By Randall Williams, MD*
“The definition of insanity is doing the same thing over and over again and expecting different results.” — Albert Einstein
If you want to lead your organization to success with value based care, I’d like to help you avoid the mistake of committing organizational insanity. As I’ve written before, all value based contracting will require a different and diligent focus on reducing cost. In order to win, you need a model that will help you do that. But first, there’s a lot to learn from those who succeeded (and failed) in the first year results of the Medicare Shared Savings Program (“MSSP”).
The first year impact of MSSP has received lots of attention in the media. To sum it up:
Only ¼ of all MSSP organizations achieved ANY financial success, as measured by receiving shared savings.
That statistic is concerning and has caused hand-wringing inside and outside the Beltway, but it is not surprising. Why? It’s simple really — most ACOs are still working on basic organizational issues like:
- integrating their doctors
- getting CMS claims data into a format that can be analyzed
- documenting and reporting quality performance metrics
While that work is necessary, it is not at all sufficient. It won’t generate the cost savings required to get to the shared savings bonus opportunity. MSSP organizations, depending a bit on their size, must reduce the total beneficiary cost (Medicare Part A and Part B) by at least 2.5 – 3.5%. Yet few are focusing on doing things differently when it comes to managing their population’s utilization and costs.
Imagine the following scenario:
The average beneficiary in your ACO spends $9,000 per year.
You have 10,000 beneficiaries.
Your savings threshold is 2.8%.
In order to get into the bonus category, you will need to avoid at least $2.5 million a year in medical expenditures. That doesn’t just happen on its own.
Sounds like tough work, you say. Maybe we can’t get there, you say. But some of your peers actually accomplished that in their first year.
Were they simply lucky, perhaps having the “good” fortune of a high starting point to work from? Or might their success be a result of the Medicare reconciliation “Black Box”? Evidence and analysis elsewhere suggests these aren’t the explanations. So what is?
Medicare’s own analysis of the Year One winners (those who got bonuses) gives some important insights to the real answer. From that data, we can see that:
- Winners saved about 6% per beneficiary overall
- Winners reduced hospitalizations by 52%, ER visits by 41%, and inpatient costs by 69%
- Winners achieved a 40% decrease in admissions for heart failure patients and a 25% decrease in admissions for COPD patients
- Winners dropped hospital readmission rates by 26%
What does this mean to organizational leaders looking to achieve savings bonuses?
- Get your organization focused on avoidable admissions and readmissions to the hospital
- Eliminate enough admissions to drive down overall costs by >5%
- Establish a monthly goal of averted admissions that you can measure and manage over the course of each performance year
- And whatever else you decide to do, don’t simply assume that doing what you’ve always done will get you different results!
For other useful analysis of MSSP results, I recommend reading insights from the Brookings Institute ‘Medicare ACOs Continue to Improve Quality, Some Reducing Costs‘. Please feel free to share your thoughts about winning with value based care in the comment section.
Dr. Williams is the founding Chief Executive Officer of Pharos Innovations. He is responsible for setting the vision and overseeing the execution of Pharos’ mission to transform healthcare through patient engagement in self-care. He has 16 years of executive experience developing chronic care monitoring programs.
The above is a guest post originally published here.