For bundled payments for Medicare-financed knee and hip replacements , hospitals will need to recruit high-quality post-acute partners, and that may be difficult in some markets, reports Modern Healthcare.
The publication noted that “Medicare will give hundreds of hospitals more flexibility in letting patients recover from such procedures in brief nursing home stays, which are significantly less expensive than hospital care. But only nursing homes that rank average or better on national quality scores will qualify for a waiver. That will exclude 1 out of 3 nursing homes in the 67 chosen areas from getting referrals for services covered in the payment bundles, according to an analysis of the markets, and the latest scores on Medicare’s five-star quality ratings. In some areas, as many as 80 percent of nursing homes will be disqualified. ”
Under ColoradoCare, state residents would choose their own health providers, but the state would pay for it, in a system similar to France’s.
The estimated cost of the program is put at $25 billion a year, to be paid through a proposed 10 percent payroll tax.
Employers would pay 6.67 percent of the tax and employees would pay 3.33 percent. Still, The Post reports, “supporters are optimistic that the benefit will outweigh the costs to Colorado residents, since it will save them $5 billion annually while still receiving the same premium healthcare.”
Nationally watched plans to implement a single-payer plan in Vermont have so far been blocked by fiscal issues.
Meanwhile, some have suggested that consolidation among private-sector health insurers should be encouraged to ease their ultimate merger into Medicare for all.
The insurance industry lobby blocked creation of the public option, though of course for poor people and the elderly there are still the “public options’ of Medicaid and Medicare.
The co-ops were meant to lower insurance prices by challenging the industry giants’ dominance.
“I don’t want to sound like an apologist for the co-ops. I was never a fan,” said the No. 2 Democrat on the House Ways and Means Health Subcommittee, Mike Thompson of California, at a congressional hearing last week. “What most of us wanted was the public option. That would have provided the competition needed.”
The greatly shrunken co-op program remains a target for GOP, even as it gets unenthusiastic help from Democrats. Their final fate may have to await the results of next year’s elections.
This piece in HealthAffairs looks at the phenomenon of falling Medicare patient readmissions coupled, apparently, with higher rates of patients being put under “observation” — even at hospitals outside the Medicare readmissions program.
The authors conclude:
“Our findings suggest that at least some hospitals are substituting observation status for inpatient readmissions, both for Medicare and privately insured patients. These trends raise a number of questions. For instance, do observation patients get the same quality of care as inpatients? Further, do drops in readmission rates truly mean that hospitals are providing better quality care? Or, as David Himmelstein and Steffie Woolhandler suggested in a recent Health Affairs blog, is it merely that some hospitals are avoiding penalties by relabeling patients they previously would have readmitted as observation patients?
“In fact, declining readmission rates may be a misleading measure of hospitals’ success in reducing medical complications or in coordinating patients’ care with other clinicians. By the same token, tying hospital payments to readmission rates may well be equivalent to allowing some hospitals to avoid financial penalties by simply relabeling patients rather than by improving patient care.”
UnitedHealthcare said Thursday it will expand its high-profile test of whether bundled payments for chemotherapy can help slow rising cancer-treatment costs, part of a growing effort by insurers to find new ways to pay for care.
Results from United’s initial pilot test – reported last year – were puzzling: The overall cost of cancer care for patients in the study dropped by 34 percent, even as spending on chemotherapy drugs spiked significantly.
To try to find out why, UnitedHealthcare said about 500 more oncologists in Texas, Colorado, Florida and Oklahoma will join the study, bringing the total to about 650 physicians in seven states. Among other things, the pilot caps the profit the oncology practices can make on the chemotherapy drugs they prescribe, while adding a payment meant to cover physician care in the hospital, hospice management and to provide case management services to patients.
It’s a variation on so-called “bundled payments” that are becoming more common in health care, particularly for such things as joint-replacement surgeries. The idea is to bill and pay based on the overall treatment of a certain condition, rather than for each separate procedure and doctor visit. Because cancer treatment is so expensive, it is also now being targeted for bundled payments, but the complexity of treatment makes it harder to design bundles.
Meanwhile, United isn’t the only private insurer testing ways to try to slow spending on cancer care, while also improving care.
