The @Aetna and @Humana Marriage: Will It Be Different This Time?

by Gregg A. Masters, MPH

Wow! Ahead of the 4th of July weekend Mark T. Bertolini (@mtbert) and Bruce D. Broussard (@BruceDBroussard) both savvy and seasoned managed health care industry players and visionary captains at @Aetna and @Humana respectively, announced their marriage via a $35 billion, see Bloomberg story: ‘Aetna-Humana Deal to Lower Consumer Costs, CEOs Say deal. aetna humanaYet the initial market reaction to this presumptive value added union has been somewhat of a Vulcan mind mood disappointment.

When the Bloomberg reporter Betty Liu inquired about the initial (and continuing as of the date of the post) bearish investor response to the transaction, Bertolini posited:

‘I don’t think its all investors Betty, I actually think it’s the ‘Arbs’ (arbitrageurs) that got in the deal looking for opportunity and I’m not quite sure they know how to do this trade.  This is a longer term strategy. This is a very big combination that is going to have a longer term impact on the quality of healthcare, the cost of healthcare in an evolving consumer marketplace [emphasis mine, more later].. once the noise settles down we’re going to do just fine.’

Then the billion, perhaps trillion dollar question was lobbed to Broussard via Liu:

‘Ok Bruce so is it going to lower healthcare costs for consumers?’ 

To wit the Humana chief noted:

‘very much so, I think as you see the transition from a more employer based to a consumer based model and a value based reimbursement model from a fee-for-service model, these combined organizations will have the capability to meet both of those trends. Both in the way of our clinical capabilities on the Humana side and the deep, deep employer relationships that Aetna has on their side.’

Now lets step back a minute and first breathe in this fact: nowhere in evidence has the aggregate cost of healthcare, nor health insurance premiums as proxy, declined (except for a brief period in the 90s when the medical care cost (MCC) index actually fell temporarily into negative territory), then as risk was pushed back by providers to the health plans, resumed their inexorable movement UP. So on a trend basis, health care costs ALWAYS rise as a multiple of CPI. Only recently has that rate of growth fallen from high single or the double digit rate of increases witnessed historically to low single digits – perhaps due more to the economic meltdown (declining demand and higher deductibles/copays) than any proactive contribution via improved health plan clinical risk management, direct or delegated).

Yet in offering documents filed with the SEC and investors as to the rationale for the combined company merger that ‘benefit’ is always posited as an outcome of the transaction. We always hear about ‘scale’, ‘operating efficiencies’ and even better management as a byproduct of the combination.

Secondly, some ‘de-coding’ is in order here. Both Bertolini and Broussard two men I admire as exemplary disruptor’s of ‘legacy healthcare’ inertia, i.e., Bertolini grew up in the HMO industry back in the day when even though his experience was forged in the for profit side of the business, it was none-the-less a mission oriented member focused sector (more MHAs, MPAs, and MPHs than MBAs) much like the community based operators in the non profit sector (RIP).

Broussard on the other hand is not your typical health plan executive as his roots are forged on the provider side with senior roles as U.S. Oncology (the successor to Physician Reliance Corp and ‘TOPA’ Texas Oncology, P.A.), Sun Health (the hospital group) and Continental Medical Systems (a rehab company). So his zeitgeist is firmly rooted in the provider culture with which his company buys, contracts for or joint ventures with to bring products to market.

Now back to the ‘code phrases’ used as rationale outlined for the inked merger/acquisition. Bertolini referred to ‘an evolving consumer marketplace‘ which means as more costs are shifted from the plan (Aetna, Humana and all other health plans writ large) to the member or insured, we (the consumers) will demand more ‘accountability’ from the provider world and thus somehow restrain aggregate healthcare costs via transparency tools or so called ‘skin in the game’ as a result of the shift to ‘consumer directed’ (i.e., high deductible) health plans.

This strikes me as a somewhat disingenuous argument bordering on perhaps naiveté (though it is highly unlikely that this characterization can stick to either of them). But ask yourself, if Aetna, Humana, United, Anthem or the member licensees of the Blue Cross and Blue Shield Association as aggregate wholesale buyers of hospital and physician services, leveraging millions of members or ‘covered lives’ (insurance speak), backed by seasoned provider contracting staffs can’t restrain the cost of healthcare, how can an ‘app empowered’, health literate enabled retail ‘shopper’ (you and me) for health services do better? I don’t think so… There is just too much of a power differential to overcome. We, empowered or not, are generally ‘screwed’ with more or less support from our ‘friends’ at the health plan.

