We’re up to 154 Medicare ACOs

Today, the CMS announced that it added another 89 ACOs to the Medicare Shared Savings Program (MSSP).  Including the original 6 Physician Group Practice Transition Demonstration participants, the 32 Pioneer ACO, and the 27 MSSP participants announced in April, that brings the total number to 154, serving more than 2.4 million Medicare beneficiaries.  Beginning this year, new applicants will be accepted only annually.

The new ACOs includes some that serve Michigan:

  • Oakwood Accountable Care Organization, LLC, located in Dearborn, Michigan (with 1,546 physicians and partner hospitals), and
  • Southeast Michigan Accountable Care, Inc., also located in Dearborn, Michigan (comprised of 333 physicians, including group practices and a network of individual practices), and
  • ProMedica  Physician Group (250 physicians in Michigan and Ohio)

Other new Medicare ACOs that are particularly large include:

  • Advocate Health Partners (2,237 physicians in Illinois)
  • Wellstar Health Network, LLC (1,203 physicians in Georgia)
  • Indiana University Health ACO (1,837 physicians)
  • Iowa Health Accountable Care (1,551 physicians),
  • University of Iowa Affiliated Health Providers (1,791 physicians)
  • Maine ACO (1,595 physicians)
  • Essential Health (1,404 physicians in Minnesota, North Dakota and Wisconsin)
  • Balance Accountable Care Network (1,069 physicians in New York City)
  • Mount Sinai Care (2,249 physicians in New York City)
  • University Hospitals Coordinated Care (1,770 physicians in Ohio)

The full list of new ACOs is available here.

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Of 27 new ACOs named by CMS: 93% avoid downside risk, 82% avoid CMS loans, 33% use payer-based infrastructure, and average beneficiaries per physician is 106

Yesterday, CMS announced the first batch of 27 “normal” ACOs under its Medicare Shared Savings Program (MSSP).

I found five things interesting about the list:

  1. 93% were unwilling to accept downside risk.  In the original proposed rule for the MSSP, ACOs would have been forced to accept downside risk.  Presumably, CMS thought that “skin in the game” would be an important motivator for real transformative change, and they wanted to increase the chances that the federal government would be able to achieve a net cost reduction.  But, in response to fierce backlash from providers saying they did not want to accept downside risk, CMS relented and introduced an option allowing providers to avoid taking downside risk in exchange for a smaller upside reward.   When it came time to lay chips on the table, 93% took the safe bet.
  2. Only 18% requested up-front payment.  One of the complaints from the provider community during the design phase of the MSSP was that providers lacked access to the capital needed to create the infrastructure to successfully improve care processes and manage risk — things like healthcare information technology, analytics and care management.  In response, CMS offered an option where ACO applicants could receive some up-front payments that would be repaid out of subsequent rewards.  CMS was offering to finance the investment, but it would be a loan, not a grant.  Only 18% of the first batch of ACOs selected this option.  I suspect this was due to the same risk aversion that led them to accept smaller rewards to avoid downside risk.
  3. 33% used payer-based infrastructure.  If physician organizations are to remain locally-focused, it makes more sense to share infrastructure with others to achieve economies of scale, rather than taking on the cost of creating their own infrastructure.   As I described in a prior post, this can be accomplished through a franchise arrangement.  It can also be accomplished through a management services organization (MSO), as is commonly done by PPOs and medical groups in mature managed care markets.  Or, it can be done by partnering with payers who already have such infrastructure.  Any of these approaches could potentially work, but I’m least enthusiastic about using payers’ infrastructure.  Nevertheless, nine of the 27 new MSSP ACOs are organized as partnerships between local health care providers and Collaborative Health Systems (CHS), a division of Universal American, a publicly-traded for-profit health insurance company that offers a variety of plans including Medicare Advantage plans.  For these 9 ACOs, Collaborative Health Systems will provide a range of care coordination, analytics and reporting, technology and other administrative services.  This is a popular option not only because of the economies of scale, but also because it allows the providers to avoid having to take out a loan, either from CMS or from traditional sources of capital such as banks or the equity markets.
  4. 44% did not note the number of physicians in their press-release blurb.  I hate to read too much into such a factoid.  But, for ACOs to work, the physicians must really be involved.  What does it tell you if the organizers of an ACO, when drafting their little blurb for the CMS press release announcing their selection as one of the first batch of MSSP ACOs, did not think to state the number of physicians involved?
  5. Average beneficiaries per physician is 107.  Of the 13 ACOs that did think to include the number of physicians in their press release blurb, 4 of them had between 100 and 400 beneficiaries per physician, 7 of them had between 31 and 60 beneficiaries per physician, and 2 of them had less then 10 beneficiaries per physician.  If ACOs are to really work, they don’t just need infrastructure, they need “mind share.”  If 5% of your patients are involved in some new program, and if you have not agreed to any downside risk in terms of taking on debts or being on the hook for possible negative rewards, and if the rewards are relatively small even for that 5% of your patients, are you really going to be motivated to radically transform your care processes and change your habitual clinical decision-making practices?

