Relevant and even prescient commentary on news, politics and the economy.

Hospital Consolidation and ACO’s

Jason Shafrin over at the Healthcare Economist points to this recent paper over at the RWJF. Interestingly the authors find that hospital consolidation increases prices and could decrease quality. Something that many of us have considered in the past.

In concentrated markets, the effects were even more pronounced with price increases over 20% noted.

Competition was noted to increase quality under an “administered” pricing system, ala the NHS in the UK. The evidence for competition increasing quality in a market system was much more mixed.

I have thought this for some time, and have even wrote about the concepts of leverage in the past. For example, I have cited a BNET article before. When one examines the the health markets in Milwaukee and Chicago, which are both midwestern cities, and geographically close to each other, one finds higher prices in Milwaukee, with providers not accepting less than 200% of Medicare. Which does not seem intuitive, as there is far more market competition in the health insurance industry there. In Chicago, one insurer, BC-BS, is rather dominant and prices are lower, with providers accepting 112% of Medicare on average. It would seem to make sense that increasing the leverage of the hospitals and providers through the mechanism of consolidation will increase prices. The same thing happens in Milwaukee, which has no dominant insurer, and therefore is unable to exert leverage over the hospital systems in Milwaukee.

The ACO models as proscribed by the ACA will increase consolidation. By developing an accountable model of care delivery, providers will attempt to consolidate to increase quality and minimize risk exposure in the sense of decreasing reimbursements.

The problem with the RWJF paper, as it rightly notes, is that the study does not really examine integrated health care systems. When you look at consolidation with true vertical and horizontal integration, it is my belief that quality improves even in the absence of competition. True integration in the case of Mayo Clinic and Kaiser also lowers prices.

In essence, I don’t think the problem is consolidation…..I think the problem is consolidation in the absence of integration.

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Health Care Thoughts: Regulatory Bumbling

by Tom aka Rusty Rustbelt

Health Care Thoughts: Regulatory Bumbling

The people who daily manage health care services (and their advisers) have been shocked at the inability of the Obama administration to manage the administrative regs roll out process. The 2009 stimulus act contained multi-year funding for adopting electronic medical records (EMR/EHR) systems.

The funding required “meaningful use” and the published regulations were and are nearly incomprehensible, especially at the physician practice level. EMR/EHRs are making progress but it is largely due to the integration of physician practices into integrated delivery systems.

 Then there is PPACA. The first major regulatory effort were the SSP accountable care organization (ACO) regulations, and that was a disaster. Even the administration’s allies ran for the hills. The administration has spent the last half of 2011 creating new ACO sub programs and revising regulations, and has finally convinced some providers to jump on board the pioneer ACO program.
(Some of the desired innovation and integration is happening, but it is being pushed by fear of the future economics of health care rather than directly by PPACA.) .

 The C.L.A.S.S. long-term care financing program died in its crib. Early on Secretary Sebelius announced the program was not financially viable, and got into a shouting match with Congressional Democrats when she announced she could change the program without Congress changing the empowering statute. There were attempts at CPR, but the program now appears to be really dead.

 The most recent botch (already mentioned in an earlier post here) are the “essential benefits” regulations. As described in WAPO (12/16) the administration punted the decisions to the states. Depending on your perspective, this could be seen as “flexibility” or seen as “surrender.” We are still digesting these rules (it occurs to me multi state employers are going to freak on this). The 2200 pages of PPACA will be backed by many thousands of pages of administrative law.

At the provider and insurer level these regulations are the real meat of the act. A smooth roll out would certainly make PPACA more valuable. Lawyers specializing in health care administrative law are delighted. Consultants and writers are happy as well (I plead guilty). Tom aka Rusty Rustbelt

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Health Care Thoughts: Accountable Care "Smackdown"</

by Tom aka Rusty Rustbelt

Health Care Thoughts: Accountable Care “Smackdown”

The American Medical Group Association represents about 400 very large and sophisticated multi-specialty physicians groups, such as the Cleveland Clinic group and Intermountain (Utah) group.

The Obama administration had counted on these groups to be the first to create Accountable Care Organizations (ACOs), starting with Medicare ACOs in 2012 and then moving to full service ACOs. These groups were more likely to have the huge resources necessary to start an ACO.

