DRIVING VALUE IN HEALTHCARE: PERSPECTIVES FROM TWO ACO EXECUTIVES, PART I

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1 DRIVING VALUE IN HEALTHCARE: PERSPECTIVES FROM TWO ACO EXECUTIVES, PART I A firm understanding of the key components and drivers of healthcare reform is increasingly important within the pharmaceutical, biotech, and medical device industries. Manufacturers are typically not identified as one of the key stakeholders (Payers, Providers and Patients) within healthcare reform, yet play a critical role in improving the health of patients as they strive to identify and bring new and innovative products to the market. In this two-part paper, we explore the evolving role of accountable care organizations (ACOs) as a core element of the Affordable Care Act and healthcare reimbursement redesign. Moderated by Thomas M. Richardson, PhD, MBA, PA-C Sr. Vice President, Strategic Consulting, KJT Group, Inc.

2 MEET THE PANEL Thomas M. Richardson, PhD, MBA, PA-C Sr. Vice President, Strategic Consulting KJT Group, Inc. Joseph S. Vasile, MD, MBA President/CEO Greater Rochester Independent Practice Association Rochester General Health System (RGHS) ACO Joel Port Chief Operating Officer Delaware Valley ACO; An ACO jointly owned by Jefferson University and Hospitals, Main Line Health System, Holy Redeemer Health System, Doylestown Health, and Magee Rehabilitation Hospital. Disclaimer: The views of both Dr. Vasile and Mr. Port are their own and do not represent the views of their organizations. KJT Group, Inc. July

3 BACKGROUND Driving Value In Healthcare: As part of our ongoing efforts at KJT Group, Inc. to maintain a deep understanding of the evolution of ACOs as part of the larger healthcare reform ecosystem, we conducted an interview with two ACO executives in their second year of operation as both a Medicare Shared Savings Program (MSSP) and a commercial ACO. Our goal was to gather their perspectives and insights into how ACOs are working with providers and healthcare systems to drive value within a reimbursement and delivery system focused on improving patient outcomes and controlling healthcare expenditures. In the interview, we explore ten topics. Interview Topics Part I: Part II: Defining an ACO and its Role Bundled and Episodic Payments Post-Acute Care Controlling Costs Care Management Pharmacy Medical Devices & Technology Assessment Desired Outcomes Pharma & Medical Device Manufacturers Price and Quality Transparency INTRODUCTION BY DR. TOM RICHARDSON (MODERATOR) Dr. Vasile, Joel, on behalf of KJT Group, we appreciate you taking the time today to share your insights on ACOs and the role that ACOs play within our quickly evolving healthcare delivery system. We have ten topics that we are interested in exploring with you both and I am not seeking to gain consensus but rather explore your individual perspectives based on your experiences leading your ACOs. With that, let s get to our discussion. KJT Group, Inc. July

4 DEFINING AN ACO AND ITS ROLE Moderator: The first question we should start with is, What is the primary role of an ACO? Driving Value In Healthcare: Joel: Our role is to figure out ways, tactics, and strategies to increase the quality of care while reducing the cost of care. We focus on the inefficiencies of the healthcare system, including poor handoffs in care, transitions in care, and we focus on the total cost of care. The healthcare system at times can be so fragmented and we re trying to look at the entire picture. Moderator: Joe, do you agree? Joe: I absolutely agree. And I d go a step further to say that part of the goal of an ACO is to align the incentives of patients (and engage them in their care), hospitals, providers, and insurance companies. Technically, when we talk about an ACO, we re really talking about a defined population that we ve agreed to care for. But, as this takes hold throughout the country, this defined population is only growing and will represent a change in how overall care is delivered. Moderator: Great. What are key success factors? Joe: You need some governance model that brings the stakeholders together so they can begin to have these dialogues. The next critical piece is having access to data and the ability to look at data and manipulate the data in a way that supports quality. Then, you really need some care management services, although those don t necessarily have to exist strictly within the ACO. Moderator: Joel, anything to add to that? Joel: I d add that, for us, it really starts at having very engaged primary care providers. I d also emphasize the role of care coordinators or care management teams. We also bring to the table what we call practice transformation coaches. These are people that work with the primary care practices trying to maximize the use of their electronic medical record and improve their local operations. Moderator: Are there any differences between running a Medicare and a commercial ACO? Joel: I think the fundamentals are the same but you re going to have different challenges. For example, in a younger population, when you focus on chronic care, you might be more focused on patients with diabetes. In Medicare, you are likely to be more focused on patients with COPD and heart failure, in addition to diabetes. Joe: You want physicians and health systems to perfect one way of operating, one workflow. We re trying to accomplish one workflow for all our patients so the physicians know what to expect and what they re being measured on. You don t want to have to build 10 different systems for 10 different insurance plans. KJT Group, Inc. July

