Uwe Reinhardt’s timely comments on ACOs and P4P

Posted by on Monday, Mar 30, 2015

This entry is from Dr. McCanne's Quote of the Day, a daily health policy update on the single-payer health care reform movement. The QotD is archived on PNHP's website.

Pay for Performance Extends to Health Care in Experiment in New York

By Anemona Hartocollis
The New York Times, March 30, 2015

(A)ccountable care organizations are appearing around the country for Medicare recipients, with mixed results. New York, which has the country’s largest Medicaid budget, is committing more than $1 billion a year for five years to the experiment.

“If we succeed, patients will be more likely to get the right tests and medicine, doctors will benefit as we simplify the business side of their practices, and businesses will benefit as we hold down health-care cost growth,” Sylvia M. Burwell, secretary of the federal Department of Health and Human Services, said this month in New York City, during a visit to promote accountable care organizations.

In the future, if the experiment works, providers may be paid solely based on outcomes rather than volume of services, with better-performing groups earning more than those whose patients are in worse shape.

Perhaps the most unusual alliance is one that brought together more than 1,000 primarily Hispanic doctors serving Upper Manhattan and the South Bronx and Asian doctors working in the Chinatowns of Manhattan, Brooklyn and Queens; and North Shore-Long Island Jewish Health System, a hospital chain that serves a largely middle-class population. The nonprofit venture they formed, called Advocate Community Providers, counts more than 770,000 patients, by far the most of the 25 groups taking part in the program.

The force behind this group is Dr. Ramon Tallaj, a former health official in the Dominican Republic who moved to the United States in 1991.

But some of the Medicaid panel members questioned the logic of having such a large, diverse group of doctors and patients like Dr. Tallaj’s, without any obvious connections among them.

“What’s the glue that holds them together?” asked Stephen Berger, a panel member and investment banker.

The sheer size of the group could also make it complicated to track patients and determine who deserves credit for any improvements in their health. Patients may continue to see any doctor they wish, even if that doctor is not in the group.

Likewise, Dr. Tallaj acknowledged that if his patients did well, he could reap the benefits even if he had not seen them, though he said that was not his motivation.

Uwe Reinhardt, a health economist at Princeton, thought the idea was not as promising as some had hoped. “People thought there was maybe more waste than there actually really is,” he said.

Dr. Reinhardt was also dismissive of performance bonuses for doctors. “The idea that everyone’s professionalism and everyone’s good will has to be bought with tips is bizarre.”

http://www.nytimes.com/2015/03/31/nyregion/pay-for-performance-extends-to-health-care-in-experiment-in-new-york.html

Value rather than volume. Quality rather than quantity. Paying for performance. Reducing costs by eliminating wasteful services. Making providers accountable and rewarding them based on the value of their services. These concepts have become memes in the political and policy communities yet with very little in the health policy literature to confirm that these should be the driving principles behind health care financing reform, though there are quite a few studies that confirm that these concepts lead to mediocrity, at best.

It is urgent that we reconsider these concepts since in two weeks the Senate is expected to pass H.R. 2 which is designed to change payment methods from fee-for-service to models of payment that instill these ideas that are more rhetoric than science-based policy. Yet the rhetoric is leading to implementation of the Merit-based Incentive Payment System (MIPS) and Alternative Payment Models (APMs). These will have a major impact – more negative than positive – on the actual delivery of health care services.

Who is behind this meme-driven revolution in health care? Much of the academic policy community. Legislative and administrative staff members. Politicians. Representatives of vested interests that will benefit from these changes. Well-meaning consumer organizations. Although some are driven by greed, most are on meme-fed autopilot and have gathered in lemming fashion charging forward to a goal in which utopian perceptions will be dashed by the reality of plowing into the shoals of flawed policy.

Although it is quite disconcerting to read the meaningless rote responses of some of the more noted representatives of the policy community, we do have the comfort of of being able to hear from some of that community who bring us reality by questioning these conclusions that are based more on wishes than on objective evidence.

One of those on whom we can rely is Uwe Reinhardt. His brief comments in this article should give the Senate pause as they consider H.R. 2. Current political activity seems to be based on the concept that these flawed policies can eliminate much of the wasteful health care services provided. As he tells us, the problem with that rationale is that there is not nearly as much waste as has been thought. The initial results of experimentation have confirmed that there just is not that much recoverable by attempting to reduce or eliminate care that is not beneficial.

Perhaps Uwe Reinhardt’s most important lesson is in his comments about paying for performance: “The idea that everyone’s professionalism and everyone’s good will has to be bought with tips is bizarre.” What could be more fundamental than the ethical foundations driving the practitioners of the healing arts? The policy people have it all wrong, and they do not seem to understand why.

  • Comments Off

Integrated Delivery Networks: In Search of Benefits and Market Effects

By Jeff Goldsmith et al.
For the National Academy of Social Insurance, February 2015

Advocates believe that IDNs [Integrated Delivery Networks] should be structured like large prepaid group practices such as Kaiser [Permanente]…. Those advocates believe that as IDNs assume more economic risk, either delegated risk through capitated payments from health plans or actual insurance risk through “captive” health plans, IDNs will evolve into Kaiser-like entities, with compelling incentives to control costs. [p. 5]

Because there are so few organizations like Kaiser, there is naturally little comparative data on its performance. There are occasional books and articles extolling the virtues of the Kaiser model, often written by Kaiser-affiliated researchers (Enthoven and Tollen, 2004; Crosson, 2005). There are also some consulting firm reports that suggest the superiority of the Kaiser model (Aon-Hewitt, 2011). Otherwise, there is no evidence that we know of that documents the competitive efficiency of the Kaiser model.

Indeed, during the 1980s and 1990s, Kaiser had difficulty exporting its own model to other parts of the U.S. beyond its native Pacific Coast market (Gitterman, Weiner, Domino et al., 2003). [p. 16]

The latest growth spurt in IDN formation has been stimulated in major part by the quasi-risk contracting model embodied in ACOs. If the intended end state for regular Medicare payment is full-risk contracting with IDNs, and present day IDNs do not display either increased operating efficiency or lower total cost of care compared to community-based alternatives, policymakers need to find another payment approach. [p. 29]

http://www.nasi.org/sites/default/files/research/Integrated_Delivery_Networks_In_Search_of_Benefits_and_Market_Effects.pdf

For nearly a half century now, the holy grail of the managed care movement has been the consolidation of the nation’s insurance companies, hospitals and clinics into large “Kaiser-like” entities. The name used by managed care proponents for these entities has changed over the years. First it was “HMO,” then it was “integrated delivery system” (IDS), and now it’s “accountable care organization”(ACO), but Kaiser Permanente always remained the movement’s poster child. Now comes a study that says there was never any evidence for the claim that Kaiser, HMOs, and IDSs cut costs. The authors predict the same will turn out to be true for ACOs.

