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Healthier Financial Incentives

By Josh Shepherd

As part of a nationwide effort to make U.S. healthcare less fractured, less expensive and more efficient, a special Humana Inc.-Norton Healthcare partnership has been exploring how to create a viable Accountable Care Organization – a provider system that financially rewards good overall health outcomes rather than billing in volume for patient visits and procedure.

One of only five such pilot programs in the country, the Norton-Humana ACO collaboration in Louisville has yielded measurable improvements in healthcare quality and cost reduction, according to a report to the U.S. Senate Committee on Health, Education, Labor and Pensions (HELP) last May by Marcia Guida James, director of Provider Engagement with Humana.

The assortment of positive outcomes included a 36.6 percent increase in physician follow-up visits within seven days of hospital discharge, and a 12.9 percent improvement in appropriate emergency room visits. There were measurable improvements in healthcare quality with increases in diabetic testing and cholesterol management, James reported.

The report briefed the Senate HELP committee on initiatives for healthcare quality improvement in which Humana is involved and included testimony on the general progress the Norton-Humana ACO has made since its inception in 2009. (See online video of the testimony.)

Similar positive results on the progress of the pilot Norton-Humana ACO were reported last January in a comprehensive study published by The Commonwealth Fund, a private national foundation dedicated to the promotion of a national high-performance healthcare system.

While the Humana-Norton ACO is still being refined, there is evidence to show commercial ACOs could succeed in raising healthcare quality while reducing costs in a self-insured environment.

In 2009, the Engelberg Center for Healthcare Reform at the Brookings Institution in Washington, D.C., and the Dartmouth Institute for Health Policy and Clinical Practice in New Hampshire (Brookings-Dartmouth) approached Humana about being one of five pilot sites for commercial ACO development. Humana readily accepted the challenge and approached Louisville-based Norton Healthcare to be its clinical provider partner.

“We jumped at the chance to develop this type of delivery model,” said Dr. Kenneth Wilson, MD, Norton system vice president for clinical effectiveness and quality. “We see the ACO as an opportunity to provide healthcare differently than we have been doing in the past.”

Importantly, the ACO model complements the direction U.S. healthcare organization structures have been moving in recent years.

Where in the past the norm was small groups of physicians organized around a single specialty or a limited number of specialties, today’s trend increasingly is multi-specialty clinics composed of numerous primary care physicians and specialists. There are hospital-based groups and groups organized under a health plan. The structure of an Accountable Care Organization makes sense because it involves a network of physicians capable of providing the full spectrum of care to a patient population.

“An ACO is a logical practice model for these large healthcare groups,” said Thomas James, corporate medical director, national network operations at Humana. More than that, he said, an ACO physician network presents providers a unique opportunity to raise healthcare quality, cut costs and benefit from the savings.

Fee-for-service model fragments care

In terms of the treatment of Medicare patients, the ACO model is a prominent feature in the federal Accountable Care Act. Under the title of Medicare Shared Savings Plan, the development of an ACO provider network is actively encouraged to promote improvement in healthcare delivery while also reducing the cost. The incentive to a provider network is a share in the savings, provided that certain levels of quality are maintained or improved.

The Brookings-Dartmouth pilot programs are an effort to translate the Medicare Shared Savings Plan into a viable commercial application. Proponents of the delivery system believe a network of physicians applying the ACO model can lower healthcare costs for a self-insured population while improving the quality of that care.

“The central idea is a bit of a departure from a typical fee-for-service approach to healthcare delivery,” said Wilson. “At Norton, (prior to embarking on the ACO pilot program) pretty much all of our physicians practiced according to a fee-for-service model.”

With the fee-for-service model, physicians increase their income by seeing as many patients as they can, with much management attention focused on the reimbursement they get for each individual patient encounter.

There is a general recognition that the fee-for-service approach has resulted in a fragmented system of healthcare delivery, Wilson said, even in a hospital-based system where a significant percentage of the medical staff is employed and salaried. There is little financial incentive for physicians to participate in the full continuum of care because the rewards are based on the volume of patients seen. Once a patient moves elsewhere in the system, there is little bottom-line incentive to follow his or her care forward, to share data, limit duplication of services, or even to take steps to encourage patients to follow through with a long-term healthcare plan.