Here’s this list, including the beneficiaries per physician calculations.

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CBO: Bundled payments for bypass surgery saved 10%, but pay-for-performance and gain-sharing was not effective in 3 Medicare demonstrations

Lyle Nelson from the Congressional Budget Office (CBO) has been busy.

Two weeks ago, I commented on the results of Nelson’s review of 6 Medicare Care Management demonstration projects over the last decade. At the same time that report was released, Nelson also released a companion report on the 4 “Value-based Payment” CMS demonstrations over the same period. The following is my adaptation of the main results table in this new CBO report.

The most influential of these demonstrations was the Physician Group Practice Demonstration (PGP).  The ten PGP participants included 2 faculty group practices within academic medical centers, 5 non-academic integrated delivery systems, one freestanding group practice, and one network consisting of 60 small practices.  All had experience with care management programs before the demonstration, and all implemented care management programs in the Medicare population for the demonstration.    These care management programs mostly consisted of nurses serving as care managers, focusing primarily on patient education and monitoring for patients with CHF or diabetes or meeting other “high risk” criteria.  Most implemented chronic disease registries for use by the care managers, in addition to using electronic medical records systems that were already in place or in the process of being implemented before the start of the demonstration.

Two of the ten PGP participants received bonuses in the first year, since the Medicare expenditures were more than 2% below the expected expense.  Four participants received bonuses in the second year, five in the third and fourth years, and four in the fifth year.  A formal evaluation of the program conducted after the first two years concluded that the overall effectiveness of the PGP across the ten participants was about 1% gross savings in year two, and even lower in year one.  Net savings, after counting the cost of the bonuses paid to some of the participants, was only 0.1% in year two.

The CBO report points out that even this meager 0.1% net savings might be an over-estimate, because PGP participants changed their diagnostic coding practices, making their populations appear to be sicker, and therefore making the risk-adjusted cost targets artificially high.  Such revenue maximization efforts have been job one in Medicare Advantage plans for years.  The PGP participants succeeded in lifting their risk scores by 8%, which was 3 percentage points higher than the increase in the comparison population.  And, the savings might have been further overestimated because all four of the PGP participants that achieved reward payments in year two already had slower than normal growth in Medicare expenditures before the PGP demonstration began.  All the other PGP participants that did not earn year 2 bonuses had pre-demonstration Medicare growth that was no different than the comparison population.

Despite these discouraging results, the PGP demonstration was nevertheless used as the main evidence base supporting the design of the Medicare Shared Savings Program, calling for the establishment of Accountable Care Organizations (ACOs).  It is also the main evidence base for the associated Pioneer ACO program, for which 32 participating provider organizations have recently been selected.

The Premier Hospital Quality Demonstration focused on 5 disease states and made bonus payments that amounted to only 0.25% of the total Medicare payments for those disease states.  That’s two orders of magnitude less than the size of incentive payments thought to substantially influence performance.  With such a tiny prize, it is not surprising that the quality improvements were assessed to have only a 1-5% incremental impact of process of care quality metrics during a period of time when such process of care metrics were improving nationally.  And, the CBO report concluded that the demonstration had no effect on Medicare expenditures for inpatient hospital care.  In fact, taking into consideration the reward payments, the demonstration led to an increase of costs by 0.3%.

The most successful of the demonstration projects was the Medicare Participating Heart Bypass Center Demonstration, which was used as a model for similar provisions in the health care reform law (PPACA).  In this program, the hospitals negotiated their bundled payments up front, ensuring that Medicare received savings compared to typical fee-for-service cases.  Overall, the program saved Medicare 10%.

So, where did the savings come from?

It’s possible that  they just came from good negotiating by CMS with hospitals that wanted to get out in front of what they saw was an inevitable trend toward bundled payment.  But, let’s assume that the hospitals really had a plan to reduce their costs in proportion to the negotiated decline in their revenue.

In interviews with leaders of the participating hospitals, the important changes in their approaches to patient management that were intended to reduce their costs included:

  1. Greater involvement by surgeons in postoperative care
  2. Earlier discharge of patients from the intensive care unit
  3. Greater standardization of surgical protocols and supplies
  4. Substitution of less expensive drugs for more costly ones, and
  5. Greater reliance on clinical nurse specialists for managing patients’ care in the hospital.

The participating hospitals substantially decreased their length of stay during the demonstration period, although length of stay for bypass surgery was dramatically decreasing nationally during that same time period.

However, probably more important than these process changes was the fact that all the participating hospitals created a physician reimbursement approach that established a fixed per case payment expected to cover all physician payments.  This amount was split in defined percentages among the four types of specialists involved in every bypass case — the thoracic surgeon, cardiologist, anesthesiologist, and radiologist.  Any payments to other specialists was essentially payed from this pool, reducing the payments to the four core specialties. Therefore, the hospitals created a strong incentive for the core specialties to limit referrals to other specialists.  This undoubtedly led to a reduction in utilization of those other specialists and the tests and procedures they generate.  Therefore, some of the savings probably came from reducing revenue to non-core specialists.