The study was commissioned by the National Academy of Social Insurance, an organization supported by much of the health policy establishment, including AARP, United HealthCare, the Centers for Medicare and Medicaid Services, the Robert Wood Johnson Foundation, and Kaiser itself.  The lead authors, Jeff Goldsmith and Lawton Burns, are prolific writers who are well known in the health policy world. The study consists of a literature review and an examination of the finances of 15 IDSs.

The authors make it clear they understand they are criticizing the most fundamental belief in managed care theology. In a blog essay about the study, Goldsmith and Burns state:

For the past four decades, there has been one dominant theme in healthcare delivery-system reform: Hospitals and physicians must transform themselves into comprehensive-care enterprises to be paid a population-based global budget. In the vision of pioneering health policy researchers Paul Ellwood Jr. and Alain Enthoven, consumers should choose among multiple Kaiser-like entities competing based on premium (e.g., total cost of care).

Ellwood, Enthoven and their disciples claimed, without evidence, that subjecting insurance-hospital-clinic conglomerates to a “global budget” – which means shifting all or much of the insurance risk traditionally borne by insurance companies onto hospitals and clinics – would create the best of all possible worlds. It would lead hospitals and clinics, with helpful instructions from the insurance component of the conglomerate, to reduce costs and improve quality. Exactly how the Kaiser-like entities were supposed to do this has never been clear.

The study found that evidence supporting the claims made by Ellwood, Enthoven and others for HMOs/IDSs/Kaiser-like entities has never existed:

What we found was, frankly, disappointing. We reviewed more than 30 years of academic literature on vertical integration and diversification in healthcare, and found virtually no measurable benefits … of putting health insurance, hospitals and physician services under the same structure.

http://www.modernhealthcare.com/article/20150307/MAGAZINE/303079978/commentary-integrated-delivery-networks-is-the-whole-less-than-sum

The study concludes, “there is no evidence that we know of that documents the competitive efficiency of the Kaiser model.” (p. 16)

The study in fact presents some evidence indicating “integrated delivery networks” (IDNs, Goldsmith et al.’s label for IDSs) are driving prices up. Goldsmith and Burns summarized this portion of the study as follows:

[W]e found that IDNs’ flagship hospitals … were more expensive than their direct in-market competitors…. Further, the size of the IDN (measured either by hospital bed count or total revenue) did not correlate with profitability…. Neither scale nor scope economies could be detected.

Perhaps most importantly, the authors found evidence indicating that IDN’s that subject their flagship hospital to risk-sharing make those hospitals more expensive:

What we found was that flagship hospitals within IDNs that have no revenue at risk are on average 6.8 percent less expensive than their in-market competitors, while flagships within IDNs that have some revenue at risk are on average 20 percent more expensive than their competitors. This finding is similar to one found in the literature review. If there is a cost of care advantage conferred on IDN hospitals by their owner operating a health plan, it was not apparent from this analysis. (p. 24)

The authors suggest profits for the provider components of IDNs fall. They state, “From the provider perspective, the available evidence suggests that the more providers invest in IDN development, the lower their operating margins and return on capital.” But what about non-provider investors in IDNs? Do they ultimately suffer lower returns too, or do they enjoy higher profits because the insurer component of the IDN sucks more money out of clinics and hospitals than it returns? The authors do not attempt to offer an answer. They report that IDNs are so “inscrutable” it is impossible to tell how money moves among the three components of IDNs.

Finally, the study found no differences in quality between the IDN flagship hospitals and their nearest competitor.

Goldsmith et al. assert that a “major reason” why the merger of insurers, hospitals and clinics into one entity raises costs and fails to improve quality is that the new entity is more difficult and expensive to manage than the individual components were by themselves. The authors observe that this explanation is consistent with the larger economic literature on mergers of firms selling different products or services. “[T]he unrelatedness of the new businesses” (p. 15) now under the control of one set of managers makes the managers’ job far more difficult and expensive, the authors argue.

To translate into plain language that will resonate with critics of managed care, Goldsmith et al. are saying:

• insurance companies don’t know how to practice medicine,
• doctors and hospitals don’t know how to run insurance companies, and,
• when insurers, hospitals and clinics are thrown into the same entity, the management of the new entity is forced to spend more on administration than the components of the entity did prior to the merger because the new entity is so much more complex than any of the three components were operating alone.

This explanation will not surprise single-payer proponents. Since the birth of the American single-payer movement in the late 1980s, the movement has been highly critical of the cost of administering America’s increasingly consolidated, increasingly micro-managed, multiple-payer system. PNHP founders David Himmelstein and Steffie Woolhandler greatly enriched the study of administrative costs, and arguably invented the field, with their 1991 paper documenting the high administrative costs of the US system. That paper and subsequent research has shown that US administrative costs have risen from about one-fifth of total spending in the 1980s to one-third today. The period since the 1980s is, of course, the period in which managed care ideology and IDSs became widespread.

If it’s true that Kaiser-like entities incur higher administrative costs and ultimately save no money for anyone, why have mergers among insurers, hospitals and clinics become so common? The answer hinted at by the authors is the that economic forces set loose by the rise of the managed care movement gave first movers – the early consolidators bent on “managing care” – an advantage over the later movers. As the myth that insurance companies should micro-manage clinics and hospitals spread among the insurance industry’s most powerful customers (large employers and the politicians who control Medicare and Medicaid), insurers rushed to consolidate with each other and with providers to enhance their power to control clinics and hospitals and to extract discounts from them.

Anecdotal evidence indicates the advantage gained by the early consolidators was enormous. In an interview published in Health Affairs, Thomas Pyle, the former CEO of Harvard Community Health Plan (an HMO) observed that the most important “lever” the HMO used to control its costs during his tenure was to cut a deal with Brigham and Women’s Hospital in which the hospital agreed to give the HMO a 42 percent discount. “When we made that deal, we closed our own hospital down,” said Pyle, “and we gave the Brigham almost all of our business, in return for which we got a 42 percent discount off rate card. It was the first time that a Harvard hospital had really broken on rate cards.”  This ability to destroy hospitals and build up others by “giving all their business” to one hospital at the expense of others gave the early HMOs a significant advantage over insurers that did not have that ability.

Similarly, the discounts HMOs extracted from Twin Cities hospitals soared during the 1980s, from 9 percent in 1981 to 38 percent by 1990. (The 1981 figure is from Allan N. Johnson, “Cost-shifting: The discount dilemma,” Journal of Health Politics, Policy and Law, 1984;2:251-260. The 1990 figure is from Katherine Hiduchenko, “Do Health Maintenance Organizations control costs or shift costs?” New England Journal of Medicine, 1993;328:971.)