The second but related theme was outlined by Broussard:

‘as you see the transition from a more employer based to a consumer based model and a value based reimbursement model from a fee-for-service model’

The two strands here are movement from the employer sponsored model which retains some vestiges of ‘defined benefits‘ at least for union negotiated plans, to a ‘consumer based model‘ more akin to the ‘defined contribution‘ practice of limiting the plan’s liabilities by capping what it pays for on behalf of its members or insureds. The kicker and perhaps ‘game changer‘ here is the near unanimous recognition in the health wonk, including health plan world that fee for services medicine is a burning platform on a dying paradigm – yet, arguably 80-90% of the money in the healthcare eco-system today remains in a predominant FFS book of business – HHS Secretary Burwell’s value based healthcare announcement notwithstanding) so don’t hold yer breath.

So there you have it. Will it, can it be different this time? Can two demonstrated champions of patient centric healthcare in an industry valued slightly higher than tobacco companies get it done when ALL of their predecessors have tried and failed? The carnage is plain to see, but only if you have an event horizon beyond the 24/7/365 current headline news cycle. I don’t know, but maybe the market knows and may even be paying attention to what came before?

For those who want some academic consideration of the broader strategic question, industry history,  if not possible glide-path in the consolidation orgy we are currently witnessing (both provider and health plan/payor/benefits solutions providers) with an exquisite dissection and analysis of the rise, fall and rise again (post Aetna/U.S. Healthcare acquisition), check out: ‘From Managed Care To Consumer Health Insurance: The Fall And Rise Of Aetna‘ by James Robinson, PhD, MPH the Leonard D. Schaeffer Professor of Health Economics and Director, Berkeley Center for Health Technology at my alma mater U.C. Berkeley.

The ACA, ACOs and Health System Reform 5 Years Later

By Gregg A. Masters, MPH

In the relentless sound byte and laughable misrepresentation of facts proffered by ideologues intent upon diluting if not repealing the ACA, one consistent voice of reason and evidence mindfulness is that presented by the cogent and thoughtful reflections on the indicia of ACA implementation courtesy of ‘team Commonwealth Fund’ aka @CommonWealthFnd.aca_5 years out

Published recently in the New England Journal of Medicine by the Commonwealth Fund‘s CEO and former National Coordinator for HealthIT David Blumenthal, MD (@DavidBluementhal) is one to consume, one provision at a time.

The full NEJM article is posted here.

The relevant discussion to readers of this blog specific to ACOs is pasted below:

Accountable Care Organizations

The ACA encourages health care providers to form new organizational arrangements called accountable care organizations (ACOs) that are intended to promote integration and coordination of ambulatory, inpatient, and post–acute care services and to take responsibility for the cost and quality of care for a defined population of Medicare beneficiaries. Under the Medicare Shared Savings Program (MSSP) of the ACA, providers who create such organizations and who also maintain or improve the quality of care can share part of any savings they achieve.
Providers can also elect to become so-called Pioneer ACOs, which not only share savings but also accept substantial risk if expenses for Medicare patients are greater than expected. Recently, CMS announced still other variations on the ACO theme, including arrangements in which ACOs function very much like Medicare Advantage plans.17 Indeed, many observers see ACOs as a bridge from fragmented fee-for-service care to integrated, coordinated delivery systems that resemble the tightly organized Medicare Advantage plans.
The two existing varieties of ACOs have spread with considerable speed. The MSSP has 405 participating ACOs serving 7.2 million Medicare beneficiaries (14% of the Medicare population).18 Quality measures have generally improved for the 33 indicators tracked by MSSP, and patients report better care experiences in some respects than Medicare beneficiaries who are not part of ACOs.19 CMS estimates the savings at approximately $700 million, as compared with control populations not enrolled in MSSP. A total of 32 organizations started in the Pioneer program; 11 transitioned to the MSSP track, and 2 withdrew entirely. The secretary of health and human services reports that the Pioneer program saved $385 million in the first 2 years, as compared with fee-for-service Medicare beneficiaries.20 These cost and quality results are early and modest, and further evaluation is needed before definitive judgments can be made.

A most useful and interesting Appendix re-capping and categorizing the many moving parts of the ACA enabling payment and health system delivery reform is available here.

