BUILDING A HEALTHIER PITTSBURGH: Rethinking the way we pay for care

Will ACOs improve your health care?

New payment and care models seeking better coordination, lower costs

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Wake County residents are already the healthiest in the state of North Carolina, according to a 2013 survey, but they may end up healthier still if changes to one of their local health systems pan out as hoped.

But will those hopes materialize? For all the hype about new payment and care models -- which are meant to better coordinate medical treatment at lower costs -- there is still uncertainty about whether they actually work as envisioned.

In December, WakeMed Key Community Care became one of 123 new Medicare-related Accountable Care Organizations, or ACOs, participating in Medicare's "shared savings program."

The U.S. Centers for Medicare and Medicaid Services (CMS) program is intended to improve quality care and reduce unnecessary costs. The creation and credentialing of such organizations are the next step for many providers looking toward the future of health care, according to Alwyn Cassil, principal of Policy Translation, a Maryland health policy consultant.

In total, there are now more than 360 Medicare-approved ACOs, caring for more than 5 million U.S. Medicare patients.

"ACOs are kind of an interim step to help providers build the capacity to [assume] more risk for the cost of patient care," she said.

An ACO is a group of hospitals, doctors and health care providers that have agreed to work together to provide more coordinated care to their patients. These groups typically work with a payer -- that is, insurer -- that sets the compensation levels for the providers.

Those providers can share in the savings if they come in below the insurer's target and keep their patient populations healthy, but the providers also share in the risk if they go over budget.

The new reimbursement system seeks to alter the traditional method of Medicare reimbursement, which pays doctors for every visit, procedure and unit of care. Critics of the "fee-for-service" system say it creates incentives for physicians and hospitals to overprescribe and over-treat, in order to rack up fees.

WakeMed Key Community Care is a collaboration between WakeMed Health & Hospitals, WakeMed Physician Practices and Key Physicians. The alliance brings together a network of more than 220 independent primary care physicians with another 250 primary care and specialty providers.

"I think that the providers that are forward-thinking recognize that ultimately there will be payment reforms that will put them more at risk for the cost of care, and having more control over that premium dollar and how that's going to be spent [is] how they're going to remain viable," Ms. Cassil said.

Will savings materialize?

In 2011, the Affordable Care Act started funding ACOs, which essentially accept a flat fee to care for Medicare patients in their area. A group that is successful in lowering costs shares the savings with the insurer, which in this case is Medicare. In the ACO pilot program, the fees are meant to cover a three-year period of care.

Medicare is hoping the new model will save at least 3.9 percent, savings that, if realized, will be split between the ACO and Medicare. Several such Medicare-sanctioned ACOs have been established in Pennsylvania, including in Erie, Philadelphia and Lancaster.

The organizations must meet standards to ensure savings are earned through improving care coordination and providing care that is appropriate, safe and timely -- rather than, say, by denying or over-rationing care. CMS measures performance using 33 quality targets on care coordination and patient safety, appropriate use of preventive health services, improved care for at-risk populations, and so on.

When it comes to the implementation of WakeMed's new plan, patients might not notice a difference in their relationship with their physician, but they will find more services available for them, said Leslie McKinney, president of the board of WakeMed Key Community Care and a physician at WakeMed's Accent Urgent Care.

The patient's pharmacist will work more closely with the physician to make sure patients are receiving the right medication, and services might even be available to help people get to their appointments. In that way, ACOs are an outgrowth of the so-called "patient centered medical home," a model of primary care meant to offer better delivery and better health at lesser cost.

"I really think that they'll notice more resources. There will be more people involved in their care," she said. "There will be more people helping them get the care that they need. By doing that, we hope that it will keep people healthier rather than having many hospital visits for the complex patients."

No matter the terminology -- ACO, patient-centered medical home, vertical integration -- the goal is better coordination of care among the insurer and the provider, and better value as a result.

