The Majority of Medicare ACO Participants Appear to Have Lost Money in 2014

There's no other way to put it.

Like many wonks, the Population Health Blog glommed onto this recent CMS report report on the 2014 performance of the Pioneer and Medicare Shared Savings Accountable Care Organizations (ACOs). 

While there's some quality reporting data, the PHB decided to focus on the economics.

It ain't pretty.

Briefly, as the PHB understands it:

The 20 Pioneer and 333 Medicare Shared Savings Accountable Care Organizations generated a total of $411 million in savings.

Among the Pioneer participants:

15 out of 20 generated savings.  Only 11 of the 15 earned enough savings to trigger a payment from CMS that totaled $82 million.  The PHB calculates that's an average payment of approximately $7.5 million for each ACO. 

Three of the Pioneer ACOs had to provide clawbacks to CMS of $9 million, or an average $3 million each.

Of the 333 Medicare Shared Savings participants:

92 out of 333 saved $806 million in health care costs.  They received checks totaling $341 million.  The PHB calculates that's a payment of $3.7 million per ACO. 

Another 89 of the Medicare Shared Savings reduced costs, but not enough to trigger a payment from CMS.  That also means that the rest of these ACOs didn't even reduce costs.

The PHB's conclusions:

ACOs in the Pioneer program have about a 50% chance of getting some money back.  Assuming that there are from $2 million to $7 million per year in program support costs - in addition to the all of the foregone billable services - it's not clear to the PHB that the business model is sustainable (for example) for many of the Pioneer participants.  To add downside-risk insult to injury, there's a 15% chance a Pioneer ACO would have to pay Medicare.

ACOs in the Shared Savings program have a 75% chance that they won't be able to generate enough savings to cover the lost of income from fewer billable service or their program costs.

That's a majority of the participating ACOs.

Admittedly, there are several advantages to ACOs.  They 1) are an answer to the threat of rising health care costs, 2) are a laboratory for bundled payments, 3) promote care coordination and 4) are linked to medical homes.

But that's all for naught if the majority of the program participants are losing money in a massive exercise in risk transfer involving hundreds of millions of Medicare dollars.

This is health reform?

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Coda: The PHB can't help noting that the title of the CMS report is "Medicare ACOs Provide Improved Care While Slowing Cost Growth in 2014."   That may be technically true, but that title is more about spin than about the science. The findings haven't been submitted to the scrutiny of peer-review, and until it is, the PHB won't really know what to believe.

The End of Power Health Care?

Corporate titans enjoying
the good old days.

While Moses Naim's The End of Power devotes only a few pages to medicine, it's still provocative and worthwhile reading for anyone involved in the delivery of health care.

As the Population Health Blog understands it, the book's central thesis is that traditional "power" is being disrupted by the three modern trends of "more," "mobility" and "mentality."

We live in an unprecedented era of more (relative) widespread wealth, have an astonishing ability to move goods, services, information and ourselves around the globe (mobility) and are far less likely to adopt the cultural and intellectual assumptions and norms of established society (mentality).

Despite the depressing narrative of the "elite 1%," the irony is that governments and corporations have far less ability to command and control the 99%. This has big implications for world affairs, democracy and U.S. power.

Wow.

Big themes like this naturally prompt the excitable Population Health Blog to speculate about the implications of Naim's more-mobility-mentality for health reform in the United States.

It should be no wonder that policymakers, politicians, academics and regulators are promoting a large and concentrated i.e. powerful version of healthcare delivery.  These cognoscenti argue that huge integrated delivery systems, accountable care organizations and regional providers can "rationalize" health care with standardized protocols, less variation, efficient service lines, alignmment of incentives, optimum capital deployment and assumption of insurance risk.

Mr. Naim cautions that the power-play may not succeed. The PHB extrapolates:

1. While pundits can argue whether the Affordable Care Act's insurance options are as good as they should be, we're devoting a lot of wealth toward health care. More individuals have higher levels of resources to put into their care than they've ever had before. And they know it.

2. While that wealth is being tempered by out-of-pocket expenses, network exclusions, service limitations and other trade-offs, consumers still have relatively abundant choices on not only when, but where to see that doctor, have that surgery or take that pill.  By the way, information is not only cheaper (thanks to the internet) but no longer monopolized by the health professions. 

3. Whether it's a one-on-one recommendation to have a procedure or a proposal to build a new hospital wing, gone are the days when a professional expert's opinion was automatically accepted. Stakeholders are demanding evidence, seeking justification, asking for alternatives and are relishing the "gotcha" moments.

Where do these healthcare versions of more-mobility-mentality take us? Greater access to resources means higher expectations. Mobility means consumers will use exercise choice to cross country, state or even national borders to access care when they choose to do so.  And mentality translates into higher levels of individual consumerism.