Still, results from three other efforts showed decidedly smaller savings compared with United’s stunning 34 percent drop, said Lindsay Conway, a managing director at the Advisory Board Company, a consulting firm.
Baptist Health South Florida, for example, reported savings of approximately two percent after the first year of its special oncology “accountable care organization,” while a partnership between oncology practices and insurer Priority Health in Michigan saw first-year savings of $550 per chemotherapy patient, Conway said.
“The big question is whether United’s results are replicable,” said Conway. “They’re working on that right now.”
While general efforts to control costs vary from creating so-called medical homes, where care is coordinated, to sharing savings with doctor groups that become more efficient, the ones drawing the most attention now are the bundled payments, said Kathryn Fitch, principal and health care consultant at Milliman. Medicare joined the effort to test bundles for cancer care this year with a pilot set to begin in the spring.
Among other things, the complex program will pay doctors an additional $160 a month per patient to provide extra support for chemotherapy patients, such as around-the-clock patient access to medical staff. Participating practices will have to meet specific requirements, including using electronic medical records, and they will get financial incentives if they reduce their overall cost below benchmarks and meet quality targets.
“This is just going to get bigger – and Medicare is driving that,” said Fitch. “All insurers are adopting the same mantra. Even the pharmaceutical companies are doing more dealswith providers and payers.”
How United Tested Its Theory
In the UnitedHealth pilot project’s first phase, five oncology practices had their profits from chemotherapy drugs essentially frozen, said Lee Newcomer, United’s senior vice president for oncology, genetics and women’s health.
Rather than being held to any specific treatment regimen, each practice drew up its own and could add new medicines at any time. United reimbursed them the average sales price of the drugs given, plus a small amount meant to cover physician care in the hospital, hospice management and to provide case management services to patients.
That differs from how the insurer pays oncologists outside the study, where they are reimbursed the amount paid for the drug, plus about 22 percent to cover office costs. By comparison, Medicare reimburses oncologists for drugs administered in their offices average sales price plus 6 percent. Policy experts say such payment methods encourage the use of more costly drugs, even when just-as-effective – but less expensive and less profitable – drugs are available.
At the end of the three-year study, even though spending on chemotherapy drugs rose substantially, the cost of caring for the patients was $33.4 million less than costs for a control group of similar patients who were not part of the study. All patients had either breast, colon or lung cancer. United redistributed one-third of the savings with the physician practices by increasing their patient payments for a second round of the pilot, which is still ongoing.
What, exactly, led to the cost savings isn’t clear. But Newcomer said a reduced number of hospitalizations and use of radiation services clearly contributed, adding that the next round of its pilot program may offer more complete answers.
Still, the initial study wasn’t large enough to find statistical differences in quality measures, so whether patients in the study fared better or worse than those outside isn’t known.
“It’s not surprising the [payment pilot] reduced hospitalization if it provided an economic incentive for doctors to do so,” said professor Jerry Avorn at Harvard Medical School. “But you have to ask, was the control group using too much hospital care or was the innovative system using too little? In the absence of outcome data, how would we know? It’s particularly important to define and measure outcomes carefully, especially in cancer patients.”
Also Thursday, United said it has launched a computer program that all its cancer doctors can use – whether part of this pilot program or not — to determine if the treatments they’re prescribing fall within recommendations crafted by the National Comprehensive Cancer Network (NCCN), a nonprofit alliance of 26 cancer centers.
In the short run, the insurer says, the program will reduce the percentage of after-the-fact claim denials, which are frustrating and sometimes costly for patients. Over time, the program will also gather data about tens of thousands of patients, the drugs they take and how well they fare, so the system will provide head-to-head comparisons of chemotherapy treatments.
“Physicians will have a real world look at what is working and what may not be working as well,” said Newcomer. The insurer plans to make the aggregated results publicly available in about two years.
A study shows that the costs of caring for people with dementia far exceed the expense of caring for people with other major ailments in the last five years of life.
The New York Times reported that the study looked at patients on Medicare.
“The average total cost of care for a person with dementia over those five years was $287,038. For a patient who died of heart disease it was $175,136. For a cancer patient it was $173,383. Medicare paid almost the same amount for patients with each of those diseases — close to $100,000 — but dementia patients had many more expenses that were not covered.”
