The false metric of “lives under management”

https://mailchi.mp/b0535f4b12b6/the-weekly-gist-march-12-2021?e=d1e747d2d8

Performance metrics. What's this all about? | by Artem Denysov | codeburst

“We’ve fully embraced value-based care,” we often hear from health system executives. “We don’t just measure inpatient admissions anymore—now we focus on ‘lives touched’.” Indeed, the proliferation of shared savings schemes, quality-based bonus payments, and the like has refocused traditional hospital leaders on a broader set of performance metrics.

But there’s some fuzzy math going on here. When we hear an executive boast that their system has “more than half our payments at risk”, our first question is, what kind of risk? A hypothetical, but very common, example, illustrates the point: if $100 of reimbursement has a $1 quality bonus attached to it, that’s often counted as $101 of “revenue at risk”. Nonsense!
 
As the lines blur between insurance companies and providers, and health systems aspire to move up the value chain, embracing risk for the health of the patients they serve, the real question shouldn’t be how many lives are under management, but rather how much management those lives are under.

Taking on greater responsibility for managing not just the total cost of care, but the total health of each individual patient, should be the strategic goal of systems looking to become fully “integrated”depth matters more than breadth when it comes to managing care. That’s where the incentives really change, and decisions about what care should be delivered when, to whom, and how, become powerful drivers of a system’s economics. 

We’d encourage health systems to fully embrace accountability for the health of their patients, and not to be satisfied with merely earning performance-based bonus payments.

Notes for the 39th Annual J.P Morgan Healthcare Conference, 2021

https://www.sheppardhealthlaw.com/articles/healthcare-industry-news/

2021 JP Morgan Healthcare Conference | Zoetis

Sitting in the dark before 6 am in my Los Angeles house with my face lit up by yet another Zoom screen, wearing a stylish combination of sweatpants, dress shirt and last year’s JPM conference badge dangling around my neck for old times’ sake, I wonder at the fact that it’s J.P. Morgan Annual Healthcare Conference week again and we are where we are. Quite a year for all of us – the pandemic, the healthcare system’s response to the public health emergency, the ongoing fight for racial justice, the elections, the storming of the Capital – and the subject of healthcare winds its way through all of it – public health, our healthcare system’s stability, strengths and weaknesses, the highly noticeable healthcare inequities, the Affordable Care Act, Medicaid and vaccines, healthcare politics and what the new administration will bring as healthcare initiatives.

I will miss seeing you all in person this year at the J.P. Morgan Annual Healthcare Conference and our annual Sheppard Mullin reception – previously referred to as “standing room only” events and now as “possible superspreader events.” What a difference a year makes. I admit that I will miss the feeling of excitement in the rooms and hallways of the Westin St. Francis and all of the many hotel lobbies and meeting rooms surrounding it. Somehow the virtual conference this year lacks that je ne sais quoi of being stampeded by rushing New York-style street traffic while in an antiquated San Francisco hotel hallway and watching the words spoken on stage transform immediately into sharp stock price increases and drops. There also is the excitement of sitting in the room listening to paradigm shifting ideas (teaser – read the last paragraph of this post for something truly fascinating). Perhaps next year, depending on the vaccine…

So, let’s start there. Today was vaccine day at the JPM Conference, with BioNTech, Moderna, Novovax and Johnson & Johnson all presenting. Lots of progress reported by all of the companies working on vaccines, but the best news of the day was the comment from BioNTech that the UK and South Africa coronavirus variants likely are still covered by the BioNTech/Pfizer vaccine. BioNTech’s CEO, Prof. Uğur Şahin, M.D., promised more data and analysis to be published shortly on that.

We also saw continued excitement for mRNA vaccines, not only for COVID-19 but also for other diseases. There is a growing focus (following COVID-19 of course) on vaccines for cancer through use of neoantigen targets, and for a long list of infectious disease targets.  For cancer, though, there continues to be a growing debate over whether the best focus is on “personalized” vaccines or “off the shelf” vaccines – personalized vaccines can take longer to make and have much, much higher costs and infrastructure requirements. We expect, however, to see very exciting news on the use of mRNA and other novel technologies in the next year or two that, when approved and put into commercialization, could radically change the game, not only as to mortality, but also by eliminating or significantly reducing the cost of care with chronic conditions (which some cancers have become, thanks to technological advancement). We are fortunate to be in that gap now between “care” and “cure,” where we have been able with modern medical advances to convert many more disease states into manageable chronic care conditions. Together with today’s longer lifespans, that, however, carries a much higher price tag for our healthcare system. Now, with some of these recent announcements, we look forward to moving from “care” to “cure” and substantially dropping the cost of care to our healthcare system.

