Dr. Farzad Mostashari: Why hospital leaders should embrace one of the PPACA's most promising provisions


Not that long ago, McAllen, Texas, seemed to be the epitome of a problem that has plagued the U.S. healthcare system for years — healthcare costs were soaring, but people weren't getting any healthier.

Healthcare costs in the mid-sized community of McAllen were some of the highest in the nation. In 2006, Medicare spent about $15,000 per beneficiary in McAllen, twice the national average and $3,000 more than the area's per capita income.

All that money was buying more care but not better care, found New Yorker staff writer Atul Gawande, MD. Based on data from Medicare and commercial payers, he discovered McAllen patients were getting more of everything, from diagnostic tests to surgeries to in-home nurse care, than patients in neighboring and demographically similar El Paso, Texas.

But all the extra procedures weren't adding up to better care quality. Patient outcomes were generally worse than they were in El Paso, a city in which Medicare spent half per beneficiary what it spent in McAllen, and McAllen hospitals were scoring worse on most of CMS' hospital quality metrics than their El Paso counterparts.

In his 2009 article "The Cost Conundrum," Dr. Gawande argued the problem in McAllen, and across the country, was a reimbursement structure that paid more for treating disease than preventing it, coupled with a general lack of accountability among providers for the cost and volume of care delivered.

Upon publication, Dr. Gawande's article caught the attention of President Barack Obama and helped guide his healthcare reform efforts. "He came into the meeting with that article having affected his thinking dramatically," Sen. Ron Wyden (D-Ore.) told the New York Times in 2009 about a meeting with the President. "He, in effect, took that article and put it in front of a big group of Senators and said, 'This is what we’ve got to fix.'"

One of the provisions of the resulting Patient Protection and Affordable Care Act was the creation of the Medicare Shared Savings Program. The Shared Savings Program was designed to reverse the trend of rising costs and slipping quality in places like McAllen. Under the program, providers come together to form networks called accountable care organizations and coordinate care for a patient population. These providers then receive a cut of the savings to the Medicare program if their efforts reduce utilization and cost.

In 2012, a group of physicians in McAllen enrolled in the MSSP and started the Rio Grande Valley ACO. To deliver care more efficiently, physicians used information already in their EHRs to identify the patients most likely to run up large Medicare bills. They then launched a variety of initiatives designed to keep these patients healthy, including proactively reaching out to high-risk patients, creating personalized chronic disease management plans and offering priority scheduling for patients recently discharged from the hospital.

Their efforts paid off — between April 2012 and December 2013, the ACO reduced Medicare expenditures by more than $20 million among its covered population. Patients were also healthier, as seen by an 11.8 percentage-point increase in the number of diabetics with their condition under control to a 12.2 percentage-point increase in the number of people who received vaccinations.

Former National Coordinator for Health IT Farzad Mostashari, MD, who recently chronicled the efforts and successes of the Rio Grande Valley ACO in a New York Times op-ed, says these results show the potential of ACOs to reduce costs while improving care.

However, it's important to note no hospitals took part in the Rio Grande Valley ACO, which doesn't surprise Dr. Mostashari. "The biggest challenge for hospitals is navigating what I call the foot-in-two-canoes problem," he says. Hospitals have to survive (and be profitable) in a volume-based world now while also preparing for the switch to value-based reimbursement. "It's a real conundrum for hospital leadership, and limits their ability to get on board with shared savings [programs]," he says.

Therefore, hospitals today are mostly focusing initiatives that will be beneficial no matter which canoe they're in, he says. "They're hedging their bets, they're doing things that will help them in both volume- and value-based scenarios," says Dr. Mostashari. For example, many organizations are creating clinically integrated networks that will help capture more service lines, increasing volume, but will also prepare the system to coordinate care under an ACO or similar structure. Similarly, merger and acquisition activity will leave expanded systems with more negotiating power in fee-for-service contracts with payers today, but will also help consolidate and streamline population health initiatives in the future, he says.

What hospital executives need to do, says Dr. Mostashari, is put both feet in the value-based canoe, though he recognizes this to be no easy feat. As the CEO of Aledade, a company focused on getting primary care physicians into ACOs, Dr. Mostashari knows these practices have less overhead than hospitals and have an easier time jumping into a new reimbursement structure.

That doesn't mean hospital executives don't need to take the leap.

Dr. Mostashari recalls an old adage that says leaders thinking a year ahead are prophets, but those who think three years ahead are martyrs. "Hospitals need leadership that can take the hit today and not get fired for doing the right thing," he says, lest they face the same fate for not preparing their hospital for the inevitable shift to value-based reimbursement.

He says hospital executives should take hope in the story of McAllen and know value-based reimbursement can be a win for all stakeholders. "For too long, there's been a tradeoff in healthcare," he says, where reimbursement policies rarely favor providers, patients and taxpayers. Now, with ACOs, they can. "Now there's this window of opportunity where you can do what's good for the patient, the provider's making more money and it's not driving up costs," says Dr. Mostashari.

"That's the space I want to live in," he says. "I want to crank that window open wide."


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