While these ACOs are only working with Medicare on the financial side, others have independent ACO arrangements with private insurers: Highmark Inc.'s new "Accountable Care Alliance," a network of 500 participating doctors including those from Highmark's Allegheny Health Network, launched last year, and does not participate in the Medicare shared savings ACO program, for example.

Some providers are leaping a step further -- launching their own health insurance carriers, Ms. Cassil said.

"Health reform has certainly added to this already-growing interest in part on the providers in taking on more of the financing fees," she said.

There has been an incredible increase in health care costs over the last 20 years, and many people on the purchasing side haven't gotten an associated increase in the value of what they have been paying for, according to Frank Williams, CEO of Evolent Health, a company that works with hospitals to create value-based care systems.

That's why there is now such intense interest in squeezing more value out of the health care money being spent.

"The one thing that is true, if you look across the last 20 years, is a real failure to control clinical costs for managing a population. The current model has not been able to do that. How do we take care of this population more effectively?" he aked. "I think that's why you've seen more of these provider-payer models emerging."

Vertical integration

Mr. Williams attributes the rise in the number of these organizations -- vertically integrated health firms that offer both health care and health insurance -- to competition in individual markets.

"Someone has decided I'm going to get more business and more lives to manage. ... As a result, when one competitor makes a move, you're starting to see more activity," he said.

While it is much more common for hospitals to start "vertically integrating" by launching a health insurer, cases like Highmark -- an insurer that bought its own hospital network -- are not totally unheard of, according to Ms. Cassil.

"There have been some very big deals that have involved acquisition of physician practices. The insurers see that as a way to get a real handle on trying to coordinate care and keep people out of the hospital," she said.

This arrangement can cause some tension, Ms. Cassil said. A hospital's typical job is to fill beds, but a health insurer focuses on the opposite.

"If you don't need to be there, you shouldn't be there, but the incentives for the hospitals right now under fee-for-services payment [model] is empty beds are not making any money," she said.

Mr. Williams said he hopes to see movement toward a model that provides the best value.

"In Pittsburgh, you have a large insurer and provider," he said. "I hope the side that wins is the one delivering the best product to the patient."

When insurers are more directly partnered with a provider, that entity is now in greater control of what hospital or specialist a patient can visit, and some people worry that care will be "rationed."

But Sister Rosemary Donley, a nursing professor who holds the Jacques Laval Chair for Social Justice in the School of Nursing at Duquesne University, reminds patients that they historically haven't had much of a choice in their hospital.

"Years ago, people went where their doctors told them, and their doctors usually practiced at a certain hospital," she said. "If he or she thought you needed to be hospitalized, he or she would refer you to the place you knew, so patients usually didn't make those decisions."

The big question, of course, is this: Does better alignment and coordination of care among insurer and provider actually result in savings -- and, more importantly, better health?

Different studies come to different conclusions.

But one from March, published in the American Journal of Managed Care, found that practices participating in the Pennsylvania-based Chronic Care Initiative, a multipayer pilot program led by Independence Blue Cross, were able to decrease total costs for high-risk patients by $107 per member per month -- or almost $1,300 a year in the first year of the pilot.

In the second year, savings were $75 per member per month. Those patients also had fewer hospital inpatient stays in all three years of the study.

Yet, a separate study, also published in the American Journal of Managed Care, and also surveying the patients in the Chronic Care Initiative, found that there were no real cost savings, and that patients' health improved in only 1 of the 11 measures being tracked.

"The medical home has gained popularity as a new model of primary care, with the expectation that the approach will produce better and lower-cost health care," said Mark Friedberg, the study's lead author and a scientist at Rand, a nonprofit research organization, to Reuters news service. "Our findings suggest that achieving all of these goals is a challenge."

And CMS released data in February, regarding its shared-savings ACOs, that found of those ACOs that have been around long enough to study, most couldn't beat their payment targets, meaning only one-quarter of the ACOs performed strongly enough from a patient health and total cost perspective to take home a piece of the savings.

Sara Payne:

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