Shared Savings in ACOs is not a fair game
In the proposed rules for ACOs, and in the rules for Pioneer ACOs, CMS has established a clear preference for ACOs to take down-side risk. CMS wants to be repaid if an ACO records costs that are higher than expected. This is proposed as a reasonable counter-balance to the proposed payments that CMS will make to an ACO if it succeeds in generating savings .
But the effect is to put ACOs at a disadvantage. Downside risk means that failure has a cost, in addition to the cost of providing administrative support to the ACO. There are two scenarios under which an ACO could fail, and be subject to down-side payments back to CMS. One is through intentional actions to increase charges, and the other is random events. But providers don't need to form ACOs to find ways to intentially increase their Medicare revenues, and it is hard to picture a scenario in which an ACO would be an appealing vehicle to do this. And, of course, many collective actions among providers to increase Medicare revenues could be illegal. So this leaves random events as the most likely cause of ACO failure.
ACOs are being given this deal: spend money to find ways to reduce your Medicare revenues, and we'll share some of the savings with you. But, if random events wipe out your savings, you have to repay us a share. Where is the upside to this deal?
Another approach, capitation, has been shown to be an effective alternative payment model for a generation. Under capitation, CMS could calculate the capitation so it guarantees itself savings. Capitation converts Medicare from the open ended committment of FFS to a defined cost model. Providers can then modify internal payment arrangements within the capitated entity, to incent and recognize performance in a way that FFS Medicare cannot.
We're waitng to see if the final ACO regulations will take cognizance of decades of experience with capitation in the private sector, to provide an alternative to shared savings that really is a fair game.
To read GHG's summary on the CMS Final Rule for the Medicare Shared Savings Program, click here.
The Difficulty in Making A Thousand Flowers Bloom
Politico included a recent article on "Why Moving on Delivery Reform is so Difficult" that described the dilemma facing Henry Ford Health System, which resulted in a decision to withdraw their application for the Medicare ACO program. They would rather focus on participating in private sector initiatives, which offer more predictability and flexibility than demonstrations designed by CMS.
It has been hard to follow the many starts and stops from the Center for Innovation as they are rolling out ACA funding for delivery reform demonstrations. CMS has many more hurdles in initiating demonstration programs than private payers. For example, the process needs to be competitive and give all parties a chance to be considered. The demonstration design needs to address the policy questions, but also produce data for an objective evaluation. There is a large bureaucracy involved in clearing politically sensitive projects and it always takes longer than expected. And another complexity is that operational support depends on offices and staff outside the Innovation Center.
Two recommendations would improve the process for potential applicants who have limited resources and leadership time to make a commitment to a new way of doing Medicare business:
First a master schedule and work plan would be helpful so that applicants would know the range and timing of funding opportunities. For example, the recently released Primary Care Demonstration was unexpected and seemed to be a revival of the medical home demonstration that CMS put on the back burner last year. The bundled payment demonstration was of interest to many of the ACO applicants but the application process partially overlapped the Pioneer ACO demonstration process.
It would also be helpful to know all of the requirements in advance of submitting an application. As others have suggested, streamlining the number of quality reporting measures and making them more consistent with core measures used by the private sector would make the Medicare demonstrations more attractive.
Pioneers Move Forward, But Medicare May Still Be Left Behind on ACOs
A CMS official announced Tuesday that final regulations for the Medicare Accountable Care Organization (ACO) Shared Savings Program are now expected mid-October. It looks like ACA's requirement that the SSP launch January 1 is now out of reach, and there's scuttlebutt here in DC that the launch date will be pushed to June or July 2012. These regs can't come fast enough -- and must be dramatically redrafted from the disastrous April draft -- or Medicare could be left behind as the ACO revolution surges just about everywhere else.
Sure, the Pioneer ACO Demonstration was some progress, especially on the beneficiary alignment provisions and the apparent willingness of CMS to consider our partial capitation proposals. All 6 of GHG's applicants for Pioneer made it to the finals this week, advancing both partial (Part B only) and global (Parts A and B capitated, excluding transplants and ESRD) capitation models. CMS intends to pick 25-30 Pioneer ACOs to launch on January 1 -- these are the advanced "already ACOs" that are ready to go given their significant integration and deep experience in Medicare Advantage -- and they'll give CMS some early wins to tout to a skeptical Congress. We are thrilled all of our Pioneers are moving forward -- with no arrows in their backs yet.
But it's the Shared Savings Program with its applicability to a much broader swath of providers that's significant here -- and that messy draft reg from last spring was like a cold shower from Medicare for most providers that might consider it. The irony is the draft regs forced many sophisticated provider systems and medical groups to recommit themselves to Medicare Advantage. CMS got over 1,200 comments on the NPRM and we're hopeful next month's final reg gets it right.
The ACO train is leaving the station in both the Medicaid and commercial markets, and Medicare must be on it if there's to be any hope of significant delivery system reform. Take for example the following initiatives being undertaken by the major payers:
- United Health Group has 1 ACO in Tucson and expects to expand to 9-13 this year
- Aetna is in more than 100 conversations about building ACOs and is actively marketing ACO back end operations functions to providers
- Centura is developing a strategy to market ACO development and operations support functions and is pursuing several ACO pilots in the commercial market
- Cigna has ACO experiments in 12 markets expanding to 30 by year end
- Humana is in discussions to develop ACOs in several of its markets, especially FL and AZ
- Wellpoint is partnering with major medical groups to establish ACOs
- Coventry is creating ACO models and may roll them out first in support of its Medicaid diversification strategy
- HealthSpring has committed to a major ACO development initiative with its major provider groups and clinics its acquired in the Bravo transaction
We're crossing our fingers that our friends in the CMS Innovation Center took those 1,200 comments to heart and that we'll see a viable final reg on ACOs next month. Broad participation in Medicare by ACOs would be another tremendous achievement to add to the legacy of Dr. Berwick.
CMS Pioneer ACO Demonstration Program: Update
The CMS Pioneer Demonstration program is in stage two of the application process -- meaning that certain applicants have been invited by CMS to proceed to the next level, which is to defend/expand their submitted application in front of a CMS interview panel.
Those interviews are currently in process and it is satisfying to know that all of our client/applicants were invited by CMS to proceed to the interview stage. We of course contiue to support our clients, as well as other oranizations by preparing them for the interview process and the anticipated implementation phase.
Although CMS has not released a specific time frame for the follow up steps to the CMS interviews, we anticpate that by mid-October CMS will issue a communication announcing:
a) those organizations successful in passing the interview process;
b) announcing the much anticipated alternative payment methodologies for the Pioneer ACO initiative; and
c) announcing the time frame for negotiating the contract between CMS and those organizations that are invited to implement a Pioneer ACO franchise.
Look for further updates on the Pioneer program in future blogs as information becomes available.
My Talk at AHIP's Medicare Conference
I had the pleasure of addressing a standing-room-only crowd at the AHIP Medicare conference yesterday, sponsored by our friends at TMG Health, our 4th year together there. That speech always keeps me on my toes, especially this year -- a tough, smart audience that demands a tough, smart message on how to survive in the new Age of American Austerity. Here are the main points of what I said:
- Volatility and Accountability will define the sext several years in Medicare. Volatility: rates, the Medicaid dual eligible explosion, the Congressional "Super-Committee", industry consolidation, and the 2012 elections. Accountability: it's already here. Star Ratings bonuses, minimum MLR regulations, compliance, rate reviews, RADV audits, and Accountable Care Organizations.
- The State of the Union in Medicare Advantage (MA) and Part D is strong. All predictions of the demise of the program following health reform were wildly premature. MA will grow about 7% this year, and over 40% of beneficiaries aging into Medicare have chosen MA in the last two years. Local PPOs with the drug benefit integrated remain the product of the future in MA, as do Special Needs Plans given the tsunami of dual eligibles -- a $300 Billion market alone. We think MA will pass 15 million members by the end of 2015.
