Corporate Research Group’s Weblog

Notes HHS: “The Pioneer ACO initiative will encourage primary care doctors, specialists, hospitals and other caregivers to provide better, more coordinated care for people with Medicare and could save up to $1.1 billion over five years.”  Other ACO options — like the Medicare Shared Savings Program — remain available to providers.

1. Allina Hospitals & Clinics
2. Atrius Health Services
3. Banner Health Network
4. Bellin-Thedacare Healthcare Partners
5. Beth Israel Deaconess Physician Organization
6. Bronx Accountable Healthcare Network (BAHN)
7. Brown & Toland Physicians
8. Dartmouth-Hitchcock ACO
9. Eastern Maine Healthcare System
10. Fairview Health Systems
11. Franciscan Health System
12. Genesys PHO
13. Healthcare Partners Medical Group
14. Healthcare Partners of Nevada
15. Heritage California ACO
16. JSA Medical Group, a division of HealthCare Partners
17. Michigan Pioneer ACO
18. Monarch Healthcare
19. Mount Auburn Cambridge Independent Practice Association (MACIPA)
20. North Texas Specialty Physicians
21. OSF Healthcare System
22. Park Nicollet Health Services
23. Partners Healthcare
24. Physician Health Partners
25. Presbyterian Healthcare Services – Central New Mexico Pioneer ACO
26. Primecare Medical Network
27. Renaissance Medical Management Company
28. Seton Health Alliance
29. Sharp Healthcare System
30. Steward Health Care System
31. TriHealth, Inc.
32. University of Michigan

A tally of 164 accountable care organizations shows that 99 (60%) are sponsored by a hospital or health system, 38 (23%) by an independent practice association, and 27 (17%) by an insurer.  The tally, published by consulting firm Leavitt Partners (Salt Lake City, UT), found that the vast majority of states had at least one ACO.  California had 17, the most of any state.

From Walter Isaacson’s biography of Steve Jobs, who died of cancer this year:

Jobs allowed his wife [Laurene Powell] to convene a meeting of his doctors.  He realized that he was facing the type of problem that he never permitted at Apple.  His treatment was fragmented rather than integrated.  Each of his myriad maladies was being treated by different specialists — oncologists, pain specialists, nutritionists, hepatologists, and hematologists — but they were not being coordinated in a cohesive approach…”One of the big issues in the health care industry is the lack of caseworkers or advocates that are the quarterback of each team,” Powell said.  This was particularly true at Stanford, where nobody seemed in charge of figuring out how nutrition was related to pain care and to oncology.  So Powell asked the various Stanford specialists to come to their house for a meeting that also included some outside doctors with a more aggressive and integrated approach….They agreed on a new regimen for dealing with the pain and for coordinating the other treatments.

Ever since David Cordani took over as chief executive of Cigna, the company has hammered home its strategy of “go deep, go global, go individual.”   So it comes as a surprise that the company is now going Medicare in a big way, announcing the acquisition of HealthSpring for $3.8 billion or $55 per share.  That’s a 37% premium over HealthSpring’s Friday close.  The deal will increase Cigna’s Medicare Advantage membership nearly four-fold to about 457,000 lives. 

The purchase price works out to about $11,000 per member for HealthSpring’s 336,000 Medicare Advantage lives, but it’s actually a bit less because the deal includes 835,000 Medicare Part D members and 1350 Medicaid members.  Cigna had just 121,000 Medicare Advantage members as of June 30, down considerably from a year earlier.  Cigna has no Medicaid members.

The deal also marks a return to large-scale consolidation among health plans — a trend many predicted would return following healthcare reform.  A complete assessment of the deal and Cigna’s renewed push into the government market will appear in this week’s Health Plan Market Trends.

Correction (Oct. 26): Number of Medicaid lives was originally reported incorrectly.

Carl McDonald of Citi on the final regulations for Accountable Care Organizations:

The final Accountable Care Organization (ACO) regulations are out, and the changes are meaningful enough that ACOs now have the potential to be a much bigger competitive threat to the Medicare Advantage industry than was the case previously. The financial incentives for providers are better, and ACOs will now have real time info on their members, rather than finding out after the fact who was actually enrolled. Providers won’t face nearly as much anti-trust scrutiny as the initial rule envisioned.

