Profit in prevention

The UnitedHealthcare-Ochsner Health System partnership is the latest of at least a half-dozen Accountable Care Organizations that have sprung up in Louisiana in the past few years. More of the coordinated-care groups are expected as insurers and providers shift to agreements that offer incentives for keeping patients healthy and lowering costs.

Ochsner now has four ACO-type contracts that cover more than 100,000 patients, and the health system is looking for more, Chief Executive Officer Warner Thomas said. The system includes 10 hospitals and more than 40 health centers in Louisiana.

“We’re trying to move more contracts with all payers to this type of model, where we are essentially rewarded for great quality and rewarded for making health care affordable,” Thomas said.

In Accountable Care Organizations, groups of doctors, hospitals and other providers form networks to coordinate patient care. ACOs are designed to keep patients healthy, especially those with chronic conditions such as diabetes and heart disease, and to control costs by avoiding duplication of tests and other services. The providers can earn bonuses for keeping patients out of the hospital and controlling costs, unlike the traditional fee-for-service system that rewards providers for the volume of care.

In 2010, there were 41 ACOs covering less than 2 million U.S. residents, according to health care consultants Leavitt Partners. At the end of 2013, 606 ACOs covered an estimated 18.2 million people. Leavitt’s most recent figures show 630 ACOs cover an estimated 20.5 million people.

Dr. Elliott Fisher, director of the Dartmouth Institute for Health Policy and Clinical Practice, said escalating health care costs are bankrupting the federal government and undermining state and local government budgets.

Despite spending enormous amounts of money, people aren’t always getting high-quality care. At least 30 percent of the wasted spending goes for specialist visits, and stays in hospitals and nursing homes that could have been avoided.

The ACO model seeks to limit that waste by rewarding providers with bonuses for meeting quality metrics, such as making sure the patient gets timely and appropriate care, Fisher said. So a provider may appoint “care managers” for the sickest patients because the greatest savings can be achieved by keeping people with chronic conditions from ending up in the hospital.

The early results appear promising. Blue Cross and Blue Shield of Massachusetts’ alternative quality contracts and some Medicare demonstration projects have slowed spending growth and even cut costs 10 percent more than expected, Fisher said. Medicare ACOs trimmed projected spending by $380 million in 2013.

Those programs have also seen dramatic improvements in care quality.

UnitedHealthcare is making a big push into ACOs. So far, the company has placed $31 billion in reimbursements to hospitals, physicians and ancillary care providers under ACOs. By 2018, the company expects to run $65 billion worth of payments through ACOs.

With that kind of money at stake, making even a small dent in costs will mean a big difference in health care spending, said Glen J. Golemi, president and CEO of UnitedHealthcare Louisiana.

“I think that moving away from a completely fee-for-service system is a way that we can systemically begin to change how health care is delivered in this country,” Golemi said.

Patients should be able to shop for health care the same way they do for iPhones, televisions, and cars, basing their decisions on quality and cost, Golemi said. ACOs will eventually be able to provide that information, and that will greatly benefit patients.

UnitedHealthcare’s partnership with Ochsner is the insurer’s first ACO in Louisiana.

Ochsner Health says the agreement now covers less than 50,000 patients. But United expects the ACO will grow quickly, eventually lowering costs while improving care for more than 350,000 South Louisiana residents.

The ACOs vary widely in membership. In July, Blue Cross and Blue Shield of Louisiana said its Quality Blue Value Partnerships coordinate care for more than 130,000 members statewide. Blue Cross is partnering with five large provider systems: Baton Rouge Clinic, Baton Rouge General Physicians Group, Gulf States Quality Network, Ochsner and West Calcasieu Virtual Medical Home. The program is an enhancement to an existing ACO program that Blue Cross created with Ochsner and Baton Rouge General Health System.

Just four months earlier, Cigna and the Baton Rouge Clinic announced an ACO agreement to coordinate care for 5,000 Cigna plan members.

Insurers and providers say the shift to these types of arrangements require some adjustments for both providers and patients.

One of the keys to a successful ACO appears to be building a strong foundation of primary care, Fisher said. For example, ACOs are expected to keep more patients from being hospitalized, and over the long term that will change the role, and pay, of specialists.

This shift is also expected to narrow the gap specialists’ income and primary care physicians. Some say this could even encourage more doctors to enter family medicine, a less lucrative practice than most specialties and one consistently faced with physician shortages.

Fisher said specialists will still be necessary; a person with a serious heart problem will need a cardiologist.

But the emphasis will be on keeping patients out of the hospital and avoiding unnecessary procedures, Fisher said. ACOs represent a change in practicing medicine toward global responsibility for patients, keeping them healthy and managing chronic conditions “as effectively and parsimoniously” as possible.

The early discussions of ACOs envisioned hospitals and doctors taking on some of the same risks as insurers. The providers would receive a set amount for each patient. If hospitals and physicians couldn’t provide care for the amount forecast, they would lose money. But many providers didn’t like this idea, partly because they had no way to stop patients from seeking care, and the attendant costs, outside the health system.

As a result, most ACOs have been designed so that providers earn more by keeping costs down and patients healthy.

United isn’t worried about moving to shared-risk arrangements just yet, Golemi said. In some ways, the ACOs are navigating uncharted waters so it makes sense for providers to start with improving patient outcomes and experiences and reducing costs.

United’s first step will be determining which patients received the majority of their care at Ochsner facilities, and the average cost of care for that patient population, Golemi said. Once that baseline has been determined, United will then measure what happens over the first 12 months such as hospital readmissions, infection rates, and which doctors are following evidence-based medicine in their practices.

By the end of the first year, United will start to see the patterns of care emerging. By the end of two years, the data will become much more measurable and meaningful, Golemi said.

After two years, when the contract comes up for renewal, United and its partners can look at what the next steps will be, he said.

Thomas said he couldn’t discuss the details of the incentives or risk-sharing agreements for Ochsner’s ACOs.

“But we are positioning ourselves so that we can assume more risk for contracts in the future,” he said.

The health system wants to make sure that it is, again, rewarded for doing a good job controlling medical costs while delivering “excellent” outcomes and quality.

Despite Ochsner’s enthusiastic move into ACOs, it’s unlikely that the health system will ever have all of its patients covered under those types of arrangements, Thomas said. Somewhere around 35 percent to 40 percent of the people the health system treats are patients who come from areas outside Ochsner’s service areas, from Mississippi, Alabama and all over the country.

Follow Ted Griggs on Twitter, @tedgriggsbr