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Health Industry Reform

TIERS OF CONFUSION…LIMITED UNDERSTANDABILITY…NETWORK PLANS

As part of the health industry’s movement toward greater cost-consciousness, tiered and limited network health plans are on the rise and confusing patients and physicians alike.

These plans known as tiered or limited network plans, require a deductible if a member wishes to be treated at these designated high cost facilities. The purpose of the plans is to drive members to the lower cost facilities; however, members can choose the higher cost facilities if they agree to pay the associated deductible amount for these providers.

Typically, the deductibles for these plans can range from $500 to $2,000 per visit. These plans are different from the high deductible plans that have been available for a number of years. The high deductible plans affect all covered members and impose an upfront deductible amount before co-payment amounts kick-on. Such plans have lower premium amounts as compared to typical lower co-pay plans; however, they do not provide the consumer with a choice of reducing their out-of-pocket cost by choosing a lower cost provider.

With the implementation of National Healthcare Reform, there is increased pressure on the insurance companies to help reduce the costs. These tiered and limited network plans are designed to put the employers and employees in the game with the insurance companies – to help lower costs. We will most likely see an increased participation in these types of plans in the coming years as a means to help control costs. (Source)

In Massachusetts, tiered and limited network plans now make up 15 percent of the health insurance market, a figure industry leaders expect to grow during the next two years, The Boston Globe reported.  As part of a recent amendment to the state’s 2006 health reform law, insurers are required to offer the plans—which either restrict a patient’s network of doctors or assign providers varying copayments based on cost and quality rankings—with premiums that are 12 percent below their standard plans. (Source)

Although this option offers patients substantial premium savings upfront, Massachusetts physician Sarah Bechta told National Public Radio’s WBUR that even she can’t determine whether a tiered plan would cost her family more in copayments and deductibles in the long run. For example, most insurers rate Boston’s Children’s Hospital as a tier 3, or high-cost hospital, to which one visit would wipe out Bechta’s $1,400 in premium savings.

“That was the thing that was really hard to predict. I could not figure it out,” Bechta said, even though, as a doctor, Bechta believes that she’s “as capable, or more capable, than everybody else who’s looking at this information.”

Even more frustrating, she said, is that every insurer uses different cost and quality measures to rank physicians, making it commonplace for physicians (herself included) to find themselves in different tiers for different health plans. Furthermore, Bechta said patients don’t understand whether they pay higher copayments for some doctors because they are better physicians or less cost-efficient.

Confusion Continues…

Massachusetts’ top three insurers say they are concerned about confusion as members get used to their new type of insurance.

“One of the things we’ve been trying to do is to make sure members know that doctors and hospitals are tiered based on quality and the efficiency of their care,” said Jonathan Chines, the director of commercial provider engagement at Tufts Health Plan.

“All of the health plans need to create easier-to-understand products with easier-to-use support tools, so that a consumer can find the knowledge we want to make available to them and use that knowledge to make health care decisions,” said Richard Weisblatt, senior vice president for provider network and product development at Harvard Pilgrim Health Care.

“Will members prefer tiered plans where there is some work on their part to figure out what their cost share is going to be for certain providers or would they rather something very simple but more limited, where the network doesn’t include every provider in the state?” asked Dana Safran, senior vice president for performance measurement and improvement at Blue Cross Blue Shield of Massachusetts.

Insurers say a growing number of employers are offering tiered insurance plans because they are the best way to lower premiums while still giving consumers some choice in where they go for care. Limited network plans that restrict where patients go for care in exchange for lower premiums are the other option many employers are considering as they try to hold down rising health care costs. Insurers are watching the consumer response to these plans with great interest.

If the physicians and the insurance companies agree that the plans are extremely difficult to understand…just what response do they believe they are going to get from patients?
(Source)

Accountable Care Organizations - Expensive Experiments?

For all the analysis and opinion on ACOs, the fact remains that provider organizations looking to start or join this type of organization are looking at significant expenses. Management consultants, counsel, and of course the IT systems that are required to collect, report and analyze the required savings and outcomes data.  The burning question is,“Will all the expense bring savings and increased quality of care”?  Recent information and expert analysis seem to suggest perhaps these organizations are not the meaningful model of cost savings and outcomes many had hoped for.

The Wall Street Journal asked the following experts to comment on the topic: Donald Berwick, former head of CMS (resigned 12/2/11), Jeff Goldsmith, president of Health Futures, Inc., and Tom Scully, former head of CMS (2001-2004) and former chief executive of the Federation of American Hospitals.

