Accountable Care, ACO, Direct Primary Care, DPC

From HMOs and PPOs to ACOs and DPCs: What’s Next?

by Gregg A. Masters, MPH

It may come to a surprise for some  that ‘healthcare innovation‘ has been in play for quite some time albeit not fueled by a culture of hacking or disrupting legacy operations principally via technology. Unfortunately a veritable acronym soup of mostly failed initiatives under varying degrees of public, private partnership (PPP) collaborations have been largely unsuccessful albeit with momentary pauses to the growth rate of healthcare or its underlying medical care cost (MCC) inflation.

When I started in the space national healthcare spend represented 6% of GDP (today, last reported at 17.9%) and many of the same stakeholders were then complaining about its unsustainable trajectory, un-affordable health insurance premiums, wide variations in quality and the uneven access created by a confusing universe of often conflicting payor class (or ‘book of business’) driven reimbursement requirements.

Back then, we witnessed the launch of professional standards review organizations (PSROs) who’s mission was to develop what many referred to as ‘cookbook’ medicine guidelines for purposes of utilization review and medical necessity determinations that health maintenance organizations (HMOs), and to a lesser degree preferred provider organizations (PPOs), deployed via a range of products introduced as ‘managed healthcare’.

HMOs were seen as ‘closed loop‘ systems principally built upon ‘staff models’ where physicians were health plan employees (think Kaiser Permanente, though technically a ‘group’ vs. staff model), Cleveland Clinic, or Geisinger Health plan and thus had not penetrated either mainstream medicine nor commercial market customers (employers, coalitions, multiple employer trusts or purchasing cooperatives, etc.) that Aetna, Cigna, United and Blue plans designed, underwrote and marketed a range of self funded and fully insured insurance products. Both Medicare and Medicaid remained untapped ‘managed markets’ as well. Thus the lion’s share of both public and private markets were in traditional domain of unbridled fee-for-services medicine based on usual and customary pricing or payment schedules tied to conversion factors associated with resource based relative value units (RBRVU).

This began to change with the introduction of independent practice associations (IPA) supported by a competent management services organization (MSO) or physician practice management company (PPMC) providing back office support needed for private physicians in independent practices to contractually engage with health plans. This pivot began an era shifting risk from the health plan to the contracted provider network via a range of reimbursement models.

From modest withholds on negotiated fee-for-services schedules, to global or service tiered per diem’s, case rates or in the most aggressive arrangements an outright delegation of global (including hospital) or partial (professional services only) risk. The latter typically involved mature multi-specialty or primary care group practices with professional management, supporting culture and the associated infrastructure to bear the risk burden.

The aggregate impact of the frenzy that followed by huge market share gains in the HMO space and a correspondingly similar growth in the PPO market was a medical trend reduction and at one point temporary negative decline in healthcare and medical cost inflation indices relative to GDP the late 80s to mid 90s.

Yet, the cultural flash point was perhaps best captured by a scene in the movie ‘As Good As It Gets’ when actress Helen Hunt weighed in on her ‘piece of sh*t HMO‘ denying her access to covered services. As I recall, the entire audience laughed identifying with her animus towards HMOs.

This moment in popular culture represented the public’s push back to ‘gatekeeper model‘ HMOs where primary care physicians ran interference between a member and his or her referral to a specialist consult or hospital admission.

To meet rising consumer frustration and the employer sponsors the plans growing concerns. right around this time (circa mid to late 90s), United Healthcare introduced PPO plans and ‘direct access’ HMO versions as well that permitted specialist referrals without the consent of the primary care gatekeeper.

What soon followed was an era of risk push-back particularly as more consumers rebelled against gatekeeper HMOs, and a lot of red ink for risk bearing IPAs, medical groups or even PHOs (physician/hospital organizations) who took on health plan risk, incurring massive operating losses. While premium increases were restrained to declining, the per member per month (PMPM) or percentage of premium contract dollars passed to participating risk bearing providers represented declining baselines for payment of covered services.

Back to the Future: ‘Deja Vu’ Again?

