FEA­TURES

Fi­nan­cial risk and cap­i­tal hur­dles are cited as rea­sons many providers aren’t join­ing ac­count­able care or­ga­ni­za­tions, but some are find­ing other routes to pay­ment re­form

Modern Healthcare - - NEWS - Me­lanie Evans

Don’t look for In­ter­moun­tain Health­care, the Utah health sys­tem widely cited for its ef­fi­ciency and qual­ity, to be among the hos­pi­tals and med­i­cal groups that are test­ing ac­count­able care or­ga­ni­za­tions—the health­care re­form law’s chief ini­tia­tive for achiev­ing cheaper yet higher qual­ity med­i­cal care.

In­ter­moun­tain, which op­er­ates 22 hos­pi­tals in two states, not only doesn’t op­er­ate an ACO, it proudly states it has no plans to do so. Of­fi­cials said it will not be join­ing the roughly 250 Medi­care ACOs, where providers as­sume some fi­nan­cial risk for their pa­tients.

“Ac­count­abil­ity has to rest with the pa­tient,” said Greg Poulsen, se­nior vice pres­i­dent and chief strat­egy of­fi­cer of In­ter­moun­tain Health­care. Since Medi­care’s ac­count­able care pro­gram does not re­quire pa­tients to ac­tively se­lect an ACO—or even, once en­rolled, seek care from that ACO— In­ter­moun­tain is in­stead de­vel­op­ing what of­fi­cials call a shared ac­count­abil­ity or­ga­ni­za­tion. In­ter­moun­tain will put up to 25% of doc­tors’ com­pen­sa­tion at risk for per­for­mance on qual­ity and cost tar­gets. But the shared ac­count­abil­ity or­ga­ni­za­tion also uses shared de­ci­sion­mak­ing and ben­e­fit de­sign to hold pa­tients ac­count­able in a way of­fi­cials say ACOs do not, he said.

In­ter­moun­tain is not alone. Fully 60% of the sys­tems in Mod­ern Health­care’s 2013 Hos­pi­tal Sys­tems Sur­vey re­ported they didn’t have an ACO. The rea­sons var­ied, rang­ing from too lit­tle cap­i­tal to too few doc­tors to too much risk un­der the pay­ment model. Their re­luc­tance un­der­scores the high de­gree of un­cer­tainty that hos­pi­tals and doc­tors face as the in­dus­try and pol­i­cy­mak­ers strug­gle to find a rem­edy for the U.S. health­care’s er­ratic qual­ity and ris­ing costs.

Mod­ern Health­care’s vol­un­tary sur­vey drew re­sponses from 150 sys­tems that col­lec­tively en­com­pass 2,245 U.S. hos­pi­tals. Sur­vey re­spon­dents ranged from one-hos­pi­tal sys­tems to gi­ants such as Univer­sal Health Ser­vices, King of Prus­sia, Pa., and As­cen­sion Health, the na­tion’s largest not­for-profit health sys­tem. The me­dian num­ber of hos­pi­tals op­er­ated within the re­spond­ing sys­tems is six.

Sys­tems in this year’s sur­vey em­ployed roughly 68,450 doc­tors, with the me­dian hos­pi­tal re­port­ing 259 doc­tors.

Only 60 re­ported hav­ing en­tered into ac­count­able care con­tracts with pay­ers. Some, such as Ad­vo­cate Health Care in Oak Brook, Ill., re­ported ac­tive ACOs with both the pri­vate and pub­lic sec­tor. Oth­ers fo­cused on only one sec­tor or the other.

Avoid­ing fi­nan­cial risk

Fi­nan­cial risk was a ma­jor fac­tor in­hibit­ing the startup of an ACO, ac­cord­ing to some sys­tems. East Texas Med­i­cal Cen­ter Re­gional Health­care Sys­tem, which owns 15 hos­pi­tals across Texas, said as much. The Charleston (W.Va.) Area Med­i­cal Cen­ter Health Sys­tem, which owns two hos­pi­tals, could not spare scarce cap­i­tal to pre­pare for an ACO.

