Managed Care Organizations� Response to Health Care Reform
As noted in the September/October 2010 issue of the Health Care Report (http://www.bw.edu/academics/bus/programs/hcmba/nl/archives/QHCR_Sept_2010.pdf ) the passage of The Affordable Care Act (ACA) will impact the future role of MCOs in a number of ways. Specific parts of the law that will have the most impact on MCOs include the following: limitation relating to medical loss ratio; health insurance exchanges and regulations relating to health risk underwriting.
The world of the MCO is also changing from a number of other perspectives. Large integrated healthcare systems are becoming more of the norm in communities throughout the country. These integrated systems will gain even more market power as a result of passage of Accountable Care Organizations. Some of these integrated systems will, over time, also market directly to employers (mostly large self-insured employers) or large purchasing coalitions as direct providers of healthcare services, and as a result minimize or eliminate the need for MCOs in those cases.
Some MCOs, especially in large metropolitan areas, will enter into exclusive contracts with Accountable Care Organizations using some form of risk arrangements as the primary form of payment (bundled payments, global fees, episode payments, capitation, etc.). These new products would mirror the HMO products of the 1990s that in most cases were only successful on the West Coast and part of New England.
Some MCOs will also look to enter into the provider side of healthcare. MCOs have the resources, technology and expertise to have an impact in selected geographic areas as well as medical services niches to be successful.
This would not be the first time that for-profits or insurance companies attempted to enter the provider world. During the 1990s, for-profit corporations such as Columbia HCA, HealthSouth and MedPartners shook up the provider world by aggressively acquiring hospitals, outpatient clinics and physician practices throughout the country. The arrival of Columbia HCA in many local marketplaces was a key catalyst of many of the non-profit hospital mergers that occurred throughout the country (including in Northeast, Ohio).
Blue Cross & Blue Shield of Ohio (the predecessor to Medical Mutual of Ohio), made headlines by acquiring hospitals in Toledo as well as northeast Ohio. Blue Cross & Blue Shield of Ohio was to become the health insurance arm of Columbia HCA, which would have evolved to a Kaiser like model. All of this never resulted because of legal issues at both Blue Cross & Blue Shield of Ohio and Columbia HCA. Ironically, HealthSouth also ran into legal issues with Medicare that also derailed their plans on becoming a major player in the outpatient clinic arena.
Fast forward to 2011, Recently, Pittsburgh insurer Highmark Inc. (part of the Blue Cross & Blue Shield family), struck a deal to acquire the second largest hospital chain in its region, an ambitious, controversial step that would further blur the lines between those who pay for medical care and those who provide it.
Under the tentative plan, nonprofit Highmark will pump as much as $475 million into the five hospitals West Penn Allegheny Health System, which has been operating in the red for the past five years.
One acquisition does not make a trend, but in various forms we are already seeing MCOs starting to enter into the provider market. In some cases it is niche markets, such as base-line primary care services that focus on wellness and prevention.
Another new entrant in the primary care market is Wal-Mart. http://www.kaiserhealthnews.org/Stories/2011/November/09/walmart-primary-care-medical-services.aspx?p=1 Wal-Mart recently announced that it is their strategic goal to be the largest provider of primary care services in the country. As a side note, nurse practitioners and physician assistants are playing a greater role in these models.
Integrated non-profit hospitals will still be the norm in most metropolitan areas, but the combination of independent minded physicians, physician groups, advances in technology on the outpatient side, cost quality transparency that can incite competition, and the increasing cost of healthcare both from the consumer and employer perspective, could indeed lead to a more creative model of ownership on the provider side of the equation.
Finally, as the financial stakes increase in healthcare it may also lead to the reemergence of the for-profits on the provider side of healthcare.
Accountable Care Organizations (ACOs)
The ACO model (https://www.cms.gov/ACO/) is one of the centerpieces of the Accountable Care Act. Ideally, ACOs are seen as the vehicle to reduce the rate of increase in health care costs over time, while also improving the coordination and quality of care of the patients. But, in reality, ACOs are not the "Field of Dreams." "If you build them, cost savings and better quality may not come."