My conclusions

  1. Don’t bother with incentives unless they are large enough to change behavior.  A 0.1% reward can’t work.  Nor can a 1% reward.  Try 10-20%.
  2. Don’t create asymmetrical up-side only incentives.  They are far weaker in terms of motivating change.  And, they create a problem with paying out undeserved rewards for lucky good results.
  3. Negotiate the savings up front, rather than just creating a game from which savings might be achieved.
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Congressional Budget Office: Care management programs only work if care managers have face to face contact with patients and substantial interaction with physicians

This month, Lyle Nelson of the Congressional Budget Office (CBO) released a “working paper” summarizing the results of a decade of experience with 6 care management demonstration projects in the Medicare population.  These demonstrations included a total of 34 disease management or care coordination programs. Nelson briefly summarized the working paper in a recent blog post.

All of the 34 care management programs were designed to reduce Medicare costs primarily by maintaining or improving the health of the Medicare beneficiaries, and thereby reducing the need for expensive inpatient hospital stays.  As shown the graph below, different programs showed different effects on the rate of hospital admissions.  On average, the programs showed no effect.

Effects of 34 Disease Management and Care Coordination Programs on Hospital Admissions (Percentage Change in Hospital Admissions)


The CBO analyzed whether specific characteristics of programs led to better or worse results. They found that programs where the care management provider’s fees were at risk did not perform better or worse than those with fees not at risk.  However, they did find two things that worked.  They found that programs in which care managers had substantial direct interaction with physicians and those with significant in-person interaction with patients reduced hospital admissions by an average of 7%, while programs that did not have these features had no impact on hospital admissions.

But, after subtracting the cost of the programs themselves, almost none of the programs achieved net savings.

The programs with the most compelling performance included:

  • Massachusetts General Hospital and its affiliated physician group reduced hospital admissions between 19-24% among patients selected as “high risk” using a program that was far more tightly integrated with the health care delivery system.  Physicians in the group were involved in the design of the intervention, and care managers were staff members in primary care physicians’ practices.  The patients received the vast majority of their care within the integrated delivery system, so almost all of their health information was available and up-to-date in an electronic medical records system.  Care managers were notified immediately when a patient was admitted to the emergency room or hospital.  They had an opportunity for face-to-face interaction with patients in the clinic.  And, they had access to a pharmacist to address medication issues.
  • Two multi-specialty group practices in the Northwest reduced hospital admissions by 12-26% among high risk patients using a program that involved telemonitoring with the “Health Buddy” device that transmitted symptoms and physiologic measurements to a care manager
  • Mercy Medical Center in rural Iowa reduced hospital admissions by 17% among patients hospitalized or treated in the ER in the prior year for CHF, COPD, liver disease, stroke, vascular disease, and renal failure using a program that involved care managers, many of which were located in physician offices and/or accompanied patients on their physician visits.

The methods used for these evaluations were far stronger than those used by the self-evaluations typically advertised by vendors of care management services.  In the CBO reports, 30 of the 34 programs were evaluated based on a comparison to a randomly selected comparison group.  The remaining 4 programs were evaluated using a concurrent comparison group selected using the same selection criteria.  In all cases, the programs were evaluated on an “intent to treat” basis, where study subjects were included in the evaluation regardless of whether they participated in the voluntary programs, thereby removing a source of bias that causes mischief in less rigorous evaluations.

To me, the take-away message is that provider-based care management is promising, but health-plan-style telephonic care management has not been successful, even in a senior population, where finding high risk targets is far easier and even when the care management services provider is highly motivated to succeed.

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HHS Releases Final ACO Rule

The Department of Health & Human Services (HHS) today released the final rule for accountable care organizations (ACO).

The new rule includes a number of changes designed to make the Medicare Shared Savings Program more palatable for health care providers who had a largely negative response to the draft rule released last March. The changes include the following:

  • Allow providers to choose to participate without any downside financial risk during the initial contract period, rather than requiring all participants to take downside risk during the third year of the contract period
  • Provide up front financial support to physician-owned ACOs to support investments in building ACO capabilities, to be repaid through gain sharing rewards in subsequent years
  • Reduce the up front investment needed by eliminating the requirement for meaningful use of electronic health records
  • Reduce the number of quality measures from 65 to 33
  • Allow providers to choose from a number of available start dates throughout 2012
  • Allow community health centers and rural health clinics to serve as ACOs
  • Prospective identification of the Medicare beneficiaries for whom the ACO will be held accountable, rather than deriving such care relationships after the accountability period
  • Eliminates the mandatory anti-trust review for newly-formed ACOs
  • Puts the burden on the federal government, rather than nascent ACOs, to gather data regarding local market share
The  text of the rule is available here, and the associated final waiver rules are available here.

In my opinion, the elimination of the requirement to accept downside risk is likely to substantially increase the willingness of providers to participate in the program, while simultaneously reducing the likelihood that participation will lead to meaningful transformation of the care process within those participants.  But, given the strong opposition to the draft rule, CMS had little choice but to dilute the requirements to at least get some players to take the field.


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