Reducing the Cost Burden of Diabetes:
The Potential Impact of the Accountable Care Organization
Provisions of the Patient Protection and Affordable Care Act
New York Medical College
School of Health Sciences and Practice
Capstone, Spring 2013
I will not edit this until you are finished with your final draft. This will then be rewritten obviously
In regards to President Obama’s Patient Protection and Affordable Care Act (Public Law 111-148, 2010) or ACA, the goal is to offer all Americans affordable health care, health insurance reform, improve patient resources and reduce hospital and operation cost.
The goal of this project is to ensure that Gotham Hospital continues to operate efficiently while meeting President Obama’s new ACA criteria and continue to provide quality care to its patient community. The team plans to offer several recommendations that will ensure Gotham is in compliance with ACA/ACO, as well as compare and analyze the effects of Pre and Post ACA hospital operations and elaborate on the hospital’s concern about how it can reduce the cost of chronic diseases particularly diabetes using its disease management program.
The project outcome is simple; to increase enrollment/utilization of the diabetes disease management and prevention at Gotham Hospital taking into account its diverse uninsured/underinsured population. The team will assess the current diabetes program at the hospital, offer recommendations and design a proactive program that will help increase utilization of diabetes care services at the Gotham Hospital.
Table of Contents
Executive Summary Page 2
Introduction Page 4-35
Methodology Page 35-55
Recommendation Page 55-70
Conclusion Page 70-72
References Page 72-82
Appendix Page 83-92
Healthcare cost in the United States (U.S) has been increasing steadily. One of the major contributors to the rising costs [this is plural throughout your paper] of healthcare is chronic diseases. Addressing this growing burden continues to be a major policy priority. The Affordable Care Act (ACA) signed into law by the Obama Administration on March 23, 2010 was aimed at controlling the cost of health care.
The ACA represents the first major piece of social legislation toward comprehensive reform of the U.S. healthcare system since 1965 with the enactment of the Medicare Act. Components of these enacted reforms seek to change aspects of both private and public health insurance programs by expanding affordable coverage without exclusions, exceptions, or community rating (Manchikanti, Caraway, Parr, Fellows & Hirsch, 2011). The legislation is intended to curb the current trend of national medical spending and decreasing the national debt. More specifically, the essential element of the act seek to provide quality and affordable healthcare for all Americans; expand the role of public programs to increase access to people living at or below the federal poverty line; improve the quality and efficiency of healthcare through evidence based health outcomes; prevent chronic diseases through public health and community health programs; emphasize primary care through the education of the current and future healthcare workforce; increase the transparency and accountability of healthcare providers; improve access to innovative medical therapies and procedures; provide community living assistance and support services; and revenue provisions that seek to promote cost efficiency. (Manchikanti, Caraway, Parr, Fellows & Hirsch, 2011). The reform act, it is estimated will provide access to care to 34 million uninsured Americans (Sharamitaro, 2011).
One of the provisions of the ACA is the establishment of the Accountable Care Organization (ACO); a form of payment and delivery reform model that tie provider reimbursement to reductions in the total cost of care for an assigned population of Patients (Center for Medicaid and Medicare Services (CMS) 2010). It was formed in part to be used as a tool to check the cost of chronic diseases by encouraging cost effective disease management approach.
Accountable Care Organizations
The ACA includes provisions that promote the establishment of ACOs within the Medicare program beginning January 1, 2012 (Adrion and Anderson (2010).The ACO is a model envisioned for improving quality of care and reducing unnecessary costs through coordination and collaboration among provider. It ensures that care is organized and delivered across the continuum. (American Hospital Association, 2012) . Under the ACO, group of doctors, hospitals and other healthcare providers form a coordinated structure to give high quality care to their Medicare beneficiaries (as well as privately insured patients). This is to avoid duplication of healthcare services and prevention of medical errors when managing patients with chronic disease in general, and diabetes in particular. It is expected that if ACO provides healthcare services at a low cost without compromising quality, the shared savings it achieves will be split between the ACO member groups and the Medicare in a predetermined cost saving formula (CMS, 2012).[ACOs both present and future are not designed only for the Medicare population. There are many demonstration projects with other populations.]
Group of providers and suppliers that satisfy certain criteria set forth by CMS may come together to manage and coordinate care through ACO for Medicare fee-for-service patients, under section 3022 of the ACA shared savings program. ACOs meeting certain quality performance standards will qualify to receive payments for shared savings from the government (ACA, 2010) Language from the ACA specifies that an ACO must:
“(1) Be willing to become accountable for the quality, cost and overall care of the Medicare fee-for-service beneficiaries assigned to it; (2) Enter into an agreement with the Secretary of HHS to participate in a program for not less than a three-year period; (3) Have a formal legal structure that would allow the organization to receive and distribute payments for "shared savings" to participating providers of services and supplies; (4) Include primary care ACO professionals that are sufficient for the number of Medicare beneficiaries (at least 5,000) assigned to the ACO; (5) Provide the Secretary with information regarding the ACOs professionals necessary to support the Medicare beneficiaries assigned to the ACO, to implement the quality and other reporting requirements under the program and for purposes of determining the payments for shared savings; (6) Have a leadership and management structure that includes both clinical and administrative systems; (7) Defined processes to promote evidence-based medicine and patient engagement, report on quality and cost measures and coordinate care (such as through the use of Telehealth, remote patient monitoring and other enabling technologies); (8) Demonstrate to the Secretary that it meets patient centeredness criteria specified by the Secretary, such as the use of patient and caregiver assessments or the use of individualized care plans; (9) Establish a mechanism for shared governance with the providers; and (10) Not participate in other government-based shared savings programs” (ACA, 2010)
The Department of Health and Human Services (HHS) will establish a contractual working agreement with different ACOs based on guidelines identifying HHS expectations of ACOs. In the new mandate, an ACO would agree to manage all of the health care needs of a minimum of 5,000 Medicare beneficiaries for at least three years (Gold, 2011). The HHS expects ACO to save money after managing these 5000 Medicare beneficiaries after a 3-year period, and the extra savings generated as a result of the ACO cost containment will be shared by Medicare and the ACO, provided quality of care is not compromised. ACOs will be rewarded financially for providing better quality care at a lower cost- a practice commonly termed as “pay for performance.” ACOs mandate will impact hospitals’ operating budget and the ability to provide quality care.
It should be noted that it is not only CMS that can go into a contractual agreement with an ACO, private insurers can also form a legal agreement with ACO depending on the particular private or commercial insurer contractual terms with the ACO. As the case is in various health reform policy issues, CMS usually set the pace and other non-government third-party insurers follow suit. [You should really be discussing the specifics of how the ACOs work logistically. Also provide some statistics regarding number operational]
ACO associated major payment reforms [The issue is not really about bundled vs. not. The real change is the sharing or shifting (or not) of risk regarding cost]
• The bundled payment system
Also known as Episode-of-Care payment or Global payment or Evidenced based case rate payment or Packaged pricing, it is a method that reimburses providers on the basis of expected cost for clinically defined episode of care (Cromil et all, 1997). This is the adopted system of payment associated with ACA in which CMS will reimburse contracted providers and so an integral part of contracts with associated ACO. The bundled payment is more advantageous [to whom?] than fee-for-service in which providers are paid per service of care which encourages unnecessary care [does it? How?]. Also, under this system of reimbursement, providers benefit from readmission of patients. The bundled payment system is also better than the Capitation system of pay in which providers are paid a “lump sum” per patient irrespective of the number of services provided to a single patient thereby penalizing providers that take care of sicker patients, and in a bid to cut cost provide poor quality of care to discharged patients that further results in readmission (American Hospital Association (AHA), 2010). In the definition of episode of care associated with bundled payment, it includes all services rendered to a patient pre, during and post admission to a particular hospital as well care given by other members of the ACO associated providers with a given episode of illness. It is expected that this inclusion will provide inpatients care providers incentive to complete effective care co-ordination and other identified best practices upon discharge from the inpatient settings (Minott, 2009). So for a hypothetical diabetic ‘Patient A’ with a poorly controlled sugar level who developed a stroke due to poor follow up and monitoring, this patient will probably require ambulatory clinical care in the hospital as well as home care and physiotherapy requiring a continuum of care across various providers in a particular ACO group. For the entire providers associated with the care of ‘Patient A’ and part of the Gotham ACO, a single bundled payment will have to be paid by the third party insurer (CMS or Private Insurer). As such, it is beneficial for the entire providers to coordinate and care for the patient in a way to reduce cost and be profitable. It will require coordination and integration of care between member specialist and preventive care providers within the ACO group such as PCP, FQHC, Social workers. They will have to work together to avoid patients developing complications from diabetes or from developing diabetes in the first place as any gains achieved from preventive services that will lead to minimal numbers of patients having overt diabetes will be shared between the whole members of the ACO and the third party insurer (Medicare and/or the private insurer in contractual legal agreement with the ACO).
