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