ACOs, no matter how effectively developed, will not be able to have a real impact on healthcare cost trends if the current Medicare payment methodologies are the dominant form of provider reimbursement. Key to long-term success of Accountable Care Organizations (ACOs) will be the rapid evolution of Medicare's current payment methodologies. Medicare's current payment methodologies reward overutilization, and does not incentivize cost-effective quality care on the part of providers.
Organizational inertia and resistance to change will be a major challenge for ACOs. Inadequate physician leadership, which plays a critical role in the success of ACOs, could also be a major barrier to success. In order to truly break down these historical barriers to cost effective quality care there needs to be real financial incentives in place that both significantly reward success but also hold providers financially accountable. This financial accountability can only be achieved by integrating a "strong risk component" into payment methodologies of all ACOs.
Finally, over the last few months, I have had the opportunity to speak to various groups who are involved in creating ACOs within their own organizations. While most of these people support the theory behind ACOs, a clear majority did not believe that they will be successful in achieving real cost savings. As one executive noted, as long as the majority of revenue to a hospital flows through a "fee for service environment," there would be no real incentive to change the business model that feeds into it. See the next section on payment reform for additional observations and recommendations on this issue.
Medicare Payment Reform
As discussed in a prior issue of the BW Health Care Report (April/May 2010) there needs to be an aggressive timeline for the implementation of payment methodologies that would lay the foundation for a true "health system" vs. the costly "sick system" that exists today. While there may be different types of payment methodologies that would incent such a transition, the common denominator in all of them should be a risk component that rewards success and promotes financial and quality accountability.
Payment methodologies that could accomplish both objectives would be the following: global/bundled payments that include all services for an episode of care (e.g. hospital, physician, pre and post care, etc.), capitation, percentage of premium, etc. These risk/reward payment methodologies would focus on both inpatient and outpatient settings as well as for management of Medicare members with chronic diseases.
Payment reform in the hospital setting (e.g. global fees/bundled payments) should be fast tracked for all hospitals since it can build off the current Diagnostically Related Groups (DRG) system. An aggressive timeline may seem too radical for some, but it probably is no less radical than the short timeline that was used to transition hospitals from cost reimbursement in the 1980s to DRGs.
The next evolution of global fees/bundled payments should be some form of capitation. Probably the best approach to implement capitation or a percentage or premium for ACOs or integrated provider networks would be to partner with Managed Care Organizations (MCOs) through Medicare Advantage. Obviously, capitation may not be appropriate for all ACOs or integrated networks of providers, but when appropriate, the partnership between the ACO and the Managed Care Organization could further facilitate the evolution of our "sick system" to a real "health system."
Finally, as noted in the prior issues of the BW Health Care Report, our healthcare system is shaped by how we pay for services and what we pay for. The government, on the federal and state levels, is already responsible for almost 50 percent of U.S. healthcare related expenditures. Medicare is by far the biggest payer of health services and, as a result of this financial leverage is the major influence on our current healthcare system. In fact, the individual private sector managed care organizations (MCOs) have mostly followed Medicare's lead, particularly regarding reimbursement methodologies, since they lack the financial leverage to effectively influence provider behavior on their own.
Federal Guidelines on Coverage for Preventive Care
In a perfect world, there'd be no limit to necessary preventive care. But, given our scarce resources, and our competing societal priorities, the definition of "necessary" grows fuzzy. As a result of this dilemma, we need to be willing to take on tough, politically unpopular issues.
I do believe there is merit in evaluating recommendations from the Institute of Medicine (IOM) concerning factors HHS should consider in drawing up the minimum benefit package as it relates to preventive care.
Given our scarce resources, we need to be willing to take on tough politically unpopular issues. Based upon a clinical cost-benefit perspective, some preventive medicine mandates may make financial and clinical sense only for a certain targeted group of patients. These will not be easy decisions as illustrated by the following recent well-publicized event.
In November 2009, the U.S. Preventive Service Task Force published new guidelines for breast cancer screening (USPSTF, 2009). The new recommendations turned the preventive screening world upside down. Reviewing several screening modalities, the task force recommended against routine mammography screening for women between the ages of 40 and 49 years. Regular biennial screening should commence at age 50 and continue until age 74.