• Shared savings
This is a payment strategy that offers incentives for providers to reduce health care costs for a defined patient population, by offering the providers a percentage of net savings gained as a result of their efforts. This payment model rewards providers that can manage health care services to come in below the planned budget. The budget represents anticipated costs related to a comprehensive set of covered services for a group of patients who receive their primary care from the provider organization. Shared savings models are attractive to employer purchasers and to insurers because they introduce an incentive to manage costs within a budget that simply does not exist in traditional volume-incenting payment arrangements (Bailit and Burns, 2012). This incentive in this case can make providers reconsider their test ordering patterns, their referral patterns, and steps they can take to prevent avoidable emergency visits and hospital admissions and to improve coordination of care. Again, shared savings models are attractive to providers who are currently only contracted with insurance companies under fee-for-service arrangements. Shared savings arrangements give an opportunity for the provider to share in any savings generated through the provider’s efforts, without the provider incurring any financial risk should expenditures exceed the budget (Bailit and Burn, 2012)
• Value-Based Purchasing
New Medicare payment reforms required by the 2010 ACA, have given the way to convincing providers to embrace value-based payment methods and to transform their processes for delivering care (Fensholt, 2012). By 2017, CMS will attach nine percent of Medicare payments to some form of value purchasing. The Partnership for Patients; an element of the ACA challenges private purchasers to use payments in support of a safety improvement goals set by HHS. Private purchasers, both large and small, will need to make good use of this opportunity to pay on value and to avoid the cost shifting that providers often claim accompanies Medicare pay. However, two studies released by Congressional Budget Office (CBO) recently present different pictures in relation to the ability of the America’s health care system to reduce costs by coordinating care and paying health care providers based on the quality and efficiency of care (Fensholt, 2012).
These studies are interesting because the federal health reform law puts all its cost-containment eggs in one basket, hoping that changing the way health care is paid can generate large-scale savings and, in turn, hold down the cost of health insurance. [Delete:The new law is playing several cards in this important bet, including] ACOs, are designed to enhance the quality of care in exchange for enhanced payments for meeting specific performance benchmarks, and various initiatives to facilitate coordination of care in order to realize efficiencies and cost savings (Fensholt, 2012). When health care providers become better and more efficient, the patient wins, but this doesn’t necessarily translate into cost savings. For instance, the hospital that responds to incentive-based payment models will provide better care, make fewer mistakes, and see fewer re-admissions, resulting in smaller insurance payments on behalf of its individual patients. (Fensholt, 2012).But if the hospital frees [FONT SIZE?] up patient space faster, doesn’t it lose revenue? However, it can be argued that the hospital through participating in the ACO can gain through the gain-sharing reform that will allow it to benefit from the extra saving. It is hoped that the extra saving gained can make up for this decrease in revenue due to fewer admissions. So potentially, the hospital can be rewarded for providing less yet higher quality care, but the question is where do the savings come from? How much savings can be achieved? Will the extra savings make up for the reduced revenue from less patient care? [will this really happen with the increased participation (i.e., covered patients)?]
Medicare has conducted two broad categories of demonstrations aimed at enhancing the quality of health care and improving the efficiency of health care delivery in its fee-for-service program. These demonstrations are: firstly, Disease management and care coordination demonstrations have sought to improve the quality of care of beneficiaries with chronic illnesses and those whose health care is expected to be particularly costly. Secondly, Value-based payment demonstrations have given health care providers financial incentives to improve the quality of care rather than payments based on the volume and intensity of services delivered.