“We don’t feel that our bal­ance sheet can with­stand the fi­nan­cial risk,” said David Ram­sey, pres­i­dent and CEO of CAMC. That does not mean the sys­tem has over­looked op­por­tu­ni­ties to in­vest in in­for­ma­tion tech­nol­ogy, health­care de­liv­ery re­form or new pay­ment mod­els. “We’re do­ing what I call plug and play,” he said, with in­vest­ment in elec­tronic health records and pa­tient-cen­tered med­i­cal homes. Ram­sey said he’s ea­ger to hear about ACOs’ suc­cesses and fail­ures, but CAMC will “wait and see.”

Cap­i­tal hur­dles to ac­count­able care can be sig­nif­i­cant, par­tic­u­larly in­for­ma­tion tech­nol­ogy costs, said Dr. El­liott Fisher, di­rec­tor of Dart­mouth In­sti­tute for Health Pol­icy and Clin­i­cal Prac­tice and an early and

ag­gres­sive cham­pion of ac­count­able care. “It’s a huge in­vest­ment, if you try to start from scratch,” he said this month dur­ing a two-day meet­ing on ac­count­able care in Wash­ing­ton.

Some ACOs are us­ing data ag­gre­ga­tion from med­i­cal claims and elec­tronic health records to iden­tify the most costly pa­tients and those more likely to need ex­pen­sive hos­pi­tal care. They can also an­a­lyze the in­for­ma­tion to pin­point who may be over­due for screen­ing, which can im­prove dis­ease man­age­ment and pre­vent ill­ness.

Fisher said ACOs with early suc­cess in re­duc­ing health­care spend­ing have suc­ceeded by tar­get­ing the most vul­ner­a­ble and high-risk pa­tients. “That’s where all the money is,” he said.

Deals for cash in­fu­sions

Dr. Mark McClel­lan, di­rec­tor of the En­gel­berg Cen­ter for Health Care Re­form and for­mer CMS ad­min­is­tra­tor, said some providers are reach­ing deals with in­sur­ers or other part­ners in the ACO for an up­front in­fu­sion of cash for the needed cap­i­tal in­vest­ments.

The CMS In­no­va­tion Cen­ter has agreed to pro­vide cap­i­tal pay­ments to 35 small ACOs, with po­ten­tially more to fol­low in Jan­uary when Medi­care’s shared-sav­ings ACO ini­tia­tive is sched­uled for an­other ex­pan­sion. Med­i­cal groups with less than $50 mil­lion in rev­enue and no hos­pi­tal can earn the cap­i­tal pay­ments. Small ru­ral or crit­i­cal-ac­cess hos­pi­tals are also el­i­gi­ble, as long as the ACO has rev­enue of less than $80 mil­lion.

McClel­lan, who backs the ac­count­able care model, noted that cap­i­tal isn’t the only

bar­rier to test­ing the new pay­ment model. Hos­pi­tal ex­ec­u­tives and doc­tors are used to think­ing about how to gen­er­ate rev­enue, he said, but the ac­count­able care model in­cen­tivizes low-cost care by seek­ing to re­duce un­nec­es­sary or avoid­able vol­ume. That cul­ture change can be a bar­rier to ac­count­able care adop­tion, he said.

Size can also be a bar­rier to pro­ceed­ing down the ACO path. A num­ber of sur­vey re­spon­dents said their mar­kets were sim­ply too small, in­clud­ing Com­mu­nity Hos­pi­tal Corp., which op­er­ates four hos­pi­tals with fewer than 50 beds and the 394-bed Bap­tist Hos­pi­tals of South­east Texas, and LifePoint Hos­pi­tals, the Brent­wood, Tenn.-based chain that has roughly two-thirds of its 52 hos­pi­tals with fewer than 100 beds.

A small-mar­ket hos­pi­tal would be at risk for huge losses if its ACO had even a few pa­tients go­ing out­side its net­work for treat­ments for their chronic con­di­tions, said Jess Judy, se­nior vice pres­i­dent of provider ser­vices for LifePoint.