Continuing consolidation also was a steady drumbeat underlying the multiple presentations today on the healthcare services side of the conference – health plans, health systems, physician organizations, home health. The drive to scale continues, as we have seen from the accelerated pace of mergers and acquisitions in the second half of 2020, which continues unabated in January 2021. There was today’s announcement of the acquisition by Amerisource Bergen of Walgreens Boots Alliance’s Alliance Healthcare wholesale business (making Walgreens Boots Alliance the largest single shareholder of Amerisource Bergen at nearly 30% ownership), following the announcement last week of Centene’s acquisition of Magellan Health (coming fast on the heels of Molina Healthcare’s purchase of Magellan’s Complete Care line of business).

On the mental health side – a core focus area for Magellan Health – Centene’s Chief Executive Officer, Michael Neidorff, expressed the common theme that we have been seeing in the past year that mental health care should be integrated and coordinated with primary and specialty care. He also saw value in Magellan’s strong provider network, as access to mental health providers can be a challenge in some markets and populations. The behavioral/mental health sector likely will see increased attention and consolidation in the coming year, especially given its critical role during the COVID-19 crisis and also with the growing Medicaid and Medicare populations. There are not a lot of large assets left independent in the mental health sector (aside from inpatient providers, autism/developmental disorder treatment programs, and substance abuse residential and outpatient centers), so we may see more roll-up focus (such as we have seen recently with the autism/ABA therapy sector) and technology-focused solutions (text-based or virtual therapy).

There was strong agreement among the presenting health plans and capitated providers (Humana, Centene, Oak Street and multiple health systems) today that we will continue to see movement toward value-based care (VBC) and risk-based reimbursement systems, such as Medicare Advantage, Medicare direct contracting and other CMS Innovation Center (CMMI) programs and managed Medicaid. Humana’s Chief Executive Officer, Bruce Broussard, said that the size of the MA program has grown so much since 2010 that it now represents an important voting bloc and one of the few ways in which the federal government currently is addressing healthcare inequities – e.g., through Over-the-Counter (OTC) pharmacy benefits, benefits focused on social determinants of health (SDOH), and healthcare quality improvements driven by the STARS rating program. Broussard also didn’t think Medicare Advantage would be a negative target for the Biden administration and expected more foreseeable and ordinary-course regulatory adjustments, rather than wholesale legislative change for Medicare Advantage.

There also was agreement on the exciting possibility of direct contracting for Medicare lives at risk under the CMMI direct contracting initiative. Humana expressed possible interest in both this year’s DCE program models and in the GEO regional risk-based Medicare program model that will be rolling out in the next year. Humana sees this as both a learning experience and as a way to apply their chronic care management skills and proprietary groups and systems to a broader range of applicable populations and markets. There is, however, a need for greater clarity and transparency from CMMI on program details which can substantially affect success and profitability of these initiatives.

Humana, Centene and Oak Street all sang the praises of capitated medical groups for Medicare Advantage and, per Michael Neidorff, the possibility of utilizing traditional capitated provider models for Medicaid membership as well. The problem, as noted by the speakers, is that there is a scarcity of independent capitated medical groups and a lack of physician familiarity and training. We may see a more committed effort by health plans to move their network provider groups more effectively into VBC and risk, much like we have seen Optum do with their acquired fee for service groups. Privia Health also presented today and noted that, while the market focus and high valuations today are accorded to Medicare lives, attention needs to be paid to the “age in” pipeline, as commercial patients who enroll in original Medicare and Medicare Advantage still would like to keep their doctors who saw them under commercial insurance. Privia’s thesis in part is to align with patients early on and retain them and their physicians, so as to create a “farm system” for accelerated Medicare population growth. Privia’s Chief Executive Officer, Shawn Morris, also touted Privia’s rapid growth, in part attributable to partnering with health systems.

As written in our notes from prior JPM healthcare conferences, health systems are continuing to look outside to third parties to gain knowledge base, infrastructure and management skills for physician VBC and risk arrangements. Privia cited their recent opening of their Central Florida market in partnership with Health First and rapid growth in providers by more than 25% in their first year of operations.

