UPDATE: Those interested should read this article in the WSJ today about the rapid consolidation of American medicine taking place right now, not in 2014.
Across the country, providers are building giant hospital systems and much tighter doctor alliances like multispecialty groups to get out ahead of a concept known as “accountable care organizations,” or ACOs. To modernize the delivery of medical services, ACOs would encourage doctors to work in teams to use resources more efficiently, streamline treatment and improve quality. The model is the Mayo Clinic and other large integrated systems.
Of course, the Mayo Clinic has concluded that it cannot treat Medicare patients and survive, as many of its Medicare members learned a few months ago.
At the moment ACOs are only a gleam in some bureaucrat’s eye, and no one has a clue how they’ll operate in practice until the government releases a working regulatory definition next year. Yet the percussive effects are already being felt across medicine.
Hospitals are now on a buying spree of private physician practices in the rush to build something that will qualify as an ACO. Some 65% of doctors who changed jobs in 2009 moved into a hospital-owned practice, while 49% of doctors out of residency were hired by hospitals, according to the Medical Group Management Association. In its 2010 census, the American College of Cardiology reports that nearly 40% of private cardiology groups are currently integrating with hospitals or merging with other practices.
Doctors are selling because complying with the ever-growing list of mandates has become more cumbersome; and while staff physicians on salary do gain predictability, they also lose the autonomy of independent practice. The other problem is price controls in Medicare, which are about 20% below private payments for doctors and 30% lower for hospitals. Hospitals are also scooping up practices to lock in referral sources and make up for ObamaCare’s Medicare cuts. As it is, two-thirds of hospitals lose money today on Medicare inpatient services, according to Medicare.
I get these e-mail articles from several industry sources, some of which sell practice management, others supported by ads. This one looks interesting for those who are wondering what Obama will do to Medicare. This is not Obamacare but Medicare will be heavily affected since his plan intends to take $500 billion from Medicare to pay for the Obamacare new enrollees.
Physician Payment Reform: What it Could Mean to Doctors – Part 1: Accountable Care Organizations
Kenneth J. Terry, MA
Introduction
The fee-for-service method of payment is wearing a bulls-eye target. It’s been blamed as a major factor in high healthcare costs, and as a result, Medicare and private insurers are exploring new ways to provide patient services and to pay doctors for those services. The new models vary, and some will be more appealing — or less unappealing — than others. This series will explore proposed payment models, what they could mean for doctors, and how they may affect physician incomes. We’ll start by looking at accountable care organizations.
Quick Summary: An accountable care organization (ACO) is a contracting group accountable for the quality and cost of care provided to a defined population. It may be led by a hospital or a physician organization, and may be a single business entity or include multiple entities. An ACO must include primary care doctors, must manage care across the continuum of care settings, and must measure and provide data on the quality of care.
This is nothing new in California where they are called IPAs (Independent Practice Associations) and are run by a board of directors. They contract with insurers as a single entity, subtract a healthy management fee and then pay the individual doctors by various formulas. I was involved in this although avoided being a board member pretty much because, as a surgeon, it is easy to alienate the treating doctors and surgeons rely on referrals. The GPs make out fairly well but there are lots of perverse incentives. For example, there are bonuses for meeting goals for keeping cost down. Some of the GPs ended up with 50% of their income from the annual bonus.
How Doctors Get Paid: There are 2 reimbursement models. In risk-taking ACO arrangements, organizations take financial responsibility for all inpatient and outpatient care and can profit by meeting quality goals and by keeping the cost of care under budget. Under the shared-savings model that Medicare will use, physicians get paid fee for service and can split savings with Medicare if they reach benchmarks on quality measures. A single ACO can have both kinds of contracts.