Even though the recommendations apply to women without a family history of breast cancer and to those without genetic mutations associated with breast cancer, patient advocacy groups including the American Cancer Society and the Society for Breast Imaging were quick to criticize the recommendations.
The current American Cancer Society guidelines recommend that women in their 40s should be screened annually. While mammography screening saves lives, how many women must be screened to save one life? The Task Force provides evidence that shows over 1,900 women from 40-49 years old must be screened to save one life. For women between 50 and 59 years old, the number is 1,300. And for women in their 60s, the number drops to 377. Thus a decade of screening will add an average of 5 days to the lifespan of a woman in her 40s. But for the one woman whose cancer is detected with those 1,900 scans, the difference is literally life and death. What strategy makes sense?�(Health Economics and Policy, Fifth Edition, James W. Henderson, South-Western Cengage Learning, Page 133)
Which of the above guidelines makes the most sense (The Task Force or the American Cancer Society (ACS))? In isolation, the ACS guideline that saves lives makes the most sense, but given that we do not have unlimited resources, we cannot make such decisions in isolation. We need to make choices, and sometimes those can be very difficult choices. From a governmental perspective would these incremental dollars be better spent on prenatal care, shelter for the homeless, preschool education, the economy, the fight against terror, etc.? Since these guidelines also impact private sector employers, would these dollars be better spent in reducing employer healthcare costs, decreasing the number of the uninsured, etc.? This is obviously an over simplification of the issue, but it does illustrate the importance of making decisions that are supported by facts, not political persuasion.
Another more recent recommendation has been issued by the United States Preventive Task Force, �Healthy men should no longer receive a P.S.A. blood test to screen for prostate cancer because the test does not save lives overall and often leads to more tests and treatments that needlessly cause pain, impotence and incontinence in many. This recommendation is based on the results of five well-controlled clinical trials and could substantially change the care given to men 50 and older. There are 44 million such men in the U.S., and 33 million of them have already had a P.S.A. test - sometimes without their knowledge - during routine physicals.
As the P.S.A. test has grown in popularity, the devastating consequences of the biopsies and treatments that often flow from the test have become increasingly apparent. From 1986 through 2005, one million men received surgery, radiation therapy or both who would not have been treated without a P.S.A. test, according to the task force. Among them, at least 5,000 died soon after surgery and 10,000 to 70,000 suffered serious complications. Half had persistent blood in their semen, and 200,000 to 300,000 suffered impotence, incontinence or both. As a result of these complications, the man who developed the test, Dr. Richard J Ablin, has called its widespread use a "public health disaster."
Of the trials conducted to assess the value of P.S.A. testing, the two largest were conducted in Europe and the United States. Both demonstrate that if any benefit does exist, it is very small after 10 years, according to the task force's draft recommendation statement.
The European trial had 182,000 men from seven countries that either got P.S.A. testing or did not. When measured across all of the men in the study, P.S.A. testing did not cut death rates in nine years of follow-up. But in men ages 55 to 69, there was a very slight improvement in mortality. The American trial, with 76,693 men, found that P.S.A. testing did not cut death rates after 10 years. (U.S. Panel Says No To Prostate Test for Healthy Men,� Gradiner Harris, The New York Times, October 7, 2011)
While there is opposition to this recommendation from the Task Force from advocacy groups and some drug makers and doctors, it is hard to refute such findings from this impartial task force recommendation that is based on controlled and large studies. The issues relating to coverage for preventive services will not be easy. Lives are indeed at stake, but there also needs to be recognition that our resources are not unlimited and there indeed may be a better use of our societal funds (e.g. education, jobs, food banks, etc.).
The following is a link to a Congressional Budget Office Report on the cost-effectiveness of preventive medicine and wellness programs:
Health Insurance Exchanges
Should states play an active or a passive purchasing role in regards to Health Insurance Exchanges?
The following are my comments from the last issue of the Quarterly relating to States role in Health Insurance Exchanges (http://en.wikipedia.org/wiki/Health_insurance_exchange). This is an important issue that bears repeating: