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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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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What can we learn from the managed care backlash of the 1990s? Can we avoid an ACO backlash?

Advocates of “accountable care organizations” (ACOs) are careful to avoid the terminology of “managed care,” which is widely viewed as a failed model from the 1980s and 1990s.  But, there are obvious similarities between ACOs and managed care.  Both involve an organization taking responsibility for the quality and cost of care for a defined population.  Both emphasize the importance of primary care as the foundation of a coordinated and efficient health care delivery system.  Both involve economic incentives to physicians to improve quality and slow the upward trend in total cost of care.

But, we all remember the strong backlash against managed care during the late 1990s.   Although almost 10% of the U.S. population are still served by HMOs, the managed care vision has been largely in exile for more than a decade now.   PPOs are now the dominant model, with relatively small financial incentives to patients to seek their care from providers within relatively large provider networks.  Many PPOs have dabbled in “pay for performance,” but the physician incentives involved have been relatively small and the performance bar set relatively low.  The use of more heavy-handed managed care approaches has declined significantly.  For example, plans usually don’t require a referral authorization by a “gatekeeper” primary care physician before granting access to specialists.  And the use of pre-authorization by health plan staff for many expensive procedures has declined significantly.   Health plans did not drop these heavy-handed approached because they became convinced they were ineffective.  They dropped them because they feared they would face a consumer backlash and lose membership.

So, what can we learn from the managed care backlash?  And what can we do differently to avoid an “ACO backlash?”

I went back to some research done during the height of the managed care backlash to refresh my memory of how bad it was, and why it happened.  Most helpful was a paper from 1997 in Health Affairs by Robert Blenden and other researchers at Harvard and the Kaiser Family Foundation. Blenden reported survey results showing that Americans hated managed care companies even more than they hated banks and oil companies.

Blenden’s survey results showed that a significant proportion of Americans experienced hassles and other problems with managed care plans.  These common, minor problems were hypothesized to serve as the seeds of stronger dissatisfaction and distrust.  The survey also showed that the public overestimated the frequency of rare events that are dramatic and threatening.  For example 66% thought that HMOs sometimes or often hold back on a child’s cancer treatment.  73% thought that HMOs send newborn babies home after just one day, in spite of mothers’ concerns about their children’s health.  As shown in the following graph, there was a dose-response relationship with the “heaviness” of the health plan and the degree of mistrust that the health plan would do the right thing if they got sick.

Blenden concluded that the backlash against managed care was primarily driven by mistrust and fear, leading to calls for government regulation and reducing the market demand for managed care.  I created the following “cause-effect” diagram to illustrate this theory.

So, what can we do differently this time around?  We must do a far better job of building trust. That will require actually being trustworthy.  And, it will require being more proactive about communicating trustworthiness.

This topic is so central to the success of ACOs that it deserves a lot more attention by people who have expertise in public opinion, market communication, and brand development.  But, here is my proposed starting point for developing a strategy to build trust in ACOs and other innovative models of health care finance and delivery.

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Klar 4: Why is it important for CMS to Share Claims Data with ACOs?

Ron Klar, MD, MPH

Ron Klar, MD, MPH is a health care consultant with a long history of involvement in federal health care policy and health plan innovation. He published a recent series of three posts regarding the draft rules for the Medicare Shared Savings Program (MSSP) in the Health Affairs Blog, an influential forum for debating health policy issues. This is my last in a series of 4 posts describing areas of agreement and disagreement with Dr. Klar. (The others are available at post 1, post 2 and post 3)

In his third post to the Health Affairs Blog, Dr. Klar proposed to eliminate CMS sharing of claims data with providers. He argued that it is too delayed to serve any useful purpose to the ACO, either for clinical operations or analysis.  He also argued that supplying ACOs with claims data would be expensive for both CMS and the ACOs that would need to create interfaces, databases and applications to receive and use the data.  He argued that it would distract providers from investment in electronic health records (EHR) and health information exchange (HIE).  Finally, he argued that it would violate the confidentiality of non-ACO providers who would be identified in the data.  Klar implies that all of the data needs of the ACO can be met with EHR data, augmented with HIE data.

I strongly disagree with this thinking.  The success of ACOs will require a transformation of the health care organization from one that reactively cares for individual patients to one that also proactively takes responsibility for a population of patients.  The analytics to support that transformation requires a comprehensive view of all the health care services received by the population.  Since patients are free to seek care from any provider participating in Medicare, only CMS can provide this comprehensive view of the data. An EHR may be richer and more up-to-date, but it lacks this comprehensive view.  An HIE might increase the completeness somewhat, but without data from the payer, it is not possible to know how much missing data might be beyond the reach on any particular HIE at any point in its development.  For the foreseeable future, EHR and HIE data are too inconsistently structured and too incomplete to give a true population-oriented measure of utilization.

In earlier demonstration projects of accountable care and care management, the participants complained that the data shared by CMS was not delivered in a useful and timely way.  So, not only must we keep the CMS claims data sharing in the ACO rules, we must also make sure that CMS does a better job of delivering it this time around.

 

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