Big h/t to Blumenthal et al for this fact based and honest reflection of measuring the impact of the ACA five years out.

Three Reasons Your ACO Will Likely Fail

by Gregg A. Masters, MPH

I’ve seen this before, and many times at that, see: 6 Reasons Your ACO Will Fail (A Series), Any One Will Do.

While some continue to debate and attempt to repeal the Affordable Care Act, the underlying market dynamics on which the vision of ‘Accountable Care‘, the triple aim or a sustainable healthcare ecosystem has risen continues to spawn innovation and remains remarkably intact.

Yet ACO’s are the workhorse in the mix of this triple aim enabling ACA magic and will remain so (until and unless the Medicare Advantage special interests prevail in their advocacy of an ‘end-run’ from ACOs direct to ‘MA’s’ aka global risk bearing HMOs).

But back to my premise…

Reason One Your ACO Will Likely Fail

The first impulse is to put ‘form’ (vs. function or culture) at the top of the agenda. I like to call this the ‘O,G & E‘ (organization, governance and equity) card. Just vision a typical process which plays out over and over again. An entity (usually a hospital or hospital system with access to capital) retains ‘advisers’ presumptively qualified to educate and guide local leadership into focused consideration of a ‘journey’ away from if not antagonistic to their core operations and culture.

First up are the lawyers, then accountants and consultants who address the business risk profile, regulatory environment, competitive landscape and outline structural models or options of organizing and participating in this new line of business consistent the mission, objectives and tax status of the ‘host’ enterprise.

Right from the outset the focus becomes the form of the organization and not it’s vision nor underlying or enabling culture per se. While these considerations may be part of the mix, breathing life into this sensitivity and operational awareness is usually seen in the designation of one or more hospital or health system friendly physicians to represent the balance (ergo interests) of the medical staff tribe. We’ve seen this in PHO formation, or the underlying management services organizations (MSOs), JV’s, etc., to support their operations. But make no mistake the ‘deliverable’ is a timeline, top down, check the box type strategy where the meter is running and things need get done whether they’re layered on quicksand or ‘terra firma’ so to speak.

Reason Two Your ACO Will Likely Fail

It’s about the right kind of ‘leadership’. More often than not the DNA guiding these conversations and shortlist of implementation decisions are principally healthcare leadership typically sourced from ‘institutional’ (hospital, health system or more recently IDN circles) vs. physician leaders who ‘see the [arbitrage] light‘, i.e., principally those trained in leadership (whether at the level of MBA’s or a scheduled participation via off-site Estes Park like medical staff/administration co-management team building efforts), have historically participated in managed care v1.0 et sequelae, AND actively value the transformation imperative under consideration.

Add this to the fact that the most appropriate physician leaders in this volume-to-value transformation are primary care physicians, yet the true power brokers in the institutional setting are the cash cow volume based specialties including cardiology, orthopedics, and neurosurgery, and fill in the blank proceduralists. PCPs have for the most part been carved out of inpatient culture and stay relatively focused on the ambulatory or outpatient side of medicine. A trend that began a while ago as the credentialing process assured a growing economic turf war as to who got to do what in the hospital, and was sealed by the industry move to the ‘hospitalist’ as the go-to inpatient specialist.

Reason Three Your ACO Will likely Fail

Rick Scott the former CEO of the disgraced Columbia/HCA hospital system (and now sitting Governor of the State of Florida) who earned that system a record $1.7 billion fine and with whom I routinely and vehemently disagree with, best framed the volume-to-value shift as follows:rick scott quote

While this quote may be another carefully crafted (some may say devious) calculus as Scott continues to oppose the ACA and Medicaid expansion in the ‘Sunshine State’ (see: ‘Gov. Rick Scott officially convenes commission on hospital spending‘ ), it none-the-less accurately reflects why institutional leadership will neither proactively nor aggressively pursue a revenue cannibalization strategy. Disruption as he noted must come from ‘outside’, however in this case outside comes in the form of hospital asset untethered ACOs driven by prudent resource allocation, access and quality in their service area.

Until hospitals become ‘cost centers‘ (as in Kaiser Permanente) vs. the traditional revenue plays they’ve no doubt perfected while hospital based care drives the cost of healthcare UP, this is mostly rhetoric to buy time and sometimes exit packages of oft overcompensated senior executives both in the 501(c)3 sector as well as their more transparent though similarly for-profit oriented health system operators.