“On average, the out-of-pocket cost for a patient with dementia was $61,522 — more than 80 percent higher than the cost for someone with heart disease or cancer. The reason is that dementia patients need caregivers to watch them, help with basic activities like eating, dressing and bathing, and provide constant supervision to make sure they do not wander off or harm themselves. None of those costs were covered by Medicare.”
One of the missions of the 2010 federal health law is to slow the soaring cost of health care. A key strategy for Medicare is encouraging doctors, hospitals and other health care providers to form Accountable Care Organizations (ACOs) to coordinate beneficiaries’ care and provide services more efficiently. Under this experimental program, if these organizations save the government money and meet quality standards, they can be entitled to a share of the savings. Participation is voluntary.
In August, Medicare officials released 2014 financial details showing that the so far the ACOs have not saved the government money. The 20 ACOs in the Pioneer program and the 333 in the shared savings program reported total savings of $411 million. But after paying bonuses, the ACOs recorded a net loss of $2.6 million to the Medicare trust fund, a fraction of the half a trillion dollars Medicare spends on the elderly and disabled each year.
To help put this development in perspective, Kaiser Health News posed this question to several ACO experts: Three years in, the ACO program has many success stories, but it’s not yet saving Medicare money. Is it working?
Here are their answers, edited for clarity and space.
Richard Barasch
Chairman and CEO of Universal American Corp, whose subsidiary, Collaborative Health Systems, operates 25 Medicare ACOs
The program started off slowly. Changing the behavior of doctors from fee-for-service to a value-based environment involves changing in some cases 30, 40 years of behavior and doesn’t happen overnight. It’s very, very hard work. The doctors who embrace it find it very challenging. Think about how it affects their entire practice.
For these things to work, it has to be not just a value-based conversation but it also has to be about how the practice is actually managed. For example, the program wants us to encourage Medicare beneficiaries to get annual wellness visits. Most doctors don’t think of their enterprise as a business with customers. They think of it as a practice with patients. And things like the marketing work to get people in for an annual wellness visit is something new to them. It’s not something that they would typically do. So the notion of once a year, calling their members and asking them to come in—not just sending a little three by five inch card – but proactively getting them into the practice turns out to be a new exercise for many. Nine of our ACOs earned $27 million in shared savings.
Components Of ACO Program
THIS MEDICARE ACO INITIATIVE HAS TWO PARTS:
The Medicare Shared Savings Program (MSSP), which is the largest group, is comprised of hospitals, doctors and other providers. It allows these organizations to opt against the risk of penalties for not meeting goals set by the program. But if they do that, they also are eligible for only lower shared savings.
The Pioneer Model is comprised of high-performing health systems. Groups in this program are eligible for higher levels of savings, but they must take on higher risks.
There’s another thing going on here too, and this is sort of interesting from the non-financial, behavioral viewpoint. The doctors want to do the right thing. We’re seeing a generational shift in how physicians view their practices—again with a little self-selection. They know that pay for performance is coming. Now they are being measured, and they want their scores high. They understand that the world is changing and there’s a little bit of self-selection in our group with doctors who want to change along with the system. And what we found remarkable in the 2014 reporting period, even the doctors who did not earn bonuses were quite happy with the quality scores that were generated around their practices.
They work hard to get their quality scores where they think they should be—and when they’re not, the doctors are very, very chagrined. Hospitalizations in 2014 decreased on average by 11 percent for beneficiaries with chronic obstructive pulmonary disease, for example, and by 8 percent for those with congestive heart failure.
They cared a lot about that, even though the money wasn’t there in this marketing period.
Robert Murray
President of Global Health Payment, a consulting firm that works on health reform initiatives, and former executive director of the Maryland Health Services Cost Review Commission
The recent results on ACO performance indicate that it hasn’t been successful. A lot of people have characterized the results as lackluster at best, and I think things are even worse than that. Medicare’s performance data ignores the fact that each of these ACOs made very substantial investments in infrastructure: new data systems, care management and care coordination systems that probably run anywhere between 1 and 2 percent of their target budget. If you apply that to the results of the ACOs, you would find that even a significant proportion of those meeting Medicare’s goals would be underwater financially.