With the passage of the Affordable Care Act (ACA) principally designed to increase access, reduce the rate of uninsured Americans’ and lay the seeds of cost containment innovation principally via Accountable Care Organizations (ACOs) – the majority participating in upside gain share only in the Medicare Shared Savings Program (MSSP) – but also encouraging pilots and demonstration efforts at the Center for Medicare and Medicaid Innovation (CMMI) we’ve re-entered another era of measured risk transfer 2.0 with the provider community (i.e., hospitals, physicians and allied health practitioners).

As the principal workhorse in the ‘innovation lab‘, six years in ACOs have been a net disappointment in terms of producing the expected savings – though their quality performance metrics are a different story – initially envisioned leading up to the law’s passage. Yet amidst contentious and shifting sands of both federal and state health policy guidance in the transition from the Obama to the Trump administration, one goal remains intact with seemingly solid bi-partisan support: the continued investment in and active pursuit of a value based (vs. production fueled fee-for-services) healthcare economy. Whether via top down federal policy or the granular baking of innovation from the grassroots up, we’ve returned to the drawing board of finding a delivery and financing system that can deliver on the promise of the triple aim – better care, better outcomes at lower per capita costs.

Enter Direct Primary Care aka ‘DPC’

In 1913 Dr. Charles Mayo one of the three founding brothers of the Mayo Clinic weighed in rather optimistically on the future of medicine delivered primary via seamless, team based healthcare. Yet, some 100 plus years later, are we there yet? I think the answer is a resounding no. But why the glacial pace of progress in a seemingly transformation resistant healthcare industry?

With layers of failed generational innovation and the inherent complexity grafted on each wave of the transformational impulse, we as an industry of stakeholders writ large (i.e., hospitals, physicians, regulators, payors, brokers, underwriters, investors and a litany of too numerous to mention suppliers and vendors at the trough) have co-created an incoherent, inefficient, costly and burdensome ‘provider centric’ healthcare economy with conflicted incentives, and little to no alignment with the mission towards building a quality, affordable healthcare economy that works for us al

In 2018 this de-facto ‘non-system‘ aggregate is at risk of imploding on itself. No-one is happy. From frustrated patients, to disillusioned clinicians, to disaffected employers and a somewhat drifting [see: ‘Rethinking The Physician-Focused Payment Model Technical Advisory Committee (PTAC)’ which addresses the ‘rising tensions’ between PTAC, and HHS] federal government are all scrambling to find solutions that deliver value.

A novel model launched in the late 90s by Garrison Bliss, MD introduced ‘direct primary care‘ (DPC) initially via Seattle Medical Associates which then re-tooled into the Qliance brand. Qliance created a fair amount of buzz and spawned considerable competition while advancing the standing of DPC. Yet, a ten year run promptly came to an end when Qliance ceased operations in June of 2017.

Dr Bliss’s legacy contributions live on as he cleared the path for DPC in the state of Washington via enabling statute. DPCs are required to register and report annually (2017 report, here) to the Department of Insurance (definition of DPC, here) a basic data set including: fees charged, enrollment, participating physicians and practice locations. He also presided over the inclusion of DPCs in Qualified Health Plan offerings listed on ACA exchanges. See below:

Treatment of Direct Primary Care Medical Home, 76 Fed. Reg. 41900 (July 15, 2011) (amending section 1301(a)(3) of the Affordable Care Act) 

A “Direct Primary Care Medical Home” plan is defined as “an arrangement where a fee is paid by an individual, or on behalf of an individual, directly to a medical home for primary care services, consistent with the program established in Washington.” (Federal Register Citation)

Meanwhile, the data since reporting began in 2007 is instructive on the limited appeal and slow uptake to date of the DPC model in the population at large, and in my view represents a bellwether for the rest of the nation, see HintHealth 2017 survey here, further documenting the very limited penetration of DPCs into the mainstream market.

Thus, Washington state became the first state to define and regulate direct primary care practices and to prohibit direct practice providers from billing insurance companies for services provided to patients under direct practice agreements.

  • Ten years later, DPC enrollment totaled 14,790 direct practice patients out of 6.7 million Washington state residents, a 0.22 percent share of the population
  • Overall patient participation increased 31%, from the fiscal year 2016 total of 11, 272 participants to 14,790 (an increase of 3,518 participants)

Under the Hood of a DPC: Is it ‘HMO Lite’?

