Changing the Mythology of Hospital Led Value Based Purchasing

By William De Marco

William J. DeMarco | Pendulum HealthHospitals whose only product is acute care will have a difficult time managing in the post reform environment. Many hospitals have ventured into outpatient services competing with physicians. This has proven to be a mistake long term when seeking collaboration with physicians. Many hospitals do not understand how ACOs actually make money and have been so confused about managed care controlling their utilization and revenue that they believe this is the same strategy, yet it is not.

There are successful collaborations between hospitals and physicians such as Geisinger, Baylor (now Baylor Scott and White Heath) and Intermountain. There are also several new PHOs emerging as underlying structures to contract with the ACO. However, there are still traditional scenarios where the hospital runs it all and then the PHO becomes the HPO.

When starting an ACO there needs to be a separate corporation with physicians as major leaders, yet often times the hospital foots the bill for the startup and ends up feeling it is a disadvantaged partner because it is going to have its length of stay and admissions restricted. When the hospital pays for all the startup cost there is an expectation that these costs will be recovered when savings are created. This expectation can wipe out any bonus monies and if there is no bonus money earned the hospital is carrying this debt forward.

Both overspending a bonus or not earning a bonus will create major long lasting conflict for both parties and the finger pointing may last for years. This finger pointing is not just between the hospital and the physicians but sometimes between the physicians themselves, primary versus specialty, older doctor versus younger doctor, etc. If the hospital does not head this off immediately, the collaboration will be in trouble. Suddenly it is all about the bonus, but not really; it’s about how the physician feels he/she has been treated by the hospital. A fire begins burning that may never be quenched. Sometimes new managers being brought to hospitals report that the doctors do not trust them even though they never did anything to them.

The essential point being missed here is that when no one is held accountable, everyone can blame each other without consequence.

Using the joint venture organizational structure and a strategy that fits the marketplace there is a better chance to build a foundation for open cooperation and accountability and this does several things.

  1. Structure provides limits in terms of what powers or authority hospitals have over physicians in the relationship. This is reflected in the participation agreements and the board make up. There is an understanding that the hospitals will have the “physicians enforce physicians” rule and the hospital will run its own departments in accordance with the clinical guidelines that formulate part of the essential strategy to manage results that earn savings against the benchmark.
  2. Committees (several) hold the organization accountable for clinical guideline creation and enforcement. Non-compliant physicians may still practice at the hospital but they do not share the bonus unless they successfully correct their utilization issues. Several committees are required but we would add management, technology assessment, finance, and reimbursement committees to support the organization.
  3. While this list of committees can go on, I am constantly amazed when asking ACO executives what kind of bonus they are expecting under optimal conditions and I get a blank look.
  4. If no feasibility study has been done, two things will fall apart – the vision is tarnished because no one can articulate why they are doing this and the reimbursement sharing (if any) is left out until there is money on the table. And then the fight begins. Like a big family when a relative with money dies, it can be nasty. Those who put more money into the early investment (the hospital) want their cut.

If part of ownership by the physician included some money up front, with the hospital matching this amount with the understanding more dollars will come that, after expenses, can be divided in accordance with a schedule, this may be a start to fixing this problem. But nothing is simple here. It will get the physician’s attention to come to meetings if he/she want a return on investment and hospitals will reduce their risk by having to match what’s put up instead of putting all the money up. Perhaps a commercial loan for any additional money could be used to share the risk further. This may sound simple, but to not discuss the ins and outs of capital before getting started often leaves one partner holding the bag if the ACO should fail to produce savings.

Unifying the structure at the top and pushing down the accountability throughout the organization with delegated committee responsibilities and then supporting this with a capital plan to launch and divide rewards as earned avoids the PHO from becoming a HPO and unifies the medical and hospital staff around a common set of goals and vision that will likely lead to other joint ventures. Hospitals can form successful ACOs but must find that simple but effective way to form a true collaboration.

William DeMarco is President and CEO of DeMarco & Associates, Inc.  Mr. DeMarco created the firm based upon 20 years experience in health plan development and management, earning his credentials working with several community based health plans in the competitive St. Paul /Minneapolis marketplace. For more information see Pendulum Healthcare and follow on Twitter via @WJDeMarco

Meet Redwood Community Care Coalition: A Health Center Nested ACO

By Gregg A. Masters, MPH

Wrapped in the ‘population health’ angle but clearly a unique play in the ACO space – at least from the participation point of view of Federally Qualified Health Centers (FQHC), former CEO Steve Ramsland (a 10% allocated FTE) addresses the audience about their market, approach to ACOs and the deployed healthIT spine (they use cClinical Works CCMR).

More information on Redwood Community Health is available here and via 2012 Annual Report. The ACO is an interesting construction of member entities up to and including ‘a doc in private practice’.Redwood Community Care Coalition ACO HealthIT

In the article noticing the Ramsland resignation – which is interesting on it’s face in terms of back-story if any, the service area for the FQHC includes:

…health centers in Marin, Sonoma, Napa and Yolo counties, including some of the largest FQHCs such as Petaluma Health Center, Marin Community Clinics, Clinic Ole in Napa and West County Health Centers in Sonoma County, among others.

