Health for life

The great Wayne Gretzky once famously observed that he achieved ice hockey prowess because he made a habit of skating to where the puck was going, not where it is.  That important lesson may have been lost on countless health care executives who, now that the Department of Health and Human Services has told us what an "Accountable Care Organization" (ACO) is, are furiously skating to fill out this application.

The Disease Management Care Blog suggests they also think about where this ACO puck could go.  Listen to the ACO zealots and its easy to believe that the triple aim will become manifest and providers will rolling in shared savings moolah in less than 18 months.

Regular DMCB readers know better.  They know that Medicares ACOs have no track record and that the ACO-like models have had a checkered experience.  As data on the Medicares ACOs come in, it is quite possible that we may discover a penalty box where a) shared risk translates to shared losses, b) the Feds are fickle partners, c) the correlation between cost inflation and quality is implacably positive and d) only a few hospital-physician alliances have the kind of non-generalizable culture necessary to make ACOs financially viable.

In other words, this is not going to be a preordained power play. By the time they get there, ACOs could find the puck went somewhere else. 

The DMCB humbly suggests that that somewhere else could be a post-ACO world.  That’s why the DMCB suggests that no organization’s long-term ACO strategic planning is complete without serious contemplation of why they should not follow the herd and plan on a 3rd quarter where:

The Bubble Bursts?  The hangover of lost millions in misallocated capital and human resource investments could preoccupy key partners and hobble lead competitors for years to come.  This has important implications for future business relationships, mergers and acquisitions and growing market share.

The Ascendancy of Physician Groups.  As hospital-physician arrangements unravel, the larger  independent physician-owned practices left behind could fill the vacuum with an array of contained, discreet and non-global commercial insurer payment arrangements that are based on 1) a level playing field and 2) what both sides value.  That is, of course, assuming these practices dont run afoul of any market dominance scrutiny by the FTC.

Federal Retrenchment:  Despite any prior deals on the SGR, a perfect storm of entitlement non-orm, rebounding cost inflation and the lack of any new innovative ideas forces CM to cut rates. The impact on physician participation in Medicare is anyone’s guess, but the new urgency to control costs means physicians will 1) have one more business reason to seek the efficiencies of larger groups and 2) be even less willing to take on additional practice costs that ranges from hiring to technology.

Should provider organizations skate toward this post-ACO world?  The DMCB suggests its not unreasonable.  Time will tell if they win this game.

ACOs and insurers discuss terms

The Disease Management Care Blog likes to think of itself as having achieved "critical mass." Now that its readership has climbed into the thousands (and Twitter is now well beyond 600), medical meeting organizers want to issue press credentials, medical journals are sending it embargoed previews and spammers are working particularly hard at getting maliciously-linked comments posted. The best upside for the DMCB, however, is its email correspondence with smart professionals who have insights that run contrary to the mainstreams confirmation bias.

Heres a gently edited email from one astute observer that the DMCB wanted to share:
 
While policymakers extoll the clinical integration virtues of ACOs and the PCMH, what goes unmentioned is that these vehicles often involve provider consolidation. While coordination of care and wasteful utilization might improve, does this mean that those entities could also amass considerable market leverage or become quasi-monopolies? Could that drive up costs?

I was at an specialty provider conference in early March where it was cited (in an admittedly unscientific member poll) that 25% of institutions surveyed had themselves been part of a consolidation or site of service change, mostly from community private practice to hospital-based setting. If physicians are not being employed outright, theyre entering into professional services agreements (PSAs).  Since this has to increase negotiating clout with insurers, the other locally competing providers are responding with an in-kind physician arms race.

Given this dynamic, what will happen when a system has a become a very efficient ACO and controls primary care with a locally dominant medical home network? Even if they fail to show any cost savings, will their ability to command favorable contracts be the key to economically surviving? Darwin would be proud of these long-beaked birds.