First up, let’s examine one definition proffered by a visionary DPC advocate and practitioner who is also a practicing attorney, Phil Eskew, DO, JD:

For the practice to qualify as a direct primary care practice, the practice must:

  • Charge a periodic fee
  • Not bill any third parties on a fee for services basis; and
  • Any per visit charge must be less than the monthly equivalent of the periodic fee

At it’s core a DPC looks like and to some degree models a ‘lite’ version of a PCP gatekeeper HMO. This includes monthly global prepayment, a defined set of covered services, an assigned patient (member) panel (albeit considerably smaller than a participating PCP in an HMO), and since compensation is budget driven and prospectively paid – little if any of the billing and coding complexity associated with the traditional billing and collections model of FFS based PCP practices.

Unlike an HMO a DPC is not a risk bearing concern other than the sponsoring physicians who go at risk for their professional services. In fact most DPCs are strongly encouraged to operate in a safe harbor of what might otherwise be deemed to be operating in the business of insurance as unlicensed and thus illegal entity.

While not a risk bearing operation per se, DPC models operate in the wild west, where if you’ve seen one practice’s footprint, you’ve seen one DPC operation. There are no standards and there are no compare and contrast opportunities. DPCs are in no way a homogeneous group, rather they are the byproduct of a patchwork of state laws, and the goals, competencies and intentions of the owner physicians.

DPCs must refer out all hospitalizations, outpatient surgeries, costly imaging or lab testing, and specialist consults, etc. Thus DPC practices will optimally work only when layered into ‘wrap around’, catastrophic or prevailing high deductible or rebranded ‘consumer directed’ health plans – though some DPC models, i.e., My MD Connect and others, are designing products for brokers and stop loss carriers offering health plan options for self insured employers built on a network of participating DPC practices.

Some DPCs will negotiate with select preferred specialists, routine lab testing and for certain imaging services. But each practice will have a different menu of primary care services and what may be included in referred care.

Market Results

In a recently published article at the Journal fo the American Board of Family Medicine titled: Direct Primary Care: Applying Theory to Potential Changes in Delivery and Outcomes, the author concludes as follows [emphasis bolded mine]:

The need for rigorous research on the DPC model is great. The American College of Physicians has made such a call, beginning with the most basic descriptive patient and provider variables.41 Information on participating patient demographics before and after DPC adoption is required to understand the population that is served by DPC and the broader implications for excluded patients. Research on the patterns of DPC location and socioeconomic context would also provide a better understanding of DPC’s niche. Following these descriptive analyses, the focus must shift toward outcomes and the attainment of the 4 attributes of primary care, with comparisons between DPCs and other models of primary care. Although this research will encounter obstacles, such as the absence of claims data for DPC practices, it is essential to guide providers, patients, and policy makers toward high-quality primary care.

Meanwhile, theoretic application informed by years of research on primary care provides insight as to what changes to expect and to monitor as practices consider DPC adoption. By applying Starfield’s conceptual model, an understanding of the potential changes to structures, processes, and outcomes for the patient population can be achieved while policy makers and providers await rigorous research on DPC. Evidence exists to support DPC as a theoretically sound approach to attaining the attributes of first contact care and longitudinality for participating patients. DPC uses changes to financing and the population eligible to trigger these potential improvements. At the health system level, DPC has low-construct validity to support a positive impact on the potentially eligible population. By limiting access to those willing and able to pay the membership fee, a vulnerable population will almost certainly be excluded. A model that does not meet the needs of a vulnerable population is unlikely to have a significant impact on the overall costs and outcomes of the US health care system. Other policies and models to address primary care financing and accessibility that do not exclude groups of patients exist and may or may not be superior to DPC. DPC’s distinguishing characteristic from these other models is that the control rests with the PCP and is not dependent on financing from third-party payers.

Complete article: Direct Primary Care: Applying Theory to Potential Changes in Delivery and Outcomes

The Road Ahead

For DPCs to scale and make a systemic impact beyond the local community in which their owners/sponsors operate and become more than a lifestyle, ethical decision or political statement giving the finger to ‘the man’, they’ll need to somehow get their arms around ‘downstream’ network risk and define certain minimum operating requirements or standards which apply to all DPCs equally.

