…(The) 2014 National Scorecard on Payment Reform tells us 40 percent of commercial sector payments to doctors and hospitals now flow through value-oriented payment methods, defined as payment methods designed to improve quality and reduce waste. This is a dramatic increase since 2013 when the figure was just 11 percent.
Suzanne Delbanco, Executive Director of CPR, in the Health Affairs blog
I’ve written before about what economists call “The Penguin Problem” — No one moves unless everyone moves, so no one moves.
The healthcare Payment Penguin Problem goes something like this:
Care Providers: “We’re hesitant to jump into the water. While we understand that fee-for-service payments are perverse, they ARE in our best economic interests. We won’t invest in infrastructure and processes toward value-based care until we believe payers are serious in making the transition.”
Payers: “We’re hesitant to jump into the water. While we understand that value-based payments could improve quality and reduce costs, we don’t know whether care providers are serious in making necessary investments and changes. We also question whether they can pull it off. We’d like to see that providers are serious in making the transition.”
- The 2014 CPR National Scorecard for Payment reform documents that the Payment Penguin Problem has been solved!
- The implications are huge!
Swiss cheese health insurance?
So, so many holes.
Ending insurance discrimination against the sick was a central goal of the nation’s health care overhaul, but leading patient groups say that promise is being undermined by new barriers from insurers. The Washington Post
In the past year, network adequacy has been one of the hot button issues for Qualified Health Plans (QHPs) in the Federal health insurance exchange. Network adequacy has focused on access to care providers and the narrow networks used by many health plans.
In the next year, the big issue will be around benefits adequacy, i.e., lack of coverage and high out-of-pocket expenses incurred due to high deductibles, co-pays, exclusions, etc. My shorthand for this is “Swiss cheese health insurance—so, so many holes.”
The Canary in the Coal Mine Letter
The canary in the coal mine is a recent letter signed by 333 patient advocacy groups (“the Letter”) to HHS Secretary Sylvia Burwell. (When’s the last time you saw a letter endorsed by 333 organizations!)
I’m being asked the same series of questions a lot lately:
Do you think the changes occurring in US healthcare are real? Are we truly moving away from rewarding volume of care under fee-for-service (FFS) and toward value-based payment and delivery? Are the changes past the point of no return? Will the economic interests of the powers-that-be prevent real change from happening, just as they have done in the past?
The phrasing of these questions assumes a split, dichotomous view of the world — that change has/hasn’t yet happened. The questions also mask the underlying and difficult process of transition that people and organizations are going through.
There’s a different way to think about the transformation of U.S. healthcare — transition as a 3-stage process:
William Bridges 3 Stage Transition Model
Here’s a summary of where I’m going with today’s essay:
- Think of Transition as a 3 Stage Process
- U.S. Healthcare—Entering the Neutral Zone
- How Long Will the Neutral Zone Last? Quite a While.
- So What? What are Implications and Actions?
by Brian Klepper
On The Health Care Blog, veteran analyst Vince Kuraitis reviews a report from the consulting firm Oliver Wyman (OW), arguing that the trend toward reconfiguring health systems to deliver more accountable care is more widespread than any of us suspect.
“The healthcare world has only gotten serious about accountable care organizations in the past two years, but it is already clear that they are well positioned to provide a serious competitive threat to traditional fee-for-service medicine. In “The ACO Surprise,” our analysis finds that 25 to 31 million Americans already receive their care through ACOs-and roughly 45 percent of the population live in regions served by at least one ACO.”
OW provides a well-reasoned analysis and conclusions, but I’m skeptical. In discussions with health system executives around the country, I hear some movement toward change, but relatively few organizations are materially turning their operations in a different direction. The specter of policy change is looming, but it is still abstract. As I’ve described before, market forces are intensifying, but they’re mostly still scattered and immature.
A recent analysis of the ACO market by Oliver Wyman market suggests we’re well on our way toward being “there”.
