An evaluation of Medicare's payment reform efforts finds that 42% of every dollar in the program was flowing to value-oriented payment methods, a nonprofit coalition of employer and healthcare purchasers says.
About 42% of Medicare's $360 billion in payments to providers in its fee-for-service program in 2013 were linked with efforts to boost the value of patient care, which is roughly on pace with similar initiatives among commercial payers, an independent review shows.
The first-of-its-kind Scorecard on Medicare Payment Reform was released Tuesday by Catalyst for Payment Reform, a nonprofit coalition of employer and healthcare purchasers.
Andréa Caballero
Using alternative payment models, the Department of Health and Human Services wants to tie 50% of fee-for-service Medicare payments to quality and value by the end of 2018.
Andréa Caballero, CPR's program director and lead researcher for the report, says 58% of Medicare payments in 2013, the latest data available, were through traditional fee-for-service models that do not include quality components.
"While we are not doing a direct comparison to our commercial scorecard, just to put it into a little bit of context, when we issued the 2014 commercial scorecard back in September, which was also a look back on 2013 data, we found that 40% of every dollar in the commercial market was flowing to value-oriented payment methods," Caballero said at a webcast detailing the report's findings.
'Uncanny Similarity'
"That's kind of an uncanny similarity in how the two sectors are moving together at a pace that is similar. It appears that both the public and private sectors are experimenting and moving rapidly in how they pay providers."
While acknowledging the difficulty in comparing commercial and Medicare value-based reforms, Caballero says the commitment demonstrated by all payers toward value-based care illustrates the growing momentum toward changing how healthcare is paid for across all sectors.
A breakdown by CPR found that:
42% of payments were linked to value.
33% were made through pay-for-performance programs.
14% were made through shared-risk and shared-savings programs.
58% did not include any quality component.
11.8% of payments were through shared savings programs.
2% were through shared risk arrangements under the Pioneer Accountable Care Organizations.
While the shift toward value-based care is on, Caballero says it's too early to gauge success or failure. "We have to realized that value-oriented payment arrangements really only matter if they are actually successful at reducing costs and improving quality," she says. "The next big challenge for all of us, now that we have quantified and set a baseline for these payments is to actually look at how effective they are."
Momentum Seen
The report excludes the Medicare Part D drug program and Medicare Advantage, and Caballero says the report methodology also adjusts for payment overlaps. The report relies on 2013 payment data collected from publicly available sources and verified by the Center for Medicare and Medicaid Services and the Center for Medicare and Medicaid Innovation, as well as data contributed to CPR directly by CMS and CMMI. CPR has made all findings available online.
"The big takeaway here is that there is tremendous momentum in the Medicare program on payment reform and we also can see a path to more reforms that are being implemented and planned," Caballero says.
"We also have to keep in mind that most of these payment methods are still entirely based on fee-for-service. Medicare Advantage payment is still unknown and we are eager to understand how the payment methods grow from the Medicare Advantage plans to their contracted providers. Our next big task is to determine which payment reform methods are working best, and spread those best approaches."
In a study, only 6% of would-be patients were told they were refused an appointment because they were not covered by a health plan. But fewer than 20% of physicians were willing to see an uninsured patient unless they were paid in full up front.
People with no health insurance have few problems making appointments at a primary care physicians' offices, but they likely will have difficulty paying for it, research shows.
Brendan Saloner
Researchers at Johns Hopkins University Bloomberg School of Public Health conducted a telephone survey of 1,613 primary care physicians' offices in 10 states in late 2012 and early 2013, before Medicaid expansion under the Affordable Care Act.
The callers, posing as uninsured patients seeking routine care, found that nearly 80% of the primary care physicians were willing to schedule an appointment. Office visit fees ranged from a low of $128 in Pennsylvania, to a high of $188 in Oregon, and a 10-state average price of $160 for a basic checkup or hypertension evaluation. The callers did not request prices quotes for blood work, imaging, or lab tests.
Only 6% of callers were told they were refused an appointment because they had no insurance. However, fewer than 20% of the physicians were willing to see the uninsured patients unless they paid the full cost up front. The study was published Monday in Health Affairs.
"The message here is that the uninured can get appointments at some price. They don't experience more difficulties with private insurance, but it costs a lot of money," says Brendan Saloner, the study's lead author and an assistant professor of Health Policy and Management. "The kinds of prices that callers in our study were being quoted would represent a real financial burden for the typically uninsured person."
Even with the advent of the Patient Protection and Affordable Care Act, Saloner says the study's findings remain relevant because 22 states have declined to expand their Medicaid roles.
"In states where Medicaid expansion has not taken off because the state made the decision not to expand the program the reality of 2012–2013 is pretty much representative of what life is like today," Saloner says.
"The big unknown is how things are evolving on the provider side, their capacity to see different kinds of patients, and whether the prices they are charging in this evolving market are going up or going down. Either of those would be possible, but we don't know for right now."
Saloner says there was no sense in the study that physicians were jacking up prices to discourage uninsured patients.
"I don't think they're in the business of frightening people away," he says. "While there are some prices that were quoted that were so high that it wouldn't be realistic for a typical patient, more typically they were offering similar prices. The prices they were quoting were what that office felt like they should be trying to get as a standard rate from a self-paying client."
"Based on what we learned in the study and comparing rates with private insurance markets, the uninsured are probably quoted prices that are similar with what the doctor has negotiated with private insurance companies."