Berwick contends that the formula for ACO success is simple: “keep quality high, save money by improving - not restricting care”. Goldsmith sees the model differently. “The ACO is more like asking the hungry horse to guard the granary. The major savings for Medicare are to be found by keeping people out of the hospital, and reducing the incomes of the specialists who dominate hospital politics”.

Goldsmith also shares my opinion that the ACO has a sure fire potential for costing millions in start-up costs and reducing the income of the particating providers. As Goldsmith called it, “Tom Sawyer’s fence painting project”. In addition, for all the talk of patient-centric care, providers are making the choice to be in an ACO, not the patients.

Berwick contends that patients can certainly choose any care provider; however, if patients are changing doctors and seeing some outside the ACO on a regular basis, it seems to me this actually defeats the purpose of better coordinated and monitored care.

Tom Scully contends that docs are human and like all humans, they follow financial incentives. Scully states the system would be better under a capitated systems (see bundled payments concept) in which care-management groups pay docs a comprehensive fee depending on the level of care provided for each patient. “ACOs are baby steps in the right direction - but they come with a big danger”. In this model hospitals, not doctors are driving the bus - one level removed from the level of care that is actually treating and monitoring the patient.

Interesting that capitation is mentioned (hey I remember that model! Total, partial, carve-out cap rates). WSJ asks “Does capitation work”? Berwick doesn’t go so far to say that capitation is the only approach and ACOs are a move in the direction of more consolidated payment schemes. Scully sees ACOs as a move in the right direction - however, Medicare fees are fixed regardless of quality levels and “...price fixing has never worked in any society ever”.

My question - are providers really ready to accept the risk of care coordination and savings that are inherent with Medicare’s ACO model? Those of us that watched the Physician Hospital Organization (PHO) model of the 1990s fizzle out when PHOs ran out of cash reserves have to wonder if this time things really will be different.

Bundled Payment Pilot Project Results, and New CMS Pilots

This article looks at the results of the PROMETHEUS Payment pilot project, which one of several bundled payment pilot projects.  The project is discussed in the November 2011 edition of Health Affairs.

But after three years of efforts, not a single bundled payment had been made, or a contract even entered into. All three projects lagged “months or years behind their planned milestones,” said the study published in the most recent edition of Health Affairs, notes the Wall Street Journal blog.

The primary culprits were determining payment rates—a process hobbled by issues analyzing claims databases—and getting those rates to interface with the insurers’ claims processing systems. According to recent study of the Prometheus system by Washington-based RAND Corp., the primary reason the organization was unable to achieve its goal of making bundled payments to providers despite three years of work was “the complexity of the model and the fact that it builds on existing complex health care systems.”

However, researchers have suggested that the efforts have helped better coordinate care at all three systems, and that advances in technology could make future bundling efforts progress more smoothly.

Interesting to note is the article by Uwe Reinhardt recommending an industry-wide switch to an “all-payer system”, similar to what Maryland does with hospital payments. Under such a scenario, the prices for health care services and products are subject to uniform price schedules that are either set by government or negotiated on a regional basis between associations of health insurers and associations of providers of health care. (Source) 

CMS’ Center for Innovation is currently accepting applications for the Bundled Payments for Care Improvement Models 2-4. For more information on the bundled payments pilot projects CMS is conducting, visit this page.

The Supreme Court Hears Health Reform Arguments March 26 – 28

And we are launching our “Verdict Pool” in February on our Facebook page! More information about the contest and cool prizes coming in early February!

The Supreme Court has finalized its schedule for oral arguments on the constitutionality of the Affordable Care Act, setting 5.5 hours of presentations during March 26-28.

CNN reports the court on March 26 will consider whether challenges to the law can be made before the individual mandate goes into effect in 2014. The individual mandate will be argued on March 27, with severability of the mandate from the rest of the law scheduled on March 28. The court on the 28th also will hear arguments on whether the government can force states to expand their share of Medicaid costs and lose federal funds if they don’t.

A ruling is expected in late June.

The Next “Big Thing” In Care Coordination & Reimbursement – Bundled Payments (1st of a series)

CMS’ Center for Medicare and Medicaid Innovation (CMMI) recently released an initiative on bundled payments. The Bundled Payments for Care Improvement initiative seeks to improve patient care through payment innovation that fosters improved coordination and quality through a patient-centered approach.  CMMI is seeking applications for four broadly defined models of care. 