So don’t hold your breath until the Kaiser Permanente model becomes the defacto clinical integration and financing standard in the U.S., but do watch what former ONC Director for Health Information Technology evangelist turn healthcare disruptor and entrepreneur at Aledade (a physician led ACO management company (MSO) – see ‘Waiting For ACOcor) Farzad Mostashari MD is up to. That Venrock and Bob Kocher in particular are rallying behind this model says a lot to me.

Bottom Line

Your ACO will fail if it’s of the institutionally led, top down, corporate check the box variety, and not imbued with the full court press commitment (so eloquently espoused by Don Berwick) of the required culture of health values to achieve the triple aim. Your ACO’s DNA must truly be truly disruptive from the bottoms up AND willing to can·ni·bal·ize  traditional hospital cash cow revenue streams.

That’s a lot to ask. Building that bridge in a quarterly earnings per share mindset maybe a bridge too far. Just ask Greg Samitt, see; Eating Glass?': A DaVita Healthcare Partners Hiccup or Impending Physician Integration ImplosionHe tried to bring that bridge forged at Dean Clinic (scaled movement from production to value) at Healthcare Partners (Da Vita) but for reasons unclear to me was prematurely asked to leave.

For some of my experience on this journey, see ‘Some Context and Perspective on Standing Up The ACO‘.

A Fork in the Road: ACOs vs. Direct Practice?

by Gregg A. Masters, MPH

If you come to a fork in the road, take it.

In the run up to the passage of the Affordable Care Act (select milestones here), the Senate Finance Committee under the leadership of Chairman Max Baucus presided over a comical volume of amendments proffered by his colleagues on the other side of the isle, see: ‘Senate Democrats Lead Historic Passage of the Patient Protection and Affordable Care Act‘.

Senate Finance CommitteeHaving witnessed gavel-to-gavel coverage of this painful historical consideration (some may say exquisite political theater) I soon began to refer to this bunch as the ‘dis-ingenuous five‘ (Hatch, Grassley, Cronyn, et al) as all of their amendments had one thing in common – to dilute if not distract from the intent of the Act or any of its targeted provisions.

Fast forward some 5+ years and the ideological drama of a very complex piece of legislation still engenders varying degrees confusion, implementation complexity, litigiousness and its share of opposition often nested inside simplistic and dumber by the dozens sound-byte alternatives, witness this recent exchange between former Senator and Governor Judd Gregg and the journalist Chris Hayes.

Yet, forged from private market competitive ‘lessons learned’ experience, supported by tomes of sound bi-partisan health policy reasoning and enabling regulatory consideration two seemingly opposing remedies co-exist with relative degrees of market uptake success: ACOs and ‘DPCs‘ (direct practice‘) including it’s retainer and membership model medicine derivatives.

Some say direct primary care (DPC), still a trickle in terms of share of medical practice participation, is the way to ‘give the finger’ to the prevailing mangled care amended bill and chase model of American medicine (and by proxy the ACA) and exit the system in favor of a more simplified and patient centric model. Yet there is more to this story as few get the provisions in the ACA enabling the inclusion of DPC’s as potentially ‘qualified health plans‘ and thus eligible for listing on State or Federally Facilitated Health Insurance Exchanges, see: ‘DPC and Insurance, HDHP, HSAs‘; not to mention there are a range including ‘hybrid’ DPC models (from Qliance to OneMedical and many in between) that stay tethered to a claims filing and collections model of operations.ACO's: what's next if we fail? Jay Crosson, MD | 3rd National ACO Congress

ACOs are a statutory construction of the ACA via introduction of Section 3022: The Medicare Shared Savings Program and center core to the impact and efficacy of the law’s intent. To many this rules ACOs out as de-facto agents of change driving transformation of an excessively complex, silo-ed and provider centric healthcare financing and delivery system quagmire.

Another Way To Look At It

So for those willing to dive a little deeper into the chassis of both business models and services line extensions there may be more similarity between these two seemingly oppositional vehicles.

Both are variably tethered to the ACA and thus part of the implementation vision of the President and his then allies in the Congress. At its core the DPC model is a return to HMO roots of ‘pre-paid’ comprehensive primary care services though the DPC model is not in the business of health insurance while HMOs clearly are. While DPCs typically only include the range of primary care services they control, and exclude specialist referrals, lab and imaging services and hospital inpatient or outpatient services, they do leverage principles of ‘re-insurance’ via optional wrap around high deductible or catastrophic plans.

