[Re-post] The ‘Medical Aggregators’: Are We Entering Round Deux?

By Gregg A. Masters, MPH

[Originally written by @2healthguru on June 1, 2010 at 11:00 AM]

First a little historical context:

For those with a healthcare ‘event horizon’ slightly more seasoned than the current health reform ‘conversation’, you might remember the initial round of aggregation in medicine lead by disruptive nameplates such as MedPartners (now operating the PBM CareMark), PhyCor, FPA Medical Management, and their second or third tier physician practice management ‘me too’ copycats.

They all emerged from a robust round of venture capital backed industry determination tagged as ‘PPMC’s’, i.e., physician practice management companies. These ‘aggregators’ were the darlings of Wall Street for a while, though with some exceptions, i.e., US Oncology (formerly Physician Reliance Network), most witnessed relatively short life spans, from IPO to unwinding in perhaps a 10 year run (see: MedPartners collapse and Aftermath).

Yet, despite the promise outlined in the offering prospectus’, why did these entities fail so miserably as the ‘white knight’ consolidators or aggregators of a multi-trillion dollar ‘cottage medical industry’? Their business model proferred essentially three core benefits:

  1. Centralized, standardized and more efficient back office medical administrative management
  2. Scale of market asset concentration and therefore increased sophistication and leverage (improved pricing) with third party payor negotiation, and downstream contract management; and
  3. Serve as an ‘anchor play’ with respect to the broader design and implementation of rational though market based local delivery organization and financing, i.e., PPMC’s would harness and more effectively articulate a business culture among physicians that valued clinical integration, medical risk management, and ultimately the allocation of limited health care resources

At least this was the longer term expectation from a ‘win/win’, i.e., payor and provider perspective, of the more established players. Most however, in an effort to demonstrate value (i.e., earn their management fee) to their physician boards, focused on short term margin improvement (better rates, focus on more profitable services via improved payor mix, maximizing the contract revenue/recovery cycle, and reduced overhead, etc.), vs. the strategic focus of managing the risk (both quality and cost) of their local population (i.e., enrolled members).

So rather quickly the strategic basis of the PPMC appeal was subordinated to a short term focus (i.e., increasing net revenues) due to a rising chorus of claims that at its core the business model was merely a third party ponzi scheme which introduced another mouth to feed from an increasingly constrained health care supply chain.

Net/net, the PPMC industry flamed out big time and did not fulfill its ‘roll-up’ promise of the practice of medicine. Now many years later, we are at another tipping point. Witness the current round of promising vehicles with a similar vision of organizing physicians. These candidates include: hospital systems, health plans, integrated delivery systems, emerging ACOs, medical homes,  and even niche play organizers in the concierge, or direct practice space including SignatureMD, MDVIP, HealthAccess Rhode Island, CarePractice, Qliance, and HelloHealth, as well as the rapidly emerging series of retail pharmacy sponsored primary care clinics, e.g., CVS/CareMark Minute Clinic, etc.

Too many docs are unwilling to risk the capital of private practice, and instead are looking to hook-up with one or more of these institutional or VC backed entrepreneurial sponsors. Will they succeed where their predecessors failed? If so, why?

From my perspective, it will clearly depend on the business model chosen to enable competition of the ‘right variety’, and the degree to which the venture embraces, nurtures and expresses physician culture that values collaborative group practice. Top down, corporate strategies dependent upon an over worked and out gunned medical director or VP of medical affairs will miss the mark. The more likely way for these ventures to succeed is by ‘baking’ the culture from the ground up. In other words, ‘seed it and they will come’. One of my mentors (Ernest Holmes) once wrote long ago:

the soil can’t argue with the seed.

Lets nourish the soil first, then make sure we plant the seeds with the right constitution and vision.

ACO’s: It Ain’t Just About ‘Health IT’

By Gregg A. Masters, MPH

We’ve been somewhat on an unexpected hiatus since HiMSS 2012 in Las Vegas, but are now back with intent to assimilate and interpret the subtext or tea leaves driving the transformation towards accountable care. I will leave that update to another blog post, but for now, a quick comment on two newsworthy items reported last week.

First is the demand for arbitration filed by Blue Shield of California against Monarch Healthcare, among other ‘breaches’ claims a violation of the assignment provision in their contract by agreeing to be acquired by the United Health Group subsidiary OptumHealth.

Second as correctly identified by Barbara Duck aka @MedicalQuack on the potential pandora’s box these ‘acquisitions’ may stimulate via as series of non arms length wholly owned subsidiary transactions, click here.