Saloner says the study is not a critique of primary care physicians. "They are under a lot of financial pressures," he says. "What we need to understand is how this fits into the broader context of where the uninsured are getting their care. For a lot of uninsured people a primary care physician's office may not be the best option. They may be better served going to a federally qualified health center."
'What States Can Do is Expand their Medicaid Programs'
The researchers found that the average price for the same basic primary care services at a federally qualified health center was $109. A $100 office visit represents about 10% of monthly income for a person living at poverty level.
"The primary care market is not going to just fix itself for the uninsured, and we shouldn't look to the broad network of primary care physicians to solve this problem by providing more charity care," Saloner says.
"If I had a message it would be more around what states can do, and what states can do is expand their Medicaid programs. That is something that is going to provide a lot of relief to people below the poverty line who are uninsured, and that is where a lot of the room for increasing the insured rate is going to be in the immediate future."
"There are states that have been sitting on the sidelines trying to figure out what to do and our study really speaks to the impact of taking a complacent stance and not moving forward with the Medicaid expansion."
The study found that office visit fees were lower in Zip Code areas where the populations were poorer, and higher in areas where there were more primary care physicians, which Saloner calls counterintuitive.
"I don't know that that is necessarily a causal relationship. I doubt that putting more primary care physicians in a market with low supply is going to drive up the cost of primary care. That runs counter to economic theory," he says.
"What it more reflects is something that our study can't exactly measure that would be true of those areas. Physicians are setting prices based on a number of factors, including the ability to schedule lucrative patients with good insurance. If you are in a market where there are a lot of people with good insurance that is going to attract more providers to the area and that, in turn, could be where the higher price is coming from."
Enrollment is on the rise, but lack of federally funded residency training positions is fueling concern among medical school deans about enrollment growth outpacing growth in graduate medical education.
The nation's medical schools are on track to reach targeted enrollment increases of nearly 30% within four years, but bottlenecks still exist with a shortage of clinical training sites and residency slots, the Association of American Medical Colleges says.
The AAMC's annual Medical School Enrollment Survey shows that first-year medical school enrollment in 2019–20 will reach 21,304—a 29.2% increase over the baseline enrollment level in 2002–03 and only 130 slots shy of the 30% target. The projections are in line with enrollment increases the AAMC called for in 2006.
"With the United States facing a shortage of up to 90,000 physicians by 2025, we are pleased to see our nation's medical schools increasing enrollment, both through the expansion of existing medical schools and the establishment of new ones," AAMC President/CEO Darrell G. Kirch, MD, said in prepared remarks.
"However, without an increase in federally funded residency training positions, all these new medical school graduates may not be able to complete their training and become practicing physicians," he added.
Medical school deans told AAMC in the survey that they were particularly concerned about the lagging number of clinical training opportunities for medical students and the bottleneck in residency slots that will be created with enrollment growth. In 2014, 87% of deans said they were alarmed by the number of clinical training sites and the supply of qualified primary care preceptors.
Similarly, 71% of schools reported "major or moderate concern" in their state about enrollment growth outpacing growth in graduate medical education.
Richard "Buz" Cooper, MD, a healthcare economist at the University of Pennsylvania, called the rising medical school enrollment "good news," but said that real issue was the lack of residency positions. "There is no enthusiasm among policy leaders or politicians to increase the numbers," Cooper says.
"They still believe that quality initiatives, reimbursement changes and the reorganization of practice into medical homes and Accountable Care Organizations with more involvement of nurse practitioners and physician assistants will solve the problem. It's a grand experiment in redesigning healthcare. I'm pessimistic that it will work."
The survey showed that two-thirds of the enrollment growth will be achieved by the 125 medical schools that were accredited as of 2002 if medical schools realize current enrollment projections for 2019. Newly accredited schools since 2002 will provide the remaining one-third of the growth.
Enrollment growth would be accelerated if any of the nine applicant schools in the Liaison Committee on Medical Education pipeline achieves preliminary accreditation. About 62% of the projected growth in enrollment by 2019 is expected to come from public medical schools, with 43% of the growth in Southern states, AAMC said.
Nearly three-in-four medical schools (72%) said they had or were planning at least one initiative to increase student interest in primary care, up from 49% in 2009, the survey said.
Congress Refiles Residency Bill
A bill backed by AAMC and other provider lobbies filed in Congress on Thursday would increase the number of residency slots by 15,000 over five years.
The Resident Physician Shortage Reduction Act of 2015 has been around since 2009, but has failed to generate sufficient support to become law.
Rick Pollack, executive vice president of the American Hospital Association, said Congress needs to expand the number of residency slots at teaching hospitals that have been "frozen for the last 18 years."
"The current freeze on the number of physician training positions that Medicare funds has severely limited hospitals' ability to train the next generation of physicians," Pollack said in prepared remarks. "It has also contributed to a shortage of physicians, especially in behavioral health, primary care and general surgery. The process of educating and training a physician can take up to a decade."
Residency training costs about $16 billion nationally, of which Medicare provides about $3.3 billion. It costs about $152,000 a year to train a physician, of which Medicaid pays $40,000.
Len Marquez, director of government relations at the AAMC, says the latest reincarnation of the bill has not been formally scored by the Congressional Budget Office, but a "back of the envelope" estimate puts the cost at about $10 billion over 10 years.
