Integrated Delivery Systems, ACOs and Community Based Plans
Clinical integration has emerged through many iterations in the past twenty years. Some created physician networks to partner with a hospital in a Physician Hospital structure to better their ability to negotiate with third parties. These are integrated only at the contractual level. Some acquired physicians to bolster more referrals from primary care to specialists and keep out competition. These are integrated at the referral level only. Some took the integration to heart, building a platform for care improvement and a long term ability to predict risk. Many of these truly integrated systems of care are integrated at the contractual, referral, data and financial levels so they are seen as mini Kaiser-like enterprises and have evolved to actually lead the care system transformation in their community away from fee-for-service and into a value based arrangement with purchasers and patients.
Many Integrated Delivery Systems are moving toward the Accountable Care Model, and this can enable physicians and hospitals to work together towards a common goal. In the first quarter of 2011, there were 64 Medicare Shared Savings Plans (MSSPs) operating in the United States. As of January 1, 2017, there were 844 Medicare ACOs in addition to the original 20 that participated in the ACO pilot. In addition, another 400 private pay ACOs have been created to serve the non Medicare commercial payers. Pioneer generated $120 million in savings during their year 3 performance year and while the MSSP program spent $806 million BELOW target, participating groups were awarded $341 million in savings in 2015 and over $450 million on $800 million in Medicare savings created in 2016.
These are all steps towards the Value Based Payment model being promoted by CMS but also by private payers. United HealthCare, the nation’s largest health insurer, paid out $36 billion on members in risk based arrangements, and other commercial insurers such as Aetna, Cigna and Blue Cross are spending $71 billion on their Value Based compensation for providers.
Moving from a network only strategy to a provider led payer strategy, we see several options for physicians to consider.
The Physician Driven Health Plan has actually become the most successful and durable model for health care in the United States. Physicians have some ownership and input into the operations and results of the enterprise but, for the most part, are professionally managed by expert managers hired by the physicians. From not-for-profit Cooperatives like Group Health Seattle, a highbred of a consumer owned and physician driven enterprise, to Physician Group Sponsored Plans like rural Greater Marshfield, to Physician Hospital models like Intermountain, to east coast provider sponsored plans like Geisinger and Tufts, to mixed models of cooperatives merged with medical groups like Health Partners Minnesota, all have one thing in common – they are Physician Driven Health Plans.
According to several studies, provider sponsored plans carry a lower premium (Sherlock and Company) because they can actually manage the care better than a third party. Add to this advantage the fact that local providers are seen as a local company worthy of consumer support versus large, far away insurance companies that may make it difficult to appeal a decision or make an exception on medical needs. Finally, the local delivery system has the ability to compete quite effectively because the doctors are owners. In other words, they have input into the quality standards for their specialty and also have a psychic value of ownership equity in the successful outcome of the plan’s operations and growth.
This translates to a higher value when the practice is sold because of the lock-in of patient volume. It also translates to a larger stake in generating more income per patient if patients are kept healthy. Most private plans do not have a gain-sharing agreement but a Physician Driven plan does.
What we are also finding from Geisinger, Greater Marshfield and Health Partners is that innovation takes place quite readily in a provider owned plan versus an insurance company owned plan that may take years to convince its contracted doctors to change their guidelines.
As not-for-profit insurance companies like Blue Cross continue to consolidate into regional and national for-profit cartels, and federal legislation favors the big national insurance companies, it becomes clear that a locally owned and operated plan would have a niche against a large player if for no other reason than its shareholders are the doctors and bonus monies recovered by these shareholders inevitability go back to the practice in terms of new equipment, better staffing and improved operations.
Many have criticized these plans, saying doctors do not know how to run an insurance company. While this is probably valid at times, seeing that there have been some failures where boards and managers clash due to issues of credibility and egos, but most successful plans have found trained executives with good track records in working with provider sponsored plans and have made these plans avoid these pitfalls. They also operate with physicians as owners and partnering with non-physician staff, some of whom may also become owners depending upon performance.
Requirements and Considerations in Building Value Based Care and HMO Models for Your Community.
First envision this as a separate living breathing enterprise with incredible potential that needs to be built step by step IN THE CORRECT SEQUENCE.
Where the wheels come off is not focusing on the right sequence. Even the professional managers get it wrong. It is not finance, legal, operations and then marketing.
It is market analysis first to see what kind of health plan fits the employers’ needs in the market and what kind of competition is present, now and in the future to determine if a MSSP product is even feasible. Many low benchmark communities have a very hard time building a sustainable model because the cost to launch and maintain an ACO is prohibitive. What often works better is a joint venture with an existing plan or developing a percentage of premiums for Medicare Advantage contracts.
Next comes legal feasibility to test the vision against state and/or federal laws.
Then there must be a discussion of Operations and the best way to phase in resources over time which logically leads to a budget and some precision on financial issues.
The best business plans discuss current but also future options for growth. Health plans are not a stagnant business; they must grow according to a plan. This means a controlled growth, enrolling members but also leasing networks and selling data. This means not overstaffing and also means using purchased or leased technology in the most effective way possible.
What We Can Do to Guide the Efforts of Your Team to a Safe Launch.
DeMarco and Associates and its affiliate Pendulum Health Care are designed to support and enable physicians and purchasers to work together to develop a better exchange of value including improved reimbursement for better quality outcomes.
We assist in the education of physicians and buyers of care using examples and local data to set up realistic goals and benchmarks based upon prevailing practice patterns.
DeMarco and Associates conducts research and feasibility studies to build the foundation for the expectations of both parties and begin moving towards a business plan. Once the business plan is affirmed by both parties, the capital formation can begin with Pendulum Health assisting in funding select programs and/or helping clients raise money through physician and employer investment.
DeMarco and Associates can further assist with employer assessments, marketing to payers and their third party administrators as well as educating brokers and consultants as to the opportunities to use this new ACO network or support the development of a community plan over the present carriers, all of whom represent an inefficient network with very poor patient engagement.
DeMarco and Associates can further assist in finding staff, preparing requests for proposals for software and claims services and finally developing working relationships with reinsurance companies and actuaries to make sure the providers have limited risk and a full opportunity for a return on their investment.
Overall DeMarco and Associates has the capability to research, design and build a locally owned and operated network and product for providers and/or purchasers that represent government beneficiaries as well as private third party payers.