But first, a perspective to the well intended but occasionally over-simplified (from a business model & market dynamics point of view) EHR and health IT evangelical flank: better know your [provider] market!

Things may not be as they seem!

Absent full economic integration, the provider marketplace is a ‘hodge–podge’ of less than transparent business relationships, often with poorly aligned if not outright conflicting reimbursement rules, driven by variable state and federal laws including local market practices. For example, some states operate under a ‘corporate practice of medicine’ doctrine, while others do not. Such state law directly impacts the type of permissible entities that can pass as ‘physician driven’ in one ‘market’ vs. another (contrast California to Florida). It influences how physicians can be hired, the terms under which contracts are entered into and the means by which professional services can be legally provided.

Yet, take into consideration the following:

  • most physicians remain in solo to small group practice
  • few operate with fully functional EHR’s to date
  • while the FTC and DOJ are enabling clinical integration absent legal integration as a permissible form to pool physicians together into ‘virtual’ potentially accountable units absent anti-trust risk

In the aggregate above, it can be quite reasonably concluded by some that all that’s needed to enable accountable care is merely stitching via ‘IT infrastructure’ these discrete physicians or small group practices together under an umbrella digital spine, and voila, we have accountable care.

Not so fast, unfortunately this assumption grossly distorts the underlying DNA or nature of the provider marketplace in 80+% of US communities. Get to know the often opaque ‘underbelly’ of your provider community. Managed care introduced quite a bit more than just discounted medicine!

Accenture: Making the Case for Connected Health

By Gregg A. Masters, MPH

Great timing and contextually rich, Accenture released their report ‘Making the Case for Connected Health’ with some surprising observations to some, including this blogger. For the complete report, click here.

To recap, the major findings include:

  • Connected health is a must. Governments around the world see connected health as a critical and essential means to improve citizens’ access to quality, lower-cost healthcare. Connected health has gained a high level of acceptance, and there is a prevailing view that without a solid connected health platform, it will be difficult to meet today’s—and future—health challenges.
  • Integration is possible. Connected health can and will work with deep and varying underlying industry structures. Different countries have very different provider systems, and these are unlikely to change in the near term. All are fragmented, but in different ways. Healthcare IT connectivity helps bridge this fragmentation to provide better integration.
  • Connected health is on a self-sustaining path. Quality and performance measures require an integrated look at the data. These measures also increase the need for additional information, which, in turn, boosts the need for healthcare IT, and process change to enable such measures.

Via U.S. Ahead of Other Countries in Physician Health IT Adoption at iHealthbeat, we can also note the following key facts:

  • About 62% of U.S. specialty physicians use electronic tools to improve administrative efficiency, compared with the global average of 49%
  • 54% of U.S. primary care physicians use electronic prescribing, compared with a global average of 20%
  • 48% of U.S. physician specialists send orders electronically, compared with a global average of about 36%
  • 38% of U.S. primary care doctors have electronic access to clinical data about patients who have been seen by a different health care provider, compared with a global average of 33%
  • 17% of U.S. physicians have given patients electronic access to their own health data, compared with a global average of 8%.

During a Booz Allen Hamilton webinar titled, Electronic Health Records 2.0: What Does the Future Hold?, Peter Basch, MD, FACP; Medical Director, Ambulatory EHR and Health IT Policy; MedStar Health, quoting the Accenture report remarked on percent of US physicians (vs. global average) using EHRs, HealthIT, e-perscribing, is now ‘..the highest in the world… [followed by laughter, the] I’ll have to change all my slides.’ Entire audio clip here.

The time is now, accountable care is here to stay, health reform legal disposition notwithstanding.

Accountable Care and HiMSS 2012

By Gregg A. Masters, MPH

On the Wednesday, February 15th 2012 broadcast at 11AM Pacific/2PM Eastern, my special guest on the HIMSS 2012 Countdown Series was Vince Kuraitis,  aka @VinceKuraitis, publisher of the ‘e-care Management blog.We spoke on the connection between ‘HIT Platforms and accountable care.’

We’re one week out from the HIMSS 2012 conference in Las Vegas, and the anticipation is palpable. For conference details, click here.

One of the key events I plan on covering via HealthGeek.tv is the eCollaboration Forum on Thursday, February 23rd.

As we debate the pathways to enable the accountable care vision the role of health information technology is at the core of those discussions.

As additional context, you might want to download the free eHealth Initiative survey, see: ‘Support for Accountable Care: Recommended Health IT Infrastructure‘, highlights duly noted by Neil Versel at Interoperable IT Crucial For Accountable Health Organizations.