Six years before the federal government came out with its regulations for ACOs, Blue Cross Blue Shield of Michigan (Detroit) had already launched its own effort to promote coordinated care among physicians.

Since 2005, BCBS-MI has offered physicians financial incentives not only to meet quality and cost savings goals but to invest in the development of patient-centered medical homes and coordinated care capabilities.

In the 12 months ended July 1, 2011, for example, BCBS-MI paid out more than $75 million to 11,274 physicians as part of the company’s Value Partnership program. That figure is expected to rise to $110 million for the 12 month ending July 1, 2012. According to David Share, M.D., program vice president, half the payments will reward results and half will reward the development of coordinated care capabilities.

BCBS-MI announced earlier this year it is expanding the effort to reduce fragmentation in the healthcare system by rewarding physicians and other providers for better integrating care across the healthcare spectrum.  This Organized System of Care initiative has similar long-term goals to ACOs.  But Share argues there is an important difference. 

The government’s approach to ACOs, he argues, is top-down, i.e., follow these rules, makes investments, and if you save money you’ll get some rewards.  The problem is organizations don’t yet know what works and what doesn’t when integrating care as part of an ACO, he says.  “It doesn’t make sense to predetermine everything,” he says. “It’s stultifying.  It squelches creativity.  It’s stacked against organizations willing to take risks and try new things,” he adds.

Complete coverage appears in the September issue of ACO Market News.

Ten states have already enacted legislation to regulate or promote ACOs in 2011, with a wide variety of other bills pending, according to the American Academy of Family Physicians. All told, 27 states have 71 ACO bills pending or passed in 2011. Legislation varies and concerns things like establishing ACO demonstration projects, testing Medicaid ACOs, encouraging formation of private-sector ACOs, evaluating ACO payment structures, and incorporating ACOs into managed Medicaid programs.

David Share, M.D., vice president of Value Partnerships for Blue Cross Blue Shield of Michigan (Detroit), commenting on the federal government’s regulations concerning development of ACOs in a soon-to-be-publishing article in ACO Market News.

It doesn’t make sense to predetermine everything.  It’s stultifying.  It squelches creativity.  It’s stacked against organizations willing to take risks and try new things.

There are 16,865 physicians participating in medical homes, according to data from the Patient-Centered Primary Care Collaborative, up from about 10,000 physicians two years ago.  Still, the number represents less than 2% of total physicians in the U.S. and less than 5% of primary care physicians.  The Blue Cross Blue Shield of Michigan PCMH Program has the most participating physicians with more than 8000. No other PCMH initiative in the listing had more than 1000 participating physicians.

UnitedHealth Group (Minnetonka,MN) confirms that it has acquired the management assets of Monarch Healthcare (Irvine,CA), an independent practice association representing 2300 physicians.  The deal doesn’t include any of the actual physician practices affiliated with Monarch, but rather the IPA assets, which will become part of United’s Optum division.  Terms of the deal weren’t disclosed. 

A United spokesman had no comment on any “grand strategy” behind the deal, and Monarch didn’t return calls for comment.  The spokesman did say United has “a track record” for managing physician practices.  He points to United’s 2008 acquisition of staff-model HMO Sierra Health Services (Las Vegas), which owns the Southwest Medical Associates multi-specialty physician practice.  United also owns two other California IPAs: AppleCare Medical Group and Memorial HealthCare IPA.

So what’s in it for United?  That’s not exactly clear.  But consider that Optum offers a wide variety of products and services to physicians, including solutions for coding and billing, cost control, clinical quality, electronic data interchange, electronic health records, practice management, and financial management.

At the very least, United can use the Monarch acquisition to push these services down to IPA-affiliated physician practices.  It can also use Monarch as a test-bed and proving ground for Optum’s expertise.  It would be a similar approach to the one taken byAetna, which plans to use its acquisition of health information exchange technology vendor Medicity as a platform for pushing clinical decision-support applications to physician practices – a cornerstone of the company’s ACO strategy

In addition to targeting revenue streams beyond the core health insurance business, the strategy appears to be aimed at ensuring that insurers stay relevant as IPAs begin to take risk and perhaps even contract directly with employers.