Though therein lies part of the problem. The safe harbor contours mentioned earlier is not iron clad and is more or less protected by variable states statutes exempting DPCs from being in the business of insurance. Any argument that can validly be made that the DPC is assuming ‘risk’ beyond the primary care services in the contract between the DPC practice and its members is one more arrow in the quiver of state department of insurance commissioners’ tasked with the protection of patients purchasing health insurance.

Two groups have organized to harmonize and advance the practice of DPC including the Direct Primary Care Coalition and DPC Alliance, the former chaired by Garrison Bliss, MD (see leadership here) and the latter Ryan Neuhofel, DO, MPH. Both proactive and visionary physician leaders committed to supporting and leveraging the business model of DPC given the heterogeneity of its member practices.

ACO and DPC Synergies?

While I do not have a business plan or model for a hybrid version or combination ACO/DPC derivative, it seems a venn diagram can identify characteristics common to both operating footprints mentioned above. Since we’re all still looking for ways to tame the rapacious appetite of a seemingly insatiable and predominantly fee-for-services fueled healthcare delivery and financing ecosystem, what do we have to lose?

Let’s think out of the box! We can do this!

 

 

 

 

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Accountable Care, ACO, Affordable Care Act

Those Failing CO-OPs: Implications for the ACA and its ACO Workhorse

by Gregg A. Masters, MPH

As the battle for the hearts and minds of Americans relative to the Affordable Care Act (ACA) continues, and the tracking sentiment index waxes and wanes between ‘favorable’ and ‘unfavorable’ one front in particular seems to have a fair degree of utility with the narrative profferred by the ‘repeal and replace‘ crowd.

Consumer Operated and Oriented Plan (CO–OP) Program

Nested in Section 1322 of the Affordable Care Act (ACA), the ACA created the Consumer Operated and Oriented Plan Program (the CO–OP program):

‘to foster the creation of new consumer-governed, private, nonprofit health insurance issuers, known as ‘‘CO–OPs.’’ In addition to improving consumer choice and plan accountability, the CO–OP program also seeks to promote integrated models of care and enhance competition in the Affordable Insurance Exchanges established under sections 1311 and 1321 of the Affordable Care Act. The statute provides loans to capitalize eligible prospective CO–OPs with a goal of having at least one CO– OP in each State. The statute permits the funding of multiple CO–OPs in any State, provided that there is sufficient funding to capitalize at least one CO–OP in each State. Congress provided budget authority of $3.8 billion for the program’

For program details and background see the Notice of Proposed Rule Making (NPRM) hereACOwatch_COOPGraphs_netIncome

As fodder for the anti-ACA crowd, much of the recent headlines have rightfully focused on the problematic ‘failure‘ rate of many of these community based AND governed start-up health plans.

Just witness some of the associated reports recently in the news:

Lets underscore the fact that CO-OPs are de-facto start-up health plans – a problematic undertaking under ideal launch conditions. As any entrepreneur or VCs fueling their vision knows, there is a tender proof of business model period during which an entities’ expenses typically exceed their revenues as they build market share and compete for members or lives in the market where they operate.

The ‘break-even’ (B/E) formula is rather simple:

revenues – expenses + subsidies = profit (or for non-profit entities: surplus revenues over expenses)

While not a golden rule, the B/E crossover point is rarely (if ever) within the first 24 or even 36 months of a stand alone (vs. subsidiary) operations and wholly determined by local market conditions and competitive landscape. Whether capitalization is via private investment or as in the case of CO-OPs via Federal loans this start-up fragility can not be overstated.

The other consideration unique to the CO-OP Program is the locally brewed, governed and accountable nature imbued in the operating culture and mission of these entities.

When you layer in the well established actuarial dynamics of profit and loss cycles predictably inherent in health insurance industry including ALL managed care derivatives, the critical variable of timing of market entry may introduce a volatility factor over-expressed under the current market conditions the ACA has fostered.

In other words, start-up health plans take time to create the infrastructure (people, processes and culture) to market, retain, price and operate successfully under ideal let alone typical market conditions. When you add the disruptive conditions the ACA has created (see: ‘Risk Adjustment Gone Wrong‘) in the small group and individual markets via Federally Facilitated or State run health insurance exchanges that complexity, associated market share gain challenges and ‘volatility ratio‘ can only be expected to play an increasingly important role in the success or failure of the enterprise.