But that advantage acquired by the early consolidators was reduced, and for some eliminated, as the provider sector responded in kind. As the insurance industry’s game plan became clear to providers, providers rushed to merge with each other to create countervailing bargaining power. As Goldsmith et al. put it, “The rise of managed care, and the perceived threat posed by the rise of capitated contracting, created anxiety among providers that fueled their efforts to form IDNs.” (p. 10)

This dynamic resembles the arms race among nations. No nation can afford to stop the race by itself and so the race goes on. Similarly, because American politicians and the intellectuals who influence them encourage merger mania within the healthcare system with their celebration of “integrated care,” and because state and federal anti-trust authorities don’t have the resources to bring the race to an end, no insurance company, hospital or clinic can afford to “disarm” unilaterally – to stay out of the race to get big and complex. Thus, even though the race to bigness and complexity ultimately benefits no one because it drives up administrative costs by more than it reduces medical costs, the race goes on. And it will go on as long as the managed care ideology which sparked the race in the first place holds a firm grip on the minds of large employers, policy-makers, and other members of the health policy elite.

If market forces unleashed by the rise of managed care are responsible for the race to gigantism and complexity, and the race is generating more expense than it is saving, then the most important question before us is: How did managed care ideology become so powerful and what can be done to reduce that power? That, ultimately, is the most important question raised by Goldsmith et al.’s study. Goldsmith et al. give a nod to the problem. They observe that “IDNs have … operated under a halo of presumed societal benefits (quality, efficiency, care integration, etc.) for the better part of four decades with remarkably little evidence that these benefits in fact exist.” (p. 29) Where did this “halo” come from?

Goldsmith et al. make no attempt to answer that question. That’s understandable. The topic they bit off was large enough for one paper, and they analyzed that topic well. By demonstrating the gaping chasm between the claims made by Ellwood et al. and reality, Goldsmith et al. have performed a valuable service. But the research must not stop there. We badly need studies of the etiology of groupthink within the American health policy establishment.

Kip Sullivan, J.D., is a member of the board of Minnesota Physicians for a National Health Program. His articles have appeared in The New York Times, The Nation, The New England Journal of Medicine, Health Affairs, the Journal of Health Politics, Policy and Law, and the Los Angeles Times.

  • Comments Off

Two week ‘doc fix’ reprieve gives us time to protect Medicare

Posted by on Friday, Mar 27, 2015

This entry is from Dr. McCanne's Quote of the Day, a daily health policy update on the single-payer health care reform movement. The QotD is archived on PNHP's website.

Senate to Take Up Medicare ‘Doc Fix’ Bill After Recess

By Siobhan Hughes
The Wall Street Journal, March 27, 2015

The Senate will take up legislation to replace a formula for reimbursing doctors who treat Medicare patients when the chamber returns from a two-week recess, Senate Majority Leader Mitch McConnell (R., Ky.) said early on Friday.

The House had one day earlier passed the bill in an overwhelming 392-37 vote. Supporters had hoped the Senate would take up the measure before a two-week spring that begins once the chamber adjourns Friday.

“We’ll turn to this legislation very quickly when we get back,” Mr. McConnell said. “There’s every reason to believe it’s going to pass the Senate by a very large majority.”

Dr. Robert Wah, the president of the American Medical Association, said his group was “extremely disappointed” that the Senate vote was delayed and said that physicians would face a “devastating” cut when the current patch expires just days from now.

The Centers for Medicare and Medicaid Services has said that it takes a minimum of 14 days to pay claims from doctors. Lawmakers expect that if Congress acts soon enough the government would be able to make payments without imposing the pay cuts.

One possible wrinkle is that Mr. Reid appeared to request votes on a limited number of amendments related the legislation. Mr. McConnell said that he would “be discussing the way forward” with Mr. Reid.

http://www.wsj.com/articles/senate-to-take-up-medicare-doc-fix-bill-after-recess-1427452707

****

AARP Statement on House Passage of Medicare SGR Reform Bill

AARP, March 26, 2015

AARP applauds the House for its bipartisan work on the Medicare Access and CHIP Reauthorization Act of 2015 (H.R. 2) that permanently replaces the Sustainable Growth Rate (SGR) formula. However, we remain concerned that Medicare beneficiaries are unfairly shouldering more than their fair share of the cost of the SGR “Doc Fix,” and we urge further improvements as the bill moves to the Senate.

While AARP commends the House of Representatives for working together in a bipartisan fashion on this SGR bill, we are concerned that Medicare beneficiaries will now face higher out-of-pocket costs, including higher premiums and reduced coverage through certain Medicare Supplemental (Medigap) plans. The typical senior on Medigap is not wealthy—nearly half have annual incomes of less than $30,000.

AARP wants a permanent solution to the SGR formula, one that achieves a balanced and fair solution for all stakeholders—Medicare beneficiaries, physicians and other health care providers, insurers, and drug companies. AARP is ready to work with the Senate to improve this important bill.

http://www.aarp.org/about-aarp/press-center/info-03-2015/statement-house-passage-sgr-reform-bill.html

****

Letter to Speaker John Boehner and Democratic Leader Nancy Pelosi

From Joe Baker, President
Medicare Rights Center, March 25, 2015

We are grateful to the House Republican and Democratic leadership for working to develop an SGR compromise. The SGR formula is fundamentally flawed, and permanent changes to the Medicare reimbursement system are long overdue. Yet, H.R. 2 does not represent a fair deal for people with Medicare—expecting too much from beneficiaries in return for too little.

We are concerned with the offset provisions in H.R. 2, including proposals to scale back comprehensive Medigap coverage and to increase costs for those already paying higher Part B and Part D premiums. The clients we represent include those beneficiaries whose Medicare cost sharing will be altered by the offsets included in H.R. 2. In particular, we are most troubled by the provision to prohibit Medigap plans from covering costs up to the Part B deductible, starting in 2020 for newly eligible Medicare beneficiaries.

We fundamentally disagree with the premise that Medigap “first-dollar” coverage should be undone as a means of controlling health care service utilization. Decades of empirical research consistently demonstrates that, while higher out-of-pocket costs certainly deter health care utilization, it deters utilization of needed care as well as unneeded care indiscriminately. Additionally, research consistently supports what we know to be true through our experience serving people with Medicare: health care providers—not beneficiaries— order services and ultimately drive utilization trends.

Medigap provides health security and peace of mind to beneficiaries living on fixed incomes. The value of Medigap to people with low- and middle-incomes is its predictability. Planning for the expense of a monthly premium is doable, but the same is not true for the unexpected cost of a deductible. This security is critically important to the 40% of Medigap enrollees with incomes below $30,000. We believe comprehensive, “first-dollar” Medigap plans should remain available to future retirees.

