With an un­cer­tain re­turn on in­vest­ment, for-profit hos­pi­tals tak­ing a wait-and-see ap­proach, let­ting not-for -prof­its go first

Modern Healthcare - - FRONT PAGE -

The health­care re­form law cre­ated a flurry of ac­tiv­ity among hos­pi­tals and sys­tems lay­ing the ground­work to get in on Medi­care’s new in­cen­tive pro­grams for ac­count­able care or­ga­ni­za­tions. But most of the largest for-profit health­care groups have been ab­sent from the clamor, hardly rep­re­sented in the first few waves of par­tic­i­pants in the CMS ex­per­i­ments. In­stead, their ex­ec­u­tives have said pub­licly and pri­vately that they’re wait­ing to see how the pro­gram evolves be­fore in­vest­ing re­sources in it.

While there are sev­eral fac­tors that sep­a­rate for-profit groups from not-for-profit providers, chief among them may be the laser fo­cus on the bot­tom line, and quar­terly earn­ings pres­sures that don’t nec­es­sar­ily mesh with a pro­gram that asks for years of pa­tience be­fore sav­ings are seen.

Wayne Smith, chair­man, pres­i­dent and CEO of Com­mu­nity Health Sys­tems, Brent­wood, Tenn., caused a small stir when he said dur­ing the Nashville Health­care Coun­cil’s “Wall Street” event in Fe­bru­ary—where fi­nan­cial an­a­lysts of­fer their pre­dic­tions to the in­dus­try—that ACOs are “an­other form of cap­i­ta­tion,” us­ing a term that re­calls the re­stric­tive and un­pop­u­lar med­i­cal-care strat­egy of the 1990s. But other for-profit health­care ex­ec­u­tives told Mod­ern Health­care that they agreed with that sen­ti­ment.

Still, when the CMS re­leased its list of Pioneer ACOs in De­cem­ber, Detroit Med­i­cal Cen­ter, part of in­vestor-owned Van­guard Health Sys­tems, stood out. The hospi­tal is par­tic­i­pat­ing in the Michi­gan Pioneer ACO—a group whose gov­ern­ing body in­cludes DMC’s top lead­er­ship and the dean of Wayne State Univer­sity’s School of Medicine and pri­vate-prac­tice physi­cians.

The col­lab­o­ra­tion be­tween physi­cians from dif­fer­ent or­ga­ni­za­tions makes the pro­gram unique, said Tim Petrikin, ex­ec­u­tive vice pres­i­dent of am­bu­la­tory-care ser­vices at Van­guard. “We’re do­ing it with es­sen­tially a mixed net­work,” he said about the ini­tia­tive, which be­gan March 1. “We’re or­ga­nized and up and run­ning.”

At Van­guard’s Nashville head­quar­ters, Petrikin stressed that the par­ent com­pany is ex­cited about what is hap­pen­ing at DMC. “We’re very sup­port­ive,” he said. “We think di­rec­tion­ally it’s the ex­act way we want to go.”

Petrikin ac­knowl­edged that other for-profit hospi­tal sys­tems have expressed less en­thu­si­asm for the ACO model and con­ceded the point.

“There isn’t cer­tainty, but that’s part of the busi­ness we’re in,” he said. “We may not re­al­ize sav­ings, but there’s not an op­tion to sit back and pro­tect the sta­tus quo. I don’t re­ally know that there’s a choice but to pur­sue low­er­ing the cost of care.”

At CHS’ head­quar­ters sev­eral ex­its south on I-65, Smith noted in an in­ter­view that, while the idea of con­ti­nu­ity of care is a good one, he ques­tioned whether the Shared Sav­ings Pro­gram will ac­tu­ally meet its goal.

“There’s no em­pir­i­cal ev­i­dence that they’re sav­ing money,” he said. “We’ve said from the very be­gin­ning that it’s try­ing to move the risk from the pay­ers to the providers. It’s very sim­i­lar to a Medi­care HMO prod­uct.”

But un­like an in­sur­ance prod­uct, the ACO model is ask­ing providers to set up in­fra­struc­ture with­out a clear un­der­stand­ing of what the level of uti­liza­tion will be—and with­out un­der­writ­ing or risk as­sess­ment in place. “The eco­nom­ics of it are even more complicated,” Smith

Dr. Mo­hamed Sid­dique tends to a pa­tient at Si­nai-Grace Hospi­tal, part of Detroit Med­i­cal Cen­ter. DMC is owned by Van­guard, one of the few for-profit chains par­tic­i­pat­ing in the ACO pro­gram.

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