CQ WEEKLY – IN FOCUS
June 4, 2011 – 8:46 a.m.
Health Care Networks Too Complex to Work?
By Joanne Kenen, CQ Staff
Dr. Nick Wolter, CEO of the Billings Clinic in Montana, has spent years trying to figure out ways to deliver better care for less money. His clinic was one of the models that inspired the Obama administration’s plans for “accountable care organizations,” or ACOs, which encourage doctors and hospitals to work more closely to coordinate care.
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So Washington took note when Wolter and other respected health care leaders gave a chilly reception to the administration’s first effort to define what these new networks would look like as part of Medicare.
“Could we create something that’s a little simpler?” Wolter wondered after the administration turned seven pages of law into 429 pages of draft regulations.
The controversy over ACOs may prove to be a blip that fades as regulations are refined in the coming months. Or it may be part of a larger narrative to be written about the chasm between envisioning a new health care system and actually creating one.
The focus on ACOs comes as Washington is consumed with partisan arguments about both the implementation of the health care law and the future of Medicare itself. It is one of several ideas in the law to bend the cost curve. Advocates say the approach could be a way to fix Medicare beyond simply cutting payments to providers or reducing benefits.
The idea of accountable care is that instead of rewarding doctors and hospitals for the quantity of services they provide, Medicare would encourage them to join together and improve patient outcomes in cost-effective ways. The Medicare version of ACOs is called Shared Savings because the organizations would get a share of any savings the new approach yielded.
One challenge of encouraging doctors and hospitals to form ACOs — and patients to accept them — is that they defy simple explanation. They require hospitals and doctors to form new relationships, but they can be configured in different ways and may well evolve slightly differently for Medicaid, Medicare and the private sector.
The ACO is supposed to provide coordinated care in a health care system that today often promotes fragmentation, duplication, overuse of some services and underuse of others. It would emphasize primary care and draw on such new tools as computerized health records and home telemonitoring for frail patients with chronic disease. Generally, patients should be able to get treatment when they need it, not just from 9 to 5. All this should translate into less reliance on expensive emergency care.
As is implied by the name, an ACO’s doctors and hospitals are supposed to be “accountable” for the cost and quality of care in ways that the current health care system does not require. In some ways, an ACO does resemble the Health Maintenance Organizations (HMOs) of the 1990s, but with greater patient choice, more transparency and a lot more emphasis on measurable, demonstrable quality, not just control of costs.
It’s a compelling, if fuzzy, idea — and, as it turns out, hugely complicated to carry out. Major groups of hospitals, physicians and even pharmacists weighed in with criticism of the draft in a six-week comment period ending June 6. They say that the complicated rules released by the Centers for Medicare and Medicaid Services (CMS) require too much new bureaucratic and legal infrastructure and that 65 distinct quality measures are a data-culling nightmare.
They worry that the potential savings are limited while the potential losses are alarming, particularly given the start-up costs. The fact that patients do retain choice, in the initial Medicare model, to go outside the ACO or see other doctors also limits how well the new entities will be able to put their own stamp on patient care.
Even nationally known health systems, including the Mayo Clinic and Geisinger Health System, which have already moved toward a more integrated team approach to care and have served as models for ACO boosters, have signaled that they are not happy with the administration’s initial attempt.
Health Care Networks Too Complex to Work?
“We support the concept of ACOs as envisioned in the statute,” wrote 10 well-known medical groups, including Wolter’s Billings Clinic, that took part in a pilot program that was a precursor to ACOs. “However, as presently proposed, we ALL have serious reservations about the economics and the complexity” of the Medicare model.
Wolter said he backs the ACO idea but worries that the initial heavily regulated approach — which Medicare officials say will undergo changes before the final rules are set later this year — could make doctors and hospitals see innovation as suffocating, not liberating.
If his own clinic finds the framework daunting, chances are that it will be even more challenging for doctors and hospitals just beginning to think about new ways of delivering care, Wolter added.
‘Troubling’ Opposition
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Citing this skepticism from health care innovators, seven Republicans on the Senate Finance Committee, which has jurisdiction over Medicare, in late May urged Medicare officials to scrap the draft framework for creating ACOs and start from scratch. “This proposed rule misses the target,” they concluded.
Gail Wilensky, a health policy analyst who ran Medicare for President George Bush in the early 1990s, expressed similar concerns. “That so many groups have come out against the ACO regulations ought to be really troubling for an idea that was given so much credence as the driver of reform during the health care legislation debate.”
Proponents say it’s too soon to draw conclusions. Leaders of health care systems interviewed in several states said they are reserving judgment — and are reasonably confident that CMS will revise the rules more to their liking.
