At the Pacific Northwest Healthcare Innovation Summit, being held at the Grand Hyatt Hotel in downtown Seattle, and sponsored by Healthcare Innovation, three senior healthcare leaders on November 19 presented fascinating narratives on the shift from volume to value in the U.S. healthcare system.
The presenters were Lynn Barr, CEO of the Kansas City, Mo.-based Caravan Health; Jim Rickards, M.D. senior medical director for population health and delivery system collaboration at the Portland, Ore.-based Moda Health; and Melanie Matthews, CEO of the Olympia, Wash.-based Physicians of Southwest Washington; each shared presentations on different elements of that shift, based on their organizations’ participation in that shift.
First to present was Barr of Caravan Health. Speaking on the topic, “Managing Risk in Medicare,” she outlined the narrative of her organization, which, since its founding in 2012, has formed 45 accountable care organizations (ACOs), representing about 625,000 attributed lives across 250 health systems.
Those ACOs are 67.9 percent rural, are relatively small in terms of attributed beneficiaries (with an average of 10,417 per ACO), involve safety-net providers (75.6 percent), include critical-access hospitals (53.3 percent) , and have used management firms (82.2 percent).
“This has been an amazing journey. We started as CIO of a rural hospital, trying to figure out how to make everything work,” she said. “So we started an ACO to figure it out, and pretty quickly realized that everything we thought about ACOs was wrong.”
Referencing the Centers for Medicare & Medicaid Centers (CMS), Barr said, “One of the reasons that we grew so fast was that we met with CMS and said, there’s really nothing out there for rural providers, would you help them? So Jonathan Blum, who was over that area, helped to create the program for rural hospitals, and CMS then $95 million in loans to get it going. This was published in the New England Journal of Medicine, and now by CMS: in two years, that rural cohort had saved CMS $300 million. That was an amazing feat, and CMS got to keep $250 million of that $300 million; and it was the most successful program they had ever had; it ended up changing rural healthcare across the country.:
Importantly, Barr said, CMS Administrator “Seema Verma and the administration are very clear about this, it’s not going away,” she said, referring to value-based healthcare payment—“because we’re going to go broke as a country if we don’t fix it.” Indeed, she said, referring to the Medicare Payment Advisory Commission, “MedPAC said, if we could save $100 per patient, or 1 percent a year for 30 years, the cumulative savings would be $30 trillion. And why is 1 percent important? Because that’s about what people are saving. So how do we think about risk and managed care in a fee-for-service environment, and what can we expect?”
In that regard, Barr said, “We’ve learned a bit along the way, and the most important thing is this: scale matters. Small ACOs experience savings and losses of plus or minus 10-30 percent simply due to statistical variation in healthcare spend and in HCC coding in performance and benchmark years,” she stressed. Meanwhile, she said, “The average savings in an ACO is about 1 percent. In a fee-for-service environment, without the ability to control the patient, what can we really do? I had originally thought that we should be able to save 10 percent or more” per attributed ACO patient, but, she said, the experience has turned out to be completely different. “So,” she said, “we have to think about this differently: we have to think about how we can go from 1 to 2 percent of savings.” And even then, she noted, the confidence interval involved is wide—plus or minus 5 to 7 percent—meaning that it can be extremely difficult to determine what savings are actually real or not. Indeed, she said, given that the potential level of savings is so small right now, and that the confidence interval is so wide, that many ACO leaders, particularly of smaller ACOs, could unreasonably become either discouraged or encouraged based on data that is not definitive. “So let’s look at the data from the state of Washington,” she said. “I’ve rank-ordered these eight ACOs. One ACO had 1.4 percent in losses; but the confidence interval is between -7 and +4. But they don’t know that. In fact, only two ACOs had statistically valid results; and both have been in the program since inception,” referring to the Medicare Shared Savings Program (MSSP).
Given the challenges—including the fact that it is virtually impossible to obtain reinsurance to cover potential financial losses in risk-based programs—Barr said that, “Really, we have to do this at the state level, and gather up all the hospital systems in a state and create a super-ACO. We can stay in the MSSP forever and can beat the numbers every time. And, in doing so, we have a platform to build our own provider-sponsored health plan, with strength in numbers.
Ultimately, she said, “What’s achievable is about $100-200 per patient per year in shared savings” in ACOs. “But that’s not where the money is. The money is actually in services,” including wellness visits, advanced care planning, and other services delivered by nurses. And, she said, to get the 1-percent savings, “You have to change patient behavior. It’s having that nurse spend an hour a year with that patient, figuring out how to improve outcomes. How can we get you to walk a mile a day? Take your meds? And the answer was, I did it for my nurse. My nurse Mary, cares so much, so I started taking my medication. And when you change a patient’s trajectory, using population health techniques, you can change that patient’s trajectory.”