At the same time, additional income-relating of Part B and Part D premiums concerns us. These provisions in H.R. 2 represent a sizable cost shift to select Medicare beneficiaries, and half of the total offsets included in the legislative package.

http://www.medicarerights.org/pdf/hr2-house-letter-032515.pdf

****

H.R. 2 – Medicare Access and CHIP Reauthorization Act of 2015

TITLE IV–OFFSETS

Subtitle A–Medicare Beneficiary Reforms

Sec. 401. Limitation on certain medigap policies for newly eligible Medicare beneficiaries.

Sec. 402. Income-related premium adjustment for parts B and D.

https://www.congress.gov/bill/114th-congress/house-bill/2/text

The decision of the U.S. Senate leadership to delay consideration of H.R. 2 (the SGR repeal bill) until after they take a two week recess provides us with an opportunity to join with others in demanding removal of two provisions that would be very harmful to our traditional Medicare program – means-tested premiums for Medicare Parts B and D, and imposing deductibles for beneficiaries of Medigap plans.

Although some might argue that these changes are comparatively trivial, make no mistake about the intent of these measures. Speaker John Boehner stated on the House floor that H.R. 2 is the beginning of the process of entitlement reform. In stating that this is “about strengthening and saving Medicare,” he really means that it is about reducing the government funding of Medicare by shifting more of the responsibility of payment to the Medicare beneficiaries, eventually culminating in the premium support (voucher) model of privatizing Medicare.

Recent Quote of the Day messages have sounded alarms about two major concerns of the “doc fix” legislation: (1) the administrative burdens that will be placed on health care professionals by the Merit-based Incentive Payment System (MIPS) and the Alternative Payment Models (APMs), and (2) the efforts to push the traditional Medicare program in the direction of privatization.

Of these two, the administrative hassles of MIPS and APMs are the less urgent since precursors of these programs already exist. The existing Medicare reporting programs include PQRS, Meaningful Use, and Value Modifier. Alternative Payment Models include accountable care organizations (ACOs), patient-centered medical homes, and others. Merely eliminating MIPS and APMs from H.R.2 will not adequately address these problems. They require much more work for a later date, hopefully leading to a single payer national health program.

On the other hand, eliminating means-tested premiums and mandated Medigap deductibles from H.R. 2 is an extremely urgent problem. We cannot allow incremental steps that shift more of the responsibility of paying for Medicare to the beneficiaries. AARP and the Medicare Rights Center agree. Sections 401 and 402 must be eliminated from H.R. 2.

Contact your Senators and urge other individuals and organizations to do likewise. Make telephone calls. Write letters. Send emails. Do it now.

  • Comments Off

Public Meeting of the Medicare Payment Advisory Commission (MedPAC)

January 15, 2015    
From the transcript

MS. [KATHY] BUTO: So, not having been [on the commission in 2008 when MedPAC recommended a] medical home pilot, were we anticipating a large increase in payments to primary care physicians, or just a greater degree … of authority … and status being given to primary care services? [p. 22]

MR. [GLENN] HACKBARTH [COMMISSION CHAIR]: [F]or me, there were two aspects of that recommendation for a medical home pilot. One was a change in the payment method for primary care, and second was an increase in the resources for primary care that might allow for practices to build more infrastructure, both staff and systems, to better coordinate care, especially for complex patients. To be frank, I’ve often thought since the time of that recommendation that it was a mistake to recommend pilots because of how drawn out and, ultimately, inconclusive that process often is, and hopefully, before I’m too far into my own Medicare years, we will get results from those pilots. I wish I were more optimistic that they would be definitive results. So –

MS. BUTO: Glenn, the method –

MR. HACKBARTH: Just a couple more points, Kathy.

So, the notion behind doing a pilot was, would the savings from better management of care be sufficient to offset the higher payment in the form of a per beneficiary lump sum payment to build infrastructure. That’s the – a key notion that’s being tested, as well as what happens to quality of care.

And, my own view … has become that even if the savings from better care management aren’t … large enough to offset the increased payment, the increased payment still makes sense, because we need robust primary care. … [W]e need to shore up the primary care delivery system and make it capable of caring for as many patients as possible … even if it means additional money. So, even if the pilot now comes back and says, well, the savings don’t offset the cost, I don’t think that means we shouldn’t do medical homes.

And, so, that’s why I feel like this was a mistake I made. We should have never recommended pilots. It’s an endless loop that you get into and not necessarily a productive one.
I’m sorry. [pp. 23-24]

http://www.medpac.gov/documents/january-2015-meeting-transcript.pdf?sfvrsn=0

In its June 2008 report to Congress, MedPAC jumped on the “medical home” bandwagon which had just begun to pick up steam. MedPAC recommended that Congress “initiate a medical home pilot project in Medicare.” (p. 22)  Glenn Hackbarth was one of two commissioners on MedPAC at that time who are still on the commission. He was one of 16 commission members who voted for that recommendation. (The seventeenth commissioner at that time, Nancy Anne DeParle, was not present.)

At MedPAC’s meeting on January 15, 2015, Hackbarth apologized for his vote. In the excerpt from the transcript of that meeting quoted above, Hackbarth states he wishes he had never endorsed pilot tests of the “medical home” concept. He offers two baffling justifications for this position: (1) he doesn’t like the “inconclusive” results of the tests that have been conducted; (2) he believes the “home” fad has caused more money to flow into primary care, and that outcome alone justifies his support for the fad.

Neither rationale makes sense.

Hackbarth is correct in stating that the research on “homes” has been inconclusive. But his reaction to the research is irrational. The rational response to research that doesn’t support your position is to admit your position was wrong. You don’t cuss out the research and apologize for having supported research.

Hackbarth’s disdain for science may seem irrational to those of us outside the managed care movement, but it is totally consistent with the mores of that movement. Movement leaders and disciples long ago tacitly accepted a double standard: The basic rules of scientific discourse apply to doctors and patients; they don’t apply to health policy analysts who promote managed care.

MedPAC is a leading proponent of the double standard. MedPAC firmly believes that doctors should accept the principles of evidence-based medicine; it does not believe that MedPAC should be governed by an analogous standard – let’s call it evidence-based health policy.

Hackbarth’s apology for having supported pilot tests of “homes” illustrates this double standard.

Hackbarth’s second rationale – that the “home” fad has poured new resources into the primary care sector – is almost certainly backward. If and when health policy analysts ever get around to conducting research on the additional costs incurred by “medical homes,” that research will probably demonstrate that those costs exceed the additional revenues “homes” receive. To date the health policy community has studiously ignored this issue.

What little anecdotal evidence we have indicates clinics that seek to “transform” into “homes” require new resources on the order of 15 to 20 percent of their existing expenditures or revenues.