On Wednesday the group announced 90% of its members would not participate, because the draft regulations issued March 31st were too prescriptive, too operationally complex, the move to risk sharing is too quick, the gatekeeper and risk management capabilities too much, and the time line too short. The AMGA consensus is the chance of success is close to zero, so why waste resources.

(see my post of 4/6/11: http://www.angrybearblog.com/2011/04/health-care-thoughts-aco-draft.html)

Not to pat myself on the back, but I just finished two papers with essentially the same comments. I’m not that smart, the flaws are just so terribly obvious to anyone with operations or insurer/risk management experience.

If the big 400 cannot chew through this and come up with a workable plan, neither will other physician groups. Based on recent conference attendance many provider organizations are taking the slow down approach.

It appears today only very large very integrated systems owning all of the necessary providers will be in the first wave. This could change for the better, but I doubt it. This could change for the worse though.

Not enough ACOs, no significant cost savings with quality improvement, no deficit improvement, train wreck.

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Health Care Thoughts: ACO Draft Regulations

Health Care Thoughts: ACO Draft Regulations On March 31st the Obama administration issued the draft regulations for Medicare Accountable Care Organizations (ACOs). ACOs are to eventually be the centerpiece of cost savings for the entire US health care system. This is the first peak at how the ACOs might be defined. In the “they never learn” category, the draft regulations are 429 pages long. http://www.ofr.gov/OFRUpload/OFRData/2011-07880_PI.pdf Okay, I read the beast, and have a couple of findings among the many dozens of pages of bureaucratic gibberish. 1. The sections delineating what an ACO should accomplish and how to do it are well formed and should be adoptable without much change. Whether these ambitious goals are attainable is a major question and concern. 2. The feds are not certain who should participate in the first round of Medicare ACOs and have laid out many options that will require a great deal of comment and time to sort out. I suspect the more limited options (physician and physician-extender providers and hospitals) will be used for the first round. It is likely the final regs will not be published until fall, and these ACOs are supposed to be operating January 1, 2012. This is a tight timeline. Tom aka Rusty Rustbelt

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Health Care thoughts: Defining an ACO

Health Care: Defining an ACO
Having recently plowed through about hundreds of pages on Accountable Care Organizations (ACOs) and Integrated Delivery Systems (IDSs), I should know how to define an ACO.
But I don’t know, not exactly. Using an old Supreme Court standard, I know one when I see it, I think, because of certain characteristics.
This is critical because the Obama administration expects to garner huge savings from providers working through ACOs, beginning for Medicare in 2012 (building such systems in less than 9 months is going to be a Herculean task)..
The best formal definition I have seen to date, and it is very general, is the CMS definition for Medicare ACOs, and I quote:
Q: What is an “accountable care organization.”
A: An Accountable Care Organization, also called an “ACO” for short, is an organization of health care providers that agrees to be accountable for the quality, cost and overall care of [Medicare] beneficiaries who are enrolled in the traditional fee-for-service program who are assigned to it (ACO).
It is a start, barely. The ACOs are supposed to be in place 1/1/2012. Administrative regulations were issued in November 2010 and the public comment period ended recently.
In a recent speech DHHS Sec. Berwick offered these “flag and apple pie” characteristics, still very general:

  • the patient and family will be at the center;
  • teamwork will now become “paramount;”
  • respect resources and reduce waste;
  • reinvest where investment counts;
  • measure and manage outcomes partially through electronic health records; and
  • establish a solid health care workforce foundation

Tom aka Rusty Rustbelt

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ACO and health care practices

There was a question on what ACO meant for health care practices and as part of reform of current practices. Rusty sends two links he thinks might help:

A guide to Accountable Care Organizations… from Health Reform Watch offers a glimpse:

Specifically, their findings illustrate that there exists wide variations in the cost of care across the country, and profoundly, that the regions that spend more per patient do not necessarily obtain better outcomes. So what to do? Dr. Fisher believes he has found at least part of the answer: the Accountable Care Organization, known as an “ACO”.

And this one here:

Thinking of selling your practice and switching to a hospital-employment model? If so, you’re not alone. In fact, if you aren’t already working as a hospital employee, you’re in the minority: Hospital employment among doctors has jumped from 25 percent in 2002 to 50 percent in 2008, according to the MGMA, and is probably even higher today.

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