My personal take on this report:
Provocative, fresh, thoughtful, well reasoned, expansive — albeit a bit of a stretch
However, I suspect many others will describe it as:
Speculative, harebrained, unsupported, overly extrapolative, out-to-lunch, wishful to the point of being woo woo
So now that I hopefully have your attention, what’s this report all about? In a nutshell:
The healthcare world has only gotten serious about accountable care organizations in the past two years, but it is already clear that they are well positioned to provide a serious competitive threat to traditional fee-for-service medicine. In “The ACO Surprise”, our analysis finds that 25 to 31 million Americans already receive their care through ACOs—and roughly 45 percent of the population live in regions served by at least one ACO.
Let’s dig in to the report. In this blog post, I’ll summarize their math, surface their critical assumptions and observations, and comment on their reasoning. I’ve indented direct quotations from the report and have italicized wording that spells out the major assumptions.
While I don’t agree with all of Oliver Wyman’s math and assumptions, I applaud them for the process they have gone through. Please take my commentary as “quibbling at the edges” and that overall I’m on board with their methodology and conclusions.
From reading recent headlines, one might easily get the impression that hospitals are resistant — or at least ambivalent — in their pursuit and adoption of accountable care initiatives.
Are Hospitals Dragging their Feet on Accountable Care?
Commonwealth Fund: “only 13 percent of hospital respondents reported participating in an ACO or planning to participate within a year”
KPMG Survey: “(only) 27 percent of [health system] respondents said current business models were either not very or not at all sustainable over the next five years”
Health Affairs: “Medicare’s New Hospital Value-Based Purchasing Program Is Likely To Have Only A Small Impact On Hospital Payments”
The Bigger Picture
Do hospitals today perceive their current business model on the metaphorical “burning platform” — when the status quo is no longer an alternative?
Over the past decade, I’ve seen a number of studies asking people whom they trust among various health care stakeholders. Nurses, pharmacists, and doctors always come out at the top. Beyond that:
- Trust of hospitals tends to be high (60–80%)
- Trust of health plans is at the bottom of the heap (10–20%)
Is this written in stone for the future? I don’t think so…and the dynamics for change are in motion. Please read on.
Here’s the emerging picture I’m seeing:
- Hospitals are dragging their feet in connecting you with your electronic health information.
- Health plans are highly motivated to connect you with your health information.
One of the biggest concerns about ACOs has been their potential to enable market consolidation— that by uniting health care providers the ACO gains market clout and ability to charge higher prices.
While this is a legitimate concern about ACOs, so far it’s not playing out.
On the Perficient Health IT blog, Christel Kellogg writes:
I am hearing that carriers are staying away from ACOs and are not planning on partnering. What have you heard?
This is one of those blip-on-the-radar-screen comments that jarred my attention — and it raises very important questions about industry dynamics.
First, let me expand on the issue. As I’ve written before, there are at least two broad categories of “accountable care initiatives”:
1) Formal Accountable Care Organizations (ACOs) by which care providers contract with Medicare
2) Informal Accountable Care-Like (AC-Like) arrangements between care providers and commercial health plans.
The list of accountable care animals in the forest is likely to keep growing. For example, just this week Oregon announced details for CCOs (Coordinated Care Organizations) for Medicaid.
So how are different stakeholders likely to react to the opportunity of a formal ACO contracting with commercial health plans? Let’s look at this from a couple of different angles.
Last week I wrote about five key differences between formal ACOs (mainly care providers contracting with Medicare) and informal Accountable Care-Like (AC-Like) arrangements between care providers and commercial health plans.
- Transaction costs
- Capital cost
There’s an important 6th difference worth noting:
Formal ACOs will be visible from miles away — think elephants on the Serengeti.
An ACO that wants to contract with Medicare must establish itself as a corporation. The Medicare ACO models have substantial disclosure and reporting requirements. We won’t know everything about formal ACOs, but we will know a lot. ACOs cannot hide.
AC-Like arrangements between care providers and commercial payers could be much more difficult to spot and categorize — think chameleons in the jungle.