Thursday, April 12, 2012

Why Can't A Single Small Physician Owned Group Enter Into A Shared Savings Contract?

Even the modest Disease Management Care Blog has to agree that its recent Patient Centered Primary Care Collaborative webinar on supporting care coordination within the medical home was a huge success.  Not only did it get to learn about the impressive work underway at North Shore-Long Island Jewish Health System, but the questions from a record 522 listeners helped the DMCB sharpen its focus.

Here’s one of the better questions that was emailed after the webinar was concluded:

What shared savings arrangements can happen on a small scale, for example a 4 doc office?

The (gently edited) DMCB reply:


The month-to month variability in the insurance claims (think 95% confidence intervals) from a small practice makes it practically mathematically impossible to confidently compare an observed dollar amount to a target dollar amount. 

There are methods that can be applied to diminish the variability (such as censoring “excess” claims and using “risk adjustment”) but, at the end of a fiscal year, a lack of documented savings could be the result of either a) poor care coordination or b) an “underpowered” or mathematically suspect claims analysis.  The skeptical insurer will say it was the former and the screwed docs will say it was the latter.  When that happens, docs lose.

This is an example of the “law of large numbers” and why the shared risk arrangements in Medicare ACOs have to be based on a minimum of “5000” persons. By having that many observations, the variability is blunted and measures of central tendency hold up in an actuarial basis.

And then there are the two policy implications.  First of all, shared risk contract involving a relatively small practice is perilously close to the bad old days of capitation and HMOs, vs. the approach of spreading accountability across a large system that is armed with all the requisite care coordination resources  A four person group can’t match that.  Secondly, the insurers have little interest in putting together a payment system that could financially cripple a four person clinical practice, especially if it's primary care.

The DMCB will examine accountable-like arrangements for a small group practice in a future post.


Vince Kuraitis said...

Jaan, Three days ago I would have agreed with your analysis.

However, take a look at the small size of the latest batch of Medicare Shared Savings ACOs...


Eric Page said...

but doesn't a 4 physician primary care practice have more than 5,000 patients? I would argue that the absolute best group to reduce costs through improved health is a well run primary care group that has the technology / data / analytics to measure risk and identify opportunities to improve care.

The moment you involve a wide range of specialists and a hospital, you have the entrenched attitudes (heads in beds) that have been rewarded for excess care for the last ... how many years? Far easier to turn around a row boat than a tanker.

Jaan Sidorov said...

Vince: I agree with your insights on the mix of ACOs. That being said, a single four person group doesn't typically have 5000 Medicare beneficiaries.

Jaan Sidorov said...

Big Chewy brings up a good point, but assuming a 4 person group has 1500-2000 patients per physician, that adds up to 8000 patients, but only 50% typically are Medicare.