"This is the approach we have advocated for, a multi-step approach where you have continued development of new delivery models and a modest increase in the number of physicians you are training," Marquez says. "Hopefully you can marry these two things and you've got an ability to address that shortage."
Marquez concedes that there might not be much of an appetite in Congress to fund more healthcare programs just after lawmakers passed the sweeping – and expensive – repeal of the Sustainable Growth Rate funding formula.
"In the current budget environment it will be very challenging to move the bills," he says. "But there is bipartisan recognition that the physician workforce shortage is a problem that we need to address. So, that is what I am hopeful about, that we are able to generate bipartisan cosponsors."
Marquez says the bill has provisions that control where the residencies are allotted and what specialties get them.
"One of the things the bill wanted to get at was this notion of rewarding states that have made that investment in medical education," Marquez says. "For example, the first priority in these bills is hospitals that are located in states with new medical schools or branch campuses since 2001. In doing that you are lining up with the states and local governments and university systems that have made the commitment to graduate new medical students. It's not just the northeast. Now you are looking at Texas, Tennessee, Florida, Georgia, Louisiana, it really is spread across the country."
The bill also directs the 15-member National Healthcare Workforce Commission to determine which specialties are most in demand, and then sets aside half of the new residency slots for those specialties.
The Federal Trade Commission says New York's Certificate of Public Advantage regulations that provide antitrust exemptions for the state's implementation plan for Medicaid redesign "are unnecessary because antitrust law already permits healthcare collaborations that benefit consumers."
The New York State Department of Health says it will move forward with its Medicaid performing provider systems, despite "strong concerns" from the Federal Trade Commission that the healthcare collaboratives are anticompetitive.
New York State's Delivery System Reform Incentive Program (DSRIP), created in April 2014, is the $6.43 billion implementation plan for the state's Medicaid redesign, with a target of reducing avoidable hospital visits by 25% within five years. Provider payouts will be based upon meeting benchmarks in system transformation, clinical management and population health.
In a letter this month, the FTC said New York's Certificate of Public Advantage (COPA) regulations that provide antitrust exemptions for DSRIP "are unnecessary because antitrust law already permits healthcare collaborations that benefit consumers."
"We write to express strong concerns that the COPA regulations, as well as the underlying authorizing legislation, are based on inaccurate premises about the antitrust laws and the value of competition among healthcare providers," the FTC said.
"Because procompetitive healthcare collaborations already are permissible under the antitrust laws, the main effect of the COPA regulations is to immunize conduct that would not [sic]generate efficiencies and therefore would not [sic] pass muster under the antitrust laws. Therefore, COPAs are likely to lead to increased healthcare costs and decreased access to healthcare services for New York consumers."
The New York State Department of Health issued a brief statement that read: "DOH is reviewing the letter from the FTC. In the meantime, DOH is moving forward with the Delivery System Reform Incentive Payment program and does not anticipate that the issues the FTC raises will have any impact on the Performing Provider Systems (PPS) that are working to transform the Medicaid system to provide improved care at a lower cost."
The FTC said the DSRIP PPS networks "are comprised of substantial portions of competing healthcare providers within their respective geographic regions," and itsingled out three newly formed PPS's as cause for concern. They are: Adirondack Health Institute PPS, based in Glens Falls; Advocate Community Partners PPS in New York City; and Staten Island PPS. Adirondack declined to comment, and Advocate Community Partners and Staten Island did not return emailed queries.
The federal agency said it's concerned that "combining the DSRIP program with the COPA regulations will encourage healthcare providers to share competitively sensitive information and engage in joint negotiations with payers in ways that will not yield efficiencies or benefit consumers."
And while the DSRIP program applies only to Medicaid, the FTC said the potential anticompetitive effects of information sharing and joint payment negotiations under a COPA could spill over to include commercial and Medicare patients.
As an example, the FTC said it would be possible for PPS's "to share information about all of their patient populations – including commercial, Medicare, and Medicaid patients – in order to properly implement the value-based payment models contemplated under the DSRIP program."
"The goals of antitrust are consistent with the goals of the (Affordable Care Act)," the FTC said. "Despite what some healthcare industry participants have claimed, the antitrust laws do not prohibit the kinds of collaboration necessary to achieve the healthcare reforms contemplated by the ACA. Specifically, antitrust is not a barrier to New York healthcare providers who seek to form procompetitive collaborative arrangements that are likely to reduce costs and benefit healthcare consumers through increased efficiency and improved coordination of care."
LG Health, which generated nearly $970 million in revenue last year, and the University of Pennsylvania Health System have agreed to merge. "There is no financial transaction," says LG Health's CEO. "This is a matter of being incorporated and consolidated."
Lancaster General Health has finalized negotiations with the University of Pennsylvania Health System and will become a member of Penn Medicine, the two nonprofit systems have announced. The agreement caps more than six months of discussions, and is now subject to state and federal regulatory approval. Until then, the two systems will remain unchanged and independent.
"Scale is going to be necessary to be able to take out costs in healthcare," Beeman said. "Just as an example, the Affordable Care Act's impact on LG Health over about seven years is close to $250 million worth of costs that we had to just take out to stay even. In order to do that you need the scale to be cost effective in the way we deliver care. That is what precipitated us looking for scale. We were fortunate to have someone like Penn located so close by."
Asked to put a price tag on the deal, Beeman called it "incalculable."
"There is no financial transaction," he added. "This is a matter of being incorporated and consolidated."