The HMO Act of 1973

There is precedent to perhaps gauge and contextually consider the relative success or failure of the CO-OP Program spawned by the ACA. When the managed care revolution was birthed by then Republican President Richard Nixon via the HMO Act of 1973 as a market driven solution to remedy the run away costs of healthcare, HMO’s were typically seeded as non-profit, community based AND governed risk bearing health plans with a principal mission to maintain the health ACOwatch_HMO_Actand well being of its members.

HMO’s like the CO-OP program today received Federal support via start-up loans to manage through the typical B/E point associated with the start-up of a community based health plan vs. the typical indemnity based, fee for services insurance companies that dominated the market. The two exceptions to this rule where the non-profits licensed and operating under the Blue Cross and Blue Shield label and at least in California the Kasier Permanente Health Plan.

During the launch trajectory as then designated ‘alternative delivery systems‘ (ADS) HMO’s slowly gained share (both mind-share and members) and made their way out of California, though constrained by their non-profit nature and operating culture including the limited marketing upside of ‘staff’ or group model HMOs portrayed as second class medicine. In the 80s HMO’s went mainstream via the introduction of Independent Practice Associations (IPAs) and later ‘network models’ which attracted the independent private practice cohort into managed care if for no other reason than to defend against an emerging trend that could threaten their livelihood as more and more health benefit plans started to traffic patients to a contracted network of ‘participating providers’.

Shortly thereafter fueled by Wall Street the major health insurance companies went on a acquisition binge of these sleepy, capital constrained community based health plans. This consolidation orgy created a legal bonanza via a new industry of for-profit conversions of community based health plans, the behemoths of which included many of the Blue Cross/Blue Shield licensees. During the ‘urge to merge‘ imperative the seminal transaction was likely the for profit conversion of Blue Cross of California under the stewardship of health wonk Leonard Schaeffer (former Administrator of HCFA – the predecessor agency to CMS). Blue Cross of California was then to serve as the founding member of the for-profit WellPoint empire now re-branded and operating as Anthem, Inc. 

As simple and narrow as HMO (alternative delivery system model) charge was then, it pales in comparison to the charge and expectations placed on the nascent and fragile CO-OP industry. Not only are CO-OPs to stand up entities that provides non-profit, community based alternatives in a competitively vetted, comparably priced tiered benefits package for exchange facilitated marketplaces, they are to do this while the hospital, physician and a health plan communities are rapidly consolidating to gain scale and thus pricing leverage.

Bottom Line

The health insurance industry is a complex and some would argue ‘protected‘ industry (see: McCarran–Ferguson Act) that challenges even best-of-breed leadership (Mark Bertolini, Bruce Broussard et al) to sustainably operate their business as profitable enterprises during the volume to value shift. Witness the ‘urge to merge‘ amidst the majors, i.e., Aetna’s proposed acquisition of Humana, and Anthem’s proposed acquisition of Cigna, both recently challenged by the Department of Justice, and both rationalized by the need for scale to achieve the operating results expected by their investors.

As to ACO implications, clearly there are some. It’s hard to predict the rate of legal and clinical integration and the seamless care coordination and commitment to quality envisioned by 2nd or 3rd generation ACOs (typically risk bearing) or any of their derivative plays as exchanges become the de-facto market place for small group and individual offerings, but the handwriting is clearly on the wall.

So as some of us point to the CO-OP failure rate as another example of ACA over-reach via fundamentally flawed legislation and thus cause for repeal or re-entrenchment from the law, it may be helpful to historically gauge the nature of their challenge AND the market conditions in which they operate. A little humility can go long way here.

 

 

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].

 

Accountable Care, ACO, Affordable Care Act

Must listen JP Morgan Healthcare Conference Webcasts: @Centene

by Gregg A. Masters, MPH

NOTE: This is second in a series of ‘Must listen’ webcasts produced at JP Morgan’s 34th Annual Healthcare Conference. The first focused on telehealth sector market leader Teladoc. For background and details on this august gathering, see ‘If It’s January, It’s JP Morgan Healthcare Conference. Remaining companies to detail as they represent important ‘bell weather’ insights relative to their respective sectors, include: Aetna, AthenaHealth, Centene, Genomic Health, Molina Health,Universal American, Tenet Health, as well as several from the ‘non-profit’ (tax exempt) sector including Baylor Scott and White

Centene’s operations and strategy positioning insights are material on a number of levels including the ‘urge to merge’ in the HMO or managed care space, and the implications such continuing consolidation holds for movement towards clinical and financial integration in the provider space. Additionally as many predict the future viability of the Medicare Trust Fund may rely largely on the efficacy of how Part C stakeholders articulate a sustainable vision of Medicare Advantage program to extend and enhance the life cycle of the Medicare program itself.