But owning IPAs is likely to be a tricky proposition for a health plan and open to potential conflicts.  For example, WellPoint’s Anthem Blue Cross (Woodland Hills, CA) – a competitor to United – already has an ACO arrangement with Monarch.  A United spokesman says Monarch will continue to contract with all insurers.

There’s good news and bad news for the Blue Cross Blue Shield of Massachusetts Alternative Quality Contract global capitation program.  A study published this month in the New England Journal Of Medicine finds the program resulted in healthcare cost savings of about 1.9% and improved quality.  However, the study says, “The savings associated with the intervention do not imply that total payments made by BCBS declined.”  After factoring in quality bonuses, shared savings and investment, payouts by BCBS-MA actually rose.  Notes the study:

The AQC was associated with modestly lower medical spending and improved quality in the first year after implementation. The savings derived largely from shifting outpatient care to providers who charged lower fees and were seen primarily among high-risk enrollees….The improvements in quality are probably due to a combination of substantial financial incentives and BCBS data support. AQC quality bonuses are much higher than those in most pay-for-performance programs in the United States, since they apply to the entire global budget rather than to physician services alone or PCP services alone.

Here are the headlines from the April 2011 issue of ACO Market News:

• Mercy/St. John’s Annual ACO Costs Run $350,000 to $400,000
• Community Health Network Takes Cautious Steps toward an ACO
• Cigna AZ Clinic Uniquely Positioned for ACO – Begins Tiered Network Pilot
• Midwest IPA Sees IT as Biggest Challenge, Expense in Establishing an ACO
• Commonwealth Fund Suggests 10 Ways to Ensure Medicare ACOs Succeed
• Aetna to Acquire Leading TPA Prodigy for $600 Million – A Sign of the Times
• BCBS-FL Pilots Bundled Payment for Radical Prostatectomy with MSI

A Commonwealth Fund study suggests 10 ways to CMS can ensure Medicaid ACOs succeed:
 Source: The Commonwealth Fund

Here are some of the featured speakers at the ACO Provider Forum, June 24, 2011 in Chicago.

Tom James, M.D., Medical Director, Kentucky Operations, Humana Inc.
Keith Pugliese, Vice President of Accountable Care and Public Policy, Brown & Toland
Scott Saran, M.D., Chief Medical Officer, Blue Cross Blue Shield ofIllinois
Norm Wu, CEO, Qliance Medical Management
Carl Mercurio, President, Corporate Research Group

Whether you’re an experienced ACO or a newbie, HHS has a shared-savings plan for you.  Rules released by HHS propose two separate financial models that allow participating ACOs to share in savings relative to Medical expenditure targets for a risk-adjusted population of patients.

The “two-sided model” is a three-year contract designed for organizations with experience managing financial risk.  Under this model, ACOs would receive 60% of shared savings – assuming the ACO also meets certain quality requirements.  However, ACOs would be at risk for a portion of expenditures that exceeds targets (5% in year one, 7.5% in year two and 10% in year three).

The “one-sided model” is a three-year contract designed to be “an entry point for organizations with less experience managing care and accepting financial risk.”  These might include physician organizations and small ACOs that need to “gain experience with population management.”  ACOs would receive 50% of shared savings in the first two years of the contract with no downside risk.  In the third year, the contact would automatically switch to a two-sided model with both upside and downside risk.  Shared savings are net of a 2% threshold.

Proposed ACO rules released yesterday by HHS project that up to 5 million Medicare beneficiaries will receive care from providers participating in ACOs, with savings from the program expected to be $510 million over three years from 2012 through 2014.  HHS says many of the beneficiaries served by ACOs are expected to be located in high-cost areas of the nation, suggesting the ACO program “can have a significant impact on lowering Medicare expenditure growth.”  (Note: the savings projections assume assignment of 1.4 million to 4 million beneficiaries to ACOs over the first three years).

