Wednesday, June 2, 2010

Integration, Accountable Care Organizations, Care Management and Minimizing Insurance Risk: Cost Center or Source of Revenue?

Are care management nurses a "revenue source" or a "cost center?" The Disease Management Care Blog says the answer depends on who you ask.

The issue is likely to repeatedly start coming up in C-Suites large and small when hospitals start tackling readmissions under bundled payments as well as from an expanding list of "hospital acquired conditions." The same will be true in other provider settings, such as integrated systems, patient centered medical homes (PCMHs) or Accountable Care Organizations (ACOs), when they begin to enter into various forms of risk contracting such as "gainsharing."

That's when their moment of truth will arrive. That's when they'll have to confront the cost of hiring additional non-physician FTEs to do the "heavy lifting" of care management.

Because care management is very "high touch" and requires health care professionals, it is notoriously expensive. Considerable time, effort and expertise is necessary for the repeated remote inbound/outbound as well as in-person contact, engagement, counseling, self-management and follow-up. What's more, it's done one person at a time. It should be available starting at 6 AM and go into the evening hours. Some of it can be automated ("robo-calls") or cheaply outsourced (like, to Lahore Pakistan) but if a health system really intends to keep a population made up of elderly Mrs. Smiths with chronic heart failure and a list of medications a mile long away from the emergency room, it's going to take bunches of dedicated nurses.

That sure sounds like a cost center. Unfortunately, that's also how it's likely to be viewed by any provider organization taking on a bigger piece of the insurance premium, assuming risk in their contracts and trying to reduce utilization. The DMCB has witnessed some provider organizations struggle with this, and it hasn't been pretty. Their administrative attitude can be summed up in this telling physician-centric reply by AMA President Dr. Rohack on the topic of ACOs. That kind of conceit usually leads to shortcuts, like adding additional job duties the closest available non-physician. Examples include assigning already overworked hospital discharge coordinators the duties of outpatient care coordination, or giving the last remaining office nurse a list of patients and telling him or her to "start calling 'em." And, even if additional nurses are recruited, the DMCB has seen physician-led organizations use carefully crafted job descriptions on part-timers as cleverly contrived "human resource mirrors." They give the unsuspecting viewer the impression that there are really two nurses for every one that is hired.

The DMCB has been involved in the risk contracting arrangements between health insurers and provider organizations. When it's seen this behavior, its advice to both parties has been to run away. They are destined to fail.

Are care management nurses a cost center? The DMCB recommends that readers don't ask anyone from the AMA.

In a follow-up post, the DMCB will speculate on why managed care organizations have a far more sophisticated approach to using care management to mitigate risk.


Chris Langston said...

Interesting post. From a societal perspective all health care workers (MDs, RNs, hospital CEOs, managed care execs) are "costs." We pay them because we have some belief that their work will yield desired benefits.

Even in the non-health care business sectors, I'm not sure that the cost center vs revenue generator distinction really makes sense. IT or HR are "cost centers" but your sales force is "revenue generating?" Sure there is a line somewhere but it is a pretty arbitrary distinction - try to sell widgets without IT support.

In fee-for-service health care the distinction is even more ridiculous - MDs are revenue generators because their interactions with patients have been defined to generate the billable events and that MDs make admission decisions that create billing opportunities for hospitals, SNFs, etc. But try to provide services without everyone else.

The entire point of the health reform payment mechanisms is to undermine this distinction via gain-sharing or capitation or partial capitation. Under these systems, ANY costs of any services or professional count against the potential residual funds to be had. At least hypothetically, this should create an incentive to use the cheapest services/workers possible to successfully achieve desired outcomes.

(Which is the reason I suspect that managed care "gets it" - to a health plan all medical services are costs [loss is the term of art, I believe].)

However, being sure that individual players in a complex system share the same incentives as the system overall (much less society) is tricky stuff. Might Docs prefer to maximize Medicare Part B billings for themselves at the expense of uncertain participation in a possible gain-share pool that might be created by disease manager/case managers?

I'm shocked, shocked - round up the usual suspects.

Jaan Sidorov said...

All excellent points. Maybe docs have the advantage because their billable activities generate $$ that can be readily identified with their name, unlike case managers. But you're right, the distinction is quite artificial.

However, I still worry that in a globally capitated setting, the uncoupling of individuals and revenue will turn EVERYONE into "cost centers." The ones to go first will be the case managers.