CBO reviewed the outcomes of 10 major demonstrations that have been evaluated by independent researchers. The evaluations show that most programs have not reduced Medicare spending. Results from demonstrations of value-based payment systems were mixed. In one of the four demonstrations examined, Medicare made bundled payments that covered all hospital and physician services for heart bypass surgeries; Medicare’s spending for those services was reduced by about 10 percent under the demonstration. Other demonstrations of value-based payment appear to have produced little or no savings for Medicare (Congressional Budget Office, 2012).
Study Site: Gotham Hospital
Gotham Hospital is a large urban-based not-for-profit medical center in the New York City (NYC) Metro Area serving a population of approximately 500,000 residents who live in Bronx County. The hospital has: 1,060 total acute care beds on two campuses; a network of 19 primary care; two specialty ambulatory care centers near Gotham hospitals; a 420,000 visit home health agency providing short and long term care to home bound patients; a unified, enterprise-wide clinical and business information system connecting all of the above components. There are more than 800 house staff members and 800 full-time academic faculties in all clinical specialties at Gotham (Boucai and Zonszein, 2007). Gotham hospital has three general hospitals and one children’s hospital along with 23 community primary care centers, 16 school health centers, 3 major specialty care centers, 2 special care units, and 4 emergency departments (Ashkenase, 2010).
Medicare and Medicaid make up the largest portion of the hospital’s payer mix at 80%, ( Medicare 37%, Medicaid 43%) while commercial (13%) and other tertiary insurance make up 20% of healthcare coverage carried by patients (Chase D, 2010) (Exhibit 1). Specific figures for the number of uninsured patients that receive services at Gotham were not available. Over the last several years the hospital has seen an increase in the number of cases of bad debt, i.e. unpaid patient accounts, and Charity Care, which includes an increase of $62 million from 2007 ($126M) to 2009 ($188M) (Ashkenase, 2010).
As a part of its 120-year tradition, the hospital has provided healthcare access to the poor, immigrants, and medically underserved patients in the Bronx. 90% of Gotham’s patients are from the Bronx or Westchester. The hospital employs modern disease management concepts, using evidence-based medicine and population surveys.
This capstone project aims to study the diabetes management unit at Gotham Hospital (the study site), a subsidiary unit at Gotham, which is a member provider of The Bronx area ACO structure. The group aims to evaluate how the coordination of care across the various provider groups comprising a typical ACO model (The Bronx ACO Group) will lead to cost reduction through patient centered integrated care in managing a typical chronic disease (Diabetes). The group will analyze the various contributory variables that are responsible for increased cost of management of diabetes Pre-ACO and evaluate how these factors can be addressed Post-ACO. However, since one of the major effects of the ACA reform leading to the formation of ACO is universal coverage for all Americans, special emphasis will be placed on how to reduce the cost of managing diabetes through increased access and utilization of services by the target population. Accordingly, the team will research the contributory factors responsible for underutilization of the services and offer appropriate recommendation on how to increase enrollment as a long-term measure to reduce the cost burden of diabetes. [Isn’t the issue really participation vs. enrollment? i.e., controlled vs. uncontrolled diabetes? Isn’t that the purpose of the ACOs?]
Why the case for ACO in controlling the cost of chronic disease?
Using Medicare as a case scenario in evaluating the rising cost of care, health care expenditure for Medicare patients is rising due to the treatment of lifestyle-related chronic conditions such as diabetes (Andrew, 2010). As noted by Berwick (2011),two out of three Americans aged 65 years and over suffer from multiple chronic conditions. A new finding by CMS reports that 93% of Medicare fee-for-service spending goes into the care of its patients with multiple chronic conditions. Care received by these Medicare beneficiaries comes from multiple physicians. Lack of coordinated care can lead to patients not receiving the needed care, receiving duplicative care and suffering from medical errors; hence the need for a more coordinated care using an ACO structure.On the average, one in seven Medicare patients on hospital admission suffers from medical error in the course of receiving care every year. Again, nearly one out of five Medicare patients discharged from hospital is readmitted within 30 days. This readmission rate could be prevented if care had been better coordinated (Berwick, 2011).[Also, Medicare won’t pay!]