The Medi­care ACOs al­low pa­tients to seek care any­where, even out­side the ACO. Yet the ACOs will be paid bonuses or face penal­ties based on the cost of pa­tients’ care, re­gard­less of where it’s de­liv­ered.

Pos­si­bil­ity of large losses

Hos­pi­tals in the LifePoint chain may be too small to of­fer spe­cialty ser­vices, such as car­diac surgery, and pa­tients may need to travel else­where for their care, Judy said. Since LifePoint has too few pa­tients to ne­go­ti­ate lower-cost care from larger hos­pi­tals with spe­cialty ser­vices, the ACO could wind up los­ing huge sums on such pa­tients.

Judy said the sys­tem could not af­ford to risk its in­vest­ment cap­i­tal on ACO de­vel­op­ment. In­stead, LifePoint has poured money into hir­ing pri­mary-care doc­tors to de­velop a more in­te­grated health sys­tem, he said. LifePoint em­ployed 673 doc­tors at the end of last year, up from about 300 two years ear­lier. In West Vir­ginia, the sys­tem is work­ing to build a net­work of pa­tient-cen­tered med­i­cal homes.

LifePoint and its joint-ven­ture part­ner Duke Univer­sity Health Sys­tem, Durham, N.C., are in talks with an in­surer to de­velop a shared-sav­ings con­tract. An anal­y­sis is un­der­way to iden­tify what may be needed to pre­pare for such a con­tract as early as 2014, Judy said. The con­tract would cre­ate an in­sur­ance plan that of­fers con­sumers a more limited net­work of providers and could be sold in in­sur­ance ex­changes cre­ated un­der the re­form law.

More than a year ago, LifePoint also be­gan to pilot dis­ease-man­age­ment ef­forts

to im­prove care and bet­ter con­trol costs among its em­ploy­ees in Ge­or­gia. Jess said re­sults un­der­score a small num­ber of pa­tients ac­count for a large amount of health­care ex­penses.

De­spite the fi­nan­cial risks, not ev­ery sys­tem stand­ing back from the ini­tial rush to start ACOs plans to re­main by the side­lines. Some sur­veyed—in­clud­ing some large or prom­i­nent re­gional sys­tems—said the move was un­der con­sid­er­a­tion or in de­vel­op­ment.

Mon­i­tor­ing re­sults

Caroli­nas Health­Care Sys­tem said an ACO was un­der eval­u­a­tion as of­fi­cials mon­i­tor the re­sults of one of its bolder af­fil­i­ates that has en­tered into an ac­count­able care con­tract. Phoebe Put­ney Health Sys­tem, a four-hos­pi­tal sys­tem based in Al­bany, Ga., con­tin­ues to an­a­lyze the op­tion. Tan­ner Health Sys­tem has hired a con­sul­tant to weigh an ACO for the three-hos­pi­tal sys­tem based in Car­roll­ton, Ga. Wheaton Fran­cis­can Health­care, with 14 hos­pi­tals in Illi­nois, Iowa and Wis­con­sin, has not ruled it out and Yale New Haven (Conn.) Health Sys­tem said its de­vel­op­ing ACO is not yet ready.

But even at sys­tems not start­ing ACOs, the push to re­vamp the de­liv­ery sys­tem to im­prove qual­ity and elim­i­nate waste is gath­er­ing steam, es­pe­cially now that Medi­care is ad­just­ing pay­ments based on ad­her­ence to qual­ity in­di­ca­tors and lim­it­ing hos­pi­tal 30day read­mis­sions.

And some, even if they don’t adopt the ACO form, are us­ing the ac­count­abil­ity label. In­ter­moun­tain’s Poulsen said a pilot of the health sys­tem’s al­ter­na­tive to ACOs, the shared-ac­count­abil­ity model, be­gan this spring with 300 doc­tors and will con­tinue through the mid­dle of next year.