The problems are largely based on design flaws. Because the formation of an ACO requires substantial levels of risk and large up-front infrastructure costs, they have been largely dominated by deep-pocketed health systems, hospital networks, large multi-specialty physician groups or other combinations of specialists and hospitals. However, these providers are unlikely to make aggressive attempts to control costs because the hospital and specialists are still being reimbursed under traditional fee-for-service payment model. For hospitals, which have high levels of fixed costs, the way to cover costs and earn profits is to generate more volume. Their incentives run directly counter to the goals of the ACO program, which are to reduce costs, to reduce unnecessary use of hospitals and high-priced professionals. The ACO model for these groups is akin to asking an overweight patient to eat his or her own flesh to become thinner.
CMS could correct these deficiencies by developing a new ACO model that features groups of primary care physicians (PCPs) as the key organizational building blocks. PCPs are at the center of care management activities for most Medicare beneficiaries and primary care is generally under-provided. Because PCPs account for a small share of total expenditures, it is possible to provide large financial incentives with modest shared savings proportions, perhaps 20 to 30 percent. However, because they account for a small share of total costs, PCPs are unable to assume financial risk. Therefore, a PCP-led ACO must include a mechanism to pay for reasonable infrastructure costs while retaining the upside-only risk characteristic of the current Medicare Shared Savings Program (MSSP). Each PCP group should also be eligible for a shared savings payment if it generates savings, regardless of the performance of the entire ACO.
Jeff Goldsmith
Associate professor of public health sciences at the University of Virginia and president of Health Futures, Inc., a health analytics firm
We are actually ten years in, not three. The ACO model was first tested in the Physician Group Practice demonstration, which began in 2005. The results of that demo greatly resemble those of the past three years: less than a fifth of the ACOs generate the vast majority of savings, and those failing to generate bonuses outnumber bonus winners three or four to one. Prominent among the “failures” are respected provider systems with decades of successful managed care experience in both the commercial market and Medicare Advantage. This isn’t a new idea.
You can make any program “work” if you employ Lake Wobegon accounting. Hire a friendly consultant to do your program evaluation, instead of a respected independent evaluator (how about the HHS Office of Planning and Evaluation?). Count the “savings” but ignore the overruns. Don’t count the bonus payments as a “cost.” Don’t count ACO set-up or operating costs (so we cannot determine the return on investment from participation). Don’t share the savings with Medicare beneficiaries. And voila, it “works.”
The CMS Innovation Center is a young agency with a very full plate. It has an audience, including Congress, health service research experts and the provider community.
Its leadership needs to establish its credibility in order for its innovations to take hold. Picking the ACO as its lead project was a bad decision, and one that has not enhanced the center’s credibility.
Michael Chernew
Professor of health care policy and director of the Healthcare Markets and Regulation Lab in the Department of Health Care Policy at Harvard Medical School
The existing data unambiguously shows that overall the Pioneer program saved a little bit of money for CMS. There should be two separate questions: One of them is before health care providers shared the savings, did they save Medicare any money? And is after they shared the savings, did they save Medicare any money? I actually think the first question is more important because it speaks to the long run savings and sustainability of the model.
Mike McWilliams and I, along with other colleagues published a paper that found the first year of the Pioneer program saved money by cutting spending by about 1.2 percent. But it saved money even after savings were shared. We don’t have enough data yet on the MSSP program to make judgments, but I wouldn’t conclude that they haven’t saved money.
I also speculate that over time we will see bigger savings and more organizations participate. Medicare has tweaked the rules to make the program more attractive to providers. In addition, ACOs can help providers get beyond the Affordable Care Act’s productivity adjustments that will reduce the rate of growth in fee-for-service payment rates to hospitals and other providers. The ACO model allows these organizations to transfer some of the efficiency gains they make into bottom-line savings. If they reduce admissions, if they reduce readmissions, if they reduce wasteful use of diagnostic services, they can keep some of those savings. When they keep those savings, it doesn’t look great if Medicare’s spending is higher than it would have been if the savings were not shared. On the other hand, the incentives of sharing helped generate the savings in the first place and they might allow those providers to survive.
We need to put the health system on a sustainable spending trajectory. Even though the Pioneer plans saved a relatively modest amount, we seem to be moving in a reasonable direction.