That being said, the real market sizzle remains with Medicare Advantage and capitation, percent of premium arrangements and global risk. The problem for many buyers, though, is that there are very few assets of size in this line of business. The HealthCare Partners/DaVita Medical Group acquisition by Optum removed that from the market, creating a high level of strategic and private equity demand and a low level of supply for physician organizations with that expertise. That created a focus on groups growing rapidly in this risk paradigm and afforded them strong valuation, like with Oak Street Health this past year as it completed its August 2020 initial public offering. Oak Street takes on both professional and institutional (hospital) risk and receives a percent of premium from its contracting health plans. As Oak Street’s CEO Mike Pykosz noted, only about 3% of Medicare dollars are spent on primary care, while approximately two-thirds are spent on hospital services. If more intensive management occurs at the primary care level and, as a result, hospitalizations can be prevented or reduced, that’s an easy win that’s good for the patient and the entire healthcare system (other than a fee for service based hospital). Pykosz touted his model of building out new centers from scratch as allowing greater conformity, control and efficacy than buying existing groups and trying to conform them both physically and through practice approaches to the Oak Street model. He doesn’t rule out some acquisitions, but he noted as an example that Oak Street was able to swiftly role out COVID-19 protocols rapidly and effectively throughout his centers because they all have the same physical configuration, the same staffing ratio and the same staffing profiles. Think of it as a “franchise” model where each Subway store, for example, will have generally the same look, feel, size and staffing. He also noted that while telehealth was very helpful during the COVID-19 crisis in 2020 and will continue as long as the doctors and patients wish, Oak Street believes that an in-person care management model is much more effective and telehealth is better for quick follow-ups or when in-person visits can’t occur.

Oak Street also spoke to the topic of Medicare Advantage member acquisition, which has been one of the more difficult areas to master for many health plans and groups, resulting in many cases with mergers and acquisitions becoming a favored growth vehicle due to the difficulties of organic membership growth. Interestingly, both Oak Street and Humana reported improvements in membership acquisition during the COVID-19 crisis. Oak Street credited digital marketing and direct response television, among other factors. Humana found that online direct-to-consumer brokers became an effective pathway during the COVID-19 crisis and focused its energy on enhancing those relationships and improving hand-offs during the membership enrollment process. Humana also noted the importance of brand in Medicare Advantage membership marketing.

Staying with Medicare Advantage, there is an expectation of a decrease in Medicare risk adjustment revenue in 2021, in large part due to the lower healthcare utilization during the COVID crisis and the lesser number of in-person visits during which HCC-RAF Medicare risk adjustment coding typically occurs. That revenue drop however likely will not significantly decrease Medicare Advantage profitability though, given the concomitant drop in healthcare expenses due to lower utilization, and per conference reports, is supposed to return to normal trend in 2022 (unless we see utilization numbers fall back below 90% again). Other interesting economic notes from several presentations, when taken together, suggest that while many health systems have lost out on elective surgery revenue in 2020, their case mix index (CMI) in many cases has been much higher due to the COVID patient cases. We also saw a number of health systems with much lower cash days on hand numbers than other larger health systems (both in gross and after adjusting for federal one-time stimulus cash payments), as a direct result of COVID. This supports the thesis we are hearing that, with the second wave of COVID being higher than expected, in the absence of further federal government financial support to hospitals, we likely will see an acceleration of partnering and acquisition transactions in the hospital sector.

Zoetis, one of the largest animal health companies, gave an interesting presentation today on its products and service lines. In addition to some exciting developments re: monoclonal antibody treatments coming on line for dogs with pain from arthritis, Zoetis also discussed its growing laboratory and diagnostics line of business. The animal health market, sometime overshadowed by the human healthcare market, is seeing some interesting developments as new revenue opportunities and chronic care management paradigms (such as for renal care) are shifting in the animal health sector. This is definitely a sector worth watching.

We also saw continuing interest, even in the face of Congressional focus this past year, on growing pharmacy benefit management (PBM) companies, which are designed to help manage the pharmacy spend. Humana listed growth of its PBM and specialty pharmacy lines of business as a focus for 2021, along with at-home care. In its presentation today,  SSM Health, a health system in Wisconsin, Oklahoma, Illinois, and Missouri, spotlighted Navitus, its PBM, which services 7 million covered lives in 50 states.