For direct link to the JP Morgan Healthcare Conference, click here. For the associated Centene profile, click here, the deck here and webcast, here.

For two related pieces on navigating the ‘white waters’ of the market’s transformation from volume-to-value as well as the recent ‘collateral damage’ (aka data breach) of healthIT as central spine enabling the transformation, check out ‘Centene–Health Net Entity Could Be Medicaid Leader and ‘Centene loses hard drives with health info on 950,000 beneficiaries, launches search‘, respectively.

Meanwhile, here are some slides which paint the picture both company and industry:

Centene overview

Centene growth 2015

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Centene

Centene specialty growth

Centene growth strategy

Centene market vy product

Centene pipeline

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Centene:

http://jpmorgan.metameetings.com/confbook/healthcare16/company.php?company=CENTENE+Corporation&p=19768&special_list_title=

http://marketrealist.com/2015/07/centene-health-net-entity-medicaid-leader/

Accountable Care, Affordable Care Act, health insurance reform

CMS Quality Measure Development Plan: A DRAFT

by Gregg A. Masters, MPH

An inspirational leader and ‘disruptive‘ politician taken down well ahead of his time once opined:

“Ask not what your country can do for you, ask what you can do for your country…” John Fitzgerald Kennedy

Fast forward some 55+ years and season such an invitation with the relentless drone of 24/7/365 faux patriotism, hate mongering, intolerance, and emotive ‘hell no‘ sound-bytes proferred by those who self righteously claim title to the ‘take back our country’ narrative and you may ask yourself how did we get from there (the Peace Corps) to here (carpet bomb em)?

Yet, in our unique strain of American democracy even through studies empirically demonstrate a consistent disconnect between what Americans want and what their representatives codify via policy with a capital ‘P’, the bottom line is look in the mirror ‘we are the government’.

CMS_quality_development_planWhether it’s the creation and passage of what merged into the ‘Affordable Care Act‘ (ACA) or how the ‘public’ participates in both the legislative process and its implementation via the rule making process initiated aka the ‘notice of proposed rule making’ (NPRM), we are presented with both the opportunity and as it turns out obligation to engage in and thus granularly shape (via a dialectical bottoms up vs. top down exchange) the ground rules which in turn govern our economy and the conduct of its constituent industry stakeholders.

In the quest to advance the efficacy of quality initiatives (garbage in garbage out) one recent effort is the DRAFT release of the ‘CMS Quality Measure Development Plan: Supporting the Transition to the Merit-based Incentive Payment System (MIPS) and Alternative Payment Models‘.  

As an industry we are process oriented sometimes to a fault. Moreover the ‘check the box’ or drop down nature of many of these measures lends itself to the argument that the state of the industry to actually measure, document and report healthcare quality is at best a crude representation of what is actually going on. Clearly there is more work to be done if this industry is to matter.

To help readers of this blog, the introduction of the executive summary is pasted below:

I. Executive Summary

Background

A transformation of the U.S. healthcare delivery system gained momentum in 2010 with the passage of the Patient Protection and Affordable Care Act (Affordable Care Act).1

The law established the Health Insurance Marketplace to extend consumer access to affordable care through private payers and provided strong incentives in publicly financed healthcare programs to connect provider payment to quality of care and efficiency. 

Building on the principles and foundation of the Affordable Care Act, the Administration announced a clear timeline for targeting 30 percent of Medicare payments tied to quality or value through alternative payment models by the end of 2016 and 50 percent by the end of 2018.
These are measurable goals to move the Medicare program and our healthcare system at large toward paying providers based on quality, rather than quantity, of care.2

The passage of the Medicare Access and Children’s Health Insurance Program (CHIP)
Reauthorization Act of 2015 (MACRA)3 supports the ongoing transformation of healthcare delivery by furthering the development of new Medicare payment and delivery models for physicians and other clinicians. Section 102 of MACRA4,i requires that the Secretary of Health and Human Services develop and post on the CMS.gov website “a draft plan for the development of quality measures” by January 1, 2016, for application under certain applicable provisions related to the new Medicare Merit-based Incentive Payment System (MIPS) and to certain Medicare alternative payment models (APMs).