You don’t expect to get a lot of the savings early, but if you can get providers to do things that will control the rate of spending growth, over time you will get a payoff. What we need to do now is not worry about 2016, but worry about the health care system in 2025. I believe that looks better if we continue on this path. Moreover, the alternatives are not great.
I don’t mean that success is easy and I don’t mean to imply that all organizations will succeed. This is not without risk. I am personally a bit optimistic. But I don’t think success is a foregone conclusion. It is very hard for many organizations. Undoubtedly, some will fail.
Sean Cavanaugh
Deputy administrator and director of the Center for Medicare at the Centers for Medicare & Medicaid Services
CMS’ ACO initiatives are off to a successful start because beneficiaries are receiving measurably better care and the trust funds are saving money.
In the Pioneer Model and the Medicare Shared Savings Program, which collectively provide care to more than 8 million Medicare beneficiaries, ACOs improved care from one year to the next and consistently outperformed fee-for-service providers in areas where there are comparable quality measures. In the third performance year, Pioneer ACOs showed improvements in 28 of 33 quality measures and experienced average improvements of 3.6 percent across all quality measures. Shared Savings Program ACOs that reported quality measures in 2013 and 2014 improved on 27 of 33 quality measures. In addition, Shared Savings Program ACOs achieved higher average performance rates on 18 of the 22 Group Practice Reporting Option Web Interface measures reported by other Medicare fee-for-service providers reporting through this system.
In addition, an independent evaluation report for CMS found that the Pioneer Model generated more than $384 million in savings over its first two years, while the CMS Office of the Actuary has certified that an expansion of the Pioneer Model would be expected to save the trust funds additional funds. While the actuary has not opined officially on cost savings in the Medicare Shared Savings Program, the program’s financial results are in line with those that we expected. And early results show that ACOs with more experience in the program tend to perform better over time. Among ACOs that entered the Shared Savings Program in 2012, 37 percent generated shared savings, compared to 27 percent of those that entered in 2013, and 19 percent of those that entered in 2014.
Another sign of success has been the growth in interest in the ACO model. The Shared Savings Program now includes more than 420 Medicare ACOs serving more than 7.8 million Americans with original Medicare. The Shared Savings Program continues to receive strong interest from both new applicants as well as from existing ACOs seeking to expand and continue in the program for a second agreement period starting in 2016. Next year, CMS will launch the Next Generation ACO model, which has also garnered significant interest among providers.
ACOs are a part of our vision of a system that delivers better care, spends our dollars in a smarter way, and puts patients in the center of their care to keep them healthy.
North Carolina is overhauling its Medicaid program. The governor and state lawmakers are using a mixture of healthcare models to put the major players — doctors, hospitals and insurers — all on the hook to keep rising costs in check.
For many of the Republicans who control the state legislature, the reason for the change is simple: budget predictability.
“For years and years and years, Medicaid has been considered the budget Pac-Man that eats up all the dollars that people in this chamber would like to see spent on many, many other things,” Rep. Bert Jones said during the North Carolina House’s debate of the bill last month. Gov. Pat McCrory signed the overhaul into law on Sept. 23.
The state, which has not expanded Medicaid under the health law, struggled with huge Medicaid cost overruns from 2010 through 2013. That sent lawmakers looking for a better way to manage it, even though a signature part of the program has won national awards for quality and cost.
The lawmakers settled into two camps: One camp wanted to use a managed-care model, which basically means paying large insurance companies a specific amount per person covered and relying on the companies to contain costs.
“The alternative idea was to contract with what are called accountable care organizations,” said Wake Forest Prof. Mark Hall, “which is a newly emerging idea both at the state level and the federal level to organize systems of healthcare finance and delivery that are led by doctors and hospitals.”
The federal government is pushing that model for Medicare, the government insurance program for the elderly. The idea is to put the doctors and hospitals in charge of the health of a certain population of people. If they can provide care that keeps people healthy and saves money, doctors and hospitals can share some of that savings.
Some state lawmakers worried that the doctor-and-hospital model wouldn’t save enough money. Others worried the insurance company model would skimp on care. So they settled on a mixture of both.