The Redwood Community Care Coalition ACO is NOT aligned with a hospital partner, it is solely sponsored by its founding members.

Atul Gawande Opines on Post ACA Agenda

By Gregg A. Masters, MPH

‘The debate about whether to provide coverage for healthcare is over…’ Atul Gawande

I had a front row seat for this one at the 5th Annual (and last) ‘Health Datapalooza‘, a label affectionately coined by the former ‘athenista’ though always energetic and singularly determined Todd Park, U.S. Chief Technology Officer and Assistant to the President. Some pretty amazing insights from this public health sensitized and Harvard trained surgeon who’s simple proscription for checklists in hospital surgical suites has no doubt served the interests of many patients who may have otherwise been subject to an unacceptable pool of recurrent adverse hospital events, see: The Checklist Manifesto’.  

‘Fear and Trembling’ or Simply ‘Lonely in’ Seattle?

By Gregg A. Masters, MPH

The old is new again…

I’ve been writing and tweeting about this theme for some time now. It was aptly offered as contextual insight via Nicole Bradberry of MZI Healthcare /Orange Solutions and CEO of the Florida Association of ACOs.

Many have similarly echoed this ‘deja vu’ theme when discussing the roll-out of ACOs including functional similarities and key differentiators with HMOs and previous managed care initiatives circa the 1980 – 2000 vintage.

One such old is new again effort is ‘direct contracting’, where the employer deals directly with the provider community without a health plan as third party intermediary. An army of TPAs (third party administrators) stepped up to offer ‘administrative services only’ (ASO) typically to larger employers who self fund their benefit plans to carve out the middleman, i.e., Aetna, United, the Blues, etc., and exercise greater flexibility with their provider community. Seeing the handwriting on the wall, many traditional insurance carriers promptly positioned themselves to compete in the TPA space via acquisition or internal accommodations.

I suppose the novelty and efficacy of direct contracting (vs. traditionally orchestrated health plan based managed care) was somewhat muted by the overall failure of the managed care industry writ large to effectively restrain the rapacious appetite of a volume fueled delivery system; see: ‘Direct Contracting: Why It Hasn’t Grown’.   

Fast forward a decade plus and we read about innovation in the Seattle market where competing health systems have internally launched ACOs and in turn are direct contracting with Boeing, see: ‘Seattle Health Systems Launch New Accountable Care Organizations for Employer’.

While the cited ‘InterStudy’ report (the think tank founded by progenitor of the ‘SuperMed’ concept and the acknowledged father of HMOs Paul Ellwood, MD) is behind a pay-wall, the report highlights are as follows [Note: for details on Boeing direct contracting see: 'Narrow Networks in Today’s Health Care Climate]:

  • Aviation giant Boeing is the first large employer in the market to sign on for both ACO networks, which will be offered to non-union members and select unionized employees. Other employers are expected to contract with the health systems prior to January 2015.
  • The UW Medicine Accountable Care Network features a mix of hospitals within the Seattle market and in surrounding communities. The network includes Seattle Children’s Hospital and Seattle Cancer Care Alliance, both of which were left off the networks for most health insurance exchange policies.
  • The state’s exchange plans prominently featured narrow networks. After outcry from affected stakeholders, state Insurance Commissioner Mike Kreidler introduced new regulations requiring the submission of provider networks for approval, and the networks must include adequate access to specialists and community care providers. Insurers warn the regulations could lead to higher premiums, while hospitals argue that the new rule does not goes far enough to protect consumers.

Comments from report author include:

  • “The introduction of direct-contract ACOs in the Seattle market is surprising, as the market has only begun fully embracing ACOs in the last year. Traditionally, Seattle health systems have shied away from bearing risk, so the market is now entering into a more advanced model of care. Franciscan Health, which was not included in a direct-contract ACO network, may feel pressure to form one to remain competitive in the market.”
  • “Boeing’s willingness to offer the new ACOs, as well as its traditional health plans, allows employees to select the coverage and network they prefer. UW Medicine may have a bigger draw as its ACO network includes providers that have been excluded from insurance networks.”

Meanwhile, per ‘Employer Direct Contracting‘ via Knowledge Source:

According to a recent National Business Group on Health survey, 11% of the large employers are using direct contracting with designated surgical centers of excellence or patient-centered medical homes. Such direct contracting is likely to increase because another roughly 20% of such employers are considering such provider agreements.

Large employers are using reference pricing, where self-insured companies offer to pay only the median price in certain geographic areas for some medical services and require employees to pay the difference at more expensive providers.

So yes, the old is new again. The question is: will it or can it be different this time? Or will we witness another round of ‘me too’ cookie cutter strategies followed by a risk push-back bloodbath, and ‘return to core operations’ by health systems who can’t manage risk, or the acquired physician practices they are so busy swallowing or health plans who can’t manage delivery systems.