The law provides both a mandate and an opportunity for the Centers for Medicare & Medicaid Services (CMS) to leverage quality measure development as a key driver to further the aims of the CMS Quality Strategy:

• Better Care,
• Smarter Spending, and
• Healthier People. 5

Measure Development Plan Purpose
The purpose of the CMS Quality Measure Development Plan (MDP) is to meet the requirements of the statute and serve as a strategic framework for the future of clinician quality measure development to support MIPS and APMs. CMS welcomes comments on this draft plan from the public, including healthcare providers, payers, consumers, and other stakeholders, through March 1, 2016.ii The final MDP, taking into account public comments on this draft plan, will be posted on the CMS.gov website by May 1, 2016, followed by updates annually or as otherwise appropriate.i

So here it is… have at it. Perhaps your input will in fact shape the substance and steward the glide-path of how the transformation from volume to value can be realized. Certainly it’s worth your consideration. Afterall, another attributed Kennedy quote with biblical DNA may apply here:

“We are not here to curse the darkness, but to light a candle that can guide us through the darkness to a safe and sure future. For the world is changing. The old era is ending. The old ways will not do.

The problems are not all solved and the battles are not all won and we stand today on the edge of a New Frontier – a frontier of unknown opportunities and perils, a frontier of unfulfilled hopes and threats.

It has been a long road to this crowded convention city. Now begins another long journey, taking me into your cities and towns and homes all over America.

Give me your help. Give me your hand, your voice and your vote.”

John Fitzgerald Kennedy

Accountable Care, ACO, Affordable Care Act, health insurance reform

Health Insurance Industry Consolidation: Any ‘Qui Tam’ Exposure?

by Gregg A. Masters, MPH

If you’re a health policy junkie like me, then the best show in town (or anywhere for that matter) was in the Dirksen Senate Office Building in Washington, D.C., where HMO industry veteran and Chairman, President and CEO of Aetna Mark T. Bertolini and Anthem President and CEO Joseph R. Swedish among other industry stakeholders testified before the Senate Judiciary Subcommittee on Antitrust, Competition Policy and Consumer Rights on health insurance industry consolidation, for video replay click here or watch below:senate hearing health insurance industry

As most of you reading this blog know, subject to the Department of Justice review Aetna will acquire Humana, and Anthem will acquire CIGNA. Thus, the submitted testimonies and ad hoc answers to sitting Senators on the Subcommittee were potentially a high stakes exchange.

Moreover, the hearing today was nothing short of a tutorial into the dynamics of the managed competition marketplace (both theory and practice since absent complete transparency assuming the salutary benefits of such competition may be more ‘wishful thinking‘ than reality as noted by Senator Blumenthal – CT, the home of the insurance industry) and whether this unique American strain of public/private collaboration can deliver on the oft repeated promises of such integration, i.e., that scale via consolidation drives operating efficiencies, improves quality and lowers costs to end users. We shall see…

As I heard the pitches from the various representatives assembled to offer perspective to the sitting Senators (see list here), I began to wonder if any of their testimony would be subject to the ‘false claims Act‘ if post consolidation the promised benefits do not accrue to the intended benefactors.

For those of you not familiar with the ‘False Claims Act‘ or otherwise known as Qui Tam filings, here a summary including its recent expanded scope via the Affordable Care Act:

The False Claims Act, expanded by the Fraud Enforcement and Recovery Act of 2009, P.L. 111-21 (S. 386), 123 Stat. 1617 (2009), now proscribes: (1) presenting a false claim; (2) making or using a false record or statement material to a false claim; (3) possessing property or money of the U.S. and delivering less than all of it; (4) delivering a certified receipt with intent to defraud the U.S.; (5) buying public property from a federal officer or employee, who may not lawfully sell it; (6) using a false record or statement material to an obligation to pay or transmit money or property to the U.S., or concealing or improperly avoiding or decreasing an obligation to pay or transmit money or property to the U.S.; (7) conspiring to commit any such offense. Additional liability may also flow from any retaliatory action taken against whistleblowers under the False Claims Act. Offenders may be sued for triple damages, costs, expenses, and attorneys fees in a civil action brought either by the United States or by a relator (whistleblower or other private party) in the name of the United States.
If the government initiates the suit, others may not join. If the government has not brought suit, a relator may do so, but must give the government notice and afford it 60 days to decide whether to take over the litigation. If the government declines to intervene, a prevailing relator’s share of any recovery is capped at 30%; if the government intervenes, the caps are lower and depend upon the circumstances. Relators in patent and Indian protection qui tam cases are entitled to half of the recovery.