ACOs in the Medicare Shared Savings Program (MSSP) are seen by many especially those risk savvy medical group or integrated delivery system operators of Medicare Advantage health plans (aka ‘HMOs’) as too little too late (or ‘HMO-lite’) versions of the real deal and unlikely to steward the meaningful transformation from a volume-to-value based healthcare economy.Standing Up the ACO

Yet, the truth is they’re both part of the broad brush of initiatives included under the tenets and principles that gave birth to the ACA, see: ‘Obama-care 101: The president’s 8 principles‘.

Clearly this transformation of 1/5 of the U.S.economy will take time and there are many moving parts. The question is do we have enough time for pluralistic remedies to take hold before the ‘system’ collapses on itself? The nightmare scenario being non-risk bearing ACOs can’t deliver the shift to value and DPC led ‘exits’ create a perfect storm of declining supply at the precise time of peak demand for primary care services.

So one more time as I often say here: ‘…we shall see?’

 

Is Evolent Health the ‘New, New’ Healtheon?

By Gregg A. Masters, MPH

There are parallels worth considering!Evolent Health S1 Filing

But first for those who’s event horizons’ don’t reach back to the Healtheon era (mid to late 1990’s) a little history may help with the construction of this narrative. Perhaps the dots are optimally connected by the talented and best selling author Michael Lewis in his book ‘The New, New Thing‘ (a reader’s digest version of Jim Clark’s impact is here) wherein Lewis profiles Silicon Valley Healtheonculture and the ‘pre-mature’ rise of an ambitious company who intended to ‘fix healthcare’ via technology – Healtheon (the vestiges of which exist today as WebMD and Emdeon). And for those of you history buffs, who want a deeper dive into the story, see ‘What The Heck Is Healtheon?

Dots Connected?

EvolentHealthBoth Evolent Health and Healtheon are (or were) ‘transformation plays’ with an ‘on the come‘ revenue upside tied to the expected (almost inevitable) market restructuring from fee-for-services medicine to an expanding book of ‘alternative payment arrangements’, i.e., capitated or fixed price healthcare (‘generation 1.0′ of bundled payment via case rates, DRGs, global or service tiered per diems, etc., as the concept of ‘valued based’ care had yet to penetrate popular healthcare lexicon).

In sum, the rather over-simplified claim for Healtheon’s upside to Wall Street is paraphrased as follows:

‘[Healtheon] would use the power of computing and the Internet to revolutionize the health-care industry, stripping away its inefficiencies and inequities and streamlining it for the new millennium.’

Here’s the company description lifted from Healtheon’s registration statement in 1995:

Healtheon Company description

Fast forward some 19+/- years later, according to Evolent Health’s S1 filing here’s their story:

We are a market leader and a pioneer in the new era of healthcare delivery and payment, in which leading health systems and physician organizations, which we refer to as providers, are taking on increasing clinical and financial responsibility for the populations they serve. Our purpose-built platform, powered by our technology, proprietary processes and integrated services, enables providers to migrate their economic orientation from fee-for-service, or FFS, reimbursement to payment models that reward high-quality and cost-effective care, or value-based payment models. By partnering with providers to accelerate their path to value-based care, we enable our provider partners to expand their market opportunity, diversify their revenue streams, grow market share and improve the quality of the care they provide.

We consider value-based care to be the necessary convergence of healthcare payment and delivery. We believe the pace of this convergence is accelerating, driven by price pressure in traditional FFS healthcare, a regulatory environment that is incentivizing value-based care models, a rapid expansion of retail insurance driven by the emergence of the health insurance exchanges and innovation in data and technology. We believe providers are positioned to lead this transition to value-based care because of their control over large portions of healthcare delivery costs, their primary position with consumers and their strong local brand.

Today, increasing numbers of providers are adopting value-based strategies, including contracting for capitated arrangements with existing insurance companies, governmental payers or large self-funded employers and managing their own captive health plans. Through value-based care, providers are in the early stages of transforming their role in healthcare as they attempt to defend their existing position and capture a greater portion of the more than $2 trillion in annual health insurance expenditures. While approximately 10% of healthcare payments are paid through value-based care programs today, including through models created by systems like UPMC, Kaiser Permanente and Intermountain Healthcare, it is estimated that this number will grow to over 50% by 2020. There were 120 provider-owned health plans as of 2010 and this number continues to grow. The number of ACOs constructed to manage capitated or value-based arrangements with existing insurance companies or government payers grew to 742 by the end of 2014.