He said any reserve funds now held by LG Health will remain "unequivocally" with the health system "under the auspices of the local board, and we have provisions long-term to ensure that it stays here."
LG Health generated nearly $970 million in revenues last year. The system includes the 533-bed Lancaster General Hospital and Women & Babies Hospital, outpatient and physician offices, urgent care centers, and the Pennsylvania College of Health Sciences. The system employs more than 7,300 people.
Penn Medicine generated close to $4 billion in revenues last year and employs nearly 19,000 people at facilities that include the flagship Hospital of the University of Pennsylvania, three other hospitals, and the Perelman School of Medicine.
The two health systems have collaborated on cancer care for decades, and in 2014 the formed a collaborative that gives LG Health patients access to specialty services at Penn Medicine.
Beeman says the LG Health board began to evaluate its options five years ago.
"We believe that LG Health was of a great size, but not to be a consolidator; to be someone that participated and was additive to another health system that could be a consolidator," he says. "At just over $1 billion we didn't have the size or scope to want to rescue other institutions. We were strong on our own, but the ability to partner with an exceptionally strong internationally recognized organization was really paramount."
Under the merger, LG Health's governance would continue under a local board of trustees, LG Health's CEO, and representatives of Penn Medicine. LG Health would also gain seats on the University of Pennsylvania Health System board. LG Health's community benefit efforts would continue and be governed by the LG Health board. The Pennsylvania College of Health Sciences will remain a part of the LG Health.
"Since forming our strategic alliance more than a year ago, we've learned our cultures are similar and that we share a passion for excellence, aimed at improving health and providing more value at less cost," Penn Medicine CEO Ralph W. Muller said in prepared remarks. "Tremendous synergies and opportunities are possible by combining two of Pennsylvania's financially strongest and clinically advanced systems."
Five TX Health Systems Launch ACO
Five health care systems in North Texas have launched an accountable care organization for employers in the region that they're calling of Forward Health Partners.
The five systems are Children's Health, Cook Children's, Methodist Health System, Texas Health Resources, and UT Southwestern Medical Center. Combined, Forward Health Partners includes 42 hospitals, 72 outpatient facilities, more than 1,300 primary care physicians, and more than 4,100 specialists, who will provide service to members of participating health plans and self-insured employers in the Dallas/Fort Worth area.
"It brings us together under a governance situation," says Jesse Beck, vice president of strategic marketing at Texas Health Resources. "We are 162-B physician-led, which gives us the ability to take risk. What makes it unique is our ability to take risk on this. We can go to employers and plan sponsors and offer unique solutions."
Beck says Forward Health's target customers are "self-funded employers who realize that healthcare benefit spend is not a one-year journey. It's looking at the long-term solutions."
"We've done a lot of research in the marketplace and we found five common themes employers are looking for around their healthcare spend: Cost containment; cost certainty; quality; member experience; and simplicity," Beck says.
"It's not just how do we save the employer money, but also how do we ensure that their employees and members are having a great experience."
The ACO will work together on common goals, but each health system will serve its own patients and preserve its independence. Each system will have equal representation in the ACO governance.
"The future of healthcare will encompass a comprehensive approach to care management, including both medical and behavioral," said Melissa Gerdes, MD, CMO of Outpatient Services and ACO Strategy at Methodist Health System, and board member of Forward Health Partners, in prepared remarks.
Jim Skogsbergh
"(That) will require tight-knit, community-based care teams to measurably improve the health of patients and the community. This coalition brings together some of the best health care providers in North Texas as a resource to create a healthier community."
Ill. Hospital Association, MCHC Merge
The board chairs of the Illinois Hospital Association and the Metropolitan Chicago Healthcare Council have signed a letter of intent to merge, the two industry groups announced.
"As the health care community continues to evolve, it is crucial that organizations like MCHC and IHA leverage their significant strengths to support their members' efforts to enhance the quality of health care for all Illinoisans," Dean Harrison, president/CEO, Northwestern Memorial HealthCare and IHA Board Chair, and Michael S. Eesley, CEO, Centegra Health System and MCHC Board Chair, said in a joint statement.
The announcement comes after nearly a year of discussions that began last July, when both organizations floated the merger idea with MCHC and IHA leaders. "Any organization created from the joining of MCHC and IHA will undoubtedly be greater than the sum of its parts," said Jim Skogsbergh, president/CEO, Advocate Health Care and chair-elect of the American Hospital Association.
"Both MCHC and IHA are financially strong, results-oriented entities that empower their respective members to provide the highest quality of care to the patients and communities they serve. I look forward to the tremendous opportunities for innovation and enhanced outcomes that this alignment will offer health care providers across Illinois and on a national level."
The process is expected to be completed by the end of the year.
The two associations said the merger will allow them "to grow current offerings" for their members in areas such as business, revenue, technology, data analytics and information to support population health management, and improve access to high-quality value-based care.
Lynn Barr, CEO of the National Rural ACO, says her organization has developed a program that allows rural health clinics, federally qualified health centers, and hospitals to join an ACO regardless of size and with no downside risk under a bonus program. But time to get that money is running out.
Rural providers have only until May 1 to apply for a share of the $114 million in one-time federal grants to help the transition to accountable care organizations.
Lynn Barr
CEO, National Rural ACO
Lynn Barr, CEO of the National Rural ACO, which is administering the program, says that even though the deadline is one week away, it's not too late to file a letter of intent to join NRACO.