- Medicaid managed care is risky (BIG) business. We've already seen major awards this year in TX, LA and KY. CA is prepping the biggest RFP in US history: 150,000 duals in plans by end of 2012; all duals in plans by end of 2015: a $21 Billion opportunity. WA, FL, NH, NE, MI and HI are all preparing to move duals into plans.
- Volatility: many of us thought we "gave at the office" in health reform when the ACA whacked over $120 Billion from MA rates over a 7-year period. There's more austerity to come from the Congressional "Super-Committee" on the debt. Best case scenario? The Super-Committee fails, sequestration occurs, and we get hit with a 2% cut in 2013, 2014 and 2015, compounded. And what about the "doc fix"? If they don't fix the SGR and docs take a 29.5% cut in Medicare reimbursement in 2012, MA gets hit by about 7% in 2013, and the beneficiaries take it in the shorts. Bar the exits! Consolidation is intensifying in both payer-payer transactions, and payer-provider deals like United/Monarch (CA). And then there's the elections. My money as of today is that Obama gets re-elected by the narrowest of margins, Democrats lose the Senate, and we have another 4 years of economic doldrums with the HUGE exception of the ACA's implementation in 2014.
- Accountability: it's already here, a cornerstone of the ACA. It's embodied throughout, in Star Ratings bonuses, Accountable Care Organizations, with growing incentives for chronic care improvement, member satisfaction, and compliance. The cornerstone is transparent data reporting. Berwick's legacy will be his embedding the "Triple Aim" in the DNA of CMS. And CMS says it will terminate MA plans with less than 3 stars for 3 years running. A "good" star rating is not a hedge against the rate cut: it is an existential issue -- and a management revolution.
- What to Do?
- Aggressive revenue management in the near term. Master risk adjustment and audit-proof the function by embedding it where it belongs in Medical Management, move from claims extracts and chart reviews to Prospective in-home Evaluations, and be a Star Czar.
- Care coordination and chronic care management over the mid-term (3 years). It will take years to see results, but this is what it's all about in the mid-to-long-term. High-touch with the frequent flyers.
- Commit to a Culture of Compliance. The regulator is the purchaser, and you keep this account happy by following their rules. To. The. Letter.
- Revisit the service model and move from reactive to proactive. Health care is still a service business and Boomers are tough customers.
- Establish and Invest in Medical Homes, Accountable Care Organizations, and Exclusive Provider Organizations. In the end, it's all about the docs.
Questions? You can always reach our team at ghg@ghgadvisors.com.
PS Join me for another talk September 25-26 in Arlington at the Opal Events MA Strategic Business Symposium. Complimentary passes are still available today.
America's Hospital Patient Safety Problem in 1 Awesome Graphic
The graphics geniuses at MedicalBillingandCodingCertification.net have come out with another of their charticles examining the American health-care system. The quick takeaway? "The United States ranks dead last out of 19 developed nations in preventable deaths at hospitals." The problem is preventable and the solutions pretty straightforward. The charticle is fascinating and scary. Enjoy.
United Acquisition of Monarch Healthcare (CA): Marx Meets Managed Care, Again
The Wall Street Journal reported this morning that United Healthcare is acquiring our longtime client, Monarch Healthcare in Irvine, CA. The transaction is further evidence that Marx (Karl, not Groucho) has met managed care: a payer controlling the means of production in an intensely competitive market.
There have been several other payer/provider deals in the last few months confirming the trend: WellPoint recently closed its acquisition of provider-owned Medicare Advantage plan CareMore; in June, Highmark bought West Penn Allegheny Health System; last December, Humana bought Concentra.
Expect to see many more of these kinds of deals, for clear strategic reasons: with greater emphasis on performance-based risk contracting arrangements in the future of healthcare financing, and an emerging focus on the patient's experience of care, in many markets it just makes sense for payers to own their supply chain -- and the day-to-day faces of the health plan with its members.
Medicare's Looming Risk Transfer
Please read Dr. Jaan Sidorov's Health Affairs blog on "Medicare's Looming Risk Transfer" where he describes how the ACA and Democrat and Republican proposals to reform Medicare "transfer substantial portions of Medicare's monetized risk from the government to one or more third parties."
The Medicare Pioneer ACO Program: What's Next?