CLOUD (Consortium for Local Ownership and Use of Data) Inc CEO on ‘N of 1 Accountable Care’

By Gregg A. Masters, MPH

On the Friday, February 10th, 2012 broadcast of ‘This Week in Accountable Care’ I had the pleasure of chatting with Gary Lee Thompson, aka @GaryLeeThompson, and @CLOUDhealth on Twitter.

As the second installment in our HIMSS 2012 countdown to Las Vegas, we spent some time getting to know Gary, understanding both his tech (and legal) background as well ‘the storm’ of 2003 (see: A View from Gary: Survivorship is Not a Phase) when the diagnosis of cancer was presented to he and his wife Maureen, concurrent with her learning she had passed the boards for licensure as an architect to practice in the state of Texas.

Gary is a thought leader who has proposed a vision of a re-fabricated internet, where the ‘you’ and the ‘what’ are contextually connected in real time and wrapped in a dynamic state of ‘you’ rights driven tag access to disparate health information silos.

We discuss his vision and it’s relationship to enabling accountable care. To listen to an archived replay of the broadcast, click here.

For more information on Gary and the consortium, see: ‘CLOUDinc‘.

Wag The Dog: Will Subacute Providers Drive Upstream Innovation?

By Gregg A. Masters, MPH

One of the more interesting and perhaps developing trends to watch in fledgling accountable care enterprises or ACOs is the blueprint adopted for their chosen pathways towards integration (clinical, economic or legal). Since all healthcare is [hyper] local and, once you’ve seen an ACO, you’ve seen one ACO its vital to appreciate not just the nuances of strategy differentials but the fundamental structural imprint of the local or regional delivery system.

As I have written before not only have we built our cathedrals of medicine separated by ‘moats and silos’ from the very people they serve, i.e., patients, but also the tapestry of service delivery is more often than not laced together in a provider driven discontinuous pattern of relationship driven referral practices, vs a patient centric approach.

Typically, top dog in the provider referral footprint food chain is the general or acute health care hospital, or regional referral center. All others are niche speciality play competitors or network integrated service extensions, i.e., ASC’s, free standing cancer centers, urgent care, etc.

Most of the network creation and management effort has focused on the acute care side. Yet as emerging ACOs begin to shift the focus from individual to population level health outcomes management, aided by certain economic consequences of potentially improper care management, i.e., readmits within 30 days of discharge, there is a renewed vigor with which the upstream providers’ (hospital, academic or regional referral medical center) examine their relationship with their ‘downstream providers’, i.e., the subacute world of SNF’s, Rehab facilities, home health agencies, case managers, medical assisted living, etc.

After all who is in a better position to judge the quality of the ‘output’ from the upstream factory, than the downstream recipients (both institutional and professional) of their work?

It seems as we look to quality of care and broad spectrum clinical risk management issues, particularly from a potential readmit point of view, the voice of the downstream players will now matter more than it has to date.

Perhaps we’ll even see a spate of acquisitions and mergers to place the downstream network into the tapestry of upstream acute care practices. From EHR to HIE nervous systems to clinical pathways of collaboration there will be much re-engineering on tap.

AHIP: It’s Not Cost Shifting, We’re ‘Unleashing Patients’

By Gregg A. Masters, MPH

Seriously folks, you’ve got to hand it to the PR firm supplying the American Health Insurance Plans (AHIP) with the brilliant, timely and thematically near argument resistant messaging copy just revealed via a .PPT preso titled ‘Health Care Innovation in the Context of Rising Health Care Costs‘ and delivered by Karen Ignani, aka to some as ‘Darth Vader’.

Perhaps brilliant does not capture the pure genius of the campaign, but lets pull back the cover a bit. Stay with me as I walk you through some thought process and history.

The practice of cost shifting has been a fact of life in American health care since the birth of the Medicare and Medicaid programs. Shortly after passage the ratcheting down of very generous third party reimbursement programs built on cost plus, and ‘you tell us what’s a reasonable charge’ for this procedure systems, the prospective payment system was introduced and the Government started to clamp down on their payment liability, thereby pushing onto the private payor market (mostly an indemnity, charge based liability system). Seeing the obvious writing on the wall, and enabled by both state and federal legislation payers re-branded themselves as ‘managed care plans’ and began to ‘cap’ the full burden of this cost shifting via selective contracting (both HMO and PPO), deploying a series of professional and institutional pricing tactics including case rates, per diems (both tiered and global), conversion factors, resource based relative value system (RBRVS), prepayment, capitation, percent of premium and other forms of limiting payments to providers, globally speaking.