Not one of Hackbarth’s fellow commissioners took issue with Hackbarth’s argument that MedPAC should ignore research they don’t like. Not one took issue with his claim that the “home” fad has resulted in a net increase in revenues for the primary care sector. MedPAC’s job is to advise Congress on how to improve Medicare. It can’t do that if it continues to promote the double standard: evidence-based medicine for doctors and faith-based health policy for MedPAC.

Kip Sullivan, J.D., is a member of the board of Minnesota Physicians for a National Health Program. His articles have appeared in The New York Times, The Nation, The New England Journal of Medicine, Health Affairs, the Journal of Health Politics, Policy and Law, and the Los Angeles Times.

  • Comments Off

Boehner: H.R. 2 begins the process of entitlement reform

Posted by on Thursday, Mar 26, 2015

This entry is from Dr. McCanne's Quote of the Day, a daily health policy update on the single-payer health care reform movement. The QotD is archived on PNHP's website.

Debate on H.R. 2, “Medicare Access and CHIP Reauthorization Act of 2015”

United States House of Representatives
C-SPAN, March 26, 2015

Speaker of the House John Boehner:

We expect to end the so-called doc fix once and for all. Many of you know we’ve patched this problem seventeen times over the last eleven years, and I decided about a year ago that I had had enough of it. In its place we’ll deliver for the American people the first real entitlement reform…

Today it’s about a problem much bigger than any doc fix or any deadline. It’s about beginning the process of solving our spending problem, and it’s about strengthening and saving Medicare which is at the heart of that problem. Normally we’d be here to admit that we’re just going to kick the can down the road one more time. But today, because of what we’re doing here, we’re going to save money 20, 30, 40 years down the road. …

We can’t become complacent. We’ve got more serious entitlement reform that’s needed. It shouldn’t take another two decades to do it, and frankly I don’t think we’ve got that much time. But I’m here today to urge all of our members to begin that process, and the process begins by voting yes on H.R. 2 today.

http://www.c-span.org/video/?324978-1/us-house-medicare-payments-doctors&live

H.R. 2 passed in the House today by a vote of 392 to 37. It goes to the Senate where it will be voted on tomorrow. But is this really about the “doc fix” – eliminating SGR? Speaker of the House John Boehner clarifies that for us. It’s about entitlement reform and H.R. 2 begins that process.

Entitlement reform…

  • Comments Off

H.R. 2 has replaced H.R. 1470

Posted by on Wednesday, Mar 25, 2015

This entry is from Dr. McCanne's Quote of the Day, a daily health policy update on the single-payer health care reform movement. The QotD is archived on PNHP's website.

H.R. 2, “Medicare Access and CHIP Reauthorization Act of 2015” replaces H.R. 1470, “SGR Repeal and Medicare Provider Payment Modernization Act of 2015”

By Don McCanne, M.D.

Yesterday, March 24, H.R. 2 was introduced in the House of Representatives. H.R. 1470, the subject of recent Quote of the Day messages, has been included in H.R. 2 as Title I. H.R. 2 is the legislation that the House will pass tomorrow.

The bill is now 263 pages long. It contains the following Titles:

TITLE I–SGR REPEAL AND MEDICARE PROVIDER PAYMENT MODERNIZATION
SGR repeal and replacement with MIPS and APMs

TITLE II–MEDICARE AND OTHER HEALTH EXTENDERS
Twenty-one Medicare and other health extenders, including extension of funding for community health centers and the National Health Service Corps

TITLE III–CHIP
Two year extension of CHIP

TITLE IV–OFFSETS
Means-tested Medicare premiums and elimination of deductible coverage in Medigap plans

TITLE V–MISCELLANEOUS
Twenty-five miscellaneous provisions

https://www.congress.gov/bill/114th-congress/house-bill/2/text

THIS EXPANSION  OF THE ACT DOES NOT CHANGE ANY OF THE RECOMMENDATIONS SENT OUT EARLIER TODAY:

1. REPEAL SGR

2. EXTEND CHIP FINANCING FOR FOUR MORE YEARS

3. EXTEND FUNDING FOR COMMUNITY HEALTH CENTERS

4. REJECT UNPROVEN AND DETRIMENTAL POLICIES CONTAINED IN THE ACT

In addition, beneficial measures added to H.R. 2 should be enacted, but they need to be sorted out from inappropriate or deleterious policies that have been added to this act.

At this time Congress should simply repeal SGR, fund CHIP, fund community health centers and the National Health Service Corps, and refer all other provisions for further study by the appropriate committees.

  • Comments Off

Repeal SGR, but don’t privatize Medicare

Posted by on Wednesday, Mar 25, 2015

This entry is from Dr. McCanne's Quote of the Day, a daily health policy update on the single-payer health care reform movement. The QotD is archived on PNHP's website.

Repeal SGR, but don’t privatize Medicare

March 25, 2015

By Don McCanne

In the fervor to finally rid us of the flawed SGR model of setting Medicare payment rates, Congress is about to pass legislation (H.R. 1470) that includes ill-advised, misguided and detrimental policies that could cause irreparable harm to our traditional Medicare program. Instead, Congress should revise the current legislation to comply with the following recommendations.

Recommendations

1. Repeal SGR

2. Extend the funding of CHIP for four years

3. Extend funding for community health centers

4. Reject unproven or detrimental policies

a. Reject the Merit-based Incentive Payment System (MIPS) which threatens the traditional Medicare program by creating an administratively burdensome but unproven method of replacing volume with value

b. Reject the Alternative Payment Models (APMs) as the only options for escaping MIPS since APMs also remain unproven methods of replacing volume with value

c. Reject the threat to quality care that can result from burnout of health care professionals overburdened with the administrative excesses of MIPS and APMs

d. Reject the false argument that SGR – a policy that has not been implemented for many years – must somehow be paid for by other reductions in public spending

e. Reject the political chicanery of introducing unrelated issues into the legislation such as policy positions on pregnancy termination

f. Reject the expansion of means-tested premiums in Medicare which would threaten solidarity in support of our Medicare program

g. Reject imposing deductibles under Medigap plans which would cause too many patients to delay or forgo beneficial health care services

h. Reject these unproven or detrimental policies that would reduce support of our traditional Medicare program, opening the door for those who would privatize Medicare through premium-support (voucher) proposals.

  • Comments Off

Having assessed in the last three posts the impacts of the Affordable Care Act (ACA) over the last five years,  we have seen that the ACA will not bring universal access, contain health care costs for patients and tax payers, or improve the quality of care.

These are some of the main lessons we have already learned from the ACA’s initial five years.

1. Health care “reform” through the ACA was framed and hijacked by corporate stakeholders, themselves in large part responsible for our system problems of health care.