We believe the transformation of the provider business model will require a set of core capabilities, including the ability to aggregate and understand disparate clinical and financial data, standardize and integrate technology into care processes, manage population health and build a financial and administrative infrastructure that capitalizes on the clinical and financial value it delivers. We provide an end-to-end, built-for-purpose, technology-enabled services platform for providers to transition their organization and business model to succeed in value-based payment models. The core elements of our platform include:

• Identifi®, our technology platform;
• an integrated technology, proprietary process and clinical services model;
• long-term, embedded and aligned partnerships with health systems;

So the mission’s of both were similar if not identical in terms of the re-structuring upside. They vision a disruptive technology play layering efficiencies into (if not picking off the low hanging fruit) of a change resistant confederation of legacy healthcare interests inclined towards internecine warfare (dis-organized medicine writ large, but primary care v. specialty care in particular and the grand canyon divide between payors and providers to get beyond the simple calculus of ‘your revenues are my expenses’).

What’s different today?

Times have indeed changed, AND the stakes have risen considerably. From a macro-economic perspective the ‘cost shifting’ shell game is officially over as today it’s about ‘total costs of care’ (the triple aim and the new focus at the level of population health) and not shifting liabilities from ‘my P&L to yours’.

Yet, the fundamental problem of a healthcare non-system incentivized by a ‘do more, earn more’ payment model continues to consume a dis-proportionate share of the national economy despite both public and private sector efforts to restrain its appetite. Yet, I see at least four underlying market considerations belying this otherwise ‘deja vu’ insight.

  1. The presumptive value prop of technology (and its enabling infrastructure) is more prevalent, powerful and affordable today than it was in the 90s.
  2. The share of GDP the healthcare spend accounts for in the 90s hovered in the 9-10% range, whereas today that share is closer to 18% where nearly 1 in 5 dollars spent in the U.S is parked inside a seemingly insatiable healthcare appetite.
  3. The healthcare reform or health system re-design imperative, once contained behind the closed doors of health systems, risk bearing physician entities, corporate board rooms of purchasers or their health plan proxies and even the halls of both State and Federal Government is now ‘out of the barn’.
  4. Anticipating the trend growth (i.e., the impending bankruptcy of the U.S Treasury) in Medicare and Medicaid spending CMS has upped the ante in the value based payment glidepath by targeting 50% of their spend to be channeled via value based payments year end 2018; see: ‘Better Care. Smarter Spending. Healthier People: Paying Providers for Value, Not Volume‘.

This change if not re-invention mandate is a national if not global conversation and quest. In other words, the healthcare spend will sink not just companies, but countries if we do not find a satisfactory path to a sustainable healthcare ecosystem.

So maybe this time things are different (those above and perhaps many others) to make this reach and business model both practical and scalable for at times ‘impatient’ investors.

So ‘Ladies and Gentlemen, start you engines’. And by all means do buckle in, this ride will no doubt be a fun one!

An ACO Update via Leavitt Partners

By Gregg A. Masters, MPH

Just released is the continuing pulse of the accountable care industry (not just ACOs per se) via the consulting firm branded with the imprimatur of a former Secretary of HHS Michael Leavitt who opines from the Red State of Utah on the progress made by market driven initiatives outlined leavitt_acosin the Patient Protection and Affordable Care Act (ACA).

I will add my thoughts to the Leavitt commentary shortly, but the one slide that caught my attention y/e 2014 was the crossover by provider type from physician led to institutionally (hospital system) led ACOs.

One might say that the traditional revenue side vs. cost basis of a hospital group is now at the head of the class of ACO innovation is the wrong form of ‘disruptive leadership’.

Yet, it’s interesting to note that the American Hospital Association (AHA) is a principal partner if not co-sponsor of the report. Might this be a filtering outcome of the ‘fox guarding the hen house‘ or even the aggregate impact (conscious or otherwise) of strategy driven choices by CEOs of U.S. Health Systems?

By way of context, as a long as hospitals maintain their ‘revenue center’ primacy vs, their actual role (in the sustainable healthcare ecosystem food chain) as the true ‘cost centers’ they are – at least in legally, financially and clinically integrated delivery systems or networks (IDNs), how can ‘hospital culture’ be expected to pro-actively cannibalize a bread-and-butter fee-for-services business model in a reimbursement paradigm largely dominated by volume driven incentives even in 2015? Only a disinterested third party (aka physician led ACOs) can re-engineer the needed disruption of maldistributed, asset concentrated overpriced hospital services.