"Oh my gosh! You'd be amazed how many people don't know about this," Barr says. "This opportunity has flown under the radar. We're trying to get the story out."
"The LOI is a form on our website. That's five minutes and it is non-binding. It gets you into the process, and then you've got 60 days to review and complete the application," she says. "The application is not like an essay test. It's 'give us your tax ID numbers and review and sign the contracts that were mandated by (the Centers for Medicare & Medicaid Services).' People can totally do this."
Once a provider is inside the 60-day window, the process becomes freighted.
"There is a $25,000 deposit they have to put down with the application, which is earnest money," Barr says. "CMS wants to make sure people are serious and that they don't send in an application without board approval or whatever. But it is fully refundable. They get the money back."
Barr expects that about 150 rural providers will apply for the grant money, which provides between $1.4 million and $2.5 million per ACO, depending upon the size of the patient population it hopes to serve. To qualify, 65% of the providers in the ACO have to practice in an area with a (Rural-Urban Commuting Area)code above 4.0.
On Monday, 12 providers submitted LOIs to NRACO and Barr says "there are a lot of people who've told us they are going to get us letters, but they haven't done so yet. People tend to wait until the deadline, but we've gotten a lot already."
Barr says the grants are large enough to incentivize fence-sitters who might otherwise wait a year or two and allow more adventuresome providers to make the potentially costly rookie mistakes. There is also no guarantee that the funding will be re-allocated beyond 2016.
On Cash as a Barrier to Entry
"It's a one-time grant," Barr says. "For people who sign up with us, that is worth almost $400,000 for each site [within an ACO]. That's been the biggest barrier for people to join, the cash. CMS will fully fund their participation, so why not take advantage of it?"
The recent permanent repeal of the sustainable growth rate formula reemphasized that future Medicare payments are going to be based in large part on cost and quality. "You have to get into a program that will work on that," Barr says. "This will help identify cost issues, work on quality, develop networks and be ready for the new payment model."
Meet NRACO
If you're in rural health and you're not familiar with NRACO, consider this an introduction.
The group was formed in 2013 by nine rural hospital CEOs from California, Michigan, and Indiana who got tired of waiting for someone else to address the challenges that rural providers face transforming away from fee-for-service and toward population health and value-based care.
The consortium has grown in the last two years and now includes six ACOs comprised of 30 community health systems in nine states, with more expected to join in 2016.
NRACO acknowledges that size, location, and funding are definitely challenges for rural providers who want to transition to ACOs. However, Barr says NRACO has developed a program that allows rural health clinics, federally qualified health centers, and hospitals to join an ACO regardless of size and with no downside risk under a bonus program only that does not affect fee-for-service payments or cost-based reimbursement.
Barr is persuasive. Talking to her reminds me of the old Dale Carnegie technique of methodically "removing the objections" to make the sale. It's imperative that rural providers take on the ACO challenge because payment models are changing, she says, and the challenges surrounding this transformation will only become more daunting for providers who delay. So, why delay?
Talking to Barr also reminds me of another old saying: If you're not at the table you're on the menu.
"Rural providers have to engage with CMS to figure out now we are going to get paid," Barr says. "These payment models aren't perfect, but if we work with CMS we will help develop a program that will work for us. But we have to be in it to win it."
Savings were similar in accountable care organizations with "financial integration" between hospitals and doctors, and those without, which suggests that this form of provider consolidation is not necessary for ACOs to reduce Medicare spending, research shows.
Medicare's 32 Pioneer Accountable Care Organizations saw modest improvements in quality at a marginally lower cost in their first year of operation, a new study shows.
The report, published in The New England Journal of Medicine, estimates that the Pioneer program saved Medicare about $116 per beneficiary each year, or about $118 million in 2012, its first year of operations.
J. Michael McWilliams, MD
"Contributing to these estimated savings were reductions in spending on acute and post-acute care as well as an apparent substitution of care in lower-priced office settings for care in higher-priced hospital outpatient departments," the study found.
"The first year of the Pioneer program was not associated with significant changes in the rates of readmissions, hospitalizations for ACSCs, or screening mammography, but was associated with slight increases in the rates of use of preventive services in diabetes care. Together with a recent study examining the experiences of patients in ACOs, our findings suggest that Pioneer ACO contracts have been associated with some early savings and either unchanged or improved performance on quality measures."
The savings report comes after large defections from the Pioneer ACO program. Of the original 32 participants, 13 had left the program by fall of 2014, citing inconsistent results and financial losses. Three of the Pioneers had to pay back CMS between $1.61 million and $2.89 million, and six other organizations received no shared savings.
Lead author J. Michael McWilliams, MD, an associate professor in the Department of Health Care Policy at Harvard Medical School, says there are indications that these savings are not a one-year phenomenon of ACOs plucking the low-hanging fruit.
"There are both conceptual reasons and empirical evidence suggesting that one would expect growing savings with experience under alternative payment models," McWilliams said in an email exchange.
"As payment changes from fee-for-service to incentives rewarding value, the delivery system will need time to restructure to respond effectively to those new payment incentives. Organizations will need time to learn what works and what does not. Changing physician practices to support more cost-effective care may also take time. Finally, as risk-contracting becomes common across multiple payers, providers will have stronger incentives to control spending."