The net effect of this ‘dance’ though modulated by a series of disabling public backlashes to the premise of the success in the managed care formula, essentially watered down the primary model that seemed to produce results for a brief period of time in the mid 90s, i.e., medical cost inflation dipped to zero and below.

Fast forward two decades, and the pace of healthcare consumption of GDP has more than resumed it’s upward march, and the rapacious appetite of the health care borg remains as unquenched as ever.

Yet this time, we’re entering an era with a mantra of ‘patient empowerment’ aided via the exploding and enabling series of platforms, devices, sensors, applications and mega availability of connectivity to the cloud as a service provider to perhaps once and for all enable informed choice, and thereby modulate the healthcare borg’s appetite.

The timing could not be more exquisite. The move by health plans on their own right into the high deductible (or consumer directed) health plan market has been received by a large ‘yawn’ for the most part. The scant research available to suggest that HDHP’s do not compromise access and quality and thereby contribute to poorer overall population health status are mostly sponsored by the industry and questioned by some as to their credibility.

But add to that the appeal of the mhealth, quantified self, personal responsibility for one’s health ethic, etc., and throw in the wellness and prevention agenda sensibilities, and voila, you have a compelling formula to appeal to a growing subset of the health care consumer and provider marketplace (from @Qliance to @CarePractice).

Brilliant? You betcha! Will it work, well that jury is still out. To get some context on the question, check out a recent webinar titled: ‘How Social Media is Revolutionizing the Healthcare Industry‘. You might want to pay particular attention to the exchange between Adam Bosworth, aka @adambosworth, of Keas and James Kean, aka @JamesRKean of @wellnessFX.

What’s this got to do with ACOs you say? More on that one in the next post.

Rebuttal and Comment to ‘NYT Op Ed: Emanuel Editorial is Irresponsible and Naive’

By Vince Kuraitis

Zeke Emanuel’s editorial in the New York Times — The End of Health Insurance Companies — really got my blood boiling. It’s irresponsible and naive. Former Obama advisor Emanuel “predicts”:

By 2020, the American health insurance industry will be extinct. Insurance companies will be replaced by accountable care organizations — groups of doctors, hospitals and other health care providers who come together to provide the full range of medical care for patients.

Irresponsible

Provoking and demonizing health plans might have had populist appeal and political value in 2009, but in 2012 it’s an unnecessary attack on a constituency that has potential to be one of the administration’s best allies in advancing accountable care.

Prior to ACA reform legislation, health plans had the wrong economic incentives — the rules of the game were not consistent with good public policy:

  • Health plans had incentives to AVOID risk, not manage risk. They were economically incentivized to avoid high risk patients (with preexisting conditions) and to get rid of patients that became sick
  • Health plans had minimal incentives to CONTROL systemic costs — they could pass them on in the form of premium increases.

ACA changed incentives and disrupted the payer business model:

  • Health plans will longer be allowed to avoid high risk patients; they must accept all comers
  • Health plans must MANAGE, not avoid costs. Health plans are abandoning their old business models.
  • What are we seeing in the marketplace? Almost all health plans are embracing the vision of accountable care and need to shift the system from Volume to Value. Health plans could be administration’s biggest friend in revamping the health care delivery non-system.

Naive

Emanual mislabels the trend that is occurring. It’s not about Accountable Care Organizations (ACOs), it’s about incentivizing and promoting “accountable care.” ACOs are one experimental model toward achieving accountable care; varied collaborations among private payers, hospitals and doctors are other experimental models.

Emanuel seems also not to have noticed that care providers have a lot of hesitations about the ACO model — at best we have some early adopters trying them out. There is no stampede.

Provocation as a tactic might have some political value when stakeholders are dragging their feet and resisting change. Provocation as a tactic when industry stakeholders are lining up to help you achieve administration objectives — well, that’s just plain dumb. Emanuel would be much wiser to take credit and praise health plans, not to bury them.

Comments
1. On February 2nd, 2012 at 1:22 pm, Gregg Masters (@2healthguru)said:

Go Vince…

I will take the counter point position, though I suspect at some level this may be a semantic argument at core.

I agree with Emanuel’s basic argument. Health plans are dinosaurs, not just from a populist perspective. Once upon a time the GHAA was a group or revolutionaries committed to making a difference. Today, it’s a ‘meet the new boss, same as the old boss…’ experience.

Health plans remain the weakest link in the value proposition of healthcare financing and delivery food chain.

Nice to see you recognize the contributions of the Act as some of its provisions do indeed level a playing field that was impossible to discern between self funded health plans, state regulated health insurance practices, and that slice of Federalism which standardized at least the HMO sector.