The ACA reform allows for Current Procedural Terminology (CPT) and payment weight charges that factor in additional payment for enhanced discharge planning practices as well as permit for gain-sharing that will allow system providers to share cost savings achieved as a result of adopting quality care practices that reduce readmissions. Conversely, the ACA bundled payment structure pays for an episode of care (and not per visit) as each readmission is counted as the same initial episode of care. This means that providers will not be paid or reimbursed for readmissions, and all cost related to readmissions will be borne by the providers.
Tactically, one of the ways the ACO can stratify to reduce the cost of healthcare is to prevent hospital readmission. While some hospital readmissions are unavoidable, most are due to preventable causes and hence the target that it can be addressed to reduce cost by the ACO [explain this].
In a study by Friedman and Basu (2004), it was noted that 19% of patients with initial preventable admission also had at least one preventable readmission within six months of discharge costing about $730 million. Gilmore (2009) also noted that 34% of discharged patients were readmitted after 90 days of discharge and 67.1% of patients were either readmitted or have died after 1 year of discharge. Accordingly, any measure aimed at reducing avoidable or preventable admission will go a long way in reducing the cost of health care. [specific examples?] In another study by Minot (2008), four years later which focused on the overall cost of readmission of medical patients, she noted an alarming cost of 18% of total healthcare spending attributable to readmission, at a revolving cost estimated at 17.4billion. This trend has continued.
Some of the causes of readmission amongst diabetic patients include breach in communication between the physician and the patient; missing list of prescribed medication; lack of follow-up appointments; confusing instructions; inappropriate wound care and inefficient monitoring of patient after discharge (Gilmore, 2009). Additionally, lack of proper knowledge by family members on how to care for discharged patients also contribute to readmission (Extend Health, 2012). All these combine to present a picture of fragmented system of care that can be adequately addressed through an integrated system of care seen in the ACO legal structure. The ACO presents a unified system of care that will reduce readmission through an appraisal of continuum of care from before, during and after initial hospital admission. This is done through improved discharge planning that entails proactively planning for discharge right from the time of sentinel admission [rewrite this it is not saying anything] that will include having the necessary plan for prescription refill and scheduling appointments with Primary Care Physicians (PCP) (Minott, 2008). Furthermore, the ACO integrated system incorporates initiatives that improve systemic failures through consolidated service delivery, home health care providers’ service, community prevention and follow-up services and telephone call service to patients and family members after discharge. [add specifics]These measures have been shown to produce a significant reduction in readmission in Gotham hospital. [this is the discussion we need to see more of. It is specific and talks to the ACO structure]
Furthermore, the payment reform presented by the formation of the ACO can serve both as a deterrent to avoid the fragmented care system that encourages readmission as well as provide an incentive that rewards providers for avoiding readmission. Therefore, the reformed payment structure gives monitory reward for providing standard of care that will limit readmission through gain-sharing as well as penalize providers for rendering a fragmented care that encourages readmission through the provider bearing the cost associated with needless readmissions.
The pay for performance structure under the ACO reimbursement structure will not offer incentives for providers to readmit patients. Improving coordination and communication among physicians and other health providers and suppliers through ACO will help improve the care received by Medicare patients while also helping reduce costs. According to the analysis of the proposed regulation for ACOs, Medicare could potentially save as much as $960 million over three years (Berwick, 2011).