Will that create “a Frankenstein’s monster?” That’s the question Hall, the Wake Forest professor, asked earlier this year.
“We proposed the thought that hybridizing these two separate ideas might be freakish, but in fact, I don’t think it is,” he said. “I think it’s actually a very sound and carefully thought-out use of the best of both models.”
Outside of North Carolina, Oregon is also contracting with both MCOs and ACOs, and a few other states are exploring how to encourage provider organizations to play a bigger role in Medicaid managed care.
In the meantime, North Carolina is drawing from the managed-care/insurance company model to change how it pays for Medicaid.
As of now, doctors bill Medicaid after they provide services, so the incentive is to provide more services. In the new system, the state will set budgets up front for whomever it puts in charge of managing care. If those managers go over budget, they’re on the hook – not the state.
That’s becoming the standard approach to payment, says Dan Mendelson, CEO of consulting firm Avalere Health.
“Most states contract for Medicaid through managed care because states don’t want open-ended financial liability,” Mendelson said.
Normally, those states contract with insurance companies. But here’s where the doctor-and-hospital model comes in. North Carolina will open up its bids to insurance companies and doctor-and-hospital systems. It will also set up quality metrics to track how they do.
Game on, says Julie Henry of the North Carolina Hospital Association.
“We’re moving in this direction in other arenas in healthcare, not just for the Medicaid population, but for commercially insured patients and for Medicare patients,” she said.
Henry points out some doctor-and-hospital systems in North Carolina are already meeting quality metric standards and saving money under Medicare. Some insurance companies are posting similar results.
Patient advocates say one system isn’t necessarily better than the other.
“We think it’s important to focus on not just who we hand a big bucket of money to, but what are the rules for spending that money,” said Corye Dunn, of Disability Rights North Carolina.
She says making sure the quality metrics are effective will be a crucial part of the overhaul process.
Also, lawmakers set a cap of 12 percent for how much money can go toward administrative costs and profits.
“The challenge lies in the fact that Medicaid is already a very lean program, and there’s just not a lot of fat to cut out there,” said Joan Alker of the Georgetown University Center for Children and Families. “The concern is, will the managed care company save money the right way or the wrong way?”
Some worry the risks of the overhaul outweigh the benefits. Cost overruns have not been a problem the past two years. And many in North Carolina’s medical community take pride in effective parts of the old program.
A Republican legislative leader on healthcare policy, Rep. Nelson Dollar, voted against the overhaul. And Democratic Rep. Gale Adcock, a nurse practitioner from Wake County, told other lawmakers to consider a guiding principle in healthcare.
“First, do no harm,” she said on the House floor. “I’m very fearful that if we pass this bill, we will do harm.”
The version that passed will change the award-winning part of the program, called Community Care of North Carolina. Community Care is a network of doctors, nurses and pharmacists who coordinate care for roughly 80 percent of Medicaid patients. A recent state audit found that Community Care has been saving the state money and improving patient outcomes.
As insurers and hospital systems take over those functions, Community Care President Dr. Allen Dobson says his organization will look to partner with them.
“We expect we’ll play a fairly significant role,” Dobson said. “It will be different. We may move from having one customer, which has been the state, to having multiple customers.”
One of the Republicans who led the overhaul effort, Rep. Donny Lambeth, says Medicaid is not broken in North Carolina. But he says as health care evolves, the state needs to keep up.
“Fact is, we can actually do better in North Carolina for these Medicaid beneficiaries,” Lambeth said on the House floor. “Do you think quality in North Carolina across all the providers is equal and good? I can tell you it is not.”
Lambeth says the new quality metrics will make it easier to track that. He says it’ll take three to four years to get federal approval and implement the changes.
This story is part of a reporting partnership that includes WFAE, NPR and Kaiser Health News
In this Q&A in the Providence Business News, Brown University healthcare economist Momotazur Rahman discusses the rates at which participants who use three high-cost services switch between Medicare Advantage and traditional Medicare — and why.
He answers these big questions:
Why do Medicare Advantage users abandon the plans and return to public Medicare precisely when their healthcare costs begin to mount?
Is it time for Congress to update, or replace, the 2003 law meant to prevent flight from private Medicare?
Are there Medicare Advantage plans with significantly less dissatisfaction and flight?