Oregon’s exciting journey around Medicaid managed care
Jim Rickards, M.D., presented next, on the subject of “How the State of Oregon Radically Transformed its Medicaid System Through the Creation of New Payment and Delivery Models.”
Rickards, who continues to practice as a radiologist, became involved a few years ago in the state of Oregon’s bold initiative to transform its Medicaid program, even as it was expanding it under the terms of the Affordable Care Act (ACA), into a 90-percent-managed-care program. Rickards is the senior medical director of population health at Moda Health, an organization that is operating one of 15 coordinated care organizations, or CCOs, across the state, which currently cover 1.1 million lives (one-quarter of Oregon’s total population), following the creation of Oregon’s coordinated care model by state legislation in 2010. He also noted that a key driver of the legislation was then-Governor John Kitzhaber, M.D., a former practicing physician. Moda Health operates the CCO that covers the 12 counties that form the eastern third of the state (which he noted is geographically larger than New York state), and manages the care of 500,000 Oregonians.
“The federal government gave us $3 billion over 10 years, based on an agreement we wouldn’t go over a trend rate of 3.4 percent” of cost inflation, he reported. “There were originally 16 CCOs, now there are 15. They are all locally governed, and function under a global budget,” though each CCO has been organized in its own way (LLC, not-for-profit, etc.).
As Rickards noted, CCOs are similar to ACOs in some ways, but “CCOs go beyond the purely medical aspects, to behavioral, dental, and non-medical aspects such as transportation, with the services run and governed by those involved in delivering the services: physicians, dentists, social workers, community organizations, etc.
Rickards shared an anecdote that speaks to the huge advantage that CCOs have in terms of operational flexibility. Several months ago, he said, a local pediatrician—who happens to be his children’s pediatrician—called him up in the evening with a problem. The pediatrician had prescribed albuterol to treat the asthma of one of the children under his care, but found out that, bizarrely, while the albuterol was totally covered under Medicaid, the spacer that delivers the albuterol had arbitrarily been classified as a medical device, and thus was not covered under Medicaid. Rickards was able to get on the phone and get the issue resolved that evening for that child. That’s exactly the kind of flexibility that is possible under CCO operations, and why Oregon’s experiment with Medicaid managed care is one that other states could well look at going forward.
Southwest Washington physicians make ACO work successful
Melanie Matthews, president and CEO of Southwest Physicians of Washington, shared the medical group perspective on the shift into value-based work, in her presentation, entitled “The Independent Provider Perspective On Transitioning to Value-Based Care.”
Her organization has been highly successful in making the shift to value-based care, Matthews stated, noting that her organization is one of only two organizations in the Pacific Northwest participating in the Next Generation ACO program, the most rigorous ACO program existing under the Medicare program (the other is in Idaho).
Among the objectives she and her colleagues have pursued include: a shifting care to high-value providers and lower-cost sites of care; reducing avoidable inpatient stays, ED visits, and readmissions; reducing low-value diagnostic and therapeutic services; optimizing access and flow; and automating processes and optimally leveraging the skills of all clinical professionals.
Among the challenges: getting providers aligned with the correct compensation model; working with relatively small patient panels; and obtaining quality data derived from electronic health records and claims data, for integrative processes.
“At Physicians of Southwest Washington, we take on full capitation,” she noted. Still, she said, “We can’t solve the movement from volume to value without looking at data differently. But it’s awfully hard to make those investments without taking on risk-based contracts, because under fee-for-service, you’re taking volume out of your system.”
What’s more, she said, “In the fee-for-service system, the hospital is the center of the system. But we’re talking about moving care out of the hospital-based system. That’s why this is challenging work, because we have polarized incentives, around volume and value. Sometimes when presenting to physicians, I ask them, do you know how much it costs to send your patient to urgent care? The ED? Average hospital admission? Nobody has any idea what anything costs. Somehow, we have this disconnect between what we do as physicians and what happens in the system.” And yet the reality is that an urgent care visit costs on average $150, while an ED visit costs $1,500, and an inpatient admission, $15,000.” Importantly, she noted, as more and more healthcare consumers are pushed into high-deductible health plans, not only physicians, but patients themselves, will become more cost-conscious.
Still, Matthews noted, risk-based reimbursement is absolutely the wave of the future, and Administrator Verma and other senior federal healthcare officials have made that clear, with CMS explicitly pushing for Medicaid to go from 15 percent of payment tied to quality and value now, to 50 percent by 2025; commercial health insurance, from 15 percent now, also to 50 percent by 2025; and Medicare Advantage and traditional Medicare, both to go from their current 30 percent tied to quality and value, to 100 percent by 2025.
How to become successful in working with independent physicians? Engage and educate primary care providers; connect concepts of value for all providers to see; start with a simple balanced scorecard for primary care physicians; and increase risk-based contract lives for more impact and incentive at the independent-provider level.
All three presenters made it clear that the shift into value-based payment and care delivery in U.S. healthcare is inevitable—and that those pioneers who move first will do the best.