Future Savings 'Will be Harder to Come By'
McWilliams says separate research on the Alternative Quality Contract in Massachusetts, a commercial ACO, showed growing savings each year from the first to fourth years.
"Eventually, yes, savings will be harder to come by as organizations achieve greater levels of efficiency," he said. "This is consistent with our findings and suggests the need for incentives to maintain high levels of efficiency in addition to achieving them."
The study found the savings were similar in ACOs with "financial integration" between hospitals and doctors, and those without, which suggests that this form of provider consolidation is not necessary for ACOs to reduce Medicare spending.
"Our findings also suggest that ACOs with higher baseline spending, whether it was due to less-efficient practices or unobserved differences in case mix, were able to reduce spending more easily, at least initially, than ACOs with lower baseline spending," the study said.
"In addition, we found that savings occurred among the 13 ACOs that subsequently withdrew from the Pioneer program, whereas CMS had calculated minimal savings or losses for 12 of these ACOs in comparisons with benchmarks."
What the study did not find was a relationship between estimated savings and continued participation in the Pioneer program, which they suggest means that "sustaining or expanding participation in a Pioneer-like ACO program will probably require greater and more reliable rewards for ACOs that reduce spending than those currently in place."
Greater access to healthcare services for residents living outside metro New Orleans is one of the aims of a proposed collaboration between Louisiana's largest not-for-profit, academic health system and a not-for-profit community hospital.
Louisiana's Ochsner Health System and Slidell Memorial Hospital are negotiating a "strategic partnership" that both sides believe will better position them to meet the demands of value-based, population health.
Bill Davis
CEO, Slidell Memorial Hospital
SMH CEO Bill Davis says the letter of intent to negotiate the partnership that was signed last week signals neither an acquisition nor a purchase of one hospital by the other.
"We are just trying to create a structure where in this environment we are able to improve access to care, quality of care, and lower the cost of care," Davis says. "If that means two organizations have to collaborate rather than duplicate services, we feel comfortable with that, in this particular marketplace, if that is the best opportunity for achieving those three goals."
SMH is a 229-bed acute care not-for-profit community hospital in a service area of about 90,000 people, located 33 miles northeast of New Orleans. Gretna-based Ochsner is Louisiana's largest not-for-profit, academic health system and includes 13 hospitals, 50 health centers, more than 15,000 employees and nearly 1,000 physicians.
If the deal is finalized as expected sometime this summer, SMH will become part of the newly formed Ochsner Health Network and will work within an oversight committee that will include equal representation from both SMH and Ochsner.
SMH, however, will remain an independent community hospital with its current board governing the hospital. Each organization will retain its name and assets.
"The challenges we currently face as healthcare providers are unprecedented. There is no doubt the future of healthcare will be about partnership and collaboration," Ochsner President and CEO Warner L. Thomas said in a media statement.
"Partnerships like this one are crucial for stand-alone community hospitals and individual providers as well as for larger systems. We are lucky to have two organizations with common cultures partnering together to improve the delivery of healthcare and to continue to make our communities stronger and healthier."
Davis says a strategic partnership has the potential to bring "the best of both worlds" to SMH and Ochsner.
"We are the leading hospital in our region," he says. "The community is invested in us to make sure we focus on delivering comprehensive services and a high level of quality locally. As a result, we felt pretty strongly that the local community wanted to be in partnership or control over the delivery of medicine locally."
The realities of the evolving healthcare delivery landscape and the advantages of consolidation make it difficult to go it alone to leverage better prices from suppliers and payers, and to eliminate redundant and expensive administrative and support systems, Davis says.
Warner L. Thomas
President and CEO,
Ochsner Health System
"We knew that ultimately we needed to partner with somebody, but not necessarily for a lot of the things that we do very well locally," he says. "The biggest deficit we've had, because we are a small, local community hospital, is intellectual capital. All the capabilities to be able to manage population health, to improve population health status, there is no way that a small player like us can deploy numerous layers of electronic medical records and other data capabilities."
Davis says he does not foresee the strategic alliance evolving into "a total sellout."
"The fact of the matter is that having local control and input with these systems of delivery really adds value, more than ever, in the new era of healthcare where you are talking about population health status improvement and population management," he says.
"You need to know that culture and be immersed in that culture because it's not necessarily going to be a cookie cutter that is going to solve the problem. You have to know your local community and the region's culture, demographics, their socio-economic challenges, to be able to come up with solutions that solve better quality, lower cost, and improved population health status."
Baptist (FL), MD Anderson Create Cancer Center
Jacksonville-based Baptist Health and the University of Texas MD Anderson Cancer Center have finalized a partnership to create a joint cancer programserving northeast Florida and southeast Georgia.
The program will be housed in the Baptist Outpatient center but will eventually move to a new building in 2017.
"The final approval of this agreement brings us one step closer toward the realization of our partnership with an international leader in cancer care," Baptist President/CEO Hugh Greene said in prepared remarks.
The two health systems are recruiting a dedicated care team of medical oncologists and other medical and surgical experts to join the existing cancer care staff. The goal is to replicate the MD Anderson care model.
Under the deal, Baptist Health will become a partner member of MD Anderson Cancer Network, which means that the Baptist cancer program will be operationally and clinically integrated with MD Anderson, so that patients at Baptist MD Anderson can access multidisciplinary care options, including access to ongoing cancer research and select clinical trials.
