Clinical Integration: The Opportunity, The Challenge, and The Alternative (Economic Erosion)

September 22, 2016 | Featured Articles

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Despite some positive slowdown in health care costs year over year, costs continue to defy gravity as they are still increasing at double the pace of overall inflation. The projected nightmare scenario is that by 2045, on the Federal Government level alone, health care and social services will consume 100% of the current tax revenues of the country, leaving the coffers empty for any other services supplied by the Federal Government. With fee-for-service reimbursement fully discredited, and blamed for nearly all the evils of healthcare, from fragmented care, unnecessary services, poor quality, government and commercial payers continue to seek models that will “bend the cost curve” downward. They believe that there is sufficient money going into the healthcare system, but that those investments are inefficiently utilized. Both government and commercials payers have tried to bring healthcare spending under control through such schemes as utilization management, prior authorizations, retrospective reviews, and rate freezes. It hasn’t worked. Intrusive administrative approaches have become expensive hassles to medical providers, added barriers to needed care, and added costs without meaningfully demonstrating cost savings or improving quality of care. So a new – some would say radically different – approach is being tried next. Clinical integration (Cl), with care provided through such entities as the Accountable Care Organization, is where the next big push is. Clinically Integrated Networks utilize payment bundles and performance based metrics, placing the problems of cost and quality on the medical providers, physicians and hospitals. The thinking is: Let the provider community organize to deliver care under a financial model that puts them at risk for the cost of care and the quality of the care provided. After all, providers are closest to the source of the issues, and surely can adapt and impact change better from the “inside” than continued failed interventions by outsiders?

The Opportunity

It may sound tough, but it is an opportunity for the providers to take control of their future and design a delivery program that works, that they themselves control, and if successful, also enjoy an economic upside while delivering care in a more cost sustainable manner and of a higher quality. The mantra adopted is the Triple Aim: improve care for the individual, improve population health, and reduce per capita costs. There is a Lot in the Triple Aim that harkens back to the days of capitation, global capitation of physician groups. Here is an economic target: if you meet it, you economically benefit. It is the same general concept here, with the addition of quality measures. 

The providers that organize themselves will have a wide range of flexibility in how they operate and, provided that the goals of meeting quality measures and cost targets are met, economic rewards will flow. The motivation of both government and commercial payers is of course to shrink the cost in the volume based fee-for-service world and they believe that if providers are at risk for costs and quality then they, being closest to the actual delivery of care, can produce better outcomes in quality and cost. The commitment by both government and commercial payers to contract on a value based purchasing (VBP) model is real and aggressive. Medicare has already committed to moving the majority of its “distribution of dollars” to payment models that are based on value, and a coalition of the major national commercial plans have likewise committed to move in the same direction. In other words, Payers are seeking to move contracting to provider groups that are prepared to accept responsibility for costs and quality (which is how value is being defined). Provider groups wishing to pursue such contracts are going to have to become clinically integrated in order to be successful.

The Challenge

Success in clinical integration is a challenge. The dynamics to get the rewards and the money to replace the erosion of fee-for-service payments needs to change dramatically. It is no Longer the physician as Lone Ranger. What you do and how you do it impacts the entire “team” which includes ALL of the physicians in the clinically integrated network ((IN). Individual performance will matter to you and to the entire group as your participation is assessed since “one bad apple can spoil the barrel”. In simple terms, clinical integration models share a common structure of providing medically necessary care at an aggregate cost. Those costs attributable to the patients in the ‘panel’ are generally growing at a rate Less than the market against which the CIN is competing. Successfully pass the quality gates – a series of proxies for delivering quality care, such as the traditional HEDIS measure of things such as Levels of vaccinated children, A1C Levels, mammography screenings, etc. – and what is available for economic reward is based on the aggregate performance of the entire physician and/or hospital performance of those in the CIN. If the collective is not successful, then no one earns any additional dollars. If there are ‘earned’ rewards, the CIN then determines how to distribute the dollars to those in the network. Achieving the twin goals of cost and quality can be complicated; especially if the physicians that have joined together cannot become enlightened that this is in their self-interest. Also, if those in Leadership roles are unable, or unprepared, to confront physician practices that are damaging to the whole, then the model cannot produce effective results. Cost is a function of utilization and volume. It is also a function of where care is delivered and by whom. The first place that any CIN needs to Look to impact costs is the use of non-contracted providers by the physicians of the CIN. For example, who is referring to non-contracted Laboratories, where costs can easily run 1000% more than the same testing by contracted in-network providers? The same is true with the referral practices to specialists. Are referrals being made because of historic referral patterns, or perhaps something more nefarious? (I.e. kickbacks). Or do such referrals identify a deficiency in quality or availability of the needed among those in the CIN? Such non-par utilization did not matter much to physicians in the past, as Long as their patients did not complain that such non-par referrals resulted in higher out of pocket costs. (After all, many non-par providers have been willing to waive the patient financial responsibility in return for the referral and being paid high out-of-network rates). Then there is the question of where care is being provided. Is the care delivered in the Least restrictive, Least costly setting? For example, hospital outpatient services are far costlier than the same service in private physician offices, or in freestanding centers. Under fee-for-service such decisions had no impact on the physician making the decision but now there is an economic dimension to decision making.

