Accountable Care Organizations (ACOs): A 'Blue Ocean' for the Disease Management Industry?

The Disease Management Care Blog eschews business gobbledygook. Many readers know this stultifying corporate-speak when they see it: jargonesque paragraphs that proclaim fresh enhancements, novel strategic directions, commitments to the value chain, stunning leadership redesigns, solutioning, portfolios, alignments and other such enigmatic nonsense from wannabe corporate titans that actually impair communication for their workers and customers alike.

That doesn’t mean that there aren’t important concepts behind the wordage, which is why the DMCB will apologetically cross the line and use one overused expression for a classic business concept: the ‘Blue Ocean Strategy.’ While those mots remain a darling of faux-visionary business people and consultants everywhere, it’s still an important concept: there may be markets that can be made tomorrow that do not exist today.

A new market opportunity may be opening up for the disease management organizations (DMOs), thanks to the U.S. House of Representatives. The DMCB went back to the ‘America’s Affordable Health Choices Act' and looked at what it had to say about ‘accountable care organizations (ACOs). The DMCB defines these as one or more hospitals and the physicians who work within and around them who are formally organized to manage quality and cost for the local populations they serve.

Like the Medicare medical home pilot, the House bill has a similar trial program for Medicare to test the ACO. The DMCB interprets the House legi-speak to define its version of an ACO as, among other things, a physician-based a) legal structure for the receipt and distribution of incentive payments, that b) has sufficient numbers of primary care physicians, c) can collect quality measures and other data for public reporting and d) prominently uses care management planning for patients. It’s up the Secretary of HHS to set performance targets and, if they’re met, the ACO can receive payments that are, in turn, distributed to the docs. ACOs are also allowed to create similar contracts with other payers. The pilot is to start at the latest by January 1, 2012.

Just like the medical home pilot, there is language aimed at getting smaller physician-owned groups to participate. In this instance participation by high cost patients can be limited, which also decreases variability and increases the likelihood of success. To the DMCB, that makes sense.

Extension of the pilot is possible for the ACOs if they are meeting targets and have qualified for at least one incentive payment. The incentives can also be flexed and expanded. Last but not least, just like the medical home pilot, the CMS’ Chief actuary has to certify that any expansion is budget neutral.

While ACOs have yet to appear in any number, parallel examples of them exist in the Medicare Coordinated Care Demonstration that was described in JAMA this year. They involved disease management organizations (DMOs), many broke even and some even made a profit. In prior posts, the DMCB doubted they had much of a real business model or had much attraction for physicians. Depending on the details of this Pilot, however, that could conceivably change.

And the House's public plan option? The Secretary of HHS is also allowed to include ACOs in its design.

Up until now, typical DMOs have contracted with commercial insurance plans and self-insured employers. While the DMCB thinks that part of the business is still healthy (though threatened by a hardening insurance market, declining insurance rolls and carve-ins), the advent of Medical Homes has presented a number of challenges for the DMOs. Two important ones are a) how to integrate their telephonic programs with team-based primary care management, and b) dealing one-at-a-time with all those clinics across a network.

Along comes ACOs. They not only aggregate primary care sites into a single administrative entity but their funding is contingent on the kind of care planning and management that is very compatible with classic disease management. The DMCB thinks that if the concept survives the legislative process, newly spawned ACOs will face the same buy or build dilemma for the many facets of population-based care management. Since telephonic care is one part of that, many smart ACOs could choose to buy, using part of the check sent to them every month courtesy of Secretary Sebelius. Who knows, they may also turn to DMOs for assistance with more intense care management programs, like case management.

That’s not gobbledygook. If this survives and the DMOs start planning now, that’s Blue Ocean.

(There's lots more on Accountable Care Organizations here)

The Senate HELP Committee's Affordable Health Choices Act: A Summary and a Recommendation for a Consumer Friendly 'Nutrition Facts Label'

Readers may have already learned that one of the two major Senate Committees that are drafting health reform legislation has finally come up with a long awaited product of the political process called a "bill." While this particular piece of legislation is still a work in progress, Senator Kennedy's Health, Education, Labor and Pensions (‘HELP’) Committee’s bill has already made some progress: it has been preliminarily ‘scored’ by the Congressional Budget Office (CBO).

