I'll Say It Again, It's The Incentives, Stupid!

Newtown, CT - December 8, 2017

Bob Galvin once told me that second marriages were the triumph of hope over experience. Recent evidence on ACOs reminds me of that quote – A study published this month in Health Affairs by Williams, Chernew and Landon indicates that, by and large, the overwhelming majority of savings coming from ACOs participating in the Medicare Shared Savings Program is due to reductions in post-acute care costs and other site of service shifts for some ambulatory services. Importantly, the study shows that only a third of the savings comes from a reduction in potentially avoidable complications of patients with one or more chronic conditions. A Health Affairs blog post by Saunders, Muhlestein and McClellan has some complementary information that sheds more light on the nuanced picture of ACO performance. First, and not surprisingly, they find that it takes time for health care organizations to shift gears, change their practice patterns, and achieve savings. However, once the momentum is engaged, it builds on itself. Second, physician led ACOs are leading the pack in practice change, performance improvement and savings. And here is where hope can triumph over the general experience if public and private payers pay close attention.
What this means to you – As I’ve said before, it’s the incentives, stupid, and an article in the Washington Post on the management of asthma for kids in inner city Baltimore sums it up. In it, one of the large system leaders is quoted as saying that, after all, they’re a business, and we should never forget that. Large health care businesses, by and large, are pretty loath to cannibalize themselves even when, as is the case in Maryland, they are subject to a global cap. On the face of it, we’d all say that the global cap should be a significant incentive to reduce unnecessary hospitalizations, and deploy resources in the community to bring down the number of high hospital users, especially when the recipe to achieve those results is straightforward. However, for many health systems, the global cap is merely a signal to reduce the rate of increase in future costs, not necessarily the signal to significantly reduce total existing costs. Saunders et al make that point by raising the concern about the meek nature of most of the incentives in these shared savings programs, and that’s translated in the everyday business of health care by continuing the current practices that fill up beds, not by taking care of the patients with high needs in such a way that would keep them out of the hospital. Hope is real, however, because the ACOs that aren’t shackled with the high fixed expenses of hospitals are making important strides, and organizations like Aledade are proving it daily. In fact, at an upcoming Summit that we’re sponsoring with the HFMA, you can see how patients with high needs can be effectively cared for and how the costs of managing them can be significantly decreased. The dilemma for public and private sector payers is that most of their ACO contracting has focused on larger health systems when they should have been seeking out the more nimble ones led by physician groups. They must now pivot because hoping that those larger systems will shift their current business models does ignore the experience to-date and will likely lead to another nasty divorce.