Will ACOs Shift Costs to Private Insurers?

The Medicare pay-for-performance program for qualified Accountable Care Organizations (ACO) is designed to reward ACOs for decreasing Medicare fee-for-service costs of their assigned members. If the ACOs meet certain quality benchmarks, then the ACO and Medicare will share in the savings as a sort of “performance bonus.”

In an excellent New York Times article last week, reporter Robert Pear quotes an experience antitrust lawyer, J. Thomas Rosch, as stating that “there will be a real risk that the savings accruing to Medicare will just come at the expense of private insurers.”

Is this really a major risk, though? The answer is … not really, but it depends.

In an article to be published in Milbank Quarterly next month, researcher Austin Frakt, Ph.D. examines the existing literature on cost shifting.  He writes that “cost shifting can and has occurred, but usually at a relatively low rate.” He writes that “it is likely to be at a rate closer to 20 cents on the dollar than the dollar-for-dollar one suggested by industry-funded reports (PWC 2009) and by Cutler’s (1998) estimate using data from the 1985-1990 period.”

While ACO Shared Savings programs may lead to some cost shifting, the effect should not be over stated. Other factors are important in the evaluation of cost-shifting, such as the hospitals’ ability to cut costs, public/private payer mix, hospital competition, and health plan market power.

Dr. Frakt states that the debate about cost shifting amongst policymakers “provides a false impression that cost shifting is a large and pervasive phenomenon.” This conventional wisdom should be “taken with a grain of salt.” Good stuff ... check out his blog, the Incidental Economist.

Do the CMS hospital P4P regs signal ACO measures to come?

CMS released the proposed rules for the hospital inpatient value-based purchasing program, in support of Section 3001(a) of the Patient Protection and Affordable Care Act. The program, designed to reward hospitals for quality improvement, will apply in 2013 to payments for discharges occurring on or after Oct. 1, 2012. According to a CMS press release, this is an example of value-based purchasing (VBP) or pay-for-performance (P4P) that will move our healthcare system, “toward rewarding better value, outcomes, and innovations instead of merely volume.” CMS will accept public comments on the proposed rule through March 8th.

Do these Hospital VBP program measures provide some insight as to which measures will be selected by CMS for ACOs under the Shared Savings P4P program? If so, what can we learn?

In their comments, CMS acknowledges that these P4P systems “should rely on a mix of standards, process, outcomes, and patient experience measures, including measures of care transitions and changes in patient functional status.” This is a wise approach that I advocated in my posting, “ACO Quality: Don’t Forget the Processes.”

The 2013 Hospital VBP program will include measures already adopted for the Hospital Inpatient Quality Reporting Program (IQR).  In this Hospital IQR program, hospitals that do not participate in reporting measures receive an annual 2.0 percentage point reduction in their Medicare rate inflation adjustments (market basket update).

The majority of the Hospital VBP program proposed measures will be clinical process of care measures, such as whether aspirin was prescribed at discharge to a patient recovering from an acute myocardial infarction. Other categories for the 17 different processes of care measures include heart failure, pneumonia, healthcare-associated infections, and surgeries. In addition, a patient satisfaction survey called, the Hospital Consumer Assessment of Healthcare Providers and Systems (HCAHPS), will be included.  For these measures, CMS proposes that the 2013 payment be based on a three-quarter performance period from July 1, 2011 through March 31, 2012 compared to the three-quarter baseline period from July 1, 2009 to March 31, 2010.

Finally, CMS proposed to include three outcome measures in the Hospital VBP program. Instead of the three-quarter performance period proposed for the process of care and HCAHPS measures, the risk-adjusted mortality outcome measures will be aggregated for 18 months to provide sufficiently accurate information about a hospital's outcomes on which to score hospitals on these measures and base payment. CMS will use the 18-month period from July 1, 2011 to December 31, 2012 to compare to the baseline period of July 1, 2008 to December 31, 2009. Acute Myocardial Infarction 30-Day Mortality Rate (MORT-30-AMI), Heart Failure 30-Day Mortality Rate (MORT-30-HF), Pneumonia 30-Day Mortality Rate (MORT-30-PN ).

So, what’s missing? According to ACA (sec. 3001(a)), CMS could not include any measure that wasn’t already included on the Hospital Compare website for at least one year. This means that readmission measures were excluded for 2013, but CMS hopes to include those in the future. Such restrictions do not apply to the ACO Shared Savings program.

Also, CMS removed the so-called “topped-out” measures from the list. “Topped-out” measures are those where all but a few hospitals performed well and provide no meaningful differentiation between hospital quality performances. Some of these measures include aspirin at arrival (AMI-1) and beta blocker at discharge (AMI-5).

In addition, the Hospital IQR structural measures, such as participation in Stroke Registries, were excluded due to measurement and reporting problems. 

CMS did not yet propose efficiency measures, including measures of “Medicare Spending per beneficiary” or “internal hospital efficiency,” as required by statute.  CMS wants public comment as to on potential efficiency measures.

Preliminary ACO regulations are due from CMS soon. We’ll see what impact these choices have on their proposed measures.

The ACO Paradox

As of today, we are still awaiting the CMS regulations on Health Reform’s Accountable Care Organizations. I’ve made a couple of postings on ACOs in the past. I reiterated the importance of process measures in pay-for-performance schemes, and I scoffed at investor-owned hospitals’ proposal of cherry-picking patients for ACO membership. Here, I’d like to discuss what I’ll call the ACO Paradox.