Yet, health plans today resemble little if any of their prior selves as ‘risk managers’ or delivery system architects and co-managers, i.e., an indemnity carrier acquiring an HMO book if business if you will. Remember Aetna’s acquisition of US Healthcare? #epicfail…

Other than the individual market, health plans have morphed into risk avoidant transaction processors, with an underwriting churn of 2 – 3 years of recycling commercial accounts. They insure precious little.

If health plans are to survive and add value, if not enable, the emerging ‘accountable care’ industry, it will be as defacto ‘utility companies’ partnering with local and regional delivery systems. They do have their core skills sets (including underwriting, marketing, member/provider administration, and private label product development) that can add value to the healthcare delivery proposition. Yet it remains to be seen if the vision exists to enable this purposeful transformation. There is some evidence to warrant optimism.

Irresponsible, I don’t think so. Also, the ACO industry need be unbundled to understand it’s components. This is not a homogeneous effort.

As a historically reform resistant industry, who’s maximized returns under a fee for services paradigm, you seem to cut a considerable degree of slack for an industry-wide culpability to NOT heal a long failing, and unsustainable business model with precious little community benefit.

2. On February 2nd, 2012 at 1:59 pm, Vince Kuraitis said:

Gregg, Thanks for your comment. Agree, our differences might be more semantic than real.

I’ll go so far as to acknowledge that Zeke’s scenario of health plan demise is “plausible”, but he loses me when he “predicts” this will happen. When there is uncertainty in the marketplace, it’s far more constructive to develop plausible scenarios rather than try to be a fortune teller.

Prior to ACA, health plans had the wrong policy and economic incentives. You can choose to call them “evil”, or you can change the rules of the game. ACA does the right thing in changing the rules of the game.

Agree that health plans have a long way to go, but in my talks with health plan execs, the “get it” – they understand the need for change and that the old business model is not viable.

Cutting health plans slack? As a consultant I work across industry segments, so I’m not writing as an spokesperson. I agree health plans have a lot of morphing to do.

Fundamentally though, I think we would agree that we need to build a more collaborative health care system. Zeke’s editorial throws rocks at a time we need to be throwing flowers.

Vince Kuraits is the publisher of the e-caremanagement.com blog where this post originally appeared. For Vince’s bio, click here.

Monarch HealthCare: Leveraging Expertise in Population Health Management

A Case Study in the Brookings–Dartmouth ACO Pilot Program

This case study examines the progress that Monarch HealthCare, a physician led independent practice association in Orange County, California, has made in
its efforts to become accountable for the quality and overall cost of care for its
patient population. Monarch HealthCare is one of the provider groups participating in the Brookings–Dartmouth ACO Pilot Program that are profiled in the Commonwealth Fund case study series Toward Accountable Care.
Accountable care organizations (ACOs) have been proposed as a new
delivery model to encourage clinicians, hospitals, and other health care organizations to work together to improve the quality of care and slow spending growth.

The Affordable Care Act’s ACO program is intended to promote better management and coordination of care for Medicare beneficiaries by enabling providers
working in ACOs to share in any savings they achieve. However, there is little evidence from the field on how health care organizations progress from traditional payment models toward the ACO model. To better understand this process, this case study documents Monarch HealthCare’s journey to develop an ACO.

To read the complete study, click here. Follow Monarch Healthcare via Twitter, here.

Miss Commonwealth Fund Webinar on ACOs?

By Gregg A. Masters, MPH

If you did, do yourself a favor and watch the recorded broadcast ‘ACO Formation: Leading the Transition to New Models of Care‘, here.

My net take away from the event is total optimism that the clearer thinking brain trust who understand, ‘failure is not an option’ for a healthcare conundrum stakeholder community which has resisted serial attempts (both in the private and public sectors) dating back to the passage of the HMO Act in the 70s, are deep into the conversation in a ‘walking the talk’ way.

What a contrast to the serial whiners and hand wringers who rarely resist the anti-thinking pejourative slam of ‘ObamaCare’, perhaps raised to a different level of fear mongering only last night by candidate Gingrich who associated the Patient Protection and Affordable Care Act with the ‘greatest threat to American liberty!’ Geesh, but I digress…..

This on the ground reporting shows that the parallel track of public, private initiative stimulated directly by the Act is well underway, and abetted not only by some of the brightest health wonk minds in the converation but a wide range of stakeholder community engagement from Hospital sponsored to payor enabled ACO models.

Do yourself a favor and watch the FREE rebroadcast of ‘ACO Formation: Leading the Transition to New Models of Care‘ (registration required)!

For complete program details, including the speaker presentations, click here.