Specifically the models as defined as:

1. Model One: a retrospective bundle that covers only the acute care hospital stay (all acute patients, all DRGs – or “episodes of care”); All Medicare Part A DRG-based payments are included.
2. Model Two: retrospective payment for the acute care hospital stay plus post-acute care associated with the stay, for a period to be defined by providers (select DRGs in a post-acute period are included); All Part A and B services and readmissions are included.
3. Model Three: post-acute care only, beginning with the initiation of post-acute care after discharge from an acute inpatient stay, which will be paid retrospectively (post-acute only for select DRGs); All Part A and B services and readmissions included.
4. Model Four: prospective payment for all services provided during the inpatient stay (Select DRGs); All Part A and B services and readmissions.

Unlike the recent ACO rules, CMMI is giving providers the flexibility to determine which model of bundled payments works best for them, have made it easier for providers of different sizes and readiness to participate in this initiative. And a new development is allowing post-acute providers (skilled nursing facilities, home health, hospice) to participate in the initiative.

So is an episode-based payment methodology the latest, greatest, new “new thing”? Deloitte defines an episode-based payment (EBP) system as a method that, “…bundles all costs of care across a clinical condition for a defined period of time and for all settings involved in direct and indirect care to the patient”. This “episode” can include many levels and types of providers across many care settings (i.e., outpatient, inpatient, home health, pharmacy, etc.). “A key feature of EBP is its alignment with evidence-based best practices, including clinical guidelines and quality measures…In EBP, the provider organization is responsible for managing a process of adherence to evidence-based practices based on what is done rather than ‘who does it’”.

I think a key consideration will first be getting providers and payers to understand and agree upon an EBP methodology, CMS’ demonstration pilots not withstanding. How care services are grouped into episodes is a key first step to implementing any EBP system. Providers and payers will have to find common ground on this, particularly in an environment where providers may not always trust payers to calculate and manage their clinical data.

Key questions providers and payers will need to ask include:

How will payors contract with providers re: the delivery of care over a defined “episode”?

Will a payor contract directly with a large group practice or other provider organization, or will they contract by episode across all related providers?

How will the contracted method be supported and managed by IT applications so that reimbursements are accurate and timely?  Since this is much more complicated than capitated or even pay-for-performance methods, a critical success factor is the IT application that supports the episode method and process.

In our forthcoming articles on Episode-Based Payment, we will discuss the following topics: IT applications to support payer contracts on EBP; opportunities and challenges for providers, payers, patients; and a review of industry experts’ opinions on EBP.

Medicaid Freezes and Cuts…Medicare Next on the Chopping Block…

MEDICAID FREEZES AND SAFTEY-NET CUTS…

With virtually every state cutting costs in anticipation of increased Medicaid spending, a new Kaiser Commission on Medicaid and the Uninsured report finds that 28 states cut or froze hospital Medicaid payment rates in fiscal year 2011, and 40 states plan to in 2012, reports AHA News Now.

According to the report, state Medicaid spending is estimated to increase 28.7 percent this fiscal year to make up for the loss of federal funds, even with the temporary relief under the American Recovery and Reinvestment Act.

Thirty-nine states restricted provider rates in 2011, and 46 states plan to next year. Almost all states cited making changes to Medicaid pharmacy programs. And five states this year increased copayments or imposed new ones, with 14 states planning to do so in 2012.  (Source)

The healthcare cuts proposed in Washington are even steeper: at least $664 million, part of an effort to close a $2 billion deficit. Rural hospitals are facing Medicaid cuts as high as 50 percent, according to AHA News Now. (Source)

ON THE MEDICARE FRONT LINES…

Without congressional intervention, physicians will face a 27.4 percent Medicare pay cut on Jan. 1 2012. This reduction is slightly smaller than the earlier estimate of 29.5 percent. (Source)

Is there any way out of the Medicare bind?  There is, but it requires careful thinking about the short-term pressures and a comprehensive strategy to respond to the long-term problem posed by growing costs.