The IPAs were conceived as an alternative to HMOs, first seen in the Competitive Practice Act from its first incarnation in 1974. It was the model of Paul Ellwood, who liked the Kaiser HMO and tried to make that the national model. He had only non-profits in mind and has become disillusioned in recent years. The for-profit HMOs figured out that they did not have to build a large infrastructure like the Kaiser system. They could simply set up their own “HMO without walls” and go around offering terrible contracts to local physicians who were afraid of losing all their patients. The IPA was created as an attempt to control this race to the bottom. The results have been spotty but better thann the alternative.
Pros: As reimbursements decline, ACOs offer an alternative source of revenue for physicians while giving them the infrastructure and the information systems they need to improve the quality of care across the board. Primary care doctors should do especially well financially because they’re key ACO players.
Cons: The ACO model is set up to gradually transfer more financial risk to providers, forcing doctors to become more efficient. They will also have to follow clinical guidelines and have their quality measured continuously. In some markets, a shift to ACOs will accelerate hospitals’ employment of physicians, hastening the demise of private practice in those areas.
I think this is where this will go. Hospitals are employing more and more doctors and, especially in smaller population areas, this will be the only viable model for Medicare. Hospitals will run clinics for Medicare patients run by nurse practitioners.
Where ACOs Stand: Many large medical groups and independent practice associations (IPAs), especially in California, are ready to become ACOs. Some hospital systems with large employed groups could do the same fairly rapidly. This activity will undoubtedly grow before Medicare launches its ACO program on January 1, 2012.
Physician Payment Reform: What it Could Mean to Doctors – Part 2: Global Payments
Leslie Kane, MA
Introduction
Quick summary. Doctors in a solo practice, group practice, or large organization would be evaluated on the cost of the resources they use to manage their patient population. The premise is that by paying attention to the total cost of patient care instead of payment for each individual service, physicians can focus on ways to manage the cost and quality of patient care more effectively. Global payment plans would address the financial risk that plagued earlier capitation plans by taking into account the healthcare resource needs of patient populations. Global payment plans also require data reporting and quality measurements.
Ever heard of death panels ? The global payment for a large population will force medical groups to concentrate resources on some of those patients and triage the rest.
How doctors get paid. There are variations, but typically, insurers pay claims as services are rendered. If doctors keep total healthcare costs under the annual target for overall patient care, they get to share in the savings. For large provider organizations, in some proposed global plans, insurers make estimated advance payments to the physician or group; withhold payment for services that the group doesn’t provide; and periodically reconcile with the group.
Pros. Global payments help address the problems of rising healthcare costs. Some proponents believe that physicians will make greater use of email, telephone calls, and care teams involving mid-level practitioners for patient communication and management, which doctors previously rejected because those activities did not get reimbursed. Global payment plans place a strong emphasis on primary care. Insurers say doctors can focus on improving a patient’s health instead of being concerned with how many patient visits or services are involved.
This is the end of seeing the doctor for Medicare patients. They will be seen in clinics as noted above. “Improving a patient’s health” is mostly BS although there is a model that can do that. I once wasted a lot of time trying to get a university hospital to adopt it. It involves very elderly people, often called the frail elderly, who are often living in assisted care homes, not nursing homes. Many are couples. There have been pilot programs in which these 85 year olds going through an intensive evaluation involving an internist, a pharmacist and a psychologist. Many of them are taking medications that interact with each other. They may have other chronic problems. The theory, and it has been tested several times in pilot studies, is that you spend more money the first six months or so and the care of these people costs less money after that. They are also in better shape. The barrier is spending more money that first year and, if you think the Obama people are going to go for a program like that, I have a bridge to sell.
Cons. Most physicians will need to plan more carefully how to proactively manage their patients and will need to retool their practices away from the current focus on patient visits. They will also need to pay more attention to the cost of care that they are delivering or referring. Doctors who don’t pay attention to costs and to the avoidance of admissions and complications are likely to earn less than they did under fee for service. They will have to consciously try to limit costs and, in most cases, aim for specific quality targets. The larger concern is that doctors may find themselves pitted against patients who want care that involves the most costly treatment alternative or that may be unlikely to improve patient outcomes.