In­ter­moun­tain’s ef­fort re­lies on pa­tient ed­u­ca­tion, shared de­ci­sion­mak­ing be­tween the provider and pa­tient, and in­sur­ance ben­e­fit de­sign to en­gage pa­tients in care­fully con­sid­er­ing the po­ten­tial out­comes, al­ter­na­tives and cost of treat­ments. Shared de­ci­sion­mak­ing may re­sults in pa­tients choos­ing the less ex­pen­sive phys­i­cal ther­apy over ortho­pe­dic surgery. Ap­pro­pri­ate in­sur­ance de­sign can en­cour­age pa­tients to use ur­gent­care cen­ters over pricey vis­its to the emer­gency room.

Pouslen said the pilot will also test new physi­cian re­im­burse­ment mod­els to en­sure new fi­nan­cial in­cen­tives aren’t mis­con­strued or twisted. Three-quar­ters of physi­cian pay will be fee-for-ser­vice, and the re­main­ing quar­ter will be tied to qual­ity and med­i­cal cost per­for­mance.

In a few cases where sur­vey re­spon­dents

re­ported no Medi­care ACO, the sys­tems re­ported they were en­ter­ing into shared-sav­ings con­tracts with pri­vate in­sur­ers that mimic the ACO pay­ment model. Shared-sav­ings con­tracts al­low providers to fi­nan­cially ben­e­fit from the lower spend­ing as­so­ci­ated with higher qual­ity per­for­mance and bet­ter pa­tient out­comes.

Clearly, the lines are blur­ring be­tween ACOs and other pay­ment re­form mod­els. That could be seen in South Dakota, where San­ford Health of­fi­cials be­lieved the risk was too great to en­ter into an ac­count­able care con­tract un­der Medi­care.

Look­ing to the pri­vate mar­ket

JoAnn Kunkel, chief fi­nan­cial of­fi­cer of Sioux Falls, S.D.-based San­ford, said ex­ec­u­tives feared reg­u­la­tion would prove too rigid and re­sult in fi­nan­cial losses as its hos­pi­tals and doc­tors learn what works— and what does not—un­der the new pay­ment model.

Yet that did not stop the rapidly ex­pand­ing health sys­tem, which has its own in­sur­ance arm, from ne­go­ti­at­ing ac­count­able care con­tracts in the pri­vate mar­ket, where health sys­tem ex­ec­u­tives be­lieved San­ford would have greater flex­i­bil­ity to mod­ify con­tract terms as they gained ex­pe­ri­ence.

In Min­nesota and North Dakota, Blues in­sur­ers agreed to pay San­ford bonuses based on qual­ity and sav­ings per­for­mance with sim­i­lar talks un­der­way with South Dakota in­surer Wellmark Blue Cross and Blue Shield, Kunkel said.

At Bap­tist Health Louisville, the gov­ern­ing board three years ago re­jected pur­suit of an ACO af­ter con­sul­tants of­fered con­flict­ing prog­noses for the pay­ment model, said Andy Sears, vice pres­i­dent of plan­ning and de­vel­op­ment for the sys­tem.

In­vest­ment re­quired for an ACO was too great, and the sys­tem in­stead chose to fo­cus on ex­pense con­trol and ex­pand­ing its physi­cian base. The Kentucky sys­tem has added 200 doc­tors to its ranks and hired a chief med­i­cal of­fi­cer. Qual­ity ini­tia­tives have in­tro­duced new dash­boards to closely mon­i­tor per­for­mance, he said.

The sys­tem rec­og­nizes new pay­ment mod­els are com­ing, he said. “We were more wor­ried about be­ing pre­pared for ac­count­able care than wor­ried about ACOs,” he said.

Bap­tist Health Louisville’s board will meet again this year to draft its lat­est three­year strate­gic plan and will likely re­visit its ap­proach to ac­count­able care. The sys­tem is far bet­ter po­si­tioned to ac­cept risk-based con­tracts, Sears said, but “we still have work to do.”

LifePoint Hos­pi­tals, which has no ACO, has moved ag­gres­sively to add doc­tors though hir­ing or ac­qui­si­tions. LifePoint’s ven­ture with Duke Univer­sity Health Sys­tem last fall ac­quired Mar­quette (Mich.) Gen­eral Hos­pi­tal, left, which has a strong physi­cian base, the com­pany said.

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