Outsource Magazine

Last month, we began our discussion on US healthcare reform will impact outsourcing providers.  Healthcare reform - officially titled The Patient Protection & Affordable Care Act or PPACA - became law in the United States on March 23, 2010.  In last month’s article we talked about the need amongst outsourcing providers for increased volume demand from healthcare customers and increased contracted price pressure as healthcare insurers also look to curb their administrative overhead expense.  I want to thank all the people who wrote to me directly asking about what the PPACA or healthcare reform really means in terms of changing the US healthcare market.  I believe we can have a better discussion of the new IT challenges, geographic demands, and new product demand, once we understand the paradigm shift that PPACA represents for the US healthcare industry.

Healthcare reform began its journey on February 24, 2009, when President Barack Obama addressed a joint session of Congress and said, “Let there be no doubt: healthcare reform cannot wait, it must not wait, and it will not wait another year."  What followed after that was a series of compromises and promises that eventually led to the passage of PPACA which was signed into law on March 23, 2010. 

The PPACA estimated savings of $143 billion over ten years as projected by the Congressional Budget Office and Joint Tax Commission and was supported by the American Medical Association (AMA) as well as other high-profile related trade organisations.  Why are we forcing a change in healthcare delivery?  While some say universal coverage is a right, others point out numerous ways to find holes in the math and the future of the US budget deficits. 

Do the November 2 elections tell us anything about the future of PPACA?  According to the Kaiser Family Foundation, Midterm Election Exit Poll, the economy and anti-incumbent sentiment dominated returns, with three out of five voters listing the economy as their primary concern, while health reform was the primary issue for one in five voters.  While many Americans complain about healthcare reform, it does not seem to be driving them to the polls. 

Nevertheless, with our recent elections, many Republicans are working to reform or repeal certain components of the act.  Recently the state of Texas sued, stating the PPACA was unconstitutional because it forced all Americans to buy health insurance.  As many as 19 other states have cases before courts challenging the extension of Medicaid or other provisions.  While these cases are the talk of the news, it is certain that these cases will be determined at the Supreme Court level. 

As I survey my colleagues about PPACA, there seems to be an equal split between enthusiasts and those that prefer to take a wait-and-see approach.  There remain a number of undefined regulations.  But while many areas of grey remain, most believe that we can count on the main provisions, such as Accountable Care Organisations (ACOs) and the Medicare Shared Savings Program surviving as they are integral to bending the cost curve downward and ensuring the sustainability of the program.  David M. Cordani, President of CIGNA, in a recent CNBC interview stated that CIGNA healthcare is investing in 11 ACOs because they are seen as the future of medical delivery systems in America.  I do think we will see some changes, for example the erroneous W-2 provision and penalising FSA limitations will most likely be voted out next year.

So, what are Accountable Care Organisations and why do we need them?  Elliot Fisher, MD and Director of the Dartmouth Center for Health Policy Research is quoted as stating, “An Accountable Care Organisation is a local network of providers that can manage the full continuum of care for all patients with in their provider network.”¹  The Mayo Clinic, the Geisinger Health System, and the Carilion Clinics are often noted as successful examples of ACO’s.  Phillip Ronning, in Becoming Accountable, states that, “the true opportunity lies not in building an accountable care organization – but in becoming accountable for delivering value to the patient.”²  This concept represents the paradigm shift that is PPACA and what holds the real value of the law. 

In the new model, the delivering value to the patient through coordination of care, physician efficiency, and physician productivity will become the drivers for financial reward.  ACOs move the industry away from the traditional fee-for-service model and instead replaces it with a patient/primary care physician experience and outcomes model.  Volume, growth and cost data are no longer the drivers for compensation. 

Comparing the old and proposed health delivery models, one can see that the primary drivers of our delivery model have changed.  Chris Hottinger, President of Strategic Business for CFH and Associates and Northern California Board Member of HIMMS, stated in an interview for this article: “We are set up for disruptive change when instead we need incremental change where we bend the cost curve down without negatively impacting customer quality of care.  We need to develop the financial tools and data analytical methodologies that will allow us to actually improve quality of care by aligning financial incentives.  For example, there needs to be an incentive for primary care physicians to take on the added responsibility for coordination of care and increased productivity, while maintaining current levels of quality, or better.  Another example might be the creation of specialised hospitals rather than all hospitals having redundant departments which drive up the cost curve.  An effective ACO delivery model with aligned financial model would allow us to optimise outcomes and minimise costs.”

I like to think of the ACO model as turning the current delivery system upside-down.  By looking at the following diagram, one can see where the power is shifting to under the new model.   Where payors and insurers used to hold the power, in the future model, patients and the PCP will hold the power.  Financial incentives will be based on outcomes and experience rather than volume and fee for service.

As one can see, it is a dramatic paradigm shift that will occur in the Medicare and Medicaid markets first.  Properly implemented, it can be very successful and adopted by the private sector provided they have the data analytical tools, analytical techniques and expertise, lean processes, and willingness. These factors together add up to form the bar the industry must leap for a successful adoption. 

The following excerpt from an article entitled 'The Physician's Place in the ACO', by Philip Betbeze, sums up the components of the argument quite well.  The article reads, “Dennis Dahlen, CFO at Banner Health in Phoenix…The payment reform modeling in the healthcare reform [law] is probably the sugar that makes the medicine go down," he says. "Whether it's bundling or an ACO, it provides a currency to work with physicians and other providers for that coordination. Absent that currency, we actually mostly have barriers to working cooperatively."³

“Despite the fact that, in some cases, physicians might not directly control how the bundled payment is distributed among the entities responsible for a patient's care, the physician is going to have to be in a key leadership role”, says George Mayzell, MD, MBA, who is chief patient care officer at Methodist Le Bonheur Healthcare, a seven-hospital system in Memphis, TN, which also owns home health centres and a number of outpatient facilities in the area.

"That's the way this will work," he says of the physician's role in the ACO. "Ultimately, they decide the quality of care and the cost through the mighty pen. If it's an IPA of docs who understand it's about the patient and quality and managing that financial risk, why can't they have the money and bring the other players to the table?" he asks. "It's not about who's calling the meeting—you'll see different models of ACOs in different communities," he says, mentioning Geisinger Health System, Summa Health System, and others as ACO leadership.³

Ask yourself today: how is my company positioned to support this new delivery model.  What new products and services might be needed?  How can my company support the Health Care Exchange Process and capture a piece off that business?  Does my company have a strategy?  Do I have a team assigned and working now?  Physicians are being challenged to improve quality of care, improve outcomes, while lowering costs. There are also new compliance requirements that lend themselves to outsourcing. What are they - and are you ready?  We will discuss these topics in next month’s article.

Bibliography:
1.    ACOs: Preparing for Medicare’s Shared Savings Program, Phil Ronning, August 2010, p 2.
2.    Strategic Financial Planning, Becoming Accountable, Phil Ronning, Summer 2010, p 1-3.
3.    'The Physician's Place in the ACO', by Philip Betbeze, Health Leaders Media, November 15th, 2010, p 3.