5 Moderator: You both mentioned the importance of engagement with providers and health systems executives. Joe, can you tell me how you work with hospital administrators and providers? Joe: Well, the challenge is that we are still in a world where the incentives are not fully aligned. So, we have to find those areas where we can align the incentives. A good example would be things like in-system utilization, sometimes known as leakage out of your system. If we can create systems around how we care for patients in a single health system, the patients win, our specialists win and the system itself wins. So, you try to find areas where you can all agree. Certainly the quality metrics, which are patient focused, are areas that we can agree on and build programs to improve. Also, many large health systems have their own employee-based self-funded medical plans. If you can use that as an incubator or pilot as you roll out these population health programs, the system wins because it s essentially the payer for that population. If you re able to demonstrate that you can actually reduce costs and improve quality, that allows you to have more conversations with other payers about expanding the program. Moderator: And, Joel, are there any specific ways in which you work with the hospital administrators and providers? Joel: One of the ways is through our ACO governance. We have five member health systems that support our ACO and each of those CEOs sit on the board. At the governance level, they understand what our goals are, our business plan, and they embrace it. But, as Joe stated, there can be conflicting priorities. Hospitals still get paid, for the most part, on the number of patients in beds, so they still get paid on a volume basis. The shift for value-based care has started for hospitals too. For example, Medicare offers a bundled payment program, where a hospital or health system can get paid for the whole course of care from pre-hospitalization to post-hospitalization. This is the type of program that incents hospitals on value versus volume. Health System CEOs recognize the world is changing. The leading CEOs, some of whom we work with at our ACO, realize they have an opportunity to move their organizations to a different place that rewards high quality and low cost, and when the healthcare world switches overnight, they ll be ready for it. BUNDLED PAYMENTS Moderator: You mentioned bundled payments, what is the future of bundled payments and what do they mean for ACOs, hospitals, and providers? Joe: When I think of bundled payments, they re a tool to get us to move, to understand risks and manage the cost of care. A bundled payment starts with a very discrete episode of care or disease. So, it s really a step towards taking on more risk. It s a way that a health system can begin to align its work in the area of quality improvement while reducing overall cost. Moderator: Joel, anything to add? Joel: Well, I think the biggest challenge is getting good data upfront. The big surprise in the bundled payment program has been the amount of cost once the patient leaves the hospital. Current cost estimates show that up to 60% of the cost of a bundle occur outside the confines of a hospital. KJT Group, Inc. July

6 Moderator: How quickly do you see bundled payments and episodic payment mechanisms replacing FFS? What conditions or specialties are they being used for or most suited for going forward? Joel: While it is always difficult to estimate these transitions, CMS has made a commitment that by 2018, 50% of all payments will be based on alternative payment models as opposed to FFS. Also, a larger coalition of providers, payers and purchasers have pledged that by 2020, 75% of all contracts will be value based. Based on these organizations, one can realistically see a shift towards bundled payments and episodic payments within the next five years. Today, there are already a number of hospitals around the country participating in the CMS bundled payment program, often times focused on orthopedic and cardiovascular procedures. POST-ACUTE CARE Moderator: Joel, you mentioned transitions in care and the role of providers outside the hospital. What are your thoughts on the future of integration with post-acute care service providers such as skilled nursing facilities, rehab, and home care? Joel: Well, today those areas don t connect very well and don t communicate as well as they could. Some health systems are trying to figure out who their post-acute partners are partners with good communication, good handoffs, progressing to maybe a bundled payment program and even sharing in the incentives and disincentives. So, to me, that s a tremendous opportunity as we move ahead together to reduce readmission and improve the transitions from acute to post-acute care. Joe: I would agree. We re currently in the process of evaluating the nursing homes and the long term care facilities that we work with. We re looking for partners that have similar incentives, similar capabilities and have the same commitment to patient satisfaction and quality. We want to work with a select group of partners. We re going to try to create a common dashboard so we can look at what our post-acute partners are doing and how they re performing. Are they sending people to the ED? Are they taking people back from the health systems in a timely way? What kind of medical services do they have within the nursing home so they can assess and keep people at that level of care? Moderator: Great. And Joel, do you feel more hospitals are going to purchase SNFs and home care agencies or will they continue to have an arm s length relationship? Joel: That s a very good question. I think you re going to continue to see what we see now, which is all types, from direct hospital ownership of SNFs, to contracts and service agreements. One problem that hospitals have regarding the outright buying of nursing homes is the limit on capital. While it is always easier to align a service that you own, it may not be the time to invest their capital in long-term care when a hospital or health system could possibly get the same level of service just from having a very strong contractual relationship that includes service expectations. Moderator: To that point, there is consolidation within the long-term care arena itself, separate from the hospital consolidation that we re seeing. Do you think that s setting things up for success, in that hospitals can partner with a larger chain of providers rather than several smaller individual entities? Joel: I agree with that. It s a lot easier to deal with one company that owns/manages multiple long-term facilities and agrees on specific levels of service and quality, than try to contract with 25 different providers. While it may depend on the local market, it s important to work with all of our post-acute providers and hopefully share a similar vision and goals. KJT Group, Inc. July