And then comes the hard part, the actual utilization patterns of the physicians in the CIN. This is where it really gets hard. Physician Leadership is required to understand the treatment patterns of the physicians and to Look for those patterns that provide the acceptable quality outcomes, with the Least use of resources (costs). For example, Leadership will have to address that ENT who does all of his procedures in the hospital outpatient setting, while his colleagues perform most of their procedures in Less costly offices or free standing centers, or understand and address the use of multiple MRls by certain orthopedists before surgery, while others use only one. For years, government and commercial Payers have tried, and failed, to stem costs by introducing invasive controls (prior auths, restrictions on care). It is the balance of cost and medical necessity, but now in a CIN it is the providers who are making the determination, based on their clinical judgment, and bearing the economic consequences of that decision, rather than arbitrary Payer administrative policies setting barriers. It is well understood that 5% of the population accounts for 50% of health spending. To confront the high-cost patients, CINs need to build mechanisms for care management and coordination. That is identifying the high cost patient – and with the right data, those identified as at-risk of becoming high cost – and engaging them with the right specialists in an effort to provide needed care, while also trying to reduce the cost by such things as maintaining the health of the chronically ill, and avoiding duplication with an acute episode.

Accomplishing all this requires extensive and effective Leadership. For example, who should be the primary care physician of the chronically ill patient? Their general internist? The nephrologist, or the cardiologist? And at what point in the patient’s care should such care be transferred? Or how best can it be shared or co-managed? Similarly, a CIN will have to press for physicians to work ‘at the top of their License’. That is, care should flow to the resources that can provide it in the most cost effective manner. Perhaps that patient’s care can be followed by a primary care physician, or provided by a physician extender, with follow up managed by a nurse? Determining who and how is at the heart of managing costs and care. The creation of a CIN also opens up a whole range of patient engagement, across the Lifespan of the patient. Not only must the CIN take on – either directly or through their provider network – the outreach to engage patients for preventive care services, but they must also move away from seeing patients as dependents engaging health care providers only when sick or injured, to seeing patients as partners in care. The economics of the VBP reward the efforts associated to improve the health status of patients. That is, instead of being paid for acute, episodic care, the goal is to keep patients healthy and managed and therefore get paid for care management instead. Health plans and government have Long been stymied in addressing utilization pattern differences, as they have Long been afraid of the argument that ‘quality’ will suffer. The HMO’s have Long been attacked for challenging the necessity of services, with the accusation of “profit over people: Now, we are swiftly moving away from Payers ‘managing dollars’ to providers ‘managing care’ and that responsibility and the consequences for practice patterns rests with the Cl N collectively.