An ACO, on the other hand, holds the entire network of partners accountable for improving quality by sharing in the benefits of an efficient delivery of care. Incentives built in to the payment structure enable, and encourage, the physician network to monitor the overall health of a specific population, coordinate care among the network providers, and, by this cooperative arrangement, reduce costs.

7,000 employees are test population

To serve the research purposes of the Brookings-Dartmouth pilot program, Norton Healthcare and Humana organized their ACO network utilizing a mix of Norton’s employed primary care and specialty physicians. Its population of patients came from among Norton and Humana employees, a test population estimated at approximately 7,000.

“This is not managed care,” James added. “People choose their own healthcare providers. However, there are advantages for patients to utilize network providers. If patients receive a better quality healthcare experience, one in which they feel that their physicians are working together to improve their health, then there is every reason to expect that the patient will seek out their care from within the ACO. I think we have been able to demonstrate, even in this short period of time, that patients respond well to the ACO model if their overall healthcare experience is positive.”

Communication among network providers is one of the fundamental keys to a successful ACO. When the pilot ACO in Louisville began operations, Norton was taking the initial steps to create an integrated Electronic Medical Record (to pull all of an individual’s medical history and treatment together for better decision making and management). But while the application of an EMR certainly helps an ACO gather data about its population and allows the payer partner in the organization to more precisely formulate cost targets for that population, physicians toying with the idea of establishing a commercial ACO must not feel that an EMR is an indispensable component of the network.

“Used correctly, it is an effective tool,” Wilson said. “But the essential aspect of an ACO is communication among partners that promotes a seamless continuum of care from the moment a patient engages a physician for treatment.”

That partnership includes not only the participating healthcare providers; the payer plays a vital role as well.

“That aspect of the network is the one of the many things I enjoy about this approach,” James said. “The ACO enhances Humana’s relationship with Norton so that we are working in concert for the benefit of the patient population. We’re not solely concerned with the numbers.”

James finds himself in a unique position with his involvement in the development of the Norton-Humana ACO. In addition to his position within Humana, he also works weekends as a Norton Healthcare physician. That position enables him to understand issues that arise from both sides of the partnership.

“The challenge in making a commercial ACO a viable business venture for a physician network is managing the fluidity of a participating population,” James said. “In a self-insured population, people come and go and their patterns of accessing care can be bit more inconsistent than a Medicare population.”

Better patient involvement important, too

An important function of reducing healthcare costs is for patients to take measures to reduce their level of risk. Historically, the general population has not been made financially accountable for failing to adhere to a plan designed to improve their health.

“It’s always a struggle to get patients to eat right, stop smoking, exercise more, and to do those other things necessary to improve their health. Even if there weren’t regulations that prevent providers from resorting to punitive measures to enforce compliance, it represents the wrong kind of thinking anyway, regardless of the healthcare delivery model to which a physician adheres,” said James. “The challenge is finding the right kind of messaging so that taking care of oneself really resonates with the individual.”

But what of the bottom line for providers? The Medicare Shared Savings Program claims an ACO earns rewards for reducing estimated costs for healthcare while also meeting or exceeding quality measures. But the emphasis on the shared savings aspect of the ACO has clouded perceptions somewhat of how physicians benefit.

“It is not accurate to get tied up into the idea that an ACO is completely different from fee-for-service in terms of reimbursement,” Guida James testified. “In the industry, there are several different types of payment methodologies for reimbursing physicians that are being developed around ACOs. We look at the population and determine cost targets with the quality piece built in. That is one of the ultimate goals in the development process – to tie cost and quality in together,” Guida James said.

The Norton-Humana ACO has already seen positive outcomes in terms of healthcare quality and cost reductions, and the effort appears to have resulted in better health for their patient population. But the Humana-Norton ACO remains a work in progress. A committee composed of Norton and Humana representatives meets monthly to address numerous questions about how to maximize the ACO model’s full potential.

“There is no dearth of items on our agenda,” Guida James said.

But so far, the early results are enough to say that an ACO-structured network is a viable practice model going forward.

Josh Shepherd is a correspondent for The Lane Report. He can be reached at [email protected]