Reading the Tea Leaves, Part 2

“Prediction is very hard, especially about the future.”

–   Yogi Berra (attributed)

It’s not too hard, however, to predict the past, especially the recent past.  And in some cases, the recent past can give us some pretty good indications about what’s coming in the near future.  It’s not exactly going out on a limb to say that health care is changing; less clear is into what is it changing, and how quickly.  Consider a few recent examples that may give us a sense of what we face.

Utah Medicaid.  On January 1, 2013, Utah became the second state after Colorado to implement an accountable care organization (ACO) for its Medicaid enrollees.  (For now, CHIP is excluded.)  The state make global payments to one of four ACOs, which have relatively broad latitude in working with providers to incentivize lower cost and higher quality, including pay for performance and shared savings.  Currently, physicians are paid on a fee-for-service basis, but the plan it to move to other payment methods (e.g., capitation, bundled payments).

What is different between this ACO model and traditional Medicaid managed care?  One is the flexibility in how the capitated payments received by the ACOs are distributed to the various providers.  The other is the requirement that the annual growth rate in Medicaid expenditures is limited to the rate of growth of the state’s general fund.  Those ACOs that are unable to limit the rate of growth may lose share or not be renewed.

Oregon.  Oregon has implemented a version of ACOs for all enrollees in Medicaid, CHIP, and the state employee health plan.  Fifteen geographically-based coordinated care organizations (CCOs) have been created.  Each will have a global budget for all health services (initially medical and mental health, with dental to be added) for the patients they cover.  Again, they have flexibility in how those funds are disbursed, but each CCO will be required to demonstrate a reduction in the rate of healthcare spending growth and meet specified quality metrics.  Shifting care to lower cost settings and preventive care are anticipated to be important elements.

Massachusetts.  Since 2009, Blue Cross Blue Shield of Massachusetts has had the Alternative Quality Contract, a modified global payment model in which annual payments to medical groups are linked to a per member per month budget.  There is both up-side risk (shared savings for coming in under budget) and down-side risk (penalties for exceeding budget), as well as incentives for meeting quality targets.  In 2012, Boston Children’s Hospital and its affiliated provider practices joined the Alternative Quality Contract, making it the first pediatric-only ACO.

What can we learn from this?  First, some form of accountable care, with elements of financial risk for providers and incentives for quality, appear to be the dominant emerging payment model.  Second, although there has been more progress so far in adult care (because the earliest ACO experiments were in Medicare), pediatrics is not immune.  Finally, this is happening very quickly.  There is no reason to think that the public and private payers in Wisconsin are not going to learn from these other states and begin to implement local version of this before long.

For those of you who still find many of these concepts in payment innovation and care delivery redesign confusing, here is a fun video from the Kaiser Family Foundation that puts it in terms even Yogi Berra would understand.

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