No matter how Congress resolves the immediate budget issue, the long-term problem will remain. Medicare’s share of the federal budget, which rose from 8.5 percent in 1990 to 15.1 percent in 2010, is projected to hit 17.4 percent in 2020—a percentage that will almost certainly increase because of implausible cuts in doctors’ fees written into current law and will rise higher still if budget cuts fall disproportionately on other programs. The way out of the Medicare bind cannot involve changes only to Medicare itself; the cost of caring for seniors reflects the overall costs of the health-care system, and spending on Medicare will become manageable only through measures that bring total costs under control.  (Source)

Time Ticking Away for the Congressional “SuperCommittee” and Federal Cuts

The supercommittee has less than a month to the Nov. 23 deadline when it must present its deficit-cutting recommendations to Congress. The Congressional Budget Office has said it’ll need the plan much earlier to give its staff enough time to score the proposals.

The high-profile panel has been working mostly in secret on the contours of a deal that would cut at least $1.2 trillion from the federal deficit. (Source)

House Minority Whip Steny Hoyer on Tuesday said he’s not entirely confident the panel will succeed in reaching a bipartisan agreement before the clock expires. (Source)

Whatever happens, cuts to the Medicare program are all but guaranteed. The Congressional Budget Office’s current baseline projections for federal spending over the next decade has Medicare spending $7.4 trillion out of a total of $44 trillion. That’s 16.8% of ALL federal spending (defense, Social Security, discretionary domestic programs, you name it).

By the November 23 deadline, the entire Congress must come up with an additional $300 billion for Medicare over the next decade to avoid sharp cuts in physician reimbursement — the so-called “doc fix.” (Source)

Political strategists are leaning towards the inability of the SuperCommittee to successfully negotiate a budget. When that happens, Medicare will be cut 2 percent across the board.

Accountable Care Organizations (ACOs)-Roundtable Discussion with CMS and more…

On October 20, we attended the National Capital Area HIMSS education event focusing on ACOs from the perspective of physician leaders from CMS and other provider organizations. The speakers included the following:

Dr. Mandy Cohen, Director of Stakeholder Engagement and Outreach, Innovation Center at CMS

Dr. Ryan Bosch, CMIO, INOVA Health System

Dr. John Batterly, Executive Vice President for Medical Affairs, Dartmouth-Hitchcock Medical Center

Dr. Stephen Morgan, Vice President and CMIO, Carilion Clinic

Dr. Ferdinand Velasco, CMIO, Texas Health Resources.

Discuss your organization’s current involvement, plans with ACOs, and the supporting role for health

Morgan: Carilion participated in the Brookings Institute pilot for ACOs. We have
collaboration to some extent with Aetna and ActiveHealth. Some HIE with UVA; but need more info exchange. Physicians have asked for data at point of care. Physicians want to be accountable to patients, want to know cost, but not so much that patients know the cost of every little thing (i.e., Band-Aids, lab supplies, etc.)

Bosch: Physicians are looking for a trusted advisor re: HIT, 5010, their legacy vendor. Inova is offering hosted EPIC practice mgmt, billing and EHR applications. However, physicians are confused as to “why are you doing this”. What is in it for you? Physicians are in the IT staff at a different level, and not at the “macro” level, but at the billing level. They are more concerned with issues such as, “Well with this change…can I still print at the printer down the hall”?

Cohen:  What actionable Point of Care data are physicians looking for? CMS is just starting to understand how to share data. They realize that claims data isn’t exactly clinical, meaningful - they need analytics and a “data dump”. Will CMS get into the analytics business? The Innovation Center is currently working with pioneer organizations and trying to figure out what the data analytics needs are. “This is just the beginning”.

Morgan: We started openly producing quality data on our legacy system four years ago, and it was not well received by the physicians. Now this data is starting to get better reception and has changed culture on a limited number of quality metrics. It will take more culture change on the new CMS measures. This will be another leap.

Butterly: We are comparing individual physicians to peers in same practices, and have found this to be a strong motivator for change. “Rising tide lifts all ships”. The question is, “Who owns the data”? We don’t want to rely on a second or third party to give the data, especially if they are at risk (such as in an ACO arrangement).

Bosch: The main data cannot come from claims, this is useless.

Velasco: There needs to be more investment, governance around what has to be put in place. EPIC’s “CareEverywhere” provides HIE with other EPIC customers. This is a challenge in terms of conforming to data standards. So this organization acquired another HIE product but not yet live. In the interim, they have a free portal for our community doctors to access EHR data for respective patients.

Question: “So how do you explain the concept of an ACO to physicians? What is your elevator speech”?