One of the most different, interesting and unexpected presentations of the day came from Paul Markovich, Chief Executive Officer of Blue Shield of California. He put forth the thesis that we need to address the flat or negative productivity in healthcare today in order to both reduce total cost of care, improve outcomes and to help physicians, as well as to rescue the United States from the overbearing economic burden of the current healthcare spending. Likening the transformation in healthcare to that which occurred in the last two decades with financial services (remember before ATMs and banking apps, there were banker’s hours and travelers cheques – remember those?), he described exciting pilot projects that reimagine healthcare today. One project is a real-time claims adjudication and payment program that uses smart watches to record physician/patient interactions, natural language processing (NLP) to populate the electronic medical record, transform the information concurrently into a claim, adjudicate it and authorize payment. That would massively speed up cash flow to physician practices, reduce paperwork and many hours of physician EMR and billing time and reduce the billing and collection overhead and burden. It also could substantially reduce healthcare fraud.

Paul Markovich also spoke to the need for real-time quality information that can result in real-time feedback and incentivization to physicians and other providers, rather than the costly and slow HEDIS pursuits we see today. One health plan noted that it spends about $500 million a year going into physician offices looking at medical records for HEDIS pursuits, but the information is totally “in the rearview mirror” as it is too old when finally received and digested to allow for real-time treatment changes, improvement or planning. Markovich suggested four initiatives (including the above, pay for value and shared decision making through better, more open data access) that he thought could save $100 billion per year for the country. Markovich stressed that all of these four initiatives required a digital ecosystem and asked for help and partnership in creating one. He also noted that the State of California is close to creating a digital mandate and statewide health information exchange that could be the launching point for this exciting vision of data sharing and a digital ecosystem where the electronic health record is the beginning, but not the end of the healthcare data journey.

Centene’s $2.2B deal for Magellan adds focus on behavioral health

Dive Brief:

  • Centene has entered into a definitive agreement to acquire Phoenix, Arizona-based Magellan Health for $2.2 billion, or $95 per share, the payer said Monday. Magellan will operate independently under the Centene umbrella.
  • Executives said the combination will result in one of the nation’s largest behavioral health platforms as the two will provide behavioral services to about 41 million members in the U.S.
  • The deal also boosts Centene’s already established footprint in government sponsored health plans with the addition of 5.5 million lives and another 2.2 million to add to its pharmacy benefit management platform.

Dive Insight:

The deal is designed to boost Centene’s ability to market a “whole health” approach for its members. The COVID-19 pandemic has underscored the need to care for more than just a member’s physical health by also caring for their mental health, the company said Monday.

“This has become even more evident in light of the pandemic which has driven a dramatic rise in behavioral health needs,” Centene CEO Michael Neidorff said in statement. Both boards unanimously approved the deal.

Magellan Health provides managed care and pharmacy services for an array of clients that include health plans, unions and third-party administrators. Centene has been a client of Magellan’s in years past.

Magellan leans on analytics and other technologies in an attempt to improve health outcomes and lower costs. In addition to behavioral health, Magellan focuses on high-cost or complex patients for its clients. In its presentation to investors on Monday, Centene said 71% of total healthcare costs in the U.S. are spent on complex patients, illustrating the need for the deal.

For its healthcare management services, Magellan typically enters into risk-based contracts with its clients where it assumes all or a substantial portion of the risk in exchange for a per member, per month fee. Or, Magellan will enter into an administrative services only agreement in which it reviews utilization and claims administration and manages provider networks, according to its latest 10-Q filing.

The deal is expected to close in the second half of the year pending regulatory approvals. CEO Ken Fasola and other Magellan executives will continue their leadership roles.

Last year, Centene completed its blockbuster acquisition of rival WellCare, a $17 billion deal that catapulted the company to the fourth-largest insurer by membership when including Aetna, which is now part of CVS Health. The deal also doubled Centene’s Medicare Advantage footprint. Centene’s core business is Medicaid managed care and it is the largest insurer on the Affordable Care Act exchanges.

Could coronavirus derail the decades-long shift to value-based care?

As the coronavirus sickens tens of thousands of Americans while pressuring the bottom lines of medical providers, analysts worry the pandemic could also hit pause on the decades-long march toward value-based care, as hospitals and doctors look to recoup revenue in the short-term instead of putting more dollars at risk.

Massive health systems and independent physician offices alike are diverting funds to shore up resources like personal protective equipment, ventilators and staff to prepare for an expected influx of COVID-19 patients or to cope with those already there. Expenses are skyrocketing as providers halt non-essential visits including lucrative elective procedures like joint replacements, winnowing down a major source of revenue.​

Clinicians in value-based payment arrangements face higher levels of financial risk than their fee-for-service counterparts. Money spent preparing for the coronavirus and treating COVID-19 patients will be a sunk cost and they could be dinged financially again at the end of the year when their spending and performance is evaluated.

Already, the coronavirus is leading providers to think about exiting the models.

survey published this week of more than 220 accountable care organizations nationwide found almost 60% are likely to drop out of their risk-based model to avoid financial losses. Some 77% are “very concerned” about the coronavirus’ impact on their 2020 performance.

“The value-based movement is at a critical juncture,” wrote National Association of ACOs CEO Clif Gaus in a letter to CMS Administrator Seema Verma last month.

Fee-for-service still dominates — roughly 40% of healthcare payments made in 2018 were under fee-for-service, according to the Health Care Payment Learning & Action Network (LAN) — but it’s been on the downswing. One in three healthcare payments currently flows through some sort of alternative payment model, and that has been projected to grow.

Among the four main types of value-based arrangements — shared risk, global capitation, bundled care and shared savings —​ most require an upfront financial commitment. And providers are unlikely to put more capital at risk given the current economic situation, analysts told Healthcare Dive, instead focusing on making up the losses they sustained during the outbreak by ramping up capacity.

Doctor’s offices and hospitals will reschedule delayed procedures and even operate on weekends to recapture as much revenue as possible before they’re likely to consider taking on more risk.

“Even if you’re not in the hotspots, you are preparing right now. This puts on hold a lot of the initiatives that have been on the value-based side of things,” Jefferies senior healthcare analyst Brian Tanquilut told Healthcare Dive. “I don’t think the value-based discussion goes away, but I think it will take a recovery of the hospital system before it can go there.”

Pleas for loss waivers

The National Association of ACOs told CMS in mid-March that ACOs in Medicare’s flagship ACO program the Shared Savings Program, along with other shared risk models like the Next Generation ACO model and the upcoming Direct Contracting initiative, could face losses beyond their control because of the pandemic.

CMS did pause some reporting requirements for value-based initiatives late last month. The agency pushed back the deadline for groups participating in the Medicare ACO program, Merit-based Incentive Payment System and the Hospital Readmissions Reduction Program to report quality data, or waived reporting entirely for the fourth quarter of 2019. The relaxation was framed as a way to help value-based organizations free up time and resources amid the pandemic.

But provider groups including NAACOS and the American Hospital Association have lobbied aggressively for the Trump administration to forgive all ACO losses for 2020. CMS is reviewing their request.

But all normal rules have gone out the window, experts say, and it’s almost impossible to move the needle toward value in the future when providers are facing a tsunami of patients now.

“This is not about managing a population. This is about doing everything you can to keep these people alive,” Dean Ungar, vice president of Moody’s Investors Service, told Healthcare Dive. “Coronavirus is really a five-alarm fire. But if your building’s on fire, that doesn’t really tell you how to maintain your business in normal circumstances.”

Silver lining?

Some, however, are more optimistic that the unique financial challenges brought on by the pandemic highlight the problems with the traditional fee-for-service model and could even nudge providers toward value-based arrangements down the line.

“If all of your revenue is based on patients walking in the door, when they can’t walk in the door anymore, you’re kind of up the creek without a paddle,” Dan Bowles, SVP of growth and network operations at accountable care organization Aledade told Healthcare Dive. “You need to find a way to create non-visit-based revenue.”

Some hope the pandemic could help the value-based movement in the long term as practices look for ways to uncouple revenue from patient volume. And, as medical costs continue to rise, accounting for 19% of the country’s GDP, any pause in the shift to value-based care due to the coronavirus is likely to be a short detour, not a complete derailment.

“Maybe some providers are going to see it in a different light when their business kind of dries up — see that there’s a benefit to it,” Ungar said. “Ultimately, it’s a trend of where things are going, but it’s a big ship and it’s moving slowly.”

And value-based care arrangements were built predominantly for the populations being hit hardest by the coronavirus: those with serious underlying medical conditions like chronic lung disease or severe obesity.

If those vulnerable patients were being treated in value-based arrangements, it’s possible more COVID-19 cases could have been caught earlier before they became life-threatening, Moody’s analyst Stefan Kahandaliyanage told Healthcare Dive. That could renew industry’s focus on managing the health of those most at-risk from novel infectious diseases in the future.

“Costs are very high and there’s been a pandemic,” Kahandaliyanage said. “Let’s get more healthy before the next pandemic comes.”