Although deregulated markets in our medical-industrial complex were largely responsible for problems of access, costs and quality of health care for many years, policy makers and framers were unwilling to confront corporate stakeholders of the existing system where the business “ethic” prevails. Thus the interests of insurers, the drug and medical device industries, hospitals and organized medicine took precedence over the needs of patients throughout the political process. By the time the ACA was enacted, some 1,750 organizations and businesses had hired about 4,525 lobbyists, eight for every member of Congress, at a cost of $1.2 billion, to get the kind of legislation they wanted. (1) Drafters of the ACA often had conflicts of interest; Elizabeth Fowler, for example, as the lead author of the Senate Finance Committee’s bill, had served as vice president for public policy for Wellpoint, the country’s second largest insurer. (2)

2. We can’t contain health care costs by letting for-profit health care industries pursue their business “ethic” in a deregulated marketplace.

All of the corporate stakeholders in health care have seen a bonanza of profits through new subsidized markets with no significant price controls. Health insurer stocks have soared, as illustrated by UnitedHealth Group, the nation’s largest insurer, which saw its share price rise from $30.40 in March 2010, to $113.85 this month, a 375 percent increase. The other five of the six top insurers more than doubled or tripled their stock value. (3) The ACA has rewarded hospitals with several million more paying customers through the individual mandate and Medicaid expansion as they merge and consolidate with larger market shares. All this has led to higher prices. As one example, charges for medical procedures rose four times faster than the rate of inflation in 2012. (4)

3. We can’t reform the delivery system without reforming the financing system.

Drafters of the ACA never questioned the multi-payer financing system which is a big part of our problems. Ignoring the experience of most other advanced countries, they kept not-for-profit, single-payer public financing off the table. Private insurers have successfully avoided costlier, sicker patients for many years. While the ACA sets some limits on this behavior, the industry has found new ways to continue to game the new system for their business interests, as we shall see in our next post. Today, the “partnership” is still close between government and the private insurance industry. They both need each other—the Obama administration, which counts on private insurers to participate in expanding their markets, and insurers, who welcome nearly $2 trillion in subsidies expected over the next ten years. (5)

4. It is futile to embark on unproven and untested incremental tweaks to our present system while ignoring health policy and experience around the world.

As we have seen in recent posts, the ACA embarked on various new initiatives that were either untested or had failed in earlier years, including increased cost-sharing with patients, changes in payment policies, accountable care organizations, and further privatization. All of those initiatives ignored the role of the deregulated marketplace in perpetuating our access, cost and quality system problems.

5. In order to have the most efficient insurance coverage, we need the largest possible risk pool to spread the risk and avoid adverse selection.

It is well known that the larger and more diverse the risk pool is, the more efficient and affordable insurance can be. About 20 percent of the population accounts for 80 percent of all health care spending. But the ACA has opted to leave some 1,300 private insurers in place, with continued increased fragmentation of risk pools. Risk pools under the ACA are made smaller by many young people not signing up through the exchanges, one-third of middle-aged men opting to stay uninsured (6), and many exemptions to the individual mandate given by the Department of Health and Human Services (HHS).

6. The ACA has been much more disruptive to our system than a simplified single payer alternative would have been.

The key question that was never asked or answered by the framers and promoters of the ACA was who is the system for— corporate interests or patients? Instead of minimizing disruption by corporate stakeholders, the ACA brings us increased disruption for patients: a more confusing and unstable system, more discontinuity of insurance coverage, disruption of many doctor-patient relationships, less choice of hospitals and physicians through narrowed (and changing) networks, and more uncertainty. As one example of how ineffective accountable care organizations (ACOs)  have been, a recent study found that two-thirds of office visits to specialists were provided outside of assigned ACOs, especially for higher-cost patients with more office visits and chronic conditions. (7)

7. We can’t trust many states to assure an adequate safety net for the uninsured and underinsured.

Red states and those that have opted out of Medicaid expansion give us no confidence that they will assure that the uninsured and underinsured will receive sufficient essential health care. Many states are cutting already low Medicaid reimbursement, with the result that more physicians will not accept new Medicaid patients. (8) The ACA gives states wide latitude to determine what “adequate access to covered services” is. Churning in coverage will continue—a 2014 study found that 40 percent of adults likely to enroll in Medicaid or subsidized marketplace coverage will have a change of eligibility within 12 months. (9) And at the national level, the GOP is targeting big cuts in Medicaid and food stamps. (10)

Can this trajectory be changed going forward? Based on the lessons above, the answer has to be “No,” though many supporters are not yet prepared to acknowledge this. It is unfortunate that we will have to see ongoing profiteering and administrative waste at patients’ and taxpayers’ expense before we can get health care right in this country. Our next blog will address one of the main culprits perpetuating our dysfunctional health care system—the private insurance industry itself.

References:
1. Center for Public Integrity, as cited by Moyers, B, Winship, M. The unbearable lightness of reform. Truthout, March 27, 2010.
2. Connor, K. Chief health aide to Baucus is former Wellpoint executive. Eyes on the Ties blog, September 1, 2009.
3. Potter, W. Health insurers’ stock soars as they dump small business customers. The Progressive Populist, March 1, 2015.
4. O’Leary, W. On the road to corporate health care. The Progressive Populist, March 1, 2015.
5. Pear, R. Health law turns Obama and insurers into Allies. New York Times, November 17, 2014.
6. Flavelle, C. Obamacare’s dropouts are middle-age men. Bloomberg News, March 17, 2014.
7. McWilliams, JM, Chernew, ME, Dalton, JB et al. Outpatient care patterns and organizational accountability in Medicare. JAMA Internal Medicine, April 21, 2014.
8. Pear, R. For many new Medicaid enrollees, care is hard to find, report says. New York Times, September 14, 2014.
9. Summers, BD, Graves, JA, Swartz, K et al. Medicaid and marketplace eligibility changes will occur often in all states; policy options can ease impact. Health Affairs 33 (4): 700-707, April 2014.
10. Peterson, K. GOP targets Medicaid, food stamps. Wall Street Journal, March 13, 2015: A 5.


Adapted in part from my new book, How Obamacare Is Unsustainable: Why We Need a Single Payer Solution for All Americans.

SGR Fix: APMs threaten physician burnout (RAND)

Posted by on Tuesday, Mar 24, 2015

This entry is from Dr. McCanne's Quote of the Day, a daily health policy update on the single-payer health care reform movement. The QotD is archived on PNHP's website.