Doctors’ incomes from Medicare are already so low, they are dropping out of the program.
Physician Payment Reform: What it Could Mean to Doctors – Part 3: Bundled Payments
Shelly M. Reese
Introduction
Summary. Unlike the current fee-for-service system in which each provider who cares for a patient is paid for the different services he or she provides, a bundled payment — also known as an “episode of care” or “case rate” payment — is a single payment covering a particular episode of care, such as a myocardial infarction or a hip replacement. Multiple providers in multiple settings may share in the payment for a patient’s episode of care. An episode of care could encompass a period of hospitalization, hospitalization plus post-acute care, or a defined time frame of care for a chronic condition.
This is already the way IPAs work and I have negotiated methods of payment for surgeons. There are some benefits to this system if the global payment is fair. In our IPA, we instituted a system in which surgeons were paid a monthly fee that was shared among all the other surgeons of that specialty in the IPA. The share for each surgeon was determined by the number of new patients he/she saw each month. That made it easy for GPs and internists to get their patients seen quickly. The surgeons were NOT paid by the number of surgeries they did each month. When that system went into effect, back surgery dropped by 40%; General Surgery, my specialty did not change. The implications are pretty clear. Not all of this stuff is bad.
How doctors get paid. A bundled payment is made to a hospital, which divides the payment between the hospital and all of the providers who cared for the patient. If the cost of an episode of care is less than the bundled payment amount, typically the hospital and physicians share the difference; physicians may receive a bonus. If the cost of care exceeds that of the bundled payment, the hospital and doctors bear the financial liability.
This will be another driver of hospitals hiring physicians. Hospital administrators hate physicians because they are disruptive to smooth operation. They keep demanding things for their patients. That will stop when they are employees. There may not be enough jobs in some specialties.
Potential benefits. Proponents of the system hope it will give providers a greater incentive to coordinate care, thus improving outcomes and reducing waste and unnecessary care.
Potential problems. Physicians worry that hospitals will get the lion’s share of payments and that those unaffiliated with hospitals or integrated networks will find it difficult to participate. Some worry it could put patients at risk because providers might shun very sick patients as too expensive to treat. Access to specialists could be limited. Defining an “episode of care” can be difficult for certain illnesses and chronic conditions.
These are obvious concerns, or should be.
Physician Payment Reform: What it Could Mean to Doctors – Part 4: Prometheus Payment
Kenneth J. Terry, MA
Introduction
Quick summary. One of the current experiments in payment bundling, Prometheus Payment rewards physicians for practicing efficiently and avoiding complications. Prometheus care teams negotiate all-inclusive case rates according to evidence-based guidelines for episodes of acute and long-term care.
How doctors get paid. Physicians are paid fee for service, which is a debit against the case rate. They can share a withhold if their team prevents avoidable complications.
I don’t know if this is bad or good. Some doctors have high complication rates and there is little that can be done unless they are egregious.
Pros. Physicians stand to receive bonuses for high-quality, efficient care without being at financial risk.
Cons. Physicians need the infrastructure of a large organization to make this model work.
Where it stands. The private organization behind Prometheus is conducting four pilot projects across the country, and more are on the way.
Whether Prometheus will catch on, however, depends on whether its incentives to follow evidence-based guidelines will eliminate enough waste to fund quality-based bonuses for physicians.
Conceived by a health policy experts and healthcare, insurance, and employer leaders, Prometheus Payment received a $6 million, 3-year grant from the Robert Wood Johnson Foundation in 2007. The Healthcare Incentives Improvement Institute, Inc, a Newtown, Connecticut, think tank housed at Bridges to Excellence (a national, employer-sponsored pay for performance program), is working with the pilot organizations to develop a variety of approaches to the Prometheus concept.
There could be some benefit to this concept but the temptations inherent in Obamacare are the source of much moral hazard.