ACOs seek flexibility from CMS to mitigate losses due to coronavirus

https://www.fiercehealthcare.com/payer/acos-seek-flexibility-from-cms-to-mitigate-losses-due-to-coronavirus?utm_medium=nl&utm_source=internal&mrkid=959610&mkt_tok=eyJpIjoiTW1NMU9UbGxOekptTXpRMiIsInQiOiIydkNzdjUxRGpwNlZ1SFo3dWJmaW9rbWZ5TG5aV0J2YnZ0N2dWSFhqOStERTlvSUdhRU9maG1GWTJVMWtTSXk5NkNjaWdQaENIS3FRWHJhSlwvT3I0S0M5RnJOUW5yRUFuXC84OU5xOVwvS1gzTTFyTk9WaFwvQVpwWWFTWGtYZVA1QTAifQ%3D%3D

Coronavirus

Accountable care organizations (ACOs) are seeking flexibility from the Trump administration on mitigating any financial losses that could arise from treating the burgeoning coronavirus outbreak. 

The concerns come as the coronavirus has spread to more than 1,200 people across the country and has healthcare facilities worried about being overwhelmed. ACOs are in a particularly difficult situation as they are on the hook for paying back Medicare if healthcare costs skyrocket.

ACOs participating in either the Medicare Shared Savings Program (MSSP) or the Next-Gen ACO program agree to take on some form of financial risk. If they meet spending targets, they get a share of the savings, but if that spending accelerates they must pay back the Centers for Medicare & Medicaid Services (CMS) for a share of the losses. 

CMS does have a policy in place for “extreme and uncontrollable” circumstances that could impact the shared savings and losses.

Under the policy, CMS agrees to mitigate the amount of shared losses that an ACO has to pay back to Medicare. The amount is determined by looking at the duration of the circumstance and the percentage of an ACO’s beneficiaries are in the affected area.

CMS also has a policy in place to account for how an unforeseen circumstance could affect an ACO’s quality score.

If an ACO can’t report quality then its quality score, which impacts whether the ACO saved or lost money, will be pegged to the mean score for all ACOs in the MSSP.

The policy has usually been applied for natural disasters like wildfires or hurricanes but never for a pandemic. But ACOs are worried about whether the policy goes far enough.

For one thing, the policy does not address ACOs that otherwise would have gotten shared savings without the outbreak.

“Many ACOs, especially those new to accountable care models and smaller and rural ACOs that don’t have reserves rely on those shared savings to invest in the care coordination programs, IT, infrastructure that is necessary to rely no high-quality care,” said Allison Brennan, senior vice president of government affairs for the National Association of ACOs.

It would also be helpful for the Center for Medicare & Medicaid Innovation (CMMI), which oversees ACOs, to outline some scenarios on what applying the policy would look like, said Ashley Ridlon, senior vice president of health policy at Evolent Health, a value-based care consulting and services company.

ACOs are also concerned about the calculation of the benchmark, which is what ACO healthcare expenditures are measured against. The financial benchmark is calculated based on the previous three years of medical spending.

If the medical spending spins out of control due to the coronavirus, then spending would go well beyond the benchmark.

The CMMI could only take action, though, if the national spending is affected.

But ACOs worry CMMI, which oversees the MSSP and the Next-Gen Program, will only take action if the benchmark is changed on a national basis.

“The way CMMI will look at this is only if the national trend comes exceptionally off projections,” said Donna Littlepage, senior vice president of accountable care strategies for Carilion Clinic, a Virginia-based healthcare system with seven hospitals and more than 200 physician practices. “If this happens in small pockets and not nationally then ACOs will be hit hard and there won’t be a fix.”

However, if the benchmark is completely off the actual spending trend, then CMMI will have to step in, said Littlepage.

“It doesn’t do CMMI good to drive all ACOs into the red,” she added.

CMS said that it has the authority to retroactively modify the benchmark for ACOs in the Next-Gen program if the national spending trend is affected by the coronavirus or other factors such as a natural disaster.

“We are monitoring events and will determine at a later date if we need to make any modifications to our benchmarking methodology,” the agency said.

CMS said it can also update the benchmark for the MSSP after a performance year to adjust for any national or regional trends regarding spending and healthcare utilization.

The agency did not say if it will employ the “extreme and uncontrollable” circumstances policy.

The application cycle for MSSP opens April 20. 

“We encourage ACOs to apply since applicants have multiple opportunities throughout the summer to update and revise their application,” the agency said.

 

 

 

 

Accountable Care Organizations: The case for “embracing” down-side risk

https://www.linkedin.com/pulse/accountable-care-organizations-case-embracing-risk-thomas-campanella/

The picture above is not exactly on point, but who can resist a little boy “embracing” a bear.

