Shift to pop­u­la­tion-health pay­ment un­likely to come any­time soon

Modern Healthcare - - COMMENT - By Jeff Gold­smith and Nathan Kauf­man

Most in­dus­try lead­ers be­lieve that, in the near fu­ture, fee-for-ser­vice pay­ment will be re­placed by “pop­u­la­tion­based pay­ment,” in­tended to re­duce in­cen­tives to over-treat pa­tients and to en­cour­age preven­tion. How­ever laud­able these goals, we be­lieve the ex­pected shift to pop­u­la­tion-based pay­ment is un­likely to ma­te­ri­al­ize.

We take pop­u­la­tion-based pay­ment to mean time-lim­ited fixed per-capita pay­ment for a de­fined pop­u­la­tion of cov­ered lives. Much of the in­evitabil­ity of the trend to­ward pop­u­la­tion health is at­trib­uted to the Medi­care ACO/Shared Sav­ings pro­grams cre­ated by the Af­ford­able Care Act. The ac­count­able care or­ga­ni­za­tion has been touted as the even­tual suc­ces­sor to DRG and Part B pay­ments in reg­u­lar Medi­care. Medi­care’s ACO pro­grams now cover about 8 mil­lion of its ben­e­fi­cia­ries (com­pared to 17 mil­lion in Medi­care Ad­van­tage).

While ad­vo­cates in the CMS claim hun­dreds of mil­lions in sav­ings (in an over­all pro­gram spend­ing more than $600 bil­lion a year), the Pi­o­neer ACO pro­gram and its much larger younger sis­ter, the Medi­care Shared Sav­ings pro­gram, have strug­gled to gain in­dus­try ac­cep­tance. Medi­care ACOs have so far had min­i­mal im­pact in re­duc­ing costs. Man­aged-care vet­er­ans (hos­pi­tal- and physi­cian-based) that have suc­ceeded in Medi­care Ad­van­tage or com­mer­cial HMO mar­kets have largely failed with ACOs.

Af­ter a decade of ex­per­i­men­ta­tion, the pat­tern in these ACO pro­grams is that a small frac­tion of ACOs gen­er­ate most of the bonuses, and that ex­ces­sively high prior Medi­care spend­ing, rather than ex­cel­lent in­fra­struc­ture and clin­i­cal dis­ci­pline, may be the real rea­son for those suc­cesses. For the ma­jor­ity of ACOs, the re­turn on in­vest­ment for set­ting up and op­er­at­ing them is neg­a­tive and likely to re­main so. The re­cently is­sued ACO reg­u­la­tions did not ma­te­ri­ally im­prove the ROI cal­cu­lus. In our view, it is ex­tremely un­likely that ACOs will evolve into a “to­tal re­place­ment” for reg­u­lar Medi­care’s cur­rent pay­ment model.

On the com­mer­cial side, about 15 mil­lion pa­tients par­tic­i­pate in ACO-like com­mer­cial in­sur­ance con­tracts. More than 90% are so-called “onesided” con­tracts, where there is no down­side risk for providers who miss their spend­ing tar­gets. Yet some providers are giv­ing up 30% dis­counts up­front to en­ter com­mer­cial ACOs that are re­ally nar­row-net­work PPOs. The dis­counts func­tion as with­holds with an earn-back if providers can meet spend­ing and qual­ity tar­gets.

The com­mer­cial ACO deals we’ve looked at are one-sided in more than one sense: they fre­quently limit fu­ture rate in­creases, so nearly all in­fla­tion risk is borne by providers. As struc­tured, they are a no-lose propo­si­tion for in­sur­ers that de­liver real ben­e­fits to providers only if their com­peti­tors are ex­cluded from the net­works. Shift­ing more in­sur­ance risk to providers is un­nec­es­sary since in­sur­ers have al­ready shifted a large amount of the first-dol­lar risk to pa­tients (and there­fore providers) through de­ductibles and co­pay­ments.

More­over, with com­mer­cial med- ical-cost growth trends con­tin­u­ing in the mid-sin­gle dig­its, there is no cost emer­gency re­quir­ing a ma­jor change in in­sur­ers’ con­tract­ing strat­egy; the present hy­brid dis­counted fee-for-ser­vice model is do­ing its job. Deeply dis­counted fee-for-ser­vice with a small frac­tion of pay­ments tied to “per­for­mance’” is not pop­u­la­tion health.

While many healthcare ex­ec­u­tives have em­braced pop­u­la­tion health in con­cept, it is our ex­pe­ri­ence that many of their physi­cians are not par­tic­i­pat­ing in a mean­ing­ful way. A re­cent RAND study of clin­i­cian ac­cep­tance of these mod­els con­cluded that they have not sub­stan­tially changed how physi­cians de­liver face-to-face care, and that the ad­di­tional non­clin­i­cal work re­quired (mostly doc­u­men­ta­tion) is per­ceived to be ir­rel­e­vant to pa­tient care.

Econ­o­mists re­mind us that pur­su­ing a given strat­egy means sac­ri­fic­ing gains from pur­su­ing al­ter­na­tives—the con­cept of “op­por­tu­nity costs.” Not only are the po­ten­tial gains from public or pri­vate ACO mod­els lim­ited, but the op­por­tu­nity costs are steep. For hos­pi­tals and sys­tems, they in­clude re­cruit­ing and re­tain­ing physi­cians; im­prov­ing hos­pi­tal oper­a­tions and prof­itabil­ity; re­duc­ing pa­tient risk and im­prov­ing their clin­i­cal ex­pe­ri­ence; and com­mit­ment of clin­i­cian time to ac­tual prac­tice. Squan­der­ing scarce re­sources on a low-pay­off strat­egy could prove costly for many health sys­tems.

As in­dus­try vet­er­ans well know, our field is prone to pe­ri­odic spasms of group­think. The in­evitabil­ity of pop­u­la­tion health is one of them. Though some may suc­ceed in mas­ter­ing pop­u­la­tion-health mod­els, fee-for-ser­vice is likely to re­main the core of the U.S. healthcare pay­ment sys­tem for some time to come.

Jeff Gold­smith, left, is pres­i­dent of Health Fu­tures and an as­so­ciate pro­fes­sor of public health sciences at the Univer­sity of Vir­ginia. Nathan Kauf­man is man­ag­ing di­rec­tor of Kauf­man Strate­gic Ad­vi­sors.

Newspapers in English

Newspapers from USA

© PressReader. All rights reserved.