Effects of Health Care Payment Models on Physician Practice in the United States

By Mark W. Friedberg, Peggy G. Chen, Chapin White, Olivia Jung, Laura Raaen, Samuel Hirshman, Emily Hoch, Clare Stevens, Paul B. Ginsburg, Lawrence P. Casalino, Michael Tutty, Carol Vargo, Lisa Lipinski

RAND Corporation, March 19, 2015

The project reported here, sponsored by the American Medical Association (AMA), aimed to describe the effects that alternative health care payment models (i.e., models other than fee-for-service payment) have on physicians and physician practices in the United States. These payment models included capitation, episode-based and bundled payment, shared savings, pay for performance, and retainer-based practice. Accountable care organizations and medical homes, which are two recently expanding practice and organization models that feature combinations of these alternative payment models, were also included. Project findings are intended to help guide efforts by the AMA and other stakeholders to make improvements to current and future alternative payment programs and help physician practices succeed in these new payment models.

Physician Incentives and Compensation

Practice leaders described transforming certain practice-level financial incentives (especially those concerning cost containment) into internal nonfinancial incentives for individual physicians, choosing instead to appeal to physicians’ sense of professionalism, competitiveness, and desire to improve patient care. Common nonfinancial incentives included performance feedback and selectively retaining or terminating their physicians based on quality or efficiency performance.

Generally speaking, alternative payment models had negligible effects on the aggregate income of individual physicians within our sample.

Physician Work and Professional Satisfaction

Within our sample, alternative payment models had not substantially changed how physicians delivered face-to-face patient care. However, the overall quantity and intensity of physician work had increased because of growing patient volume expectations and ongoing pressure for physicians to practice at the “top of license” (e.g., by delegating less intense patient encounters to allied health professionals), which was described as a potential contributor to burnout because lower-intensity patients could be an important source of respite for busy physicians.

Additional nonclinical work, particularly documentation requirements, created significant discontent. Physicians recognized the value of documentation tasks that were directly related to improvements in patient care, such as identifying patients with diabetes to facilitate better management of all patients with this condition, but they disliked the extra burden generated when documentation requirements were perceived as irrelevant to patient care.

Most physicians in practice leadership positions were optimistic and enthusiastic about alternative payment models, while most physicians not in leadership roles expressed at least some level of apprehension, particularly with regard to the documentation requirements of new payment models. Overall, even these physicians seemed to believe that major changes in payment methods would continue and acknowledged that some changes were useful. Nevertheless, their attitude was frequently one of resignation, rather than enthusiasm, because their day-to-day work life was more difficult and included burdens they did not believe would improve patient care.

Factors Limiting the Effectiveness of New Payment Models as Implemented

Physicians and practice leaders described encountering three general types of operational problems in new payment programs that limited their effectiveness and sapped physicians’ enthusiasm for them.

First, physicians and practice leaders participating in a variety of alternative payment models described encountering errors in data integrity and timeliness, performance measure specification, and patient attribution (the process by which patients are assigned to a specific physician or practice). These payment models shared characteristics that might have made errors more likely: They were administratively more complex than FFS payment; some required payers to develop new measurement systems; and some were deployed for the first time quite quickly, without a “dress rehearsal” in which errors could be corrected before payments were on the line.

Second, physicians had a variety of concerns about the implementation of performance and risk-adjustment measures underlying PFP, shared savings, and capitation programs. Broadly speaking, these concerns stemmed from a sense that the multiplicity of measures within and across programs could distract physician practices from making the changes to patient care that were actually the ultimate goal of many payment programs.

Third, the influence of uncontrollable, game-changing events in shared savings and capitation programs (e.g., the introduction of very high-cost specialty drugs) sapped physician practices’ enthusiasm for these payment models. Finally, some physicians reported that they could not understand exactly what behaviors were being encouraged or discouraged by certain performance-based payment programs—even after seeking clarification from payers.

Increased Stress and Time Pressure

New nonclinical work for physicians was almost universally disliked, especially when there was no clear link to better patient care. For example, frustration was common when physicians believed they were being asked to spend more time on documentation solely to get credit for care they had provided already. Overall, increased stress on physicians might directly harm the quality of patient care and might also serve as a marker that physicians are concerned about the quality of care they are able to provide.

Full report (142 pages):
http://www.rand.org/content/dam/rand/pubs/research_reports/RR800/RR869/RAND_RR869.pdf

HR 1470, which Congress is scheduled to approve in only two days (March 26), would replace the flawed Sustainable Growth Rate (SGR) method of determining Medicare payments with a new Merit-based Incentive Payment System (MIPS). MIPS introduces considerable administrative complexity which would be a great burden to physicians, but the legislation allows physicians to opt out of MIPS by joining Alternative Payment Models (APMs) such as Accountable Care Organizations (ACOs) or Patient Centered Medical Homes (PCMHs). This RAND study of APMs reveals that physician members of APMs are at very high risk of BURNOUT.

Some believe that the onerous structure of MIPS was designed specifically to drive physicians into APMs, especially ACOs. But is moving from burnout to burnout really progress?

From the report: “(physicians’) day-to-day work life was more difficult and included burdens they did not believe would improve patient care.” Further: “Overall, increased stress on physicians might directly harm the quality of patient care and might also serve as a marker that physicians are concerned about the quality of care they are able to provide.”

This legislation will require physicians to submit to MIPS requirements or join an APM, in either case incurring a high risk of burnout. But health care should really be about the patient. Well, this does affect patients, but in a bad way. Stressed-out physicians unintentionally provide lower quality care. This is the exact opposite of the intent of this legislation, assuming that higher value is intended to represent higher quality.

Supporters say that getting rid of SGR is not only worth the legislative compromise, but that the new MIPS provides the additional benefit of improving quality, not to mention some CHIP funding being thrown in as well. As we have seen, quality will likely be worse instead because of the inevitable burnout. But now the supporters are responding with the usual: “perfect being the enemy of the good,” “art of legislative compromise,” “bipartisan support,” “making sausage,” and “must move on to other priorities.”

It’s tempting to tell them what to do with their sausage, but, above all, we should speak out loudly on behalf of our patients. This legislation will make health care worse. With only two days left and the steamroller in full momentum, can we do anything to prevent this injustice about to be inflicted on patients and their health care professionals?

  • Comments Off

Public Meeting of the Medicare Payment Advisory Commission (MedPAC)

January 15, 2015
From the transcript

[COMMISSION CHAIR GLENN] HACKBARTH: [W]e’re now finished with our work for the March report and moving on to work for June, and first up is a continuation of past discussions we’ve had on creating a level playing field or synchronizing payment across traditional Medicare, Medicare Advantage, and ACOs. Jeff.

DR. [JEFF] STENSLAND [STAFF]: Good afternoon….So let’s begin with a review of last year’s discussion. Under the current Medicare program, there are three payment models: traditional fee-for-service, Medicare Advantage, and ACOs. [pp. 110-111]

DR. NERENZ: If we could go to Slide 5, middle column [which purports to show ACO costs], please. Back in October and November when we had the focused ACO discussion, I asked a question about the infrastructure operating costs. You’ve got contracting, you’ve got IT infrastructure, you’ve got care coordinators. And the issue was that those are not reimbursed by CMS, so those are not included in this column, right, because they’re not program costs?