Per the Centers for Medicare & Medicaid Services (CMS), Accountable Care Organizations (ACOs) are groups of doctors, hospitals, and other health care providers, who come together voluntarily to give coordinated high quality care to the Medicare patients they serve (and hopefully saves money in the process).

ACOs are a product of the Affordable Care Act of 2010 (ACA). The theory behind ACOs was based on the recognition that we have a fragmented healthcare system that contributes to poor quality and higher healthcare costs.

Hospital-based health systems aggressively jumped on the ACO bandwagon starting with the passage of the ACA and, in the process, established relationships with physicians, ancillary providers, long-term care organizations, etc. Many times these Health Systems acquired (especially physicians) rather than established collaborative agreements with these community providers.

As a result of these acquisitions and collaborations, the hospital-based ACO and, in turn, the parent health systems became an even greater force in their communities. They were also in a better position to negotiate with payers because of the increased leverage they had as a result of their enhanced local provider presence. 

This also had a negative impact on health systems, since it did increase their fixed costs and made them less flexible to respond to competitors of different forms, especially in the outpatient and home setting.

Have ACOs lived up to their promise?

There have been many articles and research studies on the value of ACOs to determine if they have lived up to their promise of increased quality and cost-efficiencies. The consensus of research seems to be that ACOs have had a positive impact on quality, especially with regard to continuity of care for individuals with chronic diseases.

The jury is still out on the cost savings side, especially for hospital-based ACOs. 

Recently CMS has required that hospital-based ACOs to take on both up-side and downside risk.

Historically, ACOs have had the ability to take on only upside risk (or rewards), but at a lower percentage of potential gain vs. what they would have received if they were also willing to take on downside risk.

As I have noted in prior blogs, I am believer in risk/value-based contracting with downside financial exposure for hospital systems. I support this approach, not in a vindictive way, but because I want hospitals to survive and prosper in this new world of healthcare.

I also believe that if we are to successfully evolve from a “sick-care” system to a true “health” system, hospitals need to enter into the appropriate payer contracts that reward them for keeping patients healthy, not just for providing additional services.

Breaking down the silos inside and outside the walls of the hospital

I have worked in the healthcare industry in a variety of sectors since the early 1980s and during that period of time, I constantly heard the refrain about the need to break down the silos of healthcare both inside and outside the walls of the hospital.

The fee-for-service payment methodologies that exist today “the more you do the more you make” creates no “real” incentives to break down these silos. ACOs that have downside risk exposure along with payment methodologies such at capitation and bundled payments have the real ability to break down these silos.

As long as the majority of payments from payers is based on the fee-for-service payment methodologies, hospitals will have no “real” incentives to break down the silos that prevent value-based care from being provided. It also does not provide any “real” incentives to keep people healthy.

Per the dictionary, “Accountability refers to an obligation or willingness to accept responsibility for one’s actions. … When roles are clear and people are held accountable, work is accomplished efficiently and effectively. Furthermore, constructive change and learning is possible when accountability is the norm.”

While this definition was not met for ACOs, it really does apply and was ultimately the goal of the original drafters of the ACO concept. ACOs must be held accountable, and only through downside risk along with appropriate rewards will that occur.

If we want to achieve our goals of a value-base healthcare system as well as an overall healthier society, we need to create the proper incentives in our payment methodologies. As I have stated repeatedly in past healthcare blogs, “a healthcare system is shaped by what you pay for and how you pay for it.” The “how you pay for it” gets to the heart of the “risk” linkage with regard to hospital-based ACOs.

All of this is not to say that physician-led ACOs should not have risk but, given their size, these independent practices are much more financially vulnerable. Payment models for physician-led ACOs need to recognize the current value they are bringing to the ACO world, and consider ways to gradually add a risk component.

Hospital-based ACOs are looking to exit (or walk away from) Medicare Shared Savings Programs if required to take on downside risk

Per a recent article (April 26, 2019), “Just over half of accountable care organizations (ACOs) said they would consider leaving (or walking away from) the Medicare Shared Savings Program (MSSP) if required to take on more downside risk, revealed a study published in Health Affairs.

Thirty-two percent of ACOs said they are extremely or very likely to leave, and 19 percent believe they are moderately likely to leave.

The results also showed that there were significant differences in responses from physician-based ACOs and hospital-based ACOs.

“Approximately two-thirds of physician-based ACO respondents reported that they were likely to remain in the program if required to accept downside risk, compared with only about one-third of hospital-based ACOs,” the team said.

