Policy Perspective: Francois de Brantes’ Contrarian View on Provider Aggregation

July 7, 2014
As the U.S. healthcare system moves forward more and more deeply into the arena of quality-based purchasing and pay-for-performance, Francois de Brantes of the Health Care Incentives Improvement Institute says the key to true health system reform lies in bundled payments among mid-sized providers

As the U.S. healthcare system moves forward more and more deeply into the arena of quality-based purchasing and pay-for-performance, policy and industry leaders are sorting through a welter of issues around what should be measured, how it should be measured, and what the implications are for the providers, payers, purchasers, and consumers of healthcare, in an environment that is focusing increasingly on accountability, transparency, quality, and cost-effectiveness.

One organization very much involved in the discussion is the Newtown, Conn.-based Health Care Incentives Improvement Institute. As explained on its website, HCI3 “aims to improve healthcare quality and value with evidence-based incentive programs and a fair and powerful model for payment reform.” Among its goals are to “measure health outcomes; reduce preventable care defects; promote a team-based approach to caring  for patients; realign provider payment incentives around quality”; and “reward excellence wherever we find it.”

Among the organization’s upcoming events are upcoming conferences on pay for performance and bundled payments. Francois de Brantes, the organization’s executive director, spoke recently with HCI Editor-in-Chief Mark Hagland regarding his perspectives on payment and policy, and how CIOs and other healthcare IT leaders can play a part in transforming the healthcare system. Below are excerpts from that interview.

How long has your organization been in existence?

Technically, since 2003; the name Health Care Incentives Improvement is about four years old, but the organization itself started out with the name Bridges to Excellence. We transitioned the name to make sure we made clear we had a broader mission.

Francois de Brantes

And how would you articulate in your own words the main focus of your organization in U.S. healthcare right now?

The main goal of HCI3 is really to develop, test, and implement new payment models, as well as other incentive programs that impact the behavior of both providers and payers. So I like to say that we’re a “do tank,” as opposed to a think tank, though of course, we think carefully about what we do! But there a lot of folks doing different things, and my inclination has always been to actually get things done, and learning from doing those things, and spread that innovation.

When you look at ACOs (accountable care organizations), bundled payments, patient-centered homes,  etc., what types of initiatives do you see working best right now? And what are the elements common to those broad initiatives?

It’s a tough question to answer. Let me start from the ground up. The evidence for PCMH effectiveness is very, very limited. In fact, I think it’s going to continue to be limited, principally because the consumption of healthcare in this country is very different today from how it was even 15 years ago. When you look at the percentage of dollars spent on primary care versus specialty care, the percentage spent on primary care is miniscule in comparison. And the types of patients whom PCPs [primary care physicians] see today are kids, for the pediatricians, and adults who require minor, basic sick care, and stuff you can’t deal with by yourself. The moment it goes from basic to more severe, you’re punted off to a specialist.

And it’s not just because of incentives; it’s really because American consumers’ shopping habits have shifted. I try to remind people that fewer and fewer Americans shop at Sears, because we’ve come to realize that specialty shopping provides more expertise and more specific choices. So the notion that you get the bulk of your care in a PCP’s office just doesn’t jibe with the actual patterns of care utilization. So you can do all sorts of things, but it won’t change the reality, unless you force everyone back into an intense gatekeeper-type system.

So you start thinking about broader levels of aggregation. And I think the central divide—and I don’t think there’s evidence or research that supports one or the other—but there is a camp, clearly, that believes that full integration is the only is the only way to assure quality of care—vertical or horizontal ownership, so your uber-ACO model. And the evidence doesn’t support that. We call them ACOs, but we know that they’re essentially large integrated health systems—that that model offers the best, most effective care. There’s some evidence that that works in Medicare, because of price controls; but when it comes to the private insurance realm, the evidence is that the concentration of power only leads to market power and higher prices, from the providers.

