Posts Tagged accountable care organization

Improve ACA — so says USA Today

peopletowerKelly Kennedy of USA Today published the story “Finding Consensus on How to Improve the ACA” 2/28/14.

Here is the list:

  1. Pay doctors more
  2. Let the government pay subsidies to families not covered by the employee’s health insurance.
  3. Get rid of fee-for-service payments
  4. Smooth the transition from Medicaid to subsidized health insurance
  5. Transparent pricing

There are obviously some problems with this “consensus”.  To begin with, who is part of the consensus?  And who benefits from the 5 suggestions?  On the face the ideas seem OK but where is overall cost reduction — the real crux of our health care problem?

So, to address each point:

  1. Pay doctors more — if the payment is not tied to reducing health care costs and increasing quality then it is money down the drain.
  2. Covering families — seems simple enough but why should business be exempt from doing what they have traditionally done?  Employer insurance needs to cover the whole family — that’s simple.
  3. Get rid of fee-for-service.  Yes that payment method  is a problem but there must be an incentive for health care providers to provide a high volume of work and an incentive to do quality work.  The simple solution is to pay a health care system (an accountable care organization) to provide care for a large group of people for a yearly fee.  The organization must meet quality and budget constraints as opposed to our current “the sky is the limit” fee model.
  4. Smooth the the transition away from Medicaid.  At this point Medicaid is less expensive than standard indemnity plans — why think about a change?  If the person enters the workforce the employer just pays the cost — simple.  Changing providers is not easy but if quality is uniformly better there would not be such concern.
  5. Transparent pricing.  This is presented to suggest people could decide on what tests and treatments to buy if only they knew the prices — patients have never had the knowledge to make that decision and never will.  The transparency of pricing should be the price for ALL the healthcare a person needs per year.  Market forces may be helpful on the macro level (like for a healthcare system) but there is no free market for healthcare on the micro level — imagine a person being asked  to choose between various methods of treating diabetes or the best way to remove an appendix (the decision is either random or biased by what the very person asking the question tells them).

The U.S. is experiencing something its citizens have not witnessed before:  the transition away from population healthcare decisions being made behind closed doors at insurance companies to those decisions being made in the political arena.  Other countries experience this all the time — just look at newspaper headlines in the UK or France over the past 20 years!

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Twice the Quality at Half the Price — the NHS in the UK

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How do the Brits do it?  They made a healthcare system with twice the quality at half the price compared to the US (according to the Commonwealth Fund cost per person per year US $7960 UK $3487, developed country quality rank UK #2 US #7).  Simply, they do it by having original ideas and a willingness to adopt good ideas from other countries.

The National Health Service (NHS) of the UK was born in the aftermath of WWII.  Taxes pay for the system, which is free to citizens at the point of care.  Internally, the system is based on capitation — doctors and hospitals are paid by the size of the population they serve.   The system grew to be one of the highest quality and least expensive systems in the world.  In the 90’s it was bogged down by waiting lines and old facilities until a modernization push got it back on track around 2000.

The DRG example:  In 1983  Medicare adopted a way to pay hospitals with a single payment for each case based on the diagnosis of the patient.  This revolutionary idea was called the diagnosis related group or DRG.  NHS experts embraced the Medicare cost saving idea and renamed it the HRG (health resource group) and started using it in about 2003.  Consequently, by adopting what works, the UK has strikingly transformed the financial workings of the NHS.

The NHS noticed cost variations between providers and solved the problem with “Best Practice Tariffs”.  That means if the provider follows a well established guideline they get a full payment, if not, the payment is lower.  In the US we call that concept “value based purchasing” (VBP) but the US only has a few pilot projects and only dreams about making VBP happen on a large scale.

The UK decided they wanted better results.  The reform was called Payment by Results (PbR) and implemented in 2013.  The results they expected were high quality, adequate volume of services,  and cost efficiency.  The NHS basically tweaked the capitation formula with incentives for the desired results.

The US Affordable Care Act (Obama Care)  encourages the aggregation of doctors and hospitals in an economic model called an Accountable Care Organization (ACO).   The US thinks it invented the idea behind the “Accountable Care Organization”.  Actually, the concept is just a spin-off from the Primary Care Trusts and Hospital Trusts in the UK which have been functioning for over 60 years.  Think:  “Trust”=”ACO”.

