Posted in Accountable Care, ACO, Affordable Care Act

POTUS: The De Facto Health Wonk-in-Chief of the US?

by Gregg A. Masters, MPH

United States Health Care Reform

 

Love him or hate him President Barack Obama continues to demonstrate depth, insight, tenacity and a firm grip on the state of the U.S. Healthcare ecosystem dysfunction (and remedies) well beyond his formal training as a Constitutional scholar. Now as arguably one of the most legislatively accomplished President’s in U.S. history, particularly in light of the catastrophic train wreck he inherited from his predecessor and fueled by the nonstop ‘hell no‘ chorus of his disingenuous (often health policy clueless) political opposition he weighs in to set the record straight and for legacy purposes.

On July 11, 2016, JAMA released ‘United States Health Care Reform: Progress to Date and Next Steps‘ a rather scholarly construed unbundling of the state of healthcare then and now (pre and post ACA implementation). As a rather complex piece of legislation with many moving parts, and staggered implementation timelines (some as a result of political accommodation, some merely in tune with operational and prevailing healthcare delivery and financing legacy inertia) he steps up and in classic barrister narrative fashion lays out his case, and simultaneously calls out the next steps to remedy the U.S. healthcare conundrum.

POTUS aka ‘Health Wonk-in-Chief‘ Barack Obama concludes:

Policy makers should build on progress made by the Affordable Care Act by continuing to implement the Health Insurance Marketplaces and delivery system reform, increasing federal financial assistance for Marketplace enrollees, introducing a public plan option in areas lacking individual market competition, and taking actions to reduce prescription drug costs. Although partisanship and special interest opposition remain, experience with the Affordable Care Act demonstrates that positive change is achievable on some of the nation’s most complex challenges.

I strongly encourage you to click on and read the entire piece. It is well worth your time and wholly consistent with the ‘accountable care’ narrative (the subject of this blog) driving Medicare ACOs, their commercial derivatives and large portions of the moving parts of the ACA including the entire spectrum of ‘value based’ healthcare initiatives.

For this piece, I want to focus on four areas of the ‘next steps‘ called out by POTUS, namely: the ‘Health Insurance Marketplaces’, associated ‘delivery system reform’, AND the introduction of ‘a public plan option in areas lacking individual market competition, and finally ‘taking actions to reduce prescription drug costs’.

Health insurance marketplaces

So much of the ACA oppositional cheerleading liked to stress the ‘buying across state lines‘, and ‘malpractice reform‘ as ‘freedom and choice‘ enabled solutions to the health insurance quagmire. Never mind the rampant marketing, churn, double digit premium increases, retrospective rescissions or opportunistic denial rates, coverage limits and lifetime caps so endemic in the space. Not to mention ‘mini-meds‘ or ‘junk insurance’ so prevalent in the market before some baseline notions of what constitutes ‘insurance‘ in the face of typical health, illness or accident challenges one may experience in life. Here again, coverage baselines and the need for consistency to shop, compare and ultimately purchase real health insurance seemed like too much regulatory over-reach in a market where choice absent basic ground rules somehow seemed like a more attractive solution – at least to the often clueless opposition. The entire over-reach narrative was wrapped up, sold and bought as a ‘Government controlled healthcare takeover‘ per the vacuous talking points proffered by ACA oppositional research.

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Yet, the value proposition of an ‘insurance market place‘ whether Federally run, ‘facilitated’ or state delegated exchange option makes total sense if a transparent consumer market is to emerge from the chaos that is principally the individual market (non employer sponsored health insurance), though the group, or self funded ASO market ain’t much to cheer about either. Yet such a model was/is a proven way (witness the explosive growth of private exchanges) to introduce orderly competition in an otherwise opaque industry.

If you’ve ever run a health plan, built a managed care organization or contracted for hospital, physician, ancillary and pharmaceutical services (I presided over several employer sponsored health plan initiatives, MSOs, PHOs and IPAs tackling both capitated and discounted fee for service plan launch and operational issues in for-profit, voluntary and academic health systems) you will know that prudent (empowered, informed, etc.) purchasing of health insurance options requires clear apples-to-apples covered services comparisons, exclusions and non-covered item disclosures coupled with understandable pricing transparency and the cost sharing burden associated with your election. Absent this comprehensive clarity, listing guidance and/or requirements that an exchange imposes to ‘qualify’ eligible participants as candidates to choose from is virtually impossible. Standing up the infrastructure (people,  process, culture, etc.) to enable informed choice requires such an exchange environment whether public, private or some combination thereof to transparently market their services to the consuming public.