For the complete Leavitt Partners report click here.

ACOs by sponsor type Leavitt Partners

The ‘NexGen ACO': CMS Speaks [again]

By Gregg A. Masters, MPH

At one level you have perhaps the most risk savvy and successful operators in the Medicare Advantage space aka ‘CAPG‘ (the California Association of Physician Groups) closely tethered to it’s less geographically constrained though California domiciled partner IHA as in ‘Integrated Healthcare Association’ explicitly advocating for the preservation of the Medicare Advantage program (MA) aka ‘Part C‘ even though the pre-ACA historical cost to the Medicare Trust fund ‘overfunded’ the program by 114% (estimated in 2014 at 106%) vs. historical FFS program payouts. CAPG’s value prop statement is in part reflected below:

Medicare Advantage is a critical element in the nation’s movement from volume to value in healthcare. With its emphasis on risk-based contracting and clinically integrated care, Medicare Advantage is paving the way for the advancement of coordinated care in every other healthcare program. Medicare Advantage has motivated the deployment of electronic medical records, the expansion of robust quality measurement and reporting, and the movement to team based care, all of which have resulted in better care for seniors. In addition to improving care and quality of life for seniors, this risk-based coordinated care model has the ability to rein in Medicare spending, unlike fee-for-service and its volume-driven incentives.

ACO Next Generation Model

Whereas, under the new if not ‘Deputy’ leadership since the departure of Marilyn Tavenner, former CMS Administrator, Patrick Conway, MD, recently announced the launch of a ‘new and improved’ ACO tagged the next generation ACO – which at some level may be virtually indistinguishable from it’s more mature MA program.

So the question remains, where is this program going and what if any difference will there be between Medicare Advantage and ‘Next Generation of ACOs?’

Quoting from CMS, the initiative details are:

The Next Generation ACO Model is an initiative for ACOs that are experienced in coordinating care for populations of patients. It will allow these provider groups to assume higher levels of financial risk and reward than are available under the current Pioneer Model and Shared Savings Program (MSSP). The goal of the Model is to test whether strong financial incentives for ACOs, coupled with tools to support better patient engagement and care management, can improve health outcomes and lower expenditures for Original Medicare fee-for-service (FFS) beneficiaries.

Included in the Next Generation ACO Model are strong patient protections to ensure that patients have access to and receive high-quality care. Like other Medicare ACO initiatives, this Model will be evaluated on its ability to deliver better care for individuals, better health for populations, and lower growth in expenditures. This is in accordance with the Department of Health and Human Services’ “Better, Smarter, Healthier” approach to improving our nation’s health care and setting clear, measurable goals and a timeline to move the Medicare program — and the health care system at large — toward paying providers based on the quality rather than the quantity of care they provide to patients. In addition, CMS will publicly report the performance of the Next Generation Pioneer ACOs on quality metrics, including patient experience ratings, on its website.

CMS expects approximately 15 to 20 ACOs to participate in the Next Generation ACO Model with representation from a variety of provider organization types and geographic regions. The Model will consist of three initial performance years and two optional one-year extensions. Specific eligibility criteria are outlined in the Request for Applications (PDF).

Clearly this may be an inflection point, or more aptly stated, a convergence of what has been a parallel track (excluding the Pioneer ACO program) between ACOs in the Medicare Shared Savings Program (aka ‘HMO-lite’) and their more risk savvy competitors in the MA space.

For a 2014 analysis of the costs of the Medicare Advantage vs. traditional Medicare program see: ‘Medicare Advantage Program in 2014‘.

As tweeted to me earlier this week by James Hansen, VP of the ACO and MA operator company Lumeris:

‘Next generation ACO, finally a starter or more kissing your cousin?’

No doubt CMS is being responsive to provider (contractor) market input from both the Pioneer program exits as well as the overwhelming election by ACOs to NOT assume downside risk under the current terms of the MSSP.

Like it or not, [ACO/HMO] convergence is coming. Clinical and financial integration including partial or full risk assumption are the business models that will succeed in the pursuit of sustainable healthcare financing and delivery business models. I view this latest CMS announcement as confirmation of this macro directional trend.