Baptist Health includes five hospitals with 1,129-licensed beds, 1,644 medical staff and more than 250 outpatient facilities throughout North Florida and South Georgia.
In our November 2014 Intelligence Report, 82% of healthcare leaders said that their organization needed to enhance its executive compensation structure to attract, retain, and engage leaders. HealthLeaders Media Council members discuss the factors involved.
This article first appeared in the May 2015 issue of HealthLeaders magazine.
Michael D. Williams
President and CEO
Community Hospital Corp.
Plano, TX
One of the challenges that we face is finding individuals who possess the experience and the business acumen that are necessary to lead in this complex environment. Historically in healthcare, relational skills sometimes were enough to create opportunities for success. Now the mandate is the combination of relational skills with business skills to be able to lead organizations in such a fashion that they can be competitive and continue to be successful.
Executive compensation is but one component of the fit. It is what I would call the threshold component. Once that interest is created, we find that if we are competitive in executive compensation, then it's all about culture.
Finding the right metrics for value-based compensation is a fairly straightforward process. Historically the gatekeepers for incentive compensation have been quantitative in nature from the standpoint of EBITDA earnings or financial focus. What many organizations, including ours, are now doing is having clinical outcome gatekeepers in place, as well, before incentive compensation can be paid. That is a great opportunity to say externally that the bottom line is important but outcomes are just as important, if not more so.
Joseph Pepe, MD
President and CEO
Catholic Medical Center Health System
Manchester, NH
Over the past few years we have aligned executive compensation incentives with value-based metrics, which have driven executive performance and engagement already. Now we have embarked on a major development and succession planning program, which we believe will be very important toward recruiting, retention, and addressing the problems of executive turnover.
Our biggest business expense is on people—their education, salary, benefits. So it's important that we take a look at this and don't treat them like one size fits all. We are revamping our evaluation forms and processes throughout the entire hospital. We are trying to align our culture of compliance and respect and service into these evaluation forms and goals.
With some executives, it's about the senior executive retirement plans. With others, it's about contracts. Not all executives want the same things. We need to be flexible. We look at individualizing when we can but also keep in mind equality throughout the senior leadership team. We're trying to get them to be more efficient at the things they do well, and we're trying to take off their plate the things that are not up to their license, giving them more support so that they can be more efficient in doing the things that they were hired to do.
If I am going to preach that the market is paying for value-based healthcare, then I cannot be giving them incentive bonuses based on volume. I have to start paying them for performance, just like the market.
Kenneth S. Lewis, MD, JD
President and CEO
Union Hospital
Elkton, MD
On aligning with goals: The compensation process for hospitals needs to be aligned with the overall organizational objectives. It's the whole transition from volume to value. That has occurred within this state and that has significant implications from a compensation perspective.
On population health: You are not going to be able to achieve population health or some of the quality initiatives on your own. The incentive/goal piece of compensation is becoming increasingly important, and it is starting to move away from individual goals to executive team goals. There clearly is a greater focus now on tying compensation to performance, quality, population health, and cost containment—less on a direct connection with operating margins, because the reality is that unless we achieve the objectives for quality, population health, and cost containment, there will not be an operating margin to reward.
On compensation and the long view: There was a time when the goals were not only individually focused but they were short-term, too. Not only are we seeing the transition to group goals but also multiyear goals. These changes take time, and to do a "one-and-done" approach toward incentive goals no longer seems rational in this environment.
On compensation and the long view: There was a time when the goals were not only individually focused but they were short-term too. Not only are we seeing the transition to group goals but also multiyear goals. These changes take time, and to do a "one-and-done" approach toward incentive goals no longer seems rational in this environment.
Hamlin J. Wilson
Senior Vice President for Human Resources
Wellmont Health System
Kingsport, TN
Our organization would be among the 82% in the survey who are working to enhance executive compensation. We have to remain competitive in our market, and our market at the executive level is very broad. We want to be able to recruit from all over the country for our vacancies.
More and more there is a push toward ensuring that executive compensation is structured around performance, specifically clinical outcomes. A lot of organizations have not yet fully leveraged clinical outcomes and quality in designing the executive compensation plan, specifically around variable-based pay.
In our organization, for the past 10 years we have structured executive compensation and variable pay around patient satisfaction and financial outcomes. The one area that has been on the table that we may be poised to go after this year is the matter of clinical quality outcomes. We are investigating the degree to which we need to restructure our program to address the quality aspect of the work we do.
I am not sure there is a "right way" to do this. You have to look at each organization to make it right for that organization. But there are some things we have to make sure we do correctly when we move toward quality. We have to make sure we pick the right outcome measures. That can be a bit of an art.
Virtually every member of Congress who voted for H.R.2 can tell his or her constituents, in all honesty, that the bill keeps the doors open for critical healthcare programs in their districts.
After more than a decade of teeth gnashing, hand wringing, and ululating, the nation's physicians and other frontline providers can take comfort in knowing that Medicare's hated Sustainable Growth Rate funding formula has been euthanized, with a DNR attached for good measured. The President's signature is assured.
In the morning afterglow it's time to sweep up the various flotsam and commentary surrounding H.R.2, which does a lot more than simply kill the SGR. In fact, this bill is the most sweeping and costly piece of healthcare legislation since the Patient Protection and Affordable Care Act of 2010.
Here are a few morning-after tidbits I've collected.