Not sure if qui tam consideration can or even remotely applies to the upside representations proffered in favor of the acquisitions, since as noted by one or more witnesses today much of the empirical (public) record is incomplete and inconsistent with respect to supporting or discounting the arguments that will or have been made to DOJ as they conduct their anti-trust investigation into the proposed acquisitions or mergers.

[Editor’s Note: Two examples of previous health insurance industry consolidations were noted, including Aetna’s 1999 acquisition of PruCare, and United Health Group’s acquisition of Sierra Health Services. I will post the submitted witness testimony once it becomes available online, including any current discussion ‘tea leaves’ of what and where the DOJ investigation may be headed in both transactions. If you have anything, please feel free to add in comments section.]

This Subcommittee hearing is rich with both fundamentals and nuance considerations of the Affordable Care Act and whether it’s many moving parts can indeed align to meet the legislative intent of its authors.

Stay tuned!

Accountable Care, ACO, Precision Medicine

Precision Medicine v. Accountable Care: A Faux Choice?

By Gregg A. Masters, MPH

Whether you call it personalized medicine or as Eric Topol MD prefer’s ‘individualized medicine’ or even via the possible conflation of the two c/o the President @BarackObama ‘Precision Medicine’s’ initiative (see fact sheet here), it strikes me that we may need an emerging business model glossary to make sure we’re comparing, contrasting and discerning health reform and clinical practice innovation correctly.

Precision Medicine Fact Sheet

Further considering the difficulty in separating healthcare innovation or clinical practice transformation/re-engineering from political spinmeisters and their ideological agenda’s, it’s vitally important to gain a grasp of the range of conversations now in play under a ‘big tent’ of widely variable practice in health[care] innovation circles.

It’s tempting to dumb down the debate by assigning those ventures in the ACO or accountable care derivative play space to ‘tweaks at the margin’ of business as usual medicine, while reserving the more promising frontier represented by precision medicine as a life sciences and biotechnology fueled new breed of medicine enabling us to walk away from the business as usual burning platforms required by the current financing and delivery of care paradigm.

A few articles will help with the discernment and formation of a common taxonomy of accountable care and precision medicine practices – which I will use to include both personalized and individualized medicine.

In Specialist Doctors Head for Exit as U.S. Shifts Payments we revisit the perennial dispute between cognitive vs. procedural medicine specialists and the relative embrace or resistance of ‘bundled payment’ as a transitional practice to value (vs. volume) based medicine. Disorganized medicine has a history of ‘circling the wagons’ and shooting in to solve differences. Unfortunately, the current developing divide between primary care specialists and their sub-specialty peers will likely continue this tradition of internecine warfare.

InPrecision medicine takes genetic mapping to the next level Florence Comite, MD (@comiteMD) an endocrinologist turned precision medicine evangelist unbundles the biotech and genomic medicine fueled promise of this emerging field.

And at Will patients pay for Personalized Medicine? Rob Wright (@RfwrightLSL) dips into the ‘follow the money’ question given the continued practice (now somewhat codified by the ACA via a metals designation of plan type) of cost shifting from health plans to patients/members the increasing burden of health benefits coverage.

Finally perhaps tangential though relevant to the conversation is the recent ruling in the Massachusetts Attorney General v. Partners Healthcare litigation where the delivery system merger is being challenged as anti-competitive. Fueled by accountable care strategy roll-outs (formerly ‘managed care’), market trends and the ACA, consolidation is one of the key themes likely to influence both the alchemy and market conditions under which both of these models will continue to evolve before before their inevitable convergence into a sustainable health[care] ecosystem.

Yes, we do live in ‘interesting times’.