7 Joe: I would agree on both counts. One is that I don t think you necessarily have to own the nursing homes, although many health systems do own post-acute care facilities. I think that you re able to partner, but you have to align the goals and be open about what you re trying to accomplish. And I would also agree that, like many areas of medicine, scale is going to have increased importance. You re going to see consolidation in that area like you are in just about every other area of medicine. CONTROLLING COSTS Moderator: Okay. Let s talk a little bit about some of the most pressing issues that ACOs and health systems face in regard to cost containment. Can you elaborate on where the focus is to help control costs and improve outcomes? Joe: We are looking at readmissions or admissions or the site where care is delivered. Specifically, we are also focusing on the high-cost, high-risk patients and actively and aggressively care managing these patients. It s also not a surprise that things like high cost imaging, CT scans and MRIs, are on the list of things that we re looking at. Certainly, pharmacy is on this list as well. Moderator: Joel, anything to add to that? Joel: The only thing I would add is the use of skilled nursing facilities. We just happen to have high post-acute costs as compared to national averages. We believe it reflects that there aren t enough alternatives in the post-acute spectrum, including having the right services to get people back to their home. In our marketplace, there are opportunities to do more within the home and get people back home quicker. Moderator: And what does this mean for home care providers? Joel: First, I think there s tremendous opportunities for home care. However, the reimbursement for home care services can get in the way as they don t have incentives focused on the total cost of care. There are some excellent experimental programs out there where when a patient goes home, they re accompanied by a nurse or some type of clinical worker. They check out the home, make sure they re minimizing the chance for falls, make sure that the refrigerator has food in it and address basic activities of daily living. We have a lot of seniors living alone, and the caregiver resources vary from home to home. You may not know if the patient has money to fill the prescriptions they come home with. Also, we would like to ensure that all patients going home by themselves have the right support so they don t return back to the hospital inappropriately. At times, the caregiver system often isn t in place to support them at home. Joe: I agree with all that was mentioned and suggest that we need to develop and align incentives, a dashboard, and we ll continue to evaluate the different agencies and those that provide the best value and service. Moderator: And will bundled payment force collaboration in this area and the integration of these social aspects with medical care? Joel: I m not sure force is the right word, but at least it provides the right incentives to have the multiple providers work together to achieve common goals. Moderator: Joe, anything to add? Joe: I agree a bundle is a tool. It begins to align our incentives and gives us experience in this area. Ten or 15 years from now I don t know if we re going to be using bundled payments in the same way that we use them now, but it s one step in a direction where we begin to change how we do business. KJT Group, Inc. July

8 CARE MANAGEMENT Driving Value In Healthcare: Moderator: Okay, good. I want to move to the topic of care management. What are the barriers to achieving effective care management? Joel: Well, to me, the first one is being able to identify the patient. As Joe mentioned earlier, we need good data and good analytics to support that data and then be able to risk-stratify the population and identify those patients that truly need complex care management resources. Also, since our physicians are our first line of communication, we need to get them engaged upfront. When they are engaged, we are able to address the specific concerns of their patients together, and coordinate the resources so we can offer optimal care for their patients. Moderator: Joe, what specific conditions or patients are at the top of your list for care management? And, if you have more than one chronic disease, do you end up with more than one care manager? Joe: Well, let me take that question in a couple of parts. The first is, yes, we re using care management for specific diseases. Those diseases would be things like COPD, coronary artery disease and diabetes. Although, ironically in terms of those patients that are driving risk, if you will, we re trying to push much of the work in those populations to our primary care physicians, which doesn t necessarily mean to them personally, but working with their practices to develop ways that we can engage those patients. As those patients get sicker, we re able to assess which of those patients are more at risk or at immediate risk. That s where our care management team goes to work, really, with the highest risk, the highest cost patients. And, again, those are identified through the use of data, through algorithms for which patients are most at risk. Some of the algorithms are fairly intuitive. Are you over 65? Have you had a number of hospitalizations in the past year? Do you have a diagnosis of three or more conditions? Are you on three or more medications? Etcetera, etcetera. So then, when those patients are identified, our care management team will take an active role in engaging those patients. So, again, the approach is almost two-fold. One, it s looking at the whole population and trying to prevent illness, but then engaging the highest risk, highest cost patients. KJT Group, Inc. July

9 KJT Group is an evidence-based research and consulting firm focused on guiding life science clients to uncover insights that enhance their strategies and execution. Our mission is to help our client organizations deliver superior value to their customers and constituents by enabling evidence-based decision making. Our consultants are experts in research design, survey methods, advanced analytic techniques, health services research, epidemiology, health policy, economics, and marketing and strategy development. KJT Group, Inc. July

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