For those of us even vaguely involved in Medicare, the reference to the Pioneer ACO Demonstration program elicits feelings of optimism and relief—optimism because it is an approach to reengineering healthcare and relief because the application submission deadline has come and passed.
Most of you will recall that the Pioneer ACO Demonstration program is a CMS/CMMI initiative to partner with sophisticated integrated provider organizations in an effort to improve the provision of healthcare services to Medicare eligible beneficiaries. The program is one of several initiatives first telegraphed by CMS Administrator Berwick in a November 16th 2010 press release announcing the formation and mission of the Center for Medicaid and Medicare Innovation. In part the mission of the center is to "rigorously and rapidly assess the progress of its programs and work with providers and other payers to replicate successful innovations in communities across the country. It will test models that include establishing "open innovation communities" that will serve as information clearinghouses for best practices of health care delivery reform.
By all indications, the Pioneer demonstration program is envisioned to achieve results which will hopefully become part of the CMS/CMMI toolbox for innovation and best practices. Consequently, those organizations that applied and will be selected are those who can demonstrate a history of patient/provider/payer collaboration; the existence of performance based approaches to delivering superior diagnosis and treatment of patient health issues; the presence of prerequisite governance; infrastructure and technology capabilities to integrate the clinical and financial requirements; and the financial strategies for implementation, operations and income distribution.
The good news is that the application development period is behind us and that those integrated provider systems that were assisted by GHG in their application development and submission process will have an excellent chance of moving to the next phase of the CMMI application evaluation process.
We believe the process will unfold as follows, (however we reserve the right to change our predictions once CMS/CMMI publishes its next update).
First, CMMI will review each application filed for completeness and timely submission. Some of the applications may be rejected outright. Others may be asked to submit additional information, clarify certain supporting documentation or correct omissions. It is highly likely that this initial review process will be quick and applicants will have a short window of opportunity to correct any deficiencies.
Second, those that pass the initial screen for completeness will be contacted by CMMI to schedule a face to face interview. It will focus on the content/detail of the application responses and a thorough Q & A is intended to demonstrate to CMMI the applicant's familiarity with operating a coordinated clinically and financially integrated delivery system in line with CMMI's triple —aim vision for Medicare healthcare.
Third, if the applicant interview is successful, CMMI will offer the applicant a contract to operate a Pioneer ACO for a minimum of three years and possibly for at least five years. Fortunately the applicant is not alone in navigating the post Pioneer ACO application development waters—GHG stands ready to provide assistance along every step of the way calling on our senior executives' long standing experience with the inner workings of CMS.
Those who decided not to apply for the Pioneer ACO demonstration program have not been eliminated from participating in CMMI innovation programs/initiatives, the most recent of which is the recently announced Bundled Payments for Care Improvement Initiatives.
I will be reviewing this new innovations program during my next blog and comment on GHG's perspective. Until then stay healthy.
The Medicare "Doc Fix" Will Get Pegged to Quality Measures
We're hearing from friends on the Hill that Republican staff on the Energy and Commerce Committee are thinking about attaching a pay-for-performance system to any fix of the Medicare Sustainable Growth Rate. The new approach would cost less than a straight fix of the SGR, which will slash Medicare payments to doctors by 29 percent at the end of the year if Congress doesn't intervene.
It's still early in its development, but we heard that after a year or two freeze in payment rates, a new, tiered system would be implemented. Physicians in ACOs would get the highest pay rate, followed by doctors in fee-for-service Medicare who meet performance standards, followed last by docs who don't.
There's huge issues all over the concept -- but I like it. And it has an air of inevitability all over it. It will cost close to $300 billion to permanently fix the SGR. There's no way Congress is going to lay down that kind of money without some stiff expectations on quality in return. And it could finally have the effect of breaking the curse that is fee-for-service reimbursement in Medicare -- the root of all evil in the program's cost explosion.
And remember: if Congress doesn't intervene on the SGR, that 29% hit on docs' rates will translate into a 7% whack on Medicare Advantage payments in 2013. It's imperative for both sides of the program that Congress get this done. Stay tuned.