So somewhere between atomization and full integration is probably where the truth lies. And the reason I struggle with answering your question is that it’s not clear that we’ve solved that problem in a robust way. So, experimentation and lots of pilots, have historically demonstrated effectiveness, but effectiveness limited to what’s being tested. And whether the payment model is bundles versus capitation—the evidence has been limited to procedural episodes of care, or to specialized care, like transplant or cancer care.

We keep see-sawing between providers having more market power, and payers having more market power. And there have been problems with both scenarios.

Yes, to me, this gets down to the level of looking at beliefs. But our belief is that these poles of attraction between provider consolidation and payer consolidation have essentially ignored the consumer interest. And you’ve had times of higher payer consolidation and high provider consolidation, and neither model results in satisfactory outcomes, because both of these essentially ignore putting the patient at the center of the decision-making process. And this is a problem unique to healthcare, because in any other type of economic activity, the end-user ends up being the central market force shaping that market. Now that we’re edging closer and closer to 50 percent of all insureds bearing a significant percentage of total costs, that dynamic sets up finally the mechanism through which we can reshape the healthcare markets.

And the reason we have been so engaged around bundles, is because ultimately, the bundle represents a consumable product. I have X; that’s what I need help or care for, and that’s what I’m paying a portion of the total cost of care for. If I have diabetes, I care about diabetes. If I have cancer, I care about cancer. If I busted my knee, I care about knee care. Everything else to me as a consumer is abstract. The advantage of bundles is that bundling solves that problem. So I busted my knee, and guess what? There’s a bundle for knee repair. I have diabetes; there’s a bundle that can encompass my diabetes-related care. Once you set it up that way, you can set up true market competition.

Because if I’m a consumer and I have choice, I can now decide where I want to go, and can figure out how much of my out-of-pocket can be consumed by Bundle A versus Bundle B, and I have choice. Now if you want, you can roll up all those bundles into a super-bundle, which ends up being HMO A versus HMO B. And I’m not negating that scenario. But the history of managed care has proven that only 20 percent of consumers, by choice, will opt for full-HMO models, because of the constraint of not being able to get care outside that model. And with the Kaiser model, if it truly is the best thing since sliced bread, why aren’t all Californians enrolled in Kaiser? And the denizens of the ivory towers are constantly saying, that’s what we need in healthcare is an all-Kaiser-type model. But given the option, the premium differentials haven’t been big enough to convince the majority of those who have that choice, to give up the freedom to go where they want in favor of going to a locked-in system. And the premium differential just hasn’t been big enough.

But if we can develop that market for knee replacement or cancer care, that level of competition will create efficiencies that a Kaiser will never be able to match, and you’ll find yourself in exactly the same kind of situation we’ve had in retailing, where the big-box shops can’t compete with…

Will most healthcare consumers ever get to the point of becoming empowered consumers?

A, I think most consumers are empowered today. They’re already spending a lot of money out of their pockets. And consumers are finally saying, look, I’m paying this money out of my pocket, and I can’t get information—so when the Time magazine article came out about pricing, and the series of articles in the New York Times by Jane Rosenthal. And it’s not just the sophisticated middle-class consumers. Anyone in a small business has a $5,000 or $6,000 per year deductible. These people are spending out of their pockets almost the entire year. They’re motivated! They just don’t have the information they need yet. So they’ve been incapable of acting on that motivation. It’s the fact that they have no information to act on.

Maybe some of the information is hard to digest or sift through?

Yes, there’s no question it’s hard to digest, but no one’s yet made a concerted effort to put it out there. And it’s shocking. And basically, everyone should be able to do what Castlight is doing. They’ll present health plan members with high deductibles—they’ll show them ranges of charges for various procedures. So let’s say you have a high-deductible plan, and you’ve used up maybe $500 but you still have $2,000-3,000 to spend under your deductible, and you have to go have a colonoscopy, and so you go online and you go into Castlight, and they will estimate your out-of-pocket expenses under A, B, or C. So you’re getting the information to do the shopping arbitrage. Employers have flocked to this; 90 or so employers have signed up for Castlight. And what are they doing that United or Cigna or Humana couldn’t do? And the answer is, nothing. It aggregates data, based on available historical claims data, and it presents that data to consumers, and it gives them a choice. So there are solutions emerging on the market to allow this kind of arbitrage to occur, but historically, health plans have been loath to provide this kind of provider information.

