of the law are self-funding and not dependent on Congressional outlays. By 2016, most people will have experienced the results of the law, and found its benefits far outweigh its costs. Business owners will find that it is not as burdensome as some have feared. It will have become obvious that the experience of the actual law is far different and more benign than the fears that have been drummed up about it politically. Once people experience its benefits for themselves, it will be very hard to gin up a campaign to take it away from them.

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Finally, Quality We Really Care About

Patient-centered care and patient engagement have become central to the vision of a high value health delivery system. The delivery system is evolving from a fee-for-service transactional payment model to a value-based purchasing model using outcome data and quality improvement and attainment. The Centers of Medicare and Medicaid Services (CMS) and private payers have spurred delivery redesign of networks that focuses on a set of clinical quality measures and patient care experiences along with efficiency measures.

However, the questions we ultimately really care are: “Did I get better? Am I healthier?”

With the advent of Facebook, PatientsLikeMe® and Avado, consumers and patients are sharing their healthcare experiences openly with their support system and strangers with similar illnesses. Our delivery system has yet to leverage the power of patient/consumer reported data in feeding back to care deliverers in the quality improvement cycle.

Clinical quality measures have traditionally consisted of process or surrogate measures and centered on providers and hospitals. As we move toward a system based on value, the measurement system must shift as well. Part of this movement will be utilizing outcomes directly reported from patients and their caretakers and incorporating these outcomes into quality improvement initiatives and payment models. The widespread adoption of standardized and validated patient-reported outcomes measures (PROMs) would accelerate the development of a patient-centered health system. However, new standards; patient-friendly, digitally-enabled instruments; secure portals; and more research will be required to facilitate adoption.

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ACOs and Antitrust: A Few Words of Caution

I am coauthoring (with Cory Capps) a chapter on healthcare antitrust for the forthcoming International Handbook of Antitrust Economics. As we finish our first draft, we were searching for a good way to tie everything together. We both thought of concluding by discussing antitrust and ACOs. Cory and I believe that the underappreciated (and often excruciatingly boring) topic of antitrust is fully interwoven with the story of ACOs. And even if the Supreme Court strikes down the ACA (note to readers of my prior blog – I was just kidding), ACOs may endure. So this is as good a time as any to explain the connections between antitrust and ACOs.

I first recognized this connection twenty years ago, when my colleague Steve Shortell was touting the growth of integrated delivery systems. Steve even offered a universal health insurance proposal (which several states explored) built around competing IDSs. In Steve’s world, an IDS would consist of several hospitals and hundreds of physicians. I argued with Steve that economic theory provided little support for massive vertical integration (and theory is still not all that kind to the idea.) I granted Steve that if integration made theoretical sense, integration would be all well and good for Chicago, where there might be four or five competing IDS. But what about Milwaukee, Cleveland, or any number of other midsize metropolitan areas? They would do well to have two or three IDS. Indeed, even with a legislative mandate to form IDS, consolidation has left these and other midsize markets with just two or three health systems. Smaller metro areas might have only had one IDS.

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The Facebook-ACO-Military-Industrial Complex

Investors just ponied up well over $100 billion for a piece of the social media giant Facebook. While Mr. Zuckerberg and his co-founders deserve a hearty congratulations, I find some eerie parallels between Facebook and accountable care organizations.  The similarity does not bode well for either business model.

1. The users are not the customers: Facebook sells its users to marketeers.  ACOs sells its patients’ health care utilization to insurers.

2. It’s the data and it’s not yours: Facebook’s targeted ads are constructed off of prior usage patterns. ACO’s shared savings calculations are built off off actuarially determined health care utilization patterns.

3. Sovereign hostility: Washington DC views information technology and health care as distractions from the true task at hand: restoring the U.S. manufacturing base.

4. Do you care, really? Now that the wunderkids in charge of Facebook have made their millions, it remains to be seen if they’ll work as hard in delivering value to its users.  Ditto for all the salaried docs working for ACOs, who no longer have to arrive early, skip lunch and stay late.

5. The long term: Yahoo once was the darling of internet investors.  Even if ACOs have initial success, is a better care model being developed as you are reading this?

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