For the first time this year, three of Louisiana’s major hospital systems have joined a federal program designed to reward providers for keeping Medicare patients healthier and reducing costs.
Startup costs for Accountable Care Organizations in the Medicare Shared Savings Program have been estimated in the millions. And there is no guarantee the organizations will ever recover that investment. So why join?
“We know that there’s a financial risk to the health system, but I think it’s important that we identify how we can be successful … because this is the way everybody is going in the future,” said Dr. Richard Vath, senior vice president of the Franciscan Missionaries of Our Lady Health System.
The United States’ Medicare population is expected to jump about 50 percent by 2030.
Medicare health costs are expected to increase far more rapidly, with spending per person up 64 percent by 2024, according to the Kaiser Family Foundation.
ACOs are part of a plan to tie Medicare payments to performance and reduce costs. If Shared Savings ACOs cut Medicare costs enough while keeping patients healthy, the groups get to keep a portion of that money. ACOs aren’t penalized if they don’t reduce patients’ Medicare costs — at first. Medicare allows ACOs to participate in Shared Savings for six years without being penalized if they don’t cut costs.
“We felt strongly that we needed to learn how to manage populations. We realized that Medicare is moving to these alternative payment models, and commercial insurers would follow,” Vath said. “We needed to take this time and invest in it now.”
The hospital systems that joined Shared Savings this year are Franciscan Missionaries of Our Lady Health System Clinical Network LLC, Christus Louisiana ACO LLC and Touro Infirmary’s Crescent City ACO. Aledade Louisiana ACO LLC, a physician-led group, also is a new participant.
Ochsner Accountable Care Network and Baton Rouge-based TP-ACO LLC, a physician group, have been in the Shared Savings Program since 2013 and 2012, respectively.
The Franciscan Missionaries’ startup costs will be about $2.5 million to $3 million. It will probably take two to three years before the ACO breaks even, Vath said. Those costs don’t include information technology investments, which would increase the total considerably.
Some ACOs have cut costs by 10 percent or more, but most fall in the 2 percent to 5 percent range, Vath said. FMOL is patterning its program on more successful groups, like Memorial Hermann in Houston, which cut costs by 11 percent in 2014 and got $22.7 million from Medicare for doing so.
Under Shared Savings, providers don’t get a piece of the savings until the spending reductions reach 2.5 percent. Some ACOs dropped out before achieving that mark.
In 2014, about 28 percent of the 333 participating ACOs got money back from Medicare.
This year marks Ochsner Accountable Care Network’s fourth in Shared Savings, and the health system has yet to reach the rewards portion of the program.
In 2013, the network cut costs by 1.5 percent, saving Medicare almost $2 million.
But in 2014, costs rose 1.7 percent, and by a percent or two in 2015, said Chief Medical Officer Dr. Joseph Bisordi.
“But that’s still pretty good,” Bisordi said. “We’re pretty happy with that compared to the 5 percent, 10 percent cost increase that people were seeing in the first 10 years of the century.”
The reasons costs increased are unclear. Some of it may be that Medicare costs and patients’ use of the services have typically been higher in this region than nationally. Part of it may be that Ochsner’s ACO includes a much higher percentage of disabled patients — 20 percent of the total versus 13 percent nationally — and care for those consumers runs two to three times more than that of the average Medicare recipient.
Another complicating factor is that the ACOs don’t know who their patients are. Medicare doesn’t reveal that information until the treatment year is already over.
Right now, Ochsner has to reach out to every Medicare patient, Bisordi said. That’s a considerably higher number than the roughly 24,000 patients Medicare has assigned the ACO.
Not knowing who the participating ACO patients are ahead of time also makes it more difficult to tell them how the network can help them get healthier, improve the quality of their care and decrease their costs, he said.
The next-generation ACO model is expected to address those issues, Bisordi said.
Michael Wasser, co-founder of Bloom API, which tracks the performance of Shared Savings ACOs, said so far, no clear trends have emerged that show why some ACOs meet the savings benchmark and others don’t.
“In some cases, it just seems, honestly, like random chance,” Wasser said.
The results have been all over the map. Even the groups that have launched ACOs in different states, whether with physician- or hospital-led groups or some combination, haven’t had consistent results.
“I don’t think that there’s anybody that’s cracked that nut yet. It may just be that we never find the perfect answer,” Wasser said.
The process may not be repeatable because so much of a community-oriented organization’s results depend on variables like the region’s culture, its strengths and weaknesses, and the health of its population, he said.
But eventually, the ACOs that do achieve savings and rewards will bubble to the top, while those that lose money will drop out.
TP-ACO is one of the bubblers. The group averaged $10,180 per patient in 2012. It lowered that average by 7.7 percent in 2013 and 6.4 percent in 2014. The ACO got back $4.7 million and $3.1 million from Medicare in those years.
Some of the ACO’s doctors got more than $250,000 back in one year, said John Woods, CEO of TP-ACO. That kind of return may be twice what a primary care physician normally makes.
Woods said the group has been fortunate because its participating physicians were already meeting most of Medicare’s quality measures, such as providing timely care/appointments and access to specialists and collecting that information.
It was more a matter of teaching the doctors to report those measures and to better coordinate patient care, he said.
“It’s really not hard, but not all doctors can do this,” Woods said.
The new care model requires doctors and their patients to be more involved, he added.
Under the “old-school” model, patients saw their doctors when there was a problem, and doctors prescribed medication or treatment to get the problem under control.
Under the ACO, physicians still do this, but they also work with patients to get them to change their lifestyles so the medication isn’t needed, Woods said.
“It’s turning the pyramid upside down. Our whole health care system is geared toward taking care of the sick,” Woods said. “This system is really trying to engage the physician and the patient into maintaining a healthy status.”
Vath said one of the great things about the Shared Savings program is that physicians can consider all the risk factors a patient may have and develop a plan to address them.
“It really is a much better way of looking at patients, rather than just when they show up in your office with whatever complaint they have,” he said.
Bisordi said the Shared Savings ACO is part of Ochsner’s overall strategy to better manage all of its Medicare patients’ health.
For example, the health system has a fairly large Medicare Advantage population through Humana. Ochsner is paid a set amount for those patients’ care. In order to control the costs of that program, nurses work with the sickest patients — those who require the most care, who have two or more chronic diseases and may be frequent visitors to emergency rooms — through a complex case management system.
But extra services like that aren’t covered under the traditional fee-for-service Medicare plan, Bisordi said. They’re not under Shared Savings either, but the ACO has at least the opportunity of seeing a return because of the overall savings opportunity.
And aligning the Medicare Advantage and Shared Savings programs allows doctors to approach all of their Medicare patients in the same way, Bisordi said.
Doctors don’t want to base their treatment decisions on whether a patient’s Medicare plan will provide the reimbursement.
Eventually, Ochsner expects to lower Medicare patients’ use of services and share in the resulting savings, Bisordi said.
“We haven’t gotten there yet, but at least it’s been good for our patients, and that’s part of what we do,” he said.
Follow Ted Griggs on Twitter, @tedgriggsbr.