I just spoke with a CIO at a leading ACO. You basically don’t believe that those will provide value to consumers?

Suspend the current-state landscape for a second, and think about the community where you live, where you’d have these large integrated systems, but also autonomous providers in practices, who could be linked to another via health information exchange. So those referrals between autonomous physicians—so the transmission of information would be done easily, because that would create a powerful mechanism for care coordination. What would the difference be between that and an integrated health system? Only that the integrated system would have employed physicians and administrative overhead. So if you had open pricing competition, who would be more likely to win? I would submit that it’s the autonomous physicians linked together by HIE [health information exchange.

But they would also have no incentive for clinical performance improvement?

But that has to do with the current fee-for-service system. And that goes back to what HC3 does.

But isn’t part of the answer capitation?

Again, I would submit that capitation encourages large-system integration. If that’s all you have in the market, the balance of power actually shifts towards providers. And providers are just going to increase their PMPM [per-member per-month charges]. And everyone else does that, too. So all you’ve accomplished is to create these big health systems that can demand higher PMPM fees. And the notion that you’ll have managed competition? It’s never happened. And consumers flat-out don’t want it. So again, I would submit that if you foster the competition at the level of product that matters to the consumer, it’s not that you couldn’t have those big organizations, but they would have to show value.

Instead, what provider consolidation does is to essentially institute a hidden tax on the community. And if you want to research certain clinical areas, do fundraising the way you that museums do fundraising. And once you strip that stuff out, again, I don’t see many scenarios in which the larger organizations could in fact compete against more focused providers. You take an independent cardiology group, they can totally outshine others on value. And the demands on value need to be very clear and explicit, and tie quality performance to cost performance. And the same rules should apply to everyone.

The only different we’re talking about here is, what level of aggregation makes sense? And it can’t be at the atomized level; but American consumers have rejected the largest integrated health systems. And we just haven’t had enough formulations of that the ideal level of aggregation to be able to say for sure, yup, this is going to be the model. We have educated guesses, because we see positive results, but we haven’t covered the waterfront. So until we see examples of mid-level aggregation, we’ll always see the same old debate.

So we’re talking about mid-sized medical groups and hospitals, then, in terms of an ideal level of aggregation?

I don’t think medical groups have to be huge; the key piece of the infrastructure that’s been missing has been robust health information exchange. And honestly, for some specialties like neurology, the practices could be pretty small. In cardiology, it might need to be a bit larger; but for orthopedists, again, it could be a bit smaller. So it depends on the specialty and on what would be needed to offer that comprehensive care for patients.

But you would agree that there has to be internal benchmarking and performance management and improvement?

Yes. There are a fair number of orthopedic practices out there doing what needs to be done. For example, a few years ago, the state of Arkansas decided that their payment reform activity would be around bundles. So they started a multi-payer effort focusing on pregnancies and deliveries, heart failure, pneumonia, and pediatric asthma—things that make a difference among the Medicaid population. And the metrics were pretty clear, the policy goals were pretty clear, and the behavior shift was very rapid. So we forget that one advantage of smaller organizations is their flexibility in changing systems. Smaller organizations can pivot a lot faster. So I continue to look at instances where you have these broader, statewide policy initiatives, and it’s typically smaller organizations that pivot the fastest. I think that we’ll see a lot more of that. And I think the Bundled Payment for Care Improvement Program under Medicare will bring us a lot more examples. I think we’ll see a lot of providers pivoting quickly to show ways of improving quality and affordability.

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