AMA Priorities Shift
American Medical Association CEO James L. Madara, MD, held a telephone press conference with reporters this morning and said the AMA's efforts now shift from lobbying for the permanent repeal of the SGR, toward ensuring that the payment reforms replacing it are properly implemented.
"We will have our finger on the pulse of the implementation and [will be] working with the federal government to make sure that this tracks in a correct way," Madara says.
H.R.2 has been called a "permanent fix" for the SGR, even though the chief actuary for the Centers for Medicare & Medicaid Services says Congress will have to revisit the issue in 10 years. Madara says that even if that is the case, H.R.2 better than the status quo it replaces.
"We will be working with federal government not 10 years from now, but tomorrow, the day after that, and every day from now until the end of the next 10 years," he says.
Besides, he says, the actuary's concerns cannot take into considerations the potential for tremendous change in the healthcare landscape over the next decade.
"Projections are useful when one gets into an area that is so complex and starts thinking of nothing changing for a period of 10 years and in the second instance longer than that, about a quarter century," he says.
"That's interesting to know. It's input. But one does not make linear trajectories over periods of a decade or more and assume that is where we are going to end up. That assumption is that nothing happens in the interim, and as we all know that is simply not the way life works."
"It's also true that we have to compare this bill with the trajectory that we were on under what was previously law and this bill in our view is a tremendous improvement over the disconnected environment with competing and non-harmonized measures that we were facing in what until yesterday was current law," he says.
The 8 'No' Votes
H.R.2 passed the Senate 92-8 on Tuesday night, less than three hours before a 21% cut in Medicare reimbursements would have kicked in.
Eight Republicans voted against the bill. They are: Sens. Ted Cruz, Mike Lee, David Perdue, Marco Rubio, Ben Sasse, Tim Scott, Jeff Sessions, and Richard Shelby.
The primary objection raised by these senators was that there were no offsetting "pay-for" provisions in the bill, which adds about $141 billion to the deficit.
Supporters of the bill, which included the Republican leadership, didn't argue, but said doing nothingwould cost $900 million more over the next decade, according to the nonpartisan Congressional Budget Office.
Also, Sens. Rubio and Cruz are running for president in 2016 and they couldn't vote for anything that could be perceived as supporting Obamacare.
"I cannot support the Boehner-Pelosi bill, which institutionalizes and expands Obamacare policies that harm patients and their doctors while adding roughly half a trillion dollars to our long-term debt within two decades," Cruz said in prepared remarks.
"The so-called 'SGR' is a flawed approach that needs to be eliminated, but doing so should be a catalyst for real entitlement reform. Any deal should be fully paid for and include significant and structural reforms to Medicare that provide seniors more power and control over their healthcare."
NP Join the Celebration
Physicians aren't the only ones cheering. Nurse practitioners also scored a major victory in H.R.2. The American Association of Nurse Practitioners points out that the bill:
Authorizes NPs to document evaluations for durable medical equipment
Ensures that NP-led Patient Centered Medical Homes are eligible for incentive payments for chronic disease management
Reauthorizes the Children's Health Insurance Program, which will ensure access to for millions of children, including those who receive needed services from NPs
"The national nurse practitioner community is grateful to the U.S. Senate and House of Representatives for preserving the health services our seniors need, and further recognizing that seniors increasingly rely on the expert care of nurse practitioners who have become the providers of choice for diverse patient populations," AANP CEO David Hebert said in prepared remarks.
Health Centers Re-funded
The best news for people living in underserved communities is that H.R.2 also includes a two-year funding extension for Community Health Centers, the National Health Service Corps, and the Teaching Health Centers Graduate Medical Education Program.
"America's Health Centers and the more than 23 million patients they serve are extremely grateful that this bipartisan legislation recognizes and invests in the health center system of care," Tom Van Coverden, president/CEO of the National Association of Community Health Centers, said in prepared remarks.
"Health centers have been living under the uncertainty of the Primary Care Cliff, and, now that this legislation has passed, our dedicated clinicians and staff can get back to the daily work of providing high quality primary and preventive care to underserved patients and communities."
HLM Journalist in Shock!
I'm still trying to get used to the liberating notion that I will no longer write about the SGR in the present tense.
I wasn't covering healthcare back in 1997 when Congress passed the SGR, so I wasn't really sure what they were trying to accomplish beyond applying a sledge hammer to stem the growth in Medicare spending. Clearly, it did not work.
Every spring for the past several years, I've camped out in front of CSPAN and watched the endless bloviating around a dumb policy that was never enforced, and which should have been repealed years ago.
It was particularly frustrating because everyone agreed that SGR was dumb policy, but year after year nobody acted to repeal it. And with every Band-Aid patch—there were 17 "Doc fixes" since 2003— and the debt kept growing, making the eventual day of reckoning costlier.
I am not a Congress watcher, so I can only guess as to why lawmakers decided to act this year. I think Congress was as sick of the SGR as everyone else. They just wanted it done with, and the CBO gave fiscal hawks just enough cover to vote for it.
Attaching funding for popular and critical healthcare programs, such as community health centers, was smart. Virtually every member of Congress who voted for H.R.2 can tell his or her constituents, in all honesty, that the bill kept the doors open for critical healthcare programs in their districts.
Maybe the CMS actuary is correct. Maybe Congress will have to revisit the "permanent fix" at the end of the decade and throw more money at it. After reporting on temporary fixes for the better part of a decade myself, however, I'm OK with a 10-year reprieve.