There are two main components of the Medicare pay-for-performance program (Sec. 3022) for qualified Accountable Care Organizations (ACO), according to the Health Reform Law. First, the Medicare Shared Savings program is designed to reward ACOs for decreasing Medicare fee-for-service costs of their assigned members. If the ACO’s adjusted costs for Medicare parts A & B in the measurement year are less than the benchmark (a 3 year per-beneficiary average), then the ACO and Medicare will share in that cost difference. Second, to qualify for Shared Savings bonus, the ACO must meet quality performance standards (soon to be proposed by CMS).

It makes sense for Medicare to join the costs savings with improved quality. Both are key aims of Health Reform (expanded coverage being another). However, will the ACOs be able to achieve both cost savings and improved quality simultaneously in the measurement year?

The conventional wisdom in healthcare states that increased quality of care will save money in the short-term by reducing high-cost services, such as inpatient care. However, some QOC measures have been shown to be statistically related to increased near-term healthcare costs. For example, a recent study found that improved adherence to antiretroviral regimens used to fight HIV was associated with an increase in total medical costs. Riegal et al. (2000) have posited that the positive relationship of QOC measures to increased near-term future costs is probably due to improved access to needed services.

This isn’t to say that cost savings are not possible with improved quality. It may be that some measures do actually save in the short-term, while others do not. Or maybe it is that some (or all) quality measures save money in the long-term – 5, 10 or 20 years in the future.

So, what if the quality measures that CMS chooses are actually related to increased costs in the measurement period? What if some quality measures are not worth the investment for ACOs? In other words, will there be any Medicare cost savings to be shared in the short-term? Is there an ACO Paradox?

Perhaps Medicare should consider extending the ACO quality measurement and shared savings period to reflect the near-term investment required to produce decreased healthcare cost in the long-term.

ACO Quality: Don't Forget the Processes

While the Centers for Medciare and Medicaid Services proposed regulations for Accountable Care Organizations (ACO) are not due until early 2011, there are clues to which Quality Measures will be used in the ACO Shared Savings program. CMS does not define the quality indicators, but they have outlined a roadmap for value-based purchasing. CMS places importance on outcomes, resource use, and transition measures, but plays down some process measures. In addition, MedPAC urged CMS to adopt population-based outcome measures and patient satisfaction surveys (CAHPS and H-CAHPS). 

Unfortunately, the CMS staff responsible regulations for the ACO Shared Savings bonus program have been reported to have an anti-managed care bias. This means that the process measures typically associated with managed care quality programs may be left out. This may be a mistake when developing a the ACO pay-for-performance/shared savings scheme.

Processes are the actions that are taken to deliver care including tests, treatments, medication adherence, and education. The most common process measures for quality used by the CMS managed care regulators are those “HEDIS” measures developed by the National Committee on Quality Assurance. Outcomes are the effects of the care provider on the patient’s health status. Outcomes may be the preferred metric of CMS fee-for-service (Parts A & B) regulatory staff because they reflect the end results of healthcare services. (Together with resource use measures, outcomes indicators reflect the value of healthcare).

However, most incentive-based programs place less importance on outcomes, and instead focus on process measures. Some researchers and practitioners prefer process measures in healthcare performance assessment. Specifically, Rubin et al. (2001) write that process measures provide information that is actionable, require less risk adjustment for benchmarking, take less time to measure (no need to follow up after years of illness), and marginal effort is needed because the information can be collected in administrative data. Besides, many studies show that process measures are significantly related to health status and quality of life outcomes (Bradley et al., 2006; Kahn et al., 2007; Werner & Bradlow, 2006).

Let’s hope that process measures are included in the upcoming CMS ACO regulations.

ACA’s Medical Loss Ratio provisions

Today’s press release by the Health and Humans Services states that the Affordable Care Act’s Medical Loss Ratio floor provisions will “increase value for consumers.” In effect, the law requires health insurers to provide rebates to their policyholders if their MLR is less than 85 percent in the large group market or less than 80 percent in the small group market and individual market. There are two points that I’d like to make on these interim final regulations. The interim final regulations can be found here.

First, the regulations recognize important Quality Improvement functions that managed care purports to offer to consumers. The interim regulations define Quality Improvement as activities “grounded in evidence-based medicine, widely accepted best clinical practice, or criteria issued by recognized medical associations, accreditation bodies, government agencies, or other nationally recognized health care quality organizations.”

In addition to the obvious case/disease management initiatives, these activities include:

• “Any HIT expenditure that is attributable to improving health care, preventing hospital readmissions, improving patient safety and reducing errors, or promoting health activities and wellness to an individual or an identified segment of the population, is classified as a quality improvement activity”
• “Fraud recovery expenses … up to the amount of fraudulent claims recovered.”

The second point I want to make is regarding the regulation comments that state, “if the activity is designed primarily to control or contain costs, then expenditures for it may not be included as a quality improvement activity.” On the face, this seems to increase the “value to the consumer.”

The assumption with this comment is that more medical care is good, and that less healthcare (especially when spent on administrative activities) is bad. This is a fallacy debunked by the work done at the Dartmouth Atlas. As summarized by Dr. Skinner, “a high-intensity practice pattern is associated with lower quality of care and worse outcomes than a more conservative practice pattern.”

So, it can be said that managed care activities that control inappropriate utilization of medical care that may decrease quality healthcare outcomes. Numerous studies over the years support this notion. Here is a table of some common inappropriate treatments.

Service	% Inappropriate	Study
Childhood tube insertions	23%	Kleinman et al., 1994
Antibiotics for the common cold	60%	Mainous et al., 1996
CABG surgeries	14%	Winslow et al., 1988
Carotid endarterectomies	32%	Chassin et al., 1987
Upper GI endoscopies	17%	Chassin et al., 1987

Let me know your thoughts on the matter.