For instance, Mark Eustis, president and CEO of Fairview Health Services in Minneapolis, said his organization sees the Medicare ACO approach as flawed but hasn’t flatly ruled out participating. Fairview has spent several years working with private insurers and local employers to build a more integrated health care system, bringing together physicians, community hospitals and an academic medical center.
“The principles they [Medicare] were trying to create are consistent with the work we are doing on the commercial side,” Eustis said. “We are trying to design our systems to create value . . . and the health of the population is exactly what we were thinking about when we started this work.”
Elliott Fisher of Dartmouth, a physician-researcher who helped create and promote the ACO concept, is neither surprised nor discouraged by the initial reactions. Draft regulations are, after all, drafts; those affected by them are likely to push back in hope of getting something better.
“Positional negotiation is going on here,” Fisher said. “CMS throws out some ideas, and everyone says the sky is falling.”
Fisher, who is part of a Brookings-Dartmouth collaboration helping health groups understand ACOs, predicts that health care providers who don’t change may find themselves out of step with new payment systems being developed by commercial insurers and private employers, as well as by government programs such as Medicare.
Health Care Networks Too Complex to Work?
“For everyone in health care — if you don’t want to move in this direction, it’s going to be increasingly uncomfortable,” Fisher said.
Dr. Angelo Sinopoli, chief medical officer at Greenville Hospital System in South Carolina, sees and welcomes the changing dynamic in his own community, starting with large manufacturers that have relocated to the Greenville area. “More and more industries are willing to partner and innovate and experiment,” Sinopoli said. “It’s not like it was in the old days, the HMO days. Then it was, ‘Deny care.’ Now it’s, ‘How can we get better value?’ They are more interested in more quality for the same dollars.”
The Greenville hospital system has been hiring physicians instead of having looser affiliations with them and expanding health information technology. Sinopoli sees changes already filtering into his own practice of pulmonary medicine: better communication with colleagues, greater patient involvement in “self-care” and more real-time feedback on his own performance.
AtlantiCare in South Jersey has already taken the first steps toward accountable care, said Dr. Katherine Schneider, vice president for health engagement. “There are a small number of sick people eating up all the dollars, and the system is not ideally designed to help those people.” That’s why AtlantiCare developed special clinics for them and came up with new payment approaches with large employers in the area.
Health system officials will decide whether to become a Medicare ACO once the rules are final. ACOs have their risks, she said, but they may be preferable to other steps Congress could take to make Medicare solvent, such as “just ratcheting down fees until we all go out of business.”
Phantom Savings?
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Many health care providers aren’t convinced that ACOs are a good deal, however. They aren’t sure there will be savings to share — and are dead certain they will have expenses or bear financial risks. An American Hospital Association analysis, for instance, estimated the cost of starting an ACO at $11 million and up, way higher than the $1.8 million CMS estimate.
“There’s nothing to be shared unless there are savings obtained,” said Susan DeVore, president and CEO of the Premier health care alliance of more than 2,500 hospitals and health systems. “It feels just too challenging from a financial perspective.”
In addition, some groups best positioned to become ACOs and generate savings for Medicare don’t necessarily have incentives to share those savings with Uncle Sam, health industry consultant Robert Laszewski said.
“What you are saying to the provider community is, ‘I’m going to give you less money, and you are going to invest millions so you can survive on less money,’” he said. “Why would I be stupid enough to do that?”
After the initial round of criticisms, CMS Administrator Dr. Donald Berwick offered a few new options to jump-start Medicare ACOs. Among them is a “pioneer” program, with different financial arrangements than the standard Shared Savings, that can get some ACOs up and running in the fall. That sounds promising to Jim Kane, vice president of Central Maine Health Care, which has filed preliminary paperwork to participate.
Like Fairview, Central Maine has worked with local insurers and employers to redesign care. “At its core, an ACO is an integrated group of health care providers raising their hand, saying we want to be responsible for the cost and quality of care in a responsible manner,” Kane said. Central Maine is already doing that. Medicare, the biggest payer of all, could amplify the impact.
Health Care Networks Too Complex to Work?
Laszewski, for one, remains skeptical, recalling his high hopes for HMOs and other managed care models in years past.
“It’s 2011 rather than 1992. We have so much more data. . . . So are we smarter and better in 2011? Yes. Smarter and better enough? That’s what the pilots will tell us.”
FOR FURTHER READING: Berwick profile, CQ Weekly, p. 57; key parts of health care overhaul (PL 111-148 PL 111-152), 2010 CQ Weekly, p. 914; overhaul proposals, 2009 CQ Weekly, p. 1940.