DR. STENSLAND: They are not directly included in that column, but what is in that column is the shared savings that the program pays to them. … So it’s not directly there, but it might be indirectly there through the shared savings.

DR. NERENZ: Okay. Well, my question was: Is it directly there? And it’s not. [pp. 135-136]

http://www.medpac.gov/documents/january-2015-meeting-transcript.pdf?sfvrsn=0

This excerpt from the transcript of MedPAC’s January 2015 meeting indicates MedPAC continues to guess that ACO overhead is in the range of 1 to 2 percent of expenditures and that MedPAC continues to ignore those costs in calculating total spending on ACOs participating in Medicare’s ACO programs. Later portions of the transcript indicate ACOs are saving so little money, and are therefore getting such small “shared savings” payments back from Medicare, that ACOs are losing money. But MedPAC continues to ignore that fact as well.

Since MedPAC endorsed “accountable care organizations” at its November 2006 meeting, it has never expressed any interest in comprehending what it costs to start and run an ACO. MedPAC didn’t receive even a guesstimate of ACO overhead until its November 2013 meeting. At that meeting the commission began discussing the “synchronization” of payment to Medicare’s three programs: the traditional fee-for-service (FFS) program, the Medicare Advantage (MA) program, and Medicare’s ACO programs – the Pioneer ACO program and the Medicare Shared Savings Program (MSSP). At that meeting, one of its staff, Katelyn Smalley, told the commission Pioneer ACOs were saving Medicare half a percent but their overhead was “about 1 to 2 percent” (see p. 164). Neither Smalley nor anyone else pointed out the obvious: If ACOs incur overhead costs of 1 to 2 percent, but they’re only saving Medicare half a percent, they’re losing money and, depending on how they make up the losses, they are raising costs for the entire health care system.

Nearly a year passed before one of the commission’s 17 members asked the obvious question: Aren’t ACOs going to die off, or raise system-wide costs, if their overhead is higher than the money they are saving Medicare? The commissioner, David Nerenz, raised the issue at MedPAC’s September 11, 2014, meeting after MedPAC staffer Jeffrey Stensland asserted that ACOs have “low overhead.” Nerenz questioned Stensland on that claim. “Do we know anything about that?” he asked.

The answer Nerenz got from Stensland indicated MedPAC was still guessing ACO overhead was 1 to 2 percent. “[P]eople we talk to and the data we have seen, it looks like maybe 1 to 2 percent of your spend, that that’s what they’re spending on their ACO to operate it,” said Stensland. (p. 133).

A few minutes later Nerenz asked Stensland if he knew whether any ACOs had “made money net of overhead costs?” (p. 144). Stensland replied the average ACO is losing money. This was obviously correct. If ACOs are cutting Medicare costs by only a half-percent and are receiving back from Medicare only a portion of that half-percent (a quarter-percent is a good guess), and if ACOs have overhead equaling 1 to 2 percent of their expenditures, then ACOs are losing money.

At that September 2014 meeting, only one other commissioner, Mary Naylor, supported Dr. Nerenz’s position on ACO administrative data.

It should be no surprise, then, that when the commission resumed its discussion about leveling the playing field among Medicare’s FFS, ACO and MA programs at its January 2015 meeting, ACO overhead was not on the agenda. It would have been ignored again if Nerenz hadn’t raised the issue once more. As was the case in September 2014, only one other commissioner backed Nerenz up.

Nerenz raised the overhead issue after Stensland presented a table purporting to show that ACO costs are equal to FFS costs measured in terms of claims paid out by CMS. According to Stensland’s table, ACO costs are exactly equal to – 100 percent of – those of the FFS program. Nerenz asked Stensland whether he included ACO overhead costs in his calculations. Stensland should have said no. Instead he offered this non sequitur: He said he included the “shared savings” payments that a minority of ACOs are getting from CMS, ergo, overhead “might be indirectly” in his ACO-cost total. Stensland’s cryptic reply forced Nerenz to clarify: Stensland had not included ACO overhead costs in his estimate of ACO spending, period.

In the ensuing dialog with Nerenz, Stensland repeated his estimate that ACO overhead is in the range of 1 to 2 percent. (He said it was 1.5 percent, which was apparently splitting the difference between the estimate of “1 to 2 percent of spend” that he offered at the September 2014 meeting and that Katelyn Smalley had offered at the November 2013 meeting.) In other words, MedPAC knew no more about ACO overhead in January 2015 than it knew in November 2013.

Commissioner Scott Armstrong, the CEO of Group Health Cooperative, was the only other commissioner to express support for Nerenz’s effort to induce his fellow commissioners to instruct MedPAC staff to stop ignoring ACO overhead. But even Armstrong could not bring himself to make that demand explicitly. What he said was, “I think we need to be responsible for the total cost question.” (p. 178)

Later in the discussion at the same January 2015 meeting, Stensland was asked if he had any information on whether ACOs were saving Medicare money. Stensland replied:

I don’t remember the MSSP numbers off the top of my head. For the Pioneer it was something like 1.7 percent lower, or something, in aggregate the first year. You know, you’re kind of in that 1 percent range in terms of the aggregate. [pp. 181-182]

Note that 1 percent or 1.7 percent, whichever it was Stensland intended, is much higher than the 0.5 percent figure reported to the commission at its November 2013 meeting. (At the September 2014 meeting, a MedPAC staff member reported that Pioneer ACOs are cutting Medicare costs by 0.5 percent while MSSP ACOs are saving 0.3 percent (pp. 121-122)). But even if Pioneer ACOs are cutting Medicare costs by 1.7 percent, they are still losing money and the system as a whole is just breaking even (assuming the cost to CMS of running the ACO programs is trivial).

I commend MedPAC for insisting that payments to ACOs and MA reflect their true efficiency. But MedPAC will never know the true efficiency of ACOs if they persist in ignoring ACO overhead costs.

Kip Sullivan, J.D., is a member of the board of Minnesota Physicians for a National Health Program. His articles have appeared in The New York Times, The Nation, The New England Journal of Medicine, Health Affairs, the Journal of Health Politics, Policy and Law, and the Los Angeles Times.

  • Comments Off

About this blog

Physicians for a National Health Program's blog serves to facilitate communication among physicians and the public. The views presented on this blog are those of the individual authors and do not necessarily represent the views of PNHP.

News from activists

PNHP Chapters and Activists are invited to post news of their recent speaking engagements, events, Congressional visits and other activities on PNHP’s blog in the “News from Activists” section.