Delivery system reform

This is clearly the ACA’s ‘achilles heel‘ as there ain’t much there, there other than aggregate ‘on the come‘ efforts to tip toe into the waters of ‘clinical integration‘, measured risk assumption and a range of payment reforms collectively recognizing fee-for-service (i.e., do more to earn more) medicine as a burning platform. The most tangible form of this commitment is represented by Secretary Burwell’s call to migrate increasing shares of Medicare beneficiaries (including me, as I turn 65 in August and have elected Kaiser Permanente Senior Plan in San Diego) into Medicare Advantage, ACOs and a broadly cast series of ‘value based‘ healthcare arrangements by certain dates.

Standing Up the ACOFor the most part, ACA focused on insurance market place reforms. While delivery system reform was principally invested in ‘nascent’ ACOs (which are mutating as we speak amidst some 5 and 1/2 years of operating experience under the Medicare Shared Savings Program (one I like to call ‘HMO-lite’ which incidentally and inevitably is morphing into its more traditional gatekeeper HMO predecessor vs. the retrospective attribution methodology that undermines successful ACO risk assumption performance).

Additional delivery system reform was to come from pilots, demonstrations and other ‘innovations’ the Center for Medicare and Medicaid Services (CMS) funded via the Center for Medicare and Medicaid Innovation (CMMI) – who’s budget the Republican controlled Congress is determined to cut.  Here, I might add at the ACO Summit circa 2012 one of the most seasoned and successful risk savvy players I had the opportunity to work for and with in Dallas, Texas Richard Merkin, MD, the founder and owner of Heritage Medical Systems and Heritage Provider Network described as the ‘hidden jewel’ in the ACA.

As much as we’ve progressed into ‘managed care‘ whether discounted, bundled, case rates, per diems or global or partial per member per month (PMPM) capitation or percent of premium the majority (estimated at 80-90%) of healthcare payments are still of the fee for services variety. Back in the 80s when American Medical International (AMI) retained me to develop and preside over their managed care strategy for the California Region’s 19 hospitals I elected ‘Director of Health System Development‘ vs. Regional Director of Managed Care as a title, since I saw the strategic imperative of building and operating a hospital system as a partnership with payors, health plans and employer groups, in order to create value. Since ‘payors’ (as a group) were our customers to grow market share we needed ‘dots on the map‘ to effectively service their employees, members or insureds. That vision and strategy collapsed before taking root since quarterly earnings per share incentives of the hospital CEOs precluded the longer term strategy of acquisitions and divestitures consistent with a dots on the map game-plan could take hold.

Today, many years later health systems are ‘getting [payor/provider partnership] religion’ at least rhetorically, yet the prevailing provider/payor mindset remains ‘your revenues are my expenses‘ – not much progress! So don’t hold your breath on material delivery system reform other than the equivalent of re-arranging furniture on the deck of the Titanic while the ship sinks. Mergers, acquisitions, the ‘death of independent‘ medicine and rise of mega institutionally led health systems more or less ‘clinically integrated‘ notwithstanding.

A public plan option in areas lacking individual market competition

While POTUS stresses the individual market as the target ‘book of business‘ most at risk and dysfunctional absent effective reform the need for a ‘public option‘ across the board (group, self funded/ASO, fully insured, etc) is rather compelling, in my view. The recent failures of the ACA enabled ‘CO-OPs‘ notwithstanding (i.e., startup insurance companies or health plans rarely if ever achieve profitability in such a short timeline given the threshold need for ‘the law of large numbers‘ for actuarial credibility and the inherent volatility of the underwriting profit/loss cycle) do nothing to undermine the argument and need for a public option writ large.

I’ll go one step further and say ultimately our worshipping of ‘pluralism‘ in healthcare delivery and finance will ultimately give way to a ‘Medicare E‘ version as in Medicare for everyone. If public/private partnerships and business models could successfully manage clinical risk and meet the health and healthcare needs of their constituents we would have solved the problem in the 80s and 90s. Who remembers the ‘Harry and Louise‘ narrative battles (‘if the Government choses, we lose‘) on the Clinton Health Security Act aka ‘HillaryCare‘? So perhaps we’ll get there once we exhaust every other option to avoid ‘single payor‘?