CBO's analysis makes for very interesting reading. What is helpful about the CBO report is that it gives a readable summary of this ‘Affordable Health Choices Act’ (AHCA), saving the Disease Management Care Blog from having to don its oxygen apparatus and blow tanks for a dive into the original legislative language. CBO then tells us how well this will work and how much this is going to cost. It ain't pretty.

According to CBO, AHCA would either mandate or impose ‘play or pay’ health insurance coverage, provide States grants to establish Massachusetts-style ‘exchanges’ that enable insurance purchasing and subsidize that purchasing on a sliding scale from 150% to 500% of the Federal Poverty Level. The bill assumes that individuals below 150% would qualify for Medicaid.

Because AHCA doesn’t mention it, there is no mention by CBO on the impact of a ‘public insurance option’ or the expansion of Medicaid. Another possibility being considered in Congress is allowing children to be covered as dependents until age 27 years, which could also change things. In addition, administrative costs are unknown and some language in AHCA needs to be clarified. As a result, CBO’s assessment is technically incomplete - which was not only pointed out in their report, but on the Director's Blog.

So with the ‘incomplete’ caveat, CBO projects that, absent any legislation, the number of persons who are less than age 65 years with insurance will go from the current level of 217 million to 228 million over the next ten years. At the same time, the number of persons without insurance will go from the current level of 50 million to 54 million - or 19% of the U.S population.

If the HELP AHCA legislation, as currently written, passes Congress, the number of persons without insurance will decrease to 36 million - or 13% of the U.S. population. About a third of these uninsured would be undocumented aliens or Medicaid eligible individuals who haven’t been signed up. What’s more, the report predicts the number of persons with employer based insurance will decline from 162 million (if things are unchanged) to 147 million.

Cost? The total cost of the sliding scale insurance subsidies is $1.28 trillion, averaging $5000 per individual. $60 billion is needed to set up the insurance exchanges. These costs would be offset by taxes on more employers presumably paying higher wages if they’re not paying for health insurance ($257 billion) plus fewer people using Medicaid and SCHIP ($38 billion) plus ‘pay’ penalties from individuals who refuse to ‘play.’ Bottom line? A whopping $1.042 trillion over ten years.

Wait a minute, says the DMCB: 36 million uninsured? OK, 24 million if we exclude illegals. 13% of the U.S. population? $1 trillion? Fewer persons with employer-based insurance? That sounds like there will still be plenty of uninsureds in 2019, which even ardent liberals find shocking. Heart breaking tales of bankruptcy and lack of access will continue to pepper the health policy landscape and we’ll have 36 million reasons to move to a single payer system.

The DMCB doesn't think it's just about the money. Americans are generally willing to give the government more money if they believe the expense is worthwhile. This is not about the eye-popping sum of $1 trillion, this is about getting $1 trillion of value for the taxpayer.

Unless the DMCB is naively misreading the CBO report, $1 trillion in exchange for ‘only’ 36 million uninsured would not seem to pass muster. The DMCB hasn't done the math, but it suspects that the Federal outlays necessary to reach higher percentages of the uninsured are not a "linear" process. Much like the "last mile" of broadband connectivity, the cost will spiral up on a logarithmic scale. Good intentions, the DMCB would like to introduce you to fiscal reality.

And don't let the notion that the report is 'incomplete' fool you. Here's a quote:

“Although this analysis reflects the proposal’s major provisions, taking all of its provisions into account could change our assessment of the proposal’s effects on the budget and insurance coverage rates—though probably not by substantial amounts relative to the net costs already identified. Public plan and expansion of Medicaid would mean additional costs.”

Given the consternation over the cost of AHCA, the DMCB would like to borrow from the ubiquitous FDA's 'Nutriton Facts Label' that is designed to help consumers quickly navigate through the ingredients and the value of pre-packaged food. A similar label is necessary for AHCA bill, so that consumers can quickly and efficiently understand what they are getting for their hard earned money. If you think about it, the only difference is that the HELP Committee is giving us a pre-packaged health reform solution. If that's a box on the DMCB's fiscial breakfast table, it recommends that the label should look like this: