Debate surrounding a more obscure provision in the new health reform law to create networks known as accountable-care organizations underscores the challenge policymakers and the industry face as reform seeks to end tangled financial incentives cited as fuel for unneeded care.
Tackling cost, quality
Designing accountable-care pay model not easy
Under the law, Medicare has become one of the latest—and largest—healthcare players with plans to test whether doctors, hospitals and insurers can slow fast-rising medical spending by giving providers a chance to keep some of the savings from reduced spending.
Congress cleared the way for Medicare to offer the incentives, beginning in January 2012, to accountable-care networks, which must also achieve quality targets before any bonus will be paid out.
Commercial health plans, including UnitedHealthcare and Humana, and large health systems, among them Catholic Healthcare West, Baylor Health Care System and the Carilion Clinic, have also unveiled plans to try the payment model in the private market.
If successful, the experiment could save Medicare roughly $4.9 billion though 2019, according to one federal projection. But first, Medicare officials must figure many key details of how the untried payment model will work.
Among the details Congress left to be decided by federal health officials: How much Medicare will award in incentives, quality measures, performance and savings targets, and criteria for members in an accountable-care organization.
Under the law, accountable-care groups must agree to manage care and costs for at least three years and at least 5,000 Medicare patients. Networks must also pledge to include enough primary-care providers to meet demand and find a legal structure to share saving bonuses among providers.
Settling those details won't be an easy task, and success will hinge on whether incentives overcome legal obstacles and avoid pitfalls that undermined similar efforts more than a decade ago, policymakers and healthcare executives said.
Laws that seek to prevent price-fixing or abuse by hospitals and doctors of referrals and payments stand as barriers to accountable-care groups, though health systems that employ doctors face fewer risks than networks of independent hospitals and doctors, said lawyers working with the Medical Group Management Association. Antitrust regulators have also made allowances for some networks created to improve the quality of medical care, said Gerald Niederman, a health lawyer in Colorado who is a partner at Faegre & Benson and MGMA general counsel. Less clear is how networks can avoid violating laws to prevent kickbacks, financial incentives to withhold care or referrals by doctors to businesses in which they have a financial stake, said Bruce Johnson, a Faegre & Benson partner who consults for the trade group.
Elliott Fisher, director of the Center for Health Policy Research at the Dartmouth Institute for Health Policy and Clinical Practice, said the model stands to curb health spending growth by tying payment to quality and cost-savings, rather than how much care patients receive. The Dartmouth Institute and the Brookings Institution's Engelberg Center for Health Care Reform have launched three accountable-care pilots (July 27, 2009, p. 7).
Fisher said critical to the success of the accountable-care group will be efforts to establish standards for how to design such networks. Meanwhile, pilot hospitals are seeking to negotiate with private insurers and address fraud or antitrust issues that may arise, he said.
Bonuses may also not be enough to entice hospitals to forgo revenue and income from health plans that pay for each test, surgery and hospital stay, healthcare experts said.
Robert Berenson, a fellow at the Urban Institute, argued that bonuses could be an “awfully weak” incentive for hospitals if insurers continue to pay hospitals by volume. “You're paying me one dollar for a dollar's work today and paying me a few cents later not to do it,” he said.
Contracts that include some cap on payment for certain care, or partial capitation, may be more successful, though capitation struggled in the 1990s under managed care, he said. Under the new reform law, Medicare may enter into partial capitation for accountable-care networks. Berenson said partial capitation may be more viable because providers are better able to adjust for the financial risk from extremely ill patients and improved quality reporting may help calm fears that incentives could limit access to needed care.
In Arizona, UnitedHealthcare and the Tucson Medical Center—in one of the three pilot projects sponsored by Dartmouth and Brookings—have been in talks to create an accountable-care network for more than a year. The insurer and pilot researchers last month identified more than 15,000 enrollees for whom the 555-bed hospital, with a network of independent area doctors, could manage care, said Benton Davis, CEO for UnitedHealthcare's operations in Arizona and Utah.
Now, an analysis of common chronic disease among the patients—diabetes and heart disease—will help identify targets for quality improvement and, potentially, savings, Davis said. How bonuses will be awarded has not been determined, he said. UnitedHealthcare has not created health plans that would offer patients a financial incentive to visit accountable-care providers in Tucson but may do so in the future, he said. Palmer Evans, chief medical officer for Tucson Medical, said he continues to meet with independent local doctors and hopes the reform law will stir support for an area accountable-care group.
At the Carilion Clinic, in Roanoke, Va., the effort to decide how much would be enough to make bonus payments worthwhile hasn't produced a clear-cut formula. “It's very difficult to approach it as a math problem,” said Mark Werner, chief medical officer for Carilion, one of the three announced Dartmouth pilot sites. “I think you have to approach it with a certain degree of faith.”
Networks need solid accounting to give system officials an idea of what incentive payments will mean to revenue, Werner said. Bonuses could be calculated as a boost to yearly changes in rates insurers pay for care, such as an amount equal to another 1% for hospitals that saw rates climb 3%. But hospitals should also brace for slower revenue growth. “That we've just got to live through,” he said. “This is part of the psychological challenge of accountable care and health reform in general. Reducing spending in healthcare is also reducing the income and revenues of healthcare providers,” he said.
Send us a letter
Have an opinion about this story? Click here to submit a Letter to the Editor, and we may publish it in print.