Cohen: The response differs with who you are talking to, for example, an internist vs. a specialist. There is a current piece by Don Berwick in the NEJM today, and it discusses that primary care physicians have to think differently about how to act within the rest of the system.

Bosch: “I’ve been accountable for a long time. This is a new model, no capitation…no rationing…more power to providers”.

Morgan: We are bringing patients into the mix…empowering patients….coordination of care and patient empowerment are important concepts.

Butterly: In accountable care…truly capitated arrangements, although an unpopular word. This matters…it makes the primary care physician more important in the system…they have more attention and empowerment now.

Velasco: Patient engagement is important, and there is an emphasis on health IT to support this, as included in the final rule. This is very important to improve the user experience. Remote monitoring, house calls…all of this can be documented through health IT.

Overall it seems that provider organizations want some degree of consultant guidance on the selection and implementation of health IT applications and supporting processes to support their ACO initiatives. However, it is interesting to note that across the board, physician organization executives want to own and control their data and related analytics and processes, and are very committed to making that happen.

U.S. Health System - Keeping Score…

Evidence from the new 2011 edition of the National Scorecard on U.S. Health System Performance shows substantial erosion in access to such care in the period leading up to health reform, along with rising costs that are stressing families, businesses, and all levels of government. Across 42 performance indicators, the U.S. achieves a total score of 64 out of a possible 100, when comparing national rates with domestic and international benchmarks. Overall, the U.S. failed to improve relative to these benchmarks, which in many cases rose. Costs were up sharply, access to care deteriorated, health system efficiency remained low, disparities persisted, and health outcomes failed to keep pace with benchmarks.

The authors notes that contributing factors to the U.S. low score are variations in care across the entire U.S., which often results in missed opportunities for disease and/or disability prevention, and increased mortality. The U.S. ranks last out of 16 industrialized countries on a measure of mortality amenable to medical care (deaths that might have been prevented with timely and effective care), with premature death rates that are 68 percent higher than in the best-performing countries. As many as 91,000 fewer people would die prematurely if the U.S. could achieve the leading country rate.

Although the Scorecard draws on the latest available data, primarily from the period 2007 to 2009, the results do not fully reflect the effects of the recent economic recession on access to and use of care.

The study’s authors contend that The Affordable Care Act targets many of the gaps identified by the Scorecard.

ACO Risk Sharing Findings from The Commonwealth Fund

The Commonwealth Fund recently released a research report discussing findings on shared-risk payment models used in Accountable Care Organizations (ACOs), and what the implications might be for these models.

The paper focused on private sector payment models that meet criteria along three dimensions: provider risk, inclusion of services, and quality incentives. To describe this in more detail, the researchers examined only ACOs with models that included: a provider risk-sharing component; addressed the broad array or full continuum of patient care/services; and provided meaningful quality incentives.

One of the key findings – “Relating to accountable care organization (ACO) initiatives, providers do not currently have the infrastructure required to take on and manage risk successfully, though some payors are providing infrastructure and other support to providers”.

“Providers do not have the data they need about the clinical or financial experience of their patients to manage patient care and financial risk effectively—the HIT structure necessary to coordinate care among providers is at varying levels of implementation,” wrote Suzanne F. Delbanco, PhD, executive director of the Catalyst for Payment Reform (CPR), and colleagues. “Providers also face operational and structural challenges related to the ACO model of care, which demand more coordinated, efficient processes.” (Source)

The authors also found that there are a variety of approaches to shared risk including:

• Bonus Risk Model: Provider is at risk of not receiving a bonus payment based on quality and/or efficiency performance;
• Market Share Risk: Patients are incentivized by lower copays or premiums to select certain providers so providers are at risk of losing market share;
• Risk of Baseline Revenue Loss: Providers face a financial or payment loss if they fail to meet certain cost or quality thresholds, and/or if actual costs exceed a target cost; and
• Financial Risk for Patient Population (Whole or Partial): Providers manage patient treatment costs for all or a designated set of services within a predetermined payment stream and are at risk for costs that exceed payments.

The researchers concluded that it is too early to identify which payment models best align incentives for ACOs with high-quality, value-based care.
The research was conducted by CPR and Booz Allen Hamilton.