Are our federal and state governments prepared to reconcile the twin needs of integration and competition? I can’t help but think that regulators will be outmaneuvered by these increasingly powerful health care entities and that an unintended consequence of orm will be the increasing price points and the return of sticker-shock health care inflation.

Need an example of what is going on at the local level? Check out St. Lukes in Idaho and their ongoing battle with Trinity. St. Luke’s is a CMS designated ACO (on page 33) and is buying up assets left and right, employing physicians, and doing so in almost a direct anticompetitive way. I think that currently St. Lukes is doing a lot of forward thinking things, but if St. Luke prevails and Trinity does indeed go out of business as they state they will, it will leave a monopoly in that mostly rural state. When that happens, St. Lukes can set the price point.  Will they use that power to coordinate care or maximize revenue?

Believers in ACOs and the PCMH would do well to take a look at the Trinity perspective.

According to South Dakota researchers, the predator status of Tyrannosaurus rex can no longer be questioned. After finding one of its teeth embedded in the healed spine of a Hadrosaurus, paleontologists now believe T rex was a fearsome hunter, not an carrion munching opportunist. 

But, asks the Disease Management Care Blog, how do we really know that that Hadrosaurus wasnt  pretending to be dead when the T rex took its bite?  Alternatively, the Hadrosaurus could have been sleeping and only looked dead to a slow-witted and lazy T rex. 

Dino doubts, says the DMCB, remain.

Such is the level of skepticism that the DMCB is bringing to its reading of the recent CMS press release describing the initial results of the Pioneer ACO program.  CMS says "positive" and "promising." The DMCB says "problematic" wonders if, like the T rex dilemma, there isnt an alternative interpretation.

The DMCB explains.

Recall that the Pioneer ACO program is designed to test whether large integrated organizations can be successfully rewarded for reducing health care costs through a program of "shared savings."  Under the program, if the savings exceed a minimum threshold, CMS will remit a portion of the upside savings back to the participating organizations.

According to the press release, the health care costs for the 669,000 Medicare beneficiaries cared for by the 32 Pioneer ACO program providers grew only .3% versus .8% for a parallel group of "similar beneficiaries." 13 organizations exceeded the savings threshold, which will lead to Uncle Sam writing checks for $76 million in shared savings.

This front page article in The Wall Street Journal has more detail. It says 18 of the 32 reduced health care costs, which leads the DMCB to conclude that five otherwise "successful" participants did not cross the required savings threshold. Two participants lost money. That, in turn, suggests the remainder, or twelve, broke even.

Details on how each individual institution fared are not readily available.  According to WSJ, Bostons Partners Healthcare reduced Medicare claims expense by $14 million.  They will be rewarded with a shared savings check of $7 million. Wisconsins Bellin-ThedaCare will get "several million."

Good "win-win" news for the Pioneer organizations, CMS, Uncle Sam and U.S. taxpayers, right? A critical mass (40%) achieved millions in shared savings, which means proof of concept met and that a key part of Obamacare is successful, right?

"Not exactly," says the DMCB.

It figures 100% of the participating organizations had to each invest millions for personnel and other infrastructure to pursue the Medicare savings in the first place.  In other words, they were in the red before Pioneer even began.  That means that, in addition to the two participating organizations that lost money, the 12 that "broke even" as well as the 5 that did not make threshold also lost millions. 

Thats 19 losers or almost 60% of the participating organizations.

In addition, its possible that for some of the 13 "winners" that the shared savings awards wont  match their up-front multi-million dollar investment either.  Assuming thats true, its possible that as many as two thirds of the Pioneer organizations lost money. No wonder 9 of the participants have signaled a desire to exit the program.

The DMCBs dinosaur analogy may be apt.  Given a two out of three likelihood of losing millions in the first year of operations, ACOs may just be too big and complicated to survive in the current health care environment.  Nonetheless, the Pioneer program will continue and the DMCB will stay tuned for the Year 2 results.

In the meantime, the DMCB wishes CMS good luck in using these "positive" and "promising" results to expand the program anytime in the near - or distant - future.