Instead of protocols with less variation, patients will want the care to be personalized. Service lines will be judged less on efficiency than on local notions of value. Provider incentives based on "outcomes" and "upside risk" will have zero value proposition for their wealthy, mobile and skeptical customers.  Capital won't necessarily flow toward non-performing assets and year-end savings won't materialize just because policymakers wish it so.

Accountable care organizations and integrated delivery systems will still have huge competitive advantages. That being said, their chances competing successly against smaller competitors and access to capital will be increased if

1) their protocols are flexible,

2) variation is not only welcome but warranted,

3) patients have a good reason to choose their service lines,

4) incentives are broadened, and

5) this new and different level of complicated risk is realistically priced.

And that's assuming that the health provider policymakers, politicians, academics, regulators and CEOs realize that they're not quite in charge anymore.

Doubling Down on Accountable Care Organizations and Health Information Networks

Want to achieve effective health care, reduced costs, increased quality, population health, widespread prevention and seamless health information access? 

It's easy, says  this article in Population Health Management: mix one part PHO with one part HRB to create a HAPPI.

The Population Health Blog was confused too, but that's what's proposed by three smart academics from Johns Hopkins, Arizona State University and UC Berkeley.

As the PHB understands it, Population Health Organizations (PHOs) would be responsible for all medical, public health, community and social services in a defined geographic area and coordinate them with local education, housing and labor. Much of it would be paid for by a pooled risk-adjusted global or capitated payment (budget) from all insurers.

Each organization would be paired with a Health Record Bank (HRB), which would act as a huge data warehouse that not only stores all medical information, but any other publically available information on every individual enrolled in the PHO. The HRBs would be owned and operated by "trusted custodial organizations." Data access would be ultimately controlled by each patient.

The authors believe that patient payments would be a source of additional revenue for their PHOs. Examples include buying "apps" that are tailored to their individual health needs, or selling their personal health information, especially if it means helping physicians buy an electronic health record or access cutting edge research.

Combine a PHO and HRB and you have a Health and Prevention Promotion Initiative (HAPPI). Its size and scale would warrant contributions from community and provider organizations "without the need for additional reimbursement or outside funding." It would efficiently "align incentives" for insurers, hospitals and ACOs - with money left over for prevention, care coordination, decision support and a learning health system.

Breathtaking, isn't it?  If any PHB readers thought accountable care organizations (ACOs) and health information networks (HINs) weren't big enough, along comes Tyrannosaurus rex-sized PHOs, HRBs and HAPPIs. 

The PHB worries that while we'd want to see how pint-sized ACOs (not a slam dunk) and HINs (likewise not a slam dunk) perform before we apply the massive steroid doses, the opposite could happen: their messy failure could be just the justification for doubling down and going even bigger. 

As pointed out in a recent Wall Street Journal Notable and Quotable:

Economist Michael Munger writing in the Freeman, Aug. 11:

When I am discussing the state with my [academic] colleagues, it's not long before I realize that, for them, almost without exception, the State is a unicorn. I come from the Public Choice tradition, which tends to emphasize consequentialist arguments more than natural rights, and so the distinction is particularly important for me. My friends generally dislike politicians, find democracy messy and distasteful, and object to the brutality and coercive excesses of foreign wars, the war on drugs, and the spying of the NSA.

 

But their solution is, without exception, to expand the power of "the State." That seems literally insane to me—a non sequitur of such monstrous proportions that I had trouble taking it seriously.

 

Then I realized that they want a kind of unicorn, a State that has the properties, motivations, knowledge, and abilities that they can imagine for it. When I finally realized that we were talking past each other, I felt kind of dumb. Because essentially this very realization—that people who favor expansion of government imagine a State different from the one possible in the physical world—has been a core part of the argument made by classical liberals for at least three hundred years.

Image from Wikipedia

Can Physician Loyalty to Their Profession Be Superseded by Loyalty to their Employer?

Whenever the Population Health Blog heard the "value-not-volume" health policy operatives drone on about "provider alignment of incentives," it wondered.... really wondered.... if this Kool-Aid had completely convinced the ACO Adminosphere's inhabitants that their physicians' loyalty to their profession could be superseded by loyalty to their employer.

Sure, running a private-practice sucks and Obamacare's economics favor consolidation, but that's not necessarily enough to capture hearts and minds.  The PHB recently heard a local ACO executive explain that her long-employed physicians were still (yes, still) challenged with EHR implementation, teaming, shared savings, quality metrics, practice management, joint ventures and the role of patient educators. 

Other than that, Mrs. Lincoln, how was the ACO play?

And then there's a tweet from @VinceKuraitis on how a group of St. Louis cardiologists are "leaving" hospital employment and striking out on their own. Vince asks if this is a random blip or start of a trend.

Good question.

If this does turn out to be the start of a trend, don't be surprised. As someone very wise pointed out millennia ago, people do not live by bread alone.

Image from Wikipedia

Doubling Down on Accountable Care Organizations

What happens if CMS' grand experiment in ACOs fails?