The Role of Data

To meet the challenges placed on a CIN, data is critically necessary and it has to be converted to information; timely and accurate clinical and financial information that helps to identify areas of opportunity for improvement. For example, data that will identify “gaps in care” – those patients in need of preventive and routine services – in order for outreach to hit the best ‘targets’. It is data that will compare the treatment practices of physicians by diagnosis to identify the best practices for delivering care in the most effective and efficient manner. To obtain data, the CIN will have to engage with its physicians to obtain clinical information from the practice’s electronic medical records and with the Payers to obtain the claims histories. With the development of a database for the CIN, everything in the provision of care becomes known across the entire entity. This can be very unnerving for physicians, as their pattern of care will be exposed, and many of the knee-jerk defenses used in the past with Payers won’t stand up to the scrutiny of their colleagues. The reality is that this is how best practices for cost and quality improvement are identified and then disseminated to the specialty, with the result of a greater upside opportunity for all in the CIN. Data analytics are critical to understanding the structure of care delivery, to measure performance, and to delve deep into aberrations. As the CIN comes to understand the pattern of care delivery of its participating physicians and other providers through the use of data, it will have to confront deficiencies in the system of care delivery and, to be successful, it will have to adapt and change. For example, physicians whose patients are high utilizers of emergency room services will necessitate a deeper analysis to determine how to avoid ER use. Is it patient preference, or is it the Lack of readily available physician services as an alternative? Plans to reduce these expenses could consist of working with physicians to increase hours, expand services and hours with the addition of associates, or perhaps collectively open and operate an urgent care center where needed. Out-of-network referrals on a specialty basis may identify issues with access due to capacity, or even poor scheduling practices.

The Alternative

If a CIN can be successfully created, the opportunity that is available is to capture the revenue stream from an increasingly willing set of Payers: employers, commercial plans and Medicare and Medicaid, that are seeking organizations of providers to take responsibility for care and the quality of that care for a patient base. Those that control the patient base, control the revenue stream, and being in on its design and operation, they will be able to influence their future. Those that end up on the outside Looking in, will be trying to get by on what the CIN offers. For the individual physician, being part of a CIN means being actively engaged – engaged in working with colleagues in understanding the information gleaned from the data, and helping design the best practices and protocols that evolve over time. It also means knowing that to the extent that the CIN is successful, more of the physicians’ income will come from that source ‘ and that how the Cl N’s economic success is distributed, and individual physician efforts are recognized, is now in the hands of the CIN Leadership. As CINs become more proficient, their performance becomes their market plan. If the CIN can demonstrate success in cost increase curtailment, and quality, payers are very interested in engaging in discussions of what you, the CIN, can do for them. And CINs as a provider response, for the first time, has empirical data to show how both quality and costs are being managed. Historically, healthcare providers have argued that they provide quality care, and perhaps they are more cost effective than others, and in reality had no data to support such statements. Now with data, successful CINs will be able to show their “value” to Payers, and seek out new opportunities to capture increasingly Larger patient panels. The efforts today to create and operate a Cl N are efforts focused on the future, with the biggest payoff in the future. Currently fee-for-service remains the dominant model of payment but, the writing is on the wall – fee for service is dying (or dead). The question is, which physicians and/or hospitals are going to seize the opportunities now, and Learn how to be successful with these VBP arrangements now, while the risks are Low? Knowing that curtailing the growth of healthcare costs ultimately means that the revenue of individual providers is going to be impacted, resistance is to be expected as the creation of the CIN can and will bring a material disruption to existing providers of care. It is much better to be part of the solution, and be in a position to know and adapt, than to be on the receiving end of other’s efforts to shift dollars from you, don’t you think? Clinical integration is a game changer – done right, it is an organization that is comprised of health care providers that are prepared to operate with a high degree of enlightened self-interest, putting the needs of the collective that is the organization ahead of personal maximization of income and control of the patient. The singular, possessive of “my patient”, has to give way to “our patient”. Physicians are becoming engaged in various clinically integrated entities because that’s where the money is moving and that’s where Larger organizations are focusing. The reality is that there is Little to no new money being made available to fee-for-service reimbursement. Fee-for-service rates are now capped or being cut. With those rates flat-Lining or declining, these dollars will become an increasingly Large and important portion of the physician’s compensation. The physician who remains wholly dependent on fee-for-service reimbursement will see his income rapidly erode. It will erode for two reasons: first, the Lack of increases in fee-for-service rates, and secondly, physicians organizing into clinically integrated entities will be seeking to capture the patients and retain them in their organization. If you don’t want to be part of clinical integration, you will shortly find yourself on the outside, wishing you were in. As payments move from the traditional fee-for service to value-based payment model, physicians need to understand this new reality and how to get paid well in this opportunity-producing model.