The recent “Perspective” in the New England Journal of Medicine (NEJM 668;16 April 18, 2013, page 1465-1468) describes the recent IOM report requested by Congress.  The authors lament the “Geographic Variation in Medicare Services“.   The NHS is well known for controlling health care costs.  Looking across the pond to the UK,  here are some references that might be helpful to them:

  1. A simple guide to Payment by Results
  2. A person based formula for allocating commissioning funds to general practices in England: development of a statistical model
  3. Payment by Results: time for a rethink?
  4. Regional variation in the productivity of the English National Health Service.

Some understanding about how the NHS works would also be helpful.  The following diagram is an overview of how the NHS controls cost associated with hospitals and doctors.   They also have a good system for dealing with drugs and devices — a good topic for a future blog.

(figure revised 7/11/13)

High level NHS flow diagram (5)

Other charts of organization can be found at Nuffield Trust – New Structure of the NHS slideshowNHS website – new structure, and History of the NHS.

In the UK 90% of health care is controlled by the government and 10% by the private sector.  The UK Parliament sets a budget for health care which is administered by the Department of Health.  Based on the funds allocated in the budget the Department of Health makes a national price list for services (unlike the US where there is no cap on expenditure) .

The “SUS” approves payments to providers based on the national price list (national tariff) and adds the features of PbR (payment by results).   The commissioners are the paymasters and transfer funds to the providers.  The providers keep track of actual costs and must provide cost data to the Department of Health (unlike the US where real costs are proprietary information and hospitals use the  infamous “chargemaster“).

The US could learn a lot from other countries.  The NHS in the UK seems very willing to share what they have learned over the years — and it is in English.   The old saying  “America and England are two countries separated by a common language” is especially true for health care.

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Indigent Care and Accountable Care Organizations

Some Americans just don’t have access to health care.  That statement is hard to understand for many people.  Just get in the car and drive to your doctor’s office.  Or, if you don’t have a doctor where you live then move somewhere else!  People without money may not have a car and may live with relatives who don’t want to move.  It is reminiscent of what Marie Antoinette said about people who did not have bread “Let them eat cake”.

The majority of Americans do have access to health care so why worry about those who do not?  There are three reasons for concern; 1) we don’t like our fellow man to suffer  2) the care for people with poor access is terribly expensive once they do get medical attention.3) we have a system of care for the indigent which is very expensive and does not work well.  Poor people who live in the Mississippi Delta get health care like a third world country and sometimes not even that good.  In fact, a health care system copied from Iran is being used in Mississippi to try to improve access to care.

Just as an experiment, try to make an appointment with a doctor and say you don’t have insurance.  Voila, no appointment.  What if you have a sinus infection and can’t get an appointment with a health care provider?  You go to the emergency room.  Even though you have been admitted many times for heart failure you can’t get an appointment with a doctor so you run out of medication — back to the emergency room.  You have a growth on your breast but can’t get an appointment.  So when it smells bad you go to the emergency room.

One measure of poor quality preventive care and follow up care is the rate of emergency room visits and re-hospitalizations.  Some communities do very poorly by this measure.

When looking at the health care system as a whole providing good access to care is a way to save money.  But, in America we have lost track of those cost savings.  If a hospital, in good faith, tries to prevent readmissions for everyone, poor and rich, they lose income. The community benefits and taxpayers benefit but the organization controlling the situation is penalized.

There is some hope in the idea of an Accountable Care Organization (ACO).  That proposed system of care matches a population to an organization of hospitals and providers for care.  A certain amount is paid per person per year to the ACO (similar to insurance but without the middleman).  The ACO hospitals become overhead expense rather than cash cows and primary care providers that keep patients healthy are golden.  At least the incentives are aligned favorably for Americans but whether the idea will work is yet to be tested on a large scale.  If poor people are included in the ACO, access to care should be improved and cost may come down.  Additionally, an ACO can be held accountable for quality — since health care providers work for the ACO considerable pressure to deliver a quality product can be applied, especially if customers get to choose which ACO to join.

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