Actions to reduce prescription drug costs

This seems to me the segment the easiest to resolve. Here I’d empower Medicare to negotiate direct and on behalf of it’s entire pool of beneficiaries, rather than dilute the market power via a tapestry of variably (under) performing ‘PDPs’. The political compromise that birthed Medicare Part D (the Prescription Drug Plan) materially undermines the market power of the ‘law of large numbers’ to extract best price from vendors, suppliers or providers of services. This make NO sense, and we’re paying the price! Here, politicos assured Medicare could NOT intervene with such market clout instead they routed the business upside to a pool private participants.

Add to this macro market efficiency undermining the challenges of orphan or rare disease market segments and the egregious and unaccountable pricing practices most recently popularized by ‘bad boy’ Martin Shkreli of Turning Pharma and more recently Valeant‘s abusive pricing admissions.

Yes, specialty pharma is at risk and a major source of heartburn for AHIP and it’s employer allies, yet PHRMA has a point. The drug discovery and commercialization process/pathways to market are unpredictable and fraught will high failure rates. Coupled with the long development runways and high costs, but absent a ‘ceiling’ or ‘pricing accountability framework’ pharma’s management credo will remain ‘whatever the market can bear‘ strategy lest ProPublica‘s (et al) investigational journalism (see their guide to investigating non-profit health systems) marshals sufficient public attention and shame forces reconsideration or retraction of Pharma’s lazy over-reliance on raising ‘P’ (Price) vs. the more complex market challenge of driving ‘U’ (units via share gains) becomes their duty and ultimate measure and basis of ‘success’.

So thanks BO! Despite all odds, you (and Max Baucus et al) pulled it off. And yes, it’s only a beginning and there’s lots of work to do. In the words of then Acting CMS Administrator, Don Berwick, who was wrongly blocked (by you know who) for permanent appointment [I paraphrase below]:

This will require no less than an all hands of deck, full court press to make happen [i.e., the triple aim].

 

Posted in Accountable Care, Affordable Care Act, health innovation challenges, public health

‘Non-Profit IDNs’: Where’s Da Beef?

By Gregg A. Masters, MPH

I have followed this narrative for quite some time albeit inside the industry contained debate of whether so-called ‘non-profit’ [501(c)3] hospitals or their parent systems (really more aptly characterized as “tax exempt”) actually earn this financial advantage via material ‘returns’ to the communities they serve.

NASI_Goldsmith studyAs can be expected you have the party line of the American Hospital Association (AHA) a trade group of predominantly non-profit members vs. that of it’s for-profit brethren The Federation of American Hospitals (FAH). You can guess which side of the argument each of them favor.

Now thanks to a recently published landmark study ‘Integrated Delivery Networks: In Search of Benefits and Market Effects’ by Healthcare Futurist Jeff Goldsmith, PhD et al, of the 501(c)3 cast of characters in the related but more often than not distinctly different ‘IDN culture’ we extend that line of inquiry into what has been a somewhat conversational ‘safe harbor of sorts’ – not any longer?

The Executive Summary notes both the rationale and basis to study the market ‘incident to’ a more focused pricing (via asset concentrations) power line of inquiry:

In January 2014, the National Academy of Social Insurance commissioned a study of the performance of Integrated Delivery Networks (IDNs), incident to its Study Panel on Pricing Power in Health Care Markets. The premise of this analysis was that any examination of the role that hospitals play in health care cost growth is complicated by the fact that in most large markets, the significant hospitals are part of larger, multi-divisional health enterprises. In these markets, hospitals may be part of horizontally integrated hospital systems operating multiple hospitals; vertically integrated health services networks that include physicians, post-acute services and/or health plans; or fully integrated provider systems inside a health plan (e.g. with no other source of income than premiums) like Kaiser Permanente. The latter two models are collectively labeled IDNs.

IDNs have very different stated purposes than mere collections of hospitals: to coordinate care across the continuum of health services and to manage population health. IDN advocates claim that these complex enterprises yield both societal benefits and performance advantages over less integrated competitors. The purpose of this analysis is to evaluate the evidence to support these claims.

And now for the less than surprising but wholly unacceptable answer albeit modestly caveatted by the limits of publically available information:

Despite more than 30 years of public policy advocacy on behalf of IDN formation, there is scant evidence in the literature either of measurable societal benefits from IDNs or of any comparative advantage accruing to providers themselves from forming IDNs. We have similarly found no such evidence in our analysis of 15 IDNs. Serious data limitations hamper anyone attempting to evaluate IDN performance based on publicly disclosed information. IDN financial disclosures obscure the operating performance of their hospitals and physician groups.