 

CO-OP HEALTH PLANS

Consumers and small businesses are frustrated by the lack of affordable choices of health insurance options in the individual and small group insurance markets. Thanks to the recent health reform law (aka “PPACA”), consumers may soon be able to go to a state or federal insurance exchange and sign up for a new type of health plan called a Consumer Oriented and Operated Plan, or “CO-OP”. CO-OPs are private, non-profit health insurers with a board made up of plan members. CO-OP plans are designed to offer quality, affordable, consumer-friendly insurance options in every state.

The co-op concept was injected into the Congressional health care debate in 2009 as an alternative to the ill-fated “public option”.

Echoing the language of the PPACA, the rule bans existing insurers from getting a cut of the grant money. It also prevents any government entities—such as counties and state agencies—from using the money to launch co-ops.

“It’s for new nonprofit plans and the funding is not available to existing insurers,” said Richard Popper, director of the Office of Insurance Programs in CCIIO, dispelling any possibility of a “public option” look-alike.

On July 18, HHS proposed standards for establishing CO-OP plans. Eligible organizations seeking to establish a CO-OP will be able to apply for a portion of the total, PPACA-mandated $3.8 billion in repayable loans to fund start-up and capitalization costs. The proposed standards reflect the recommendations of an independent advisory group that held many hours of public testimony by consumers, small businesses and providers.

A New Choice for Consumers

A CO-OP is a private, nonprofit organization that sells health insurance coverage, like a Health Maintenance Organization (HMO) or a Preferred Provider Organization (PPO), and will be subject to the same rules as other health insurers.

Unlike many existing health insurance companies, a CO-OP:

• Gives its enrollees a say in their health plan. CO-OP members elect the board of directors, a majority of whom must also be enrolled in the CO-OP health plan.
• Uses profits to benefit enrollees. CO-OPs are required to use their profits to lower premiums, improve health benefits, improve the quality of health care, expand enrollment or otherwise contribute to the stability of coverage for members.
• Educates enrollees about the plan. Because a CO-OP relies on its enrollees to help decide the direction of the plan, communication about key features of the plan will be a high priority.

A New Insurance Option for Small Businesses

A CO-OP will have the option to sell coverage to small businesses and, and theoretically, this should enable these groups to enjoy a better selection of benefits and lower costs that what is currently available. Small businesses will be able to go through a new competitive insurance marketplace known as a Small Business Health Option Program or “SHOP.” The proposed rule ensures that any CO-OP offering coverage to small businesses also participates in SHOP.

Leveling The Playing Field

CO-OPs will meet the same standards as all other health insurers in the state where they offer coverage. These standards include: mandated benefits, reserve requirements, solvency, licensing, and network adequacy standards. Starting January 1, 2014, CO-OPs and all other health insurers will have to meet a set of standards in order to sell benefits through the new exchanges. CO-OPs will also have to demonstrate that premiums and federal loan funds are being used for enrollee benefits. In addition, at least two-thirds of the CO-OP’s insurance contracts must be qualified health plans offered in the individual and small group markets in the states in which the CO-OP does business. This requirement must be continually met by the organization.  The rule also proposes that CO-OPs have a management team with expertise in health insurance, and that the board includes individuals with expertise in the business of insurance. If CO-OPs are to successfully compete with existing insurance organizations, they will require experienced and knowledgeable payer staff, a claims IT system, and quality provider networks.

HHS Funding CO-OPs

HHS officials say the department will provide two rounds of loans to help CO-OPs get off the ground.

• $600 million in loans will go to help CO-OP organizers develop business models.
• $3.2 billion will go to help existing CO-OPs with any unexpected claims.

All CO-OP loans must be repaid with interest and loans will only be made to private, nonprofit entities that demonstrate a high probability of becoming financially viable. HHS’s proposed rule on co-ops estimates a default rate of 40 percent for the planning loans and 35 percent for the solvency loans. The CO-OP program contains extensive provisions to protect against fraud, waste, and abuse. Loan recipients are subject to strict monitoring, audits, and reporting requirements for the length of the loan repayment period plus 10 years. Recipients will submit semi-annual program reports and quarterly financial statements. Additionally, CMS will conduct audits including site visits, as appropriate. CO-OPs must meet a series of milestones as laid out in their loan term agreements before drawing down any money from the program.

(Source: HeathCare.Gov)

Are CO-OPs The Answer?

The CO-OPs could “further two of the important goals of the Affordable Care Act, increasing competition and enhancing the voices of consumers in the health care market,” said Steve Larsen, the director the Center for Consumer Information and Insurance Oversight, during a call with reporters to announce the rules.