Perhaps more on point with the headline of the post is: Will the health plan and institutional health system communities and their advocacy partners respond in kind to another Søren Kierkegaard ‘fear and trembling’ moment with wisdom and clarity? Or will the collective industry ignore the lessons learned from prior well intended but misguided strategic initiative?  

Times have indeed changed, and the horse is out of the barn. Healthcare reform and its required re-engineering is no longer contained behind the closed doors of board rooms of health systems or health plans. Achieving the triple aim is a ‘all hands on deck’ responsibility of all stakeholders in the healthcare ecosystem. But people are people, so we shall see!

 

Catching Up with Farzad Mostashari, MD: An Aledade Preview at HiMSS 2014?

By Gregg A. Masters, MPH

The HealthInnovation Media footprint was again on the ground at Health Information Management Systems Society (HIMSS) 2014 in Orlando, Florida. One of the privileges I enjoy as producer and creator of all digital content generated is I get to tag interesting people to put in front of the camera including suitable hosts for each interview segment.

In this shoot we meet with former Director of the Office of the National Coordinator for HealthIT and now Founder and CEO of ACO management company Aledade, Farzad Mostashari, MD.

The interview was masterfully handled by industry veteran and colleague Neil Versel.

Enjoy!

Meet Aledade An ACO Management Company Putting Docs at the Head of The Table

By Gregg A Masters, MPH

farzad mostashari MDWhen Farzad Mostashari, MD not too long ago sported a Federal business card his principal mission was to stimulate and evangelize the adoption of electronic health records (EHR) in his capacity as the lead official for the Office of the National Coordinator for HealthIT (ONC). This important market transformational role was enabled by the American Recovery and Reinvestment Act (ARRA), and in particular the provisions to ‘HITECH‘, the Health Information Technology for Economic and Clinical Health Act signed into law on February 17, 2009:

‘to promote the adoption and meaningful use of health information technology.’

Amidst ‘silo-ed medicine’ the enabling role of health information technology and specifically EHRs to the care management, care coordination and generally the principal upside of the ‘managed care’ vision has been recognized for quite some time. In fact, ‘clinical integration‘, i.e., a network wide EHR platform, shared by independent physicians who were otherwise competitors in a specific market (absent legal integration) was one of the exceptions if not ‘safe harbors’ to antitrust vulnerability.  In other words, a ‘shared healthIT spine’ of sorts allowed physicians to collaborate with each other without getting ‘married’ – if you will.

Since the passage of the Affordable Care Act (ACA), the ‘urge to merge’ is strong particularly at the hospital or institutional health system level, with many corporate parents acquiring medical practices at a pace unwitnessed during the prior ‘integration generation’ circa the 1980 – 2000 vertical integration and subsequent turbulent unwinding timeline.

Inside the ACA the majority of the ‘chop wood and carry water’ provisions of the anticipated transformation or ‘disruption’ are clearly laid at the doorstep of ACOs and the broader ‘accountable care’ framework it has set into motion via both Government and derivative private sector initiative.

Inside this market shift and not un-noticed by many healthcare ecosystem stakeholders (both pre and post passage of the ACA), many argued for the modulation if not regulation of the institutional ‘integration impulse’. Absent restraint, many provider mergers would amount to de-facto ‘too big to sail’ (i.e., more costly) enterprises via asset concentration for anti-competitive pricing leverage. Against this ‘unintended consequence of the law’ (more costly vs. less) some have stepped  up to lend support to physicians as the principal organizers and aggregators of clinical delivery (if not financing) assets. The theory goes, un-beholden to costly hospital infrastructure, physicians are the ‘free and informed agents’ to competitively purchase and allocate needed clinical assets across the care delivery continuum.Aledade ACO

Clearly the wildcard in this formula is an ‘empowered network of physician aggregators.’ Since most physicians are NOT infrastructure nor business savvy per se, a third party enabler to harmonize performance around this ‘triple aim’ (better care, better outcomes, lower costs) fueled vision is essential.  In other words, build and support the crosswalk from volume value where care is not incentivized by unit volume to support incomes and lifestyles but what’s right for the patient.

Enter ‘ACOcor’ (see: ‘Waiting for ACOcor?‘) as in Aledade, the new vision and initiative of Farzad Mostashari, MD and his capital partners at Venrock, specifically ACA advisor Bob Kocher.

Today on ‘This Week in Health Innovation‘ with my co-host Dr. Phil Marshall, we chat with Dr. Mostashari about his vision at Aledade.

 

The 5th Annual ACO Summit

By Gregg A. Masters, MPH

Can’t make the annual gathering in DC? Why not follow the conference via Twitter?

ACO Summit 5th Annual MeetingIn years past, I registered the ACO Summit as a conference with the healthcare hashtags registrar @Symplur.

While the dashboard has not been updated with current information (the program description dates back to 2012), the conference hashtag remains #ACOsummit.

So check out the twitter stream, pull real time analytics including ‘reach’, impressions’ and tweet frequency here.