There does not appear to be a relationship between hospital market concentration and IDN operating profit [emphasis mine]. However, if the performance of the IDN’s flagship hospital is any indicator of overall systemic efficiency, the IDNs’ flagship hospital services appear to be more expensive, both on a cost-per-case and on a total-cost-of-care basis, than the services of its most significant in-market competitor.

This runs counter to the theoretical claim of IDN operating efficiency. Further, the flagship facilities of IDNs operating health plans or having significant capitated revenues are more expensive per case (Medicare case-mix adjusted) than their in-market competitors.

The authors would have greater confidence in these findings if they covered not only multiple years of information but also multiple institutions in the IDN portfolio (e.g. its suburban or rural hospitals, etc.). Further, the central question of whether IDNs have abused their market power in metropolitan markets can only be answered by examining actual service-specific payments to their hospitals by local health plans and by determining the profits generated by their hospital portfolio.

NASI_Goldsmith study_cohortI am struck by the reaction or better yet absence of a reaction in public discourse let alone in health wonk or big data evangelists circles particularly at time when there’s been so much mis-direction and battle fatigue surrounding the endless debate/efforts at repeal of the Affordable Care Act.

Such a profound observation and ‘counter intuitive’ result (i.e., ‘hey, there may not be a there, there insight’) based on frequent accolades and ‘innovation’ recognition extended to such trophy name plates as Kaiser Permanente, Geisinger Health, InterMountain Health and so little public debate (see complete list) causes me to question whether we’re paying attention to what matters?

How can we intelligently debate, discern and buildout the qualities and characteristics of financing and delivery system platform efficacy and business model innovation that delivers on the triple aim and lays a solid foundation for a sustainable healthcare economy if we do not understand their root DNA and the results (“community benefit”) they ostensibly generate?

Anyone?

Posted in Accountable Care, ACO, Affordable Care Act, health reform

ACOs ‘In the News’

Gregg A. Masters, MPH

heritage masthead

As the drip, drip, drip of the reported collateral fallout – both perceived and actual – of the stalemated resolution of the Federal shutdown makes it way into the American psyche we’re also seeing reports from the front on the success, indifference or failure of the ‘ACO vision’ to successfully pivot the healthcare borg from a fee-for-services (volume) to a fee-for-value paradigm.

Today’s news reports on two entities with which I am somewhat familiar – Texas Health Resources (THR) and Heritage Medical Systems (Heritage Provider Network) both parents respectively of first generation CMMI Pioneer plays. I served as the Vice President for Managed Care and Network Development at THR’s branded affiliate ‘Wellspan Health Network” (including System Health Providers (SHP) and consulting roles to Genesis Physicians Group) pre and post merger of Presbyterian Healthcare Resources and Harris Methodist Health System into THR, while at Heritage Southwest Medical Group, I championed provider network development and management including capitating specialty services for a global risk contracts.

Sourced from: ‘Digging Deeper: Lessons from an ACO Success Story.‘ Texas Health Resources

Perhaps framing the irony surrounding the confused narrative associated with the signature accomplishment of this President against a history of persistent previous legislative failure, the author notes:

We all know that the word “Obamacare” elicits immediate emotion from a good chunk of the American public. Thanks to late night TV host Jimmy Kimmel, and a media poll or two, we know that the words Affordable Care Act (ACA) do not elicit the same kind of emotion.

This only makes sense if you can buy with a straight face the sensibilities of the Tea Party cheerleading line of ‘keep your stinkin’ Government hands off my Medicare’ rant.

Meanwhile, the decisions of these two entities shed light on the underlying motivations likely to be driving in one case the decision to ‘step down’ in the risk ladder (THR) while in the second expressing a warp speed determination to proactively manage the risk exposure and deliver on the triple aim.

The author cites THR’s CIO Ed Marx aka @marxists on twitter as follows:

[THR] ….wanted to avoid paying a penalty, but was still focusing on ACO efforts. 

Whereas, Jonathan Gluck senior executive and counsel at the Heritage Provider Network notes, we’re:

…all in on the program.

This differential approach to risk is illustrative. Both entities at least in the Texas market have erratic performance. Heritage Southwest Medical Group ultimately declared bankruptcy during the global risk days in the late 90s, while THR returned to it’s hospital roots when the succession leadership vetting was over and the insurance culture of the then CEO of Harris Methodist Health System demurred to the predominant hospital culture of the Presbyterian leadership (aka the Smith v Hawthorne succession dance) by selling the Harris Methodist Health Plan to PacifiCare Health Systems.

It should come as no surprise that a physician organization untethered in any material ‘bricks and sticks’ sense to hospital infrastructure other than a drawer full of partial (at best) risk contracts should embrace the Pioneer model; whereas a hospital system even in partnership with a risk savvy physician organization the likes of ‘NTSP’ aka North Texas Specialty Physicians (_NTSP_), the JV partner in the Pioneer ACO) would step down and recalibrate their pathway options into this value shift.

The jury is out whether institutionally led health systems can re-engineer their culture let alone their asset portfolio to meet the vision quest of the triple aim via ACO intermediaries. If I were a betting man, my money would be on Dick Merkin and Mark Wagar, et al to tame the unrestrained appetite of the often maldistributed, excess capacity and misaligned production based assets.

Posted in Accountable Care, ACO, Affordable Care Act, health reform

The ACO Innovation Summit

By Gregg A. Masters, MPH

One of the few ACO gatherings I’ve missed since the birth of the industry (and there have been quite a few since there are ‘experts’ everywhere), but the line-up NEHI put together is well worth a look.

Both Steven Shortell and Molly Coye are definitely change agents on the front lines as is the balance of the faculty. Molly is pulling levers of a major institution with, some might say, an impossible reinvention agenda given its governance complexity and cost efficiency obstacles – unlike many other private institutions similarly challenged, while Shortell has a pulse on the healthcare ecosystem DNA, the macro policy dynamics of managed competition, and the empirics of business or service delivery models that work.

 

Thanks to the organizational initiative of NEHI staff. A bit of a delay (this is raw footage), but fast forward to 9:10 mark for introductory remarks by NEHI President Wendy Everett, ScD. About NEHI:

‘…NEHI is a nonprofit, health policy institute focused on enabling innovation that will improve health care quality and lower health care costs. Working in partnership with members from across the health care system, NEHI brings an objective, collaborative and fresh voice to health policy. We combine the collective vision of our diverse membership and our independent, evidence-based research to move ideas into action.’

As discussed elsewhere the battle at the moment is for the narrative on ACOs and by proxy the Affordable Care Act aka “Obamacare”. For context see: The ACO Narrative: ‘Accountable Care 2.0 is a Journey, Not a Program’ or ‘ObamaCare is Toast’? 

 

Key take-aways from the summit included:

  • ACOs necessitate thinking about “packaged” innovations – the organizational culture, process improvements, and payment models that surround a particular innovation.
  • Bundled payments, global budgets and other new ACO payment innovations are beginning to create the “markets for health” that will move the system from a culture of care to a culture of wellness.
  • In an ACO world, physicians require comparative effectiveness research, real world evidence, and ongoing guidance from industry to achieve improved patient outcomes.
  • ACOs are transforming the research landscape by turning previously unintegrated health systems into research organizations.
  • ACOs have created new opportunities for cross-sector partnerships to share data and enhance the pace of innovation.
Posted in ACO, Affordable Care Act, MSSP, Triple Aim

CMS Call: Tips on Submitting Application for Medicare MSSP ACO

By Gregg A. Masters, MPH

There are those trying to figure out how to best ‘build out’ if not perfect (as in the Pioneer class) an ACO, while an even larger pool ‘leaning’ in the direction of playing, are focused on the mechanics of the application process. As with the ‘interface model’ that’s kept the Health Information Management Systems Society (HiMSS) afloat (some suggest the lack of inter-operability has a 60% revenue share of HiMSS members), many aligned with the ‘ACO industry’ have focused on the mechanics (and opportunities for ‘structural self assessments) associated with the launch of the Medicare Shared Savings Program application process.Physician Standing Up the ACO

In the support and outreach department CMS has been periodically hosting provider calls, webinars, etc., in the ACO trajectory domain. Still rather early in the ACO roll out game, while local strategy footprints are thrashed out and locally flavored community by geo-political community, the first order of business is to determine whether to submit or not submit the app (NOTE: this is a no brain-er if you are a hospital with even a modest share of Medicare patients, or any medical specialty that interacts with Medicare patients for that matter).