“This reflects the fact that physician-based ACOs have performed better, and a higher proportion of these ACOs have earned shared savings, than hospital-based ACOs. Physician-based ACOs have generated substantial savings by reducing spending for both inpatient and outpatient hospital services, which has not been true for hospital-based ACOs.”

Hospital based ACOs and well as hospital systems in general are doing themselves “no favors” by not accepting risk. 

By entering into “risk-based” contracts, hospital systems will create the appropriate incentives to address their supply-chain costs. Hospitals would also find it easier to engage physicians in addressing the cost side of the equation if physicians also understood and embraced the risk-based payment methodologies.

Under risk arrangements, hospitals would also have even more motivation to develop strategic relations with their vendors (medical device, etc.), such as what the auto industry does with their suppliers.

These risk arrangements will also allow hospital systems to be better prepared for the new world of healthcare. In this new world there will be winners and losers and different types of competitors, especially in the outpatient and home setting.

As we have also noted in prior blogs, hospital inpatient admissions are decreasing and patients have a higher acuity. Hospital inpatient care has been evolving to some form of a center of excellence. As hospitals look to find ways to expand their revenue opportunities they should be looking to bundle services for prospective patients and employers. These bundled services would and should have a risk-component tied to them.

Accepting risk-based contractual arrangements with payers is also better than competing in the retail marketplace where hospitals are much more vulnerable to lower priced regional and national competitors, especially as the result of the increased push for transparency.

Payers: Medicaid Managed Care, Medicare Advantage, Commercial Carriers, Self-insured employers should be pushing risk contracts. 

As noted in this article in Health Affairs, there are two ways employers should push ACO arrangements to evolve:

Financial Risk

“As experts jest, if ACO providers don’t take on the financial risk of caring for their population of patients (for example, only shared savings), it is like “vegan barbeque…or gin and tonic without the gin.” Payers’ ability to change provider behavior is likely to be negligible if they only reward providers with small bonuses for effective care a year after the fact. Greater financial accountability would encourage providers to promote preventive care and look for ways to cut waste.

In fact, without downside risk, health systems may take advantage of the ACO model. Experts argue that health systems may take on the practice of “ACO squatting” (that is, they form ACOs, take on patients, but avoid looking for ways to cut waste, reduce total cost of care, and improve quality) and that “a migration to two-sided risk for ACOs…after a certain number of years, so that there is a cost [downside financial risk]…would help to address this issue.”

Alignment of Patient Incentives

“Providers would be loath to assume financial risk for a patient population without the ability to manage their care. Commercial payers can modify patients’ out-of-pocket spending to encourage them to seek care only within the ACO. For example, by treating the ACO as a narrow network, the payer could pair it with a benefit design that offers lower premiums and minimal out-of-pocket spending for care from an ACO provider but little to no coverage for care sought outside of the ACO.

If the vast majority of patient visits occur within the ACO, it might be more likely to stay within budget because those providers can coordinate care and reduce redundancies. In addition, the ACO leadership can communicate with ACO providers about the cost and quality implications of their care decisions.”

If Medicare Advantage and Medicaid Managed Care Plans are not pushing for risk arrangements with Hospital-based ACOs or health systems, and these Plans continue to rely on some form of fee-for-service, then the true payers, Medicare and the individual states, should be reevaluating their own payment formulas with these entities. The payment formulas maybe too rich and do not provide enough incentives for these Plans to enter into risk arrangements with the above providers.

CONCLUDING THOUGHTS:

If you have been a reader of my blogs, you know I like sprinkling in health economic concepts into them. It is natural for individuals and other entities to make decisions based on their own self-interest.By not embracing risk in a manageable, but continuous fashion, hospital-based ACOs as well as hospital systems are sacrificing their long-term self-interest for immediate gain.

Active purchasers of healthcare services will continue to demand value in the marketplace, and for hospital-based ACOs and hospital system to meet this demand they need to break down the silos which can only be done effectively by embracing risk-based contracting tied to appropriate rewards.

Finally, we, as a society, are recognizing the need to focus our attention on population health, not only because it is the right thing to do, but because it also represents the best uses of our resources. We will not be able to achieve our goal of population health unless hospitals fully embrace it. One true way to expedite the transition to population health is for hospitals and ACOs payment methodologies to incorporate in their reimbursement contracts the appropriate risk/rewards that incent them to keep people healthy both inside and outside the walls of the hospital.