In other words, up to 11% of the nation’s 45 million Medicare beneficiaries will be served by an ACO.  In comparison, about 11 million — or 24% of total Medicare beneficiaries — are enrolled in a Medicare Advantage plan.  I hate to break it to the health insurance industry, but a successful Medicare ACO program — i.e., one that lowers costs and improves quality – can only put additional pressure on Medicare plan profits and prospects.  The chart below from HHS shows projected high-end, low-end and median savings from Medicare ACOs.

  Source: HHS

Now available for public comment: 429 pages of proposed ACO rules from HHS.

Babette Apland, senior vice president of health and care management at HealthPartners in her keynote address at the New Directions for Health Plans conference, Friday, March 25:

If ACOs are going to take risk then why do we need health plans?

Here’s an interesting chart from the San Francisco Health Service System illustrating a steady migration among enrollees to Kaiser’s staff-model health plan and away from Blue Shield of California.  In an attempt to stem the loss of share, Blue Shield-CA has entered into an ACO with Brown & Toland and Sutter’s California Pacific Medical Center.  Complete coverage in ACO Market News.

How does no HMO premium rate increase sound?  That’s what the city and county of San Francisco will get for the plan year ending June 30, 2012 for 26,000 employees, dependents and retirees as part of two ACO initiatives involving Blue Shield of California, local hospitals and physician groups.  The initiatives will commence July 1, 2011 and run at least 12 months.  Complete details appear in ACO Market News.

Here are the headlines from last month’s issue of ACO Market News.

• Qliance to Expand Number of Direct Medical Home Clinics in 2011
•  Blue Shield in ACO Arrangement Serving 26,000 San Francisco Employees
• WellPoint Sees Clinical Quality Improvements at CO, NH Medical Homes
• Reform, Competition – Not Employers – Are Driving ACOs, Survey Says
• 47% of Physicians Think ACOs will Reduce Profits

Qliance Medical Management (Seattle) typically charges patients about $65 per month for unlimited access to the 12 physicians in its three clinics — generating three times the per member payments a clinic typically gets from traditional insurance, reports Kaiser Health News: 

Bruce Henderson joined Qliance when its first clinic opened in 2007. Although at the time he had health insurance through his job, Henderson, now 63, was soon laid off. Now he pays Qliance $79 a month for primary care and carries a catastrophic medical plan with a $10,000 deductible, for which he pays $225 a month.

Henderson has high blood pressure, high cholesterol and Type 2 diabetes. Working with his Qliance doctor, he switched to lower-cost medications and reduced his monthly out-of-pocket costs from $500 to $100. He goes in regularly for blood work and exams to keep his diabetes in check. Periodically he also has early skin cancers removed and last month was in three times for a cyst removal

Source: Qliance

Healthcare reform and competition — not pressure from employers — are driving ACO development, according to a survey of commercial payers.  The survey, sponsored by technology company MedeAnalytics (Emeryville, CA), also finds that “there is a general uncertainty about how funds will be distributed from the payer to the ACO, as well as within the ACO.”  (Addition: March 2, 2011: the data is based on survey responses from about a dozen top commercial payers).

 
Source: MedeAnalytics

Scott Gottlieb, M.D., a fellow at the conservative American Enterprise Institute, suggests in this Health Policy Outlook that the Obama Administration may view accountable care organizations as a replacement for traditional health plans and may be crafting rules that provide ACOs with favorable treatment in health insurance exchanges.

If ACOs contract directly with patients on a health exchange by setting themselves up as entities that resemble staff-model HMOs (similar to the way Kaiser Permanente operates), some may partner with traditional health insurers to re-insure a portion of the risk they will be taking on. But on the whole, the problem with cutting out the health insurers from these arrangements is that consumers will ultimately be left with fewer provider options if they become tied to a local ACO.

The Obama administration believes that the ACOs, and the hospitals that operate them, will invest in new innovations in the delivery of medical care that lead to better coordination of health care services. The trouble with this vision is that hospitals have never been sources of innovation in the way medical care is organized and delivered. Over the last several decades, most of the notable innovations in health care services have been developed in for-profit companies, often run by entrepreneurs and backed by venture capital.