Here are the deets for today’s provider call. If you missed the live call and are reviewing this information retrospectively, the archived replay is noted below:CMS App Clipped

National Provider Call (NPC), Medicare Shared Savings Program Application Process: Tips on Completing a Successful Application. We look forward to your participation.

Time: 1:30 PM – 3:00 PM Eastern Time
Call-in Number:(877) 237-0855 (no ID or passcode is needed)

Important: Conference lines are reserved for those who are registered for today’s NPC. If you know individuals who were unable to register but would like to participate in today’s NPC; please invite them to listen in with you on one registered line.

Slide Presentation:

The location of today’s slide presentation was included in the NPC registration announcement and in your confirmation and previous reminder emails. For those who have not already downloaded the presentation, as well as additional materials for today’s call, you may do so here.

Additional CMS Guidance in Medicare Shared Savings Program ACO Applicants is here.

Other resources include:

Posted in ACO, Affordable Care Act, Triple Aim

Some Context and Perspective on Standing Up the ACO

By Gregg A. Masters, MPH

I am passionate and write a fair amount about health reform, innovation in business models and the pursuit of a ‘sustainable healthcare ecosystem’ as I’ve been intimately involved in serial efforts to restrain the appetite of a change resistant industry that Shannon Brownlee aptly frames in Escape Fire the hard hitting documentary that recently aired on CNN, that:

…we’re in the grip of a very big industry and it doesn’t want to stop making money.

For more context on the nature of that ‘grip’ and it’s persistent hold see: Mayo v. McAllen – The Battle for the Soul of American Medicine?

Most of the readers of this blog don’t know me personally, so let me offer some historical perspective that may shed light on my standing in the conversation, and why you might want to heed or discount some of the warnings and arguments I have been making since it’s launch in 2010.

First up, I am a founding member of what was the disruptive innovator in the PPO space in California back in the mid to late 80s. We were a start-up joint venture (JV) between Los Angeles and Orange County flagship hospitals and their medical staffs.  As a condition for participation in the contracting network, member hospitals formed ‘PPGs’ (professional practice groups) which later morphed into IPAs as we expanded our book from discounted fee for services (FFS) contracting to at-risk contracting under the forerunner of Medicare Advantage, i.e., Medicare Choice, program and later Maxicare’s commercial IPA ‘Window Project’.

More on point though, we were organized as a payor agnostic ‘3rd generation PPO’ since we repriced claims to contracted amounts (both hospital and physician) and cut a contract sensitive ‘expected EOB’ for the payor to process (later we were extended check writing privileges for selet payors); AND we had ‘attorney-in-fact authority’ on behalf of member hospitals and PPG physicians to enter into contracts vs. shuttle them back and forth as was customary for prevailing ‘messenger model’ PPOs then and even to some degree now.

So posit the ‘payor neutral’ or ‘agnostic’ frame of reference coupled with a claims repricing engine and attorney-in-fact standing as an optimally positioned contracting entity or management services organization (MSO) in the managed care value chain.

Second, during the run up where the major commercial insurers and payors (i.e., Aetna, Blue Cross, Blue Shield, the Equitable, Prudential, et al), and then market leading hospital management companies (i.e., Hospital Corporation of America/HCA, National Medical Enterprises/NME, and American Medical International/AMI – the latter two merged to form Tenet) strategized their entry into the managed care space by creating their own or JV’d ‘insurance vehicles’ I actively counseled (initially via back channels and later direct) principals at AMI to not invest in AMICARE, but to position a payor neutral contracting vehicle, much like the one referenced above, to contract with any and all payors that made portfolio sense in their respective markets, given net revenue and physician alignment goals. The guidance was shunned, and approximately 36 months later, AMI discontinued AMICARE taking a charge in the neighborhood of $350 million.

Incidentally the collective proprietary entry of hospital systems into the ‘business of health insurance’ met with a similar unwinding at various points in time including the respective charges to balance sheets and income statements. In addition there followed an extended period wherein a residual culture war between those with integrated delivery system DNA, and the traditional dye in the wool ACHE types, played out for the hearts and minds of the prevailing paradigm of hospital leadership and forward vision.

Then in the mid 90s I was retained by a major hospital system, an HCA spinoff dubbed ‘HealthTrust’ to propose and implement a managed care strategy for 12 hospitals in its Houston Region. Shortly after my arrival in the Lonestar state, my best strategic counsel was to leverage the creation of a super MSO that contracted on behalf of the region’s hospitals, and their associated physicians once again tethering to the principal of a payor agnostic solution, partnered with independent physicians via IPAs, participating medical groups or direct. Unfortunately, the then prevailing ‘corporate wisdom’ and business model was to create the capacity for staff model like HMO delivery capabilities via the outright acquisition of certain primary care physician practices. In Texas that vehicle is known as a ‘501.a’ entity where the hospital (or other non physician sponsor) can be the sole member and acquire the assets of a physician’s practice and in turn employ him or her even though Texas is a corporate practice of medicine state.

Over time, that commitment unwound much like the previous iterations noted above as the model was untenable and did not produce the revenues, physician loyalty nor productivity assumed in the buyouts, let alone contracting objectives the hospital system had for it’s local market and associated physicians.

Finally, and the last seasoning experience since this sheds fair amount of insight into present day ACO challenges. Two major hospital systems merged in the Dallas Fort Worth market during the mid to late 90s. At it’s core, it was a strategic merger of two fundamentally oppositional cultures.

Party A, though a hospital system none-the-less made a commitment to the health insurance [or perhaps more accurately characterized integrated delivery system paradigm] fielded the largest provider sponsored HMO, including some innovative spinoffs up to and including a parallel ‘payor agnostic’ contracting platform that dealt with other payors, in addition to operating flagship hospitals in their north Texas service areas.

Party B was a more traditional hospital system with the usual inpatient, outpatient and niche services folded into an institutional assets portfolio with geographic distribution that engaged in managed care via downstream relationships with health plans across successive iterations of PHO configurations. Risk contracting was part of the mix, but the hospital system was not a top line sponsor of an HMO nor other insurance product strategy deferring to downstream participation.

Post merger of the two hospital systems Party B’s physician partner in the PHO asserted ‘a change in ownership’ and demanded the provisioned ‘mandatory redemption’ ie., share buyout option to effectively eliminate the ‘H’ from the P/H/O. In other words, the PHO would become a PO (physician organization).

As a senior player in the conversation, I advised the leadership of Party B to not take the ‘divorce’ personally, but stand down and focus on ways to play into a value added partner relationship to the PO, primarily via contractual arrangements and a coordinated contracting game-plan. This was not to be the chosen strategy and there developed a considerable tension and back tracking on established goodwill between the hospital system parent and it’s engaged physician leadership.

As it turned out, there were much bigger issues on the table, and while forging new relationships between Party B’s PO and hospital leadership was a priority, what took center stage was what would be the ‘successor culture’ amidst an insurance vs. traditional hospital operations mindset in the newly minted merged organization? In the former scenario (Party A’s culture), hospitals are cost centers, not the traditional nor familiar ground of operating them as revenue centers. Bottom line, the hospital culture prevailed, and shortly witnessed a sequential ‘return to core business operations’ where non core assets were shopped to strategic suitors, i.e., the HMO was sold to a publically traded entity looking for a commercial market share gains in the North Texas communities. Physician Standing Up the ACO

So believe it or not, we’ve been here before. There is institutional memory to tap, and leverage from direct if not indirect lessons forged from a combination of serial strategic misfires as well as purposeful vertical integration plays. The hospital scenario mentioned above is timely as it plays out against the downside of provider consolidation disproportionately favoring pricing discrimination against patients or their health plan proxies to restrain price hikes associated with undue asset concentrations. Hospital operators have quite rationally simplified their operating strategies, perfecting the unit production driven revenue formula, and have managed to their benefit in the North Texas market as well as elsewhere as a by product of risk push-back and a return to their core strengths, i.e., maximizing the unit performance of their hospital operations. A modest tweak in the formula is re-admission risk, shared savings targets, and meeting quality metrics.

Can independent ACOs reverse if not control for the downsides of hospital asset concentrations? Perhaps, but only with proper vision, management, infrastructure and capital to weather the unavoidable transitional storm. It is not a level playing field, nor are the financial incentives harmonized with the end game. Until hospitals are seen as cost centers in a reconfigured population health or community based context, they will remain responsive to volume driven (vs. value oriented) sick-care assets in the health and wellness continuum. The hope is ACOs properly equipped the the authority, standing and scale may able to align healthcare assets into the sustainable healthcare ecosystem that works for all of us – a rather ambitious undertaking by any measure.

The jury is out, the chatter is intense and no resolution in sight anytime soon. Stay tuned!