4 key points about ACOs and other new payment models

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Healthcare Payment Reform

4 key points about ACOs and other new payment models

By Bunny Ellerin & Heidi Reinberg

On September 19, 2013, over 80 people crowded into the Park Avenue office of private-equity firm Essex Woodlands to attend From Volume to Value: Are ACOs and Bundled Payment Programs The Answer?  Moderator Steve Wiggins kicked off the event by making what he deemed a bold statement:  “The shift to ACOs and Bundled Payment Programs is the fastest and largest shift in payment dynamics in thirty years.”

Steve can say this with confidence because he has been a major player in healthcare delivery for as long, having founded Oxford Health Plans in the mid-80’s. Today Steve is Managing Director and head of Essex’s New York office. Joining the discussion were Dr. Rick Gilfillan, founding director of the Center for Medicare & Medicaid Innovation (CMMI) and Dr. Mark Callahan, CEO and Chief Medical Officer of Mount Sinai Care. It was a fascinating and open dialogue among the presenters and audience. There was much to digest, but we distilled their conversation into four key learnings.

ACOs may be an interim step along the way to a new delivery model, they are probably not the final stop.

“At Mt. Sinai, we see the ACO as a transitional vehicle,” predicted Dr. Callahan.  They are using the ACO structure as a way to develop population management experience as they begin to experiment with risk-based contracts. Dr. Callahan acknowledged that making an ACO successful will require new infrastructure (technology) and thinking (human resources) to support the shift, both of which are underway at Mt. Sinai. He pointed out that a current barrier in the ACO model is that  “patients have no skin in the game.”  They are free to go outside the ACO for care even though Mt. Sinai is financially accountable for those out-of-network visits. “It is very difficult to manage your population if you cannot steer them into your system. ” He added that they will likely evolve into another type of model in the next three to five years.

Watch Bundled Payment Programs – that’s where the real action is.

Another program CMMI is rolling out is Bundled Payments for Care Improvement (BPCI). Bundled payments have received far less attention than ACOs, but they may end up being more successful in terms of delivering better quality at a lower cost. Bundles are defined episodes of care – think total knee replacement or PCI (percutaneous coronary intervention) – for which the government sets a target price that is lower than what they are paying in fee-for-service dollars. A provider who accepts the bundle is then responsible for all care delivered during a defined period of time, usually 90 days, after the patient is admitted to a hospital. As Steve explained, “The target price implicitly adds a 2% discount. You have to cover all the losses if you go over that, but you get all the gains if you’re under. It is actually a pretty attractive risk profile. In the actuarial world it is more performance risk because you don’t have the level of randomness that you have with population risk.” Billions of dollars are moving into BPCI  over the next year. Keep your eyes on these programs.

The race is on to build up care teams that keep patients out of the hospital.

In a fee-for-service world, more is better for business. More services, more physician visits, more tests. But in a risk environment, less is more, so hospitals are now trying to figure out how to keep patients out of their institutions. This has paved the way for a new role in many primary care practices called the care coach. These are typically young (recent college or master’s graduate), non-medical (i.e. much less expensive) people who build relationships with the patients to manage their journey along the care continuum. They use a combination of technology and personal communication to help close care gaps that can impede positive clinical outcomes. Mt Sinai calls it “proactive patient management.”

We need more Rick Gilfillans in the public sector.

Dr. Gilfillan had a distinguished career as a practicing physician and CEO of several health plans before agreeing to help CMS launch its Innovation Center. Just look at the CMS site and you’ll see how many different types of payment models and demonstration projects were launched under his watch. Whether or not they succeed, at least Dr. Gilfillan was bold enough to push them through. We need more people in the government like Dr. Gilfillan.