There are some good reasons to believe that it could happen:

Preliminary results are spotty at best

Saving money doesn't mean making a profit

inefficiencies, technology shortfalls, culture barriers and inertia abound;

bending the curve for sick populations is hard;

physician and patient behavior change is difficult;

last but not least, it was tried before

But note that the Population Health Blog is not asking whether ACOs are going to fail.  That jury is still out.  The question is IF they fail, what happens next?

While the Population Health Blog Spouse would common-sensically expect the contracts to be cancelled while our national leaders look for the next good idea, the PHB doesn't expect that to happen.  For an example of the thinking behind a far more likely scenario, check out this article by RWJF Advisor and former Health Affairs Editor Susan Dentzer.

Despite some early bad news, Ms. Dentzer exclaims that she's not about to let any inconvenient facts get in the way of further "improvement" of the ACO model. 

Among her ideas for doubling down and expanding it:

1. Tying discounts on Part B premiums "or other financial incentives" to get Medicare beneficiaries to agree to a more narrow network.

And why, asks the PHB is this any different than managed care?  Or maybe ACOs are destined to be HMOs in "drag!"

2. Tying discounts or other financial incentives to the use, whenever possible, of the lowest level of care.

This is another long-used managed care tool that can justify keeping patients out of the hospital.  And the PHB would vote for RuPaul as the ACO National Medical Director. 

3. Expand the use of multi-disciplinary team-based care for persons with chronic illness.

A good idea, but teaming of medical home can succeed quite nicely outside of ACOs.

Hey, says the PHB, if CMS can pull the rug out from under Medicare Health Support, it should be able to do it to ACOs.  Fair is fair.

Image from Wikipedia

Warning: Health Insurance is Hard

As a former commercial medical director, the Disease Management Care Blog has wrangled with a number of physician colleagues in the population health, medical home and accountable care business on the basics of health insurance .

Many are afflicted with two "insurance-is-easy" conceits:

1. Insurers take in premium money, pay claims and keep what's left over, and

2. Quality health care means more money is left over.

Both have fueled the Accountable Care Organization (ACO) gold rush. Since insurers are supposedly fat with money, it's a no-brainer to want to get a piece of the action, especially since "stuff" like mammograms and the electronic record will save even more bucks.

Win-win, right?

Not so fast.  Insurers' ROI is not huge, quality costs and the EHR's money-saving potential is just that.

Which is why the DMCB likes the short American Journal of Managed Care manuscript on ACOs that asks "Is the Deal Any Good?"

Author François De Brantes reminds readers that 1) a lot of patients are needed to dampen the individual impact of costly outliers, and 2) certain assumptions must be made about cost trends.  Get either wrong and you could lose money.

The author also asks readers to consider the achievable savings rate. To the DMCB, this speaks to the assumption that quality and prevention automatically add to the bottom line. That's not necessarily true and could make you lose even more money.

Says the author:

Over a decade ago, the ability of providers to understand the uncertainty of the financial risks eventually led to the demise of many and a significant setback for the country in our collective ability to rein in runaway medical costs. We cannot allow the same mistakes to happen again, and both providers and payers need to understand whether or not the deal is any good.

In other word, insurance is hard.  Stay tuned on whether the ACOs have figured that out.

Five Things Docs Should Look for in an ACO, Including a Mirror

Pondering joining an ACO?

The Disease Management Care Blog was quoted in Software Advice's article on how primary care practices should join accountable care organizations. While regular readers won't be surprised by the DMCB's underlying skepticism about ACOs, this article does a nice job of introducing the topic of "risk transfer."

As the DMCB understands it, risk transfer is a contractual agreement to exchange money for risk.  In the instance of ACOs, provider organizations are agreeing to accept risk in exchange for a piece of any savings that accrue from managing that risk. If it sounds like doctors are adopting many of the features of insurance companies, you're right. Whether they also adopt many of the bad behaviors of insurance companies remains to be seen.

What the ACO wasn't aware of was data suggesting that the price of admission to the money-for-risk game can range between $11 and $26 million. In order to get a return on that kind of investment, physicians are going to have to figure out how to manage down a lot of admissions, specialty referrals and procedures.

At any rate, according to Profitable Practice, five elements that a primary care practice should look for in gauging an ACO partnership are:

1) Teaming: the presence of (nurse) care teams armed with protocols, plus strong internal quality improvement systems.

2) Physician-led: visible and smart physician leadership who understands health reform

3) EHR: A functioning and organization-wide EHR

4) Patience: Practice change will take more than a year. Learning collaboratives can help.

5) A Mirror: docs need to ask themselves if there is a willingness commit special attention and time to high cost, chronic conditions that generate hospitalizations, repeat visits and costly procedures. Non-physician providers will be able to do the routine care, while it will be the physicians who will need to spend day after day with complex patients.