Seriously Testing The ACO Waters

Brian Klepper

Published April 2013 in Accountable Care News

If necessity is the mother of invention, then tentativeness and ambiguity are the parents of procrastination. In health care, fee-for-service remains the dominant paradigm, so the ACO movement, lacking almost any semblance of true financial risk, is far more bark than bite. What’s the point of health systems going to all the trouble – and there’s no question it will be an overwhelmingly complicated overhaul – required to move from volume to value if it isn’t a pressing concern? Or, as several health system CFOs have expressed it, “Why should we change what we do and take less money until we have to.” There is no immediate imperative.

But there are some strategic imperatives. Overall health care cost has continued to explode. Kaiser Family Foundation data show that, for more than a decade, health plan premiums have risen 4.5 times as fast as general inflation and more than 3.5 times workers earnings. A recent RAND calculation showed that $4 of every $5 of household income growth is now absorbed by health care. It doesn’t seem likely that much more revenue can be squeezed from group and individual purchasers. (Though many of us have been saying that for decades.)

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Risk Shifting in Health Care and Its Implications: Part 1

Troyen Brennan and Thomas Lee

First posted 8/24/11 on the Health Affairs Blog

“We always overestimate the change that will occur in the next two years and underestimate the change that will occur in the next ten.”

– Bill Gates

The legislative phase of health care reform closed with President Obama’s signature on the Patient Protection and Affordable Care Act (PPACA) on March 23, 2010. We are now over one year into the regulation and adjudication phase, which will shape the impact of the imposing 1600 page law. This phase will last for years as government regulators interpret — and courts re-interpret — the legislative language, and develop action from its broad outlines.

During this phase, it will be tempting for everyone in health care to believe that little is happening –- at least at first. Skepticism that change is really going to occur has been intensified by the negative reactions to the initial version of proposed regulations for Accountable Care Organizations. Indeed, the message that “change will be optional” was essential to create consensus sufficient to pass the PPACA. Patients were assured that if they liked their current insurance plan, they would not have to change it. Employers were assured that they would continue to have broad discretion over the benefits that they offered employees.

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Risk Shifting in Health Care and its Implications: Part 2

Troyen Brennan and Thomas Lee

First posted 8/25/11 on the Health Affairs Blog

Employers

The employer outlook can best be illustrated by taking a step back, and analyzing the dynamic between employer coverage and the other major sources of health insurance: the government and individuals. A fourth source of insurance, the exchanges, will be added in 2014.

The biggest of these four sources are the government payers, Medicare and Medicaid. Medicare, growing quickly after 2020, is the real demographic sink hole for the federal government finances. Yet this is not to say that comparatively the government is a generous payer. Most health care providers barely break even or incur deficits on Medicare, cross-subsidizing Medicare recipients with patients from other segments with better reimbursement. Similar dynamics characterize Medicaid, which will cover 25 percent of all Americans in 2014.

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Medicare’s Looming Risk Transfer

Jaan Sidorov

First posted 8/24/11 on the Health Affairs Blog

Suppose, despite my good health and lifelong habit of avoiding doctors, I wanted to give you $1000 today in exchange for your agreement to cover the future cost for all my unplanned medical expenses in the next year? Your decision would be an exercise in classic “risk transfer,” in which parties simultaneously monetize ($1000) and transfer (agree to assume) risk. It’s also a gamble. I’m betting that the likelihood of an expensive illness, while low, could exceed $1000, while you are betting that my good health will continue and that you’ll get to keep most of that $1000.

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Uncertainty: The Similarity Between the Financial Markets and Health Care

Wendy Lynch

First posted 8/18/11 on the HCMS Blog

A question: Does uncertainty in medicine mean consumers should be more or less involved in choices?

As the country watched wild swings in the stock market these past weeks, every investor faced unfortunate hindsight: if only I had cashed out at 12,500! Combined with the pain of continued uncertainty, many investors decided to remove their (remaining) funds simply to stop the discomfort of an unknown future.

While we all dread the anguish of downward market fluctuations and wonder daily what it is store for our dwindling nest eggs, no one can change the fundamental truths of investing: risk and uncertainty. Yes, experts can advise us and help us assess varying degrees of risk among options, but no one can guarantee the success of our investment decisions, no matter how well informed.

If the world of financial markets is this uncertain, should investors be less involved in the decisions about where they place their money and how much risk they assume? One could easily argue that the average investor is not capable of making good decisions. So, should we all find a seasoned stock broker to make decisions for us, independent of our personal circumstances and preferences? After all, they are the experts—right?

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Physician-Hospital Relationships: The Hospital Morphs from Revenue Center to Cost Center

Vince Kuraitis and Jaan Sidorov

Part 3 of a Series

First posted 7/19/11 on eCareManagement

In our introductory posting of this series, we noted that economic incentives previously aligning doctor-hospital interests were changing. This creates the potential for The 100 Year Shift – physicians awakening to possibilities for stronger partnerships with payers than with hospitals.

In this post, we will zero in on the changing economic position of hospitals and the effect this is having on physician-hospital relationships. We will examine the trend of hospital employment of physicians and point out challenges and tensions for the future. [This is a long post…so now might be the time to refill your coffee cup.]

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Power – Er, No, Risk – To The People

Paul Levy

First published 3/2/11 on [Not] Running A Hospital

What will be the biggest trend in the health insurance business over the coming years? A tendency to shift risk from the insurance companies to the public.

How fitting for a sector that was created to manage risk to do this.

Why is it happening? Even before the recent health care legislation in the US, insurance companies were looking for a way to shift the rising cost of medical care to others.

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Vince Kuraitis and Jaan Sidorov

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