It’s no surprise however, that insurance industry experts are skeptical about the success of the program…

“Restrictions, including a requirement that the plans serve mainly individual customers and small businesses, could be the undoing of the CO-OP strategy,” say skeptics such as Robert Laszewski, an insurance industry consultant.

“They’re pointing people at the most problematic part of the market where this is the most risk, and they’re saying it can’t be people in the business who have that expertise,” Laszewski said.

Two-thirds of a CO-OP’s membership would consist of individual and small group customers. Both markets tend to be more expensive than the policies extended to workers at large employers. Larsen said HHS had concluded that small businesses pay an average of 18 percent more than their bigger counterparts to insure workers.

One goal of the new plans would be help drive those costs down. Rather than stockpiling earnings in reserves or collecting profits, insurers that accept the new grants would be required to use any extra revenue to reduce premiums, improve the quality of care or expand benefits.

Otherwise, Popper said, the CO-OP insurers would be held to the same requirements as other insurers in the state. State regulators have to license them, and, critically, make sure they have enough money on hand to cover any unexpected surge in claims, assuring their solvency.

But CO-OPs could face another hurdle as they seek approval from their state regulators, said Sabrina Corlette, a professor at the Health Policy Institute at Georgetown University. Because most regulators count repayable loans as a debt, it might not help meet state solvency requirements for health plans.

Some nonprofits that hoped to set up CO-OPs “…probably got a dose of cold water in terms of the cash they’d have to put up” when they approached regulators, she said.(Source: Kaiser Health News)

But insurance industry actuaries tell HRW this is a highly optimistic prediction since CO-OPs for individuals and small businesses face an aggressive timeline to become operational by January 2014 as planned. Also, actuaries say the challenge of lining up provider networks and managing administrative costs is especially daunting for new insurance entities setting up shop against the backdrop of newly created health insurance exchanges that start at the same time. (Source: AIS’ Health Reform Week)

ACOs – “Just Say No”?

The Centers for Medicaid and Medicaid Services’ (CMS’) deadline for comments on the Accountable Care Organization (ACO) rules closed on June 6, and since then, there have been many dynamic discussions on the topic. From the many opinions, publications, and presentations we have read and heard, the majority opinion seems to be that ACOs are definitely not for everyone; in fact, they may be only for a very small percentage of providers.

Our summary of notable comments:

1. According to Pillsbury health law practice attorneys David Main and Linda Kotis, 17 major health systems have significant concerns with the draft rules. In fact two health systems that were “inspirations” for the ACO model, Geisinger and Intermountain Health Care have said they do not plan on developing ACOs. What are main concerns of these health systems? First, they believe beneficiaries should be assigned to ACOs prospectively so that providers can know up front the patient population they will be caring for. Second, they are concerned the start-up costs are too expensive, and the shared savings rates should be adjusted so as to account for the exact number of enrollees.

   Third, the total number of proposed quality measures (currently 65) is too many. A broad industry consensus with respect to the number of quality measures (as voiced by provider, hospital, payer and think tank groups) is that 65 measures are just too many, and starting with 32 would be a better option.

 

2. A recent MedeAnalytics analysis focuses on “…leading healthcare constituencies’ recommendations on the key drivers of the ACO business model”. Key comments included: 

 

• a. AHA, AMA, and MGMA: Eliminate the CMS withhold rate (25%) applied to any earned performance payment for years 1 and 2.
• b. With respect to the shared savings rate for ACOs tracks 1 and 2 (proposed at a maximum of 50% and 60% respectively), the overwhelming industry consensus was that this should be raised to 60 - 80% (track 1) and 70 – 90% (track 2). I tend to agree – ACOs are taking on a significant risk given the estimated start-up costs. Their compensation in shared savings needs to better reflect this.  As for what the “tracks” are (from CMS’ website): “CMS is proposing to implement both a one-sided risk model (sharing of savings only for the first two years and sharing of savings and losses in the third year) and a two-sided risk model (sharing of savings and losses for all three years), allowing the ACO to opt for one or the other models”.
• c. Comments regarding the minimum savings rate (MSR). Per CMS: The MSR “…is a percentage of the benchmark that ACO expenditure savings must exceed in order for an ACO to qualify for shared savings in any given year”. There is consensus here that a standard, flat MSR of 1-2% should be established for all ACOs, rather than the sliding scale as proposed by the current CMS rules.

 

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