How Medicare Can Achieve Saving through ACA/ACO
It is extrapolated that the enrollment of Medicare Patients into a particular ACO such as the ACO associated with Gotham will result in cost savings by Medicare. This savings will be achieved through improved services that will lead to efficient care. Some of the strategies that will lead to cost savings through the ACO include:
• Coordination of care: as highlighted earlier, it is anticipated that co-ordination of care amongst the various members of the ACO structure will lead to integrated care that will eliminate redundancies. Some of these redundancies manifest themselves as repetition of investigations already performed by a particular provider and lack of proper communication between providers in managing a particular patient. One of the ways various providers in a particular ACO unit will have access to patients’ information is the use of HIPPA-compliant HIT structure in which every patient has a particular Identifier Code that each members of the ACO could use to access the patients’ information. In the case of Gotham ACO unit, all members of the structure can remotely access patient’s data through the Bronx RHIO [define and discuss] which provides a centralized EMR digital access to all associated ACO’s. This provides savings to Medicare through both reduced administrative cost and reduced cost of redundant investigations.[this is the main point about ACOs. Discuss this more with supporting documentation]
• Bundled Payment: again, as earlier highlighted, under the ACA/ACO, CMS has a contractual agreement for bundled pay per episode of care. Due to this mode of payment, the ACO will have to co-ordinate care across multiple spectrums of care settings from inpatient Physician services, hospital and clinics to post-acute and post admission care for insured patients. This will also involve preadmission preventive services that will discourage avoidable admissions. All members of the ACO unit have a common interest in ensuring that enrolled members do not develop any form of preventable disease. Thus, this method of payment introduces accountability across various spectrums of providers with common interest in saving cost since they all receive payment per episode of care rendered. This elimination of fragmented care as highlighted can potentially save money for Medicare by having a healthier population of enrolled patients. (NCSL, 2013)
• Better reimbursement coordination: The ACO provides an overarching legal structure for CMS and other third- party insurers to co-ordinate reimbursement of providers. The ACO provides direct contraction by payers with providers without reliance on healthplan intermediaries such as Managed Care Plan. In this capacity, The ACO provides Medicare and Private Insurance companies with a vehicle for implementing comprehensive payment reform that can potentially save administrative cost through efficiency.[is this true?]
All these factors put together can potentially control the cost of healthcare while also getting a better value for every dollar spent on healthcare (NCSL, 2013).
How can ACOs reduce costs for Medicare and possibly the Private Insurers?
As at the time of this writing, there are 106 new ACO in contractual agreement with Medicare, ensuring that as many as 4 million Medicare beneficiaries now have access to high quality, coordinated care across the United States (Kronick and Po, 2013). It is estimated that at least a 3-year period is needed before the full impact of the ACO in saving cost can be adequately evaluated. While it is still yet too early to effectively gauge the effect of ACO in containing cost, report released by HHS Secretary, Kathleen Sebelius indicated that “expenditure per Medicare beneficiary increased by only 0.4% in Fiscal year 2012”. This was substantially below the 3.4% increase in per Capita GDP. This pattern of low Medicare expenditure per Capita has continued since 2010 which roughly coincided with the enactment of the ACA (Kronick and Po, 2013). While this is an interesting and admirable development, the group is of the opinion that more time is needed to effectively gauge the effect of the ACA/ACO reform in reducing cost as this reduction in expenditure can be attributable to other factors such as the recession in the economy in this time period that resulted in general cut in expenditure in the healthcare.
Looking at the Gotham hospital in particular, judging by its performance since its inception, the success of the model cannot be overstated. In a recent report from the Agency for Healthcare Research and Quality (AHRQ), the agency praised Gotham ACO group of providers for its innovative achievement in containing cost and improving quality of care in spite of its capitated payment structure (Quellette, 2012). The report notes that Gotham ACO has lowered admission, readmission and medical expenses and put a strong emphasis on patients with chronic disease. This success is commendable considering the fact that Gotham has maintained capitation system reimbursement instead of the bundled payment that can potentially increase their revenue. [Is this true? Are they all capitated for Medicare?]It can be projected that even more improvement and success should be expected with the full implementation of the bundled payment in the nearest future in the Gotham ACO. Furthermore, in a white paper recently released by Modern Healthcare Insights (2012), the agency acknowledges the success of the Gotham ACO model in improving patient quality and reducing cost. However, efforts to obtain specific statistical data to enumerate the specific savings was not successful because at the time of writing this paper, the Gotham ACO was still in transition and the ACO members are still expanding. Just recently, The Empire Blue Cross and Blue Shield just entered into contractual ACO agreement with Gotham ACO which started January 1, 2013. This partnership is due to the success of the ACO model. The apparent success of the Gotham Model ACO could be due to the fact that most providers that are part of the Gotham ACO unit have had some form of partnership with Gotham hospital in one way or the other. It still remains to be seen how the ACO will evolve with the full implementation of the ACA. One important factor to note will be the implementation of the individual mandate clause of the ACA which will require mandatory purchase of Health Insurance coverage by all Americans in 2014. The group is of the opinion that the apparent holistic success of this model in curtailing cost will be measured about 2-3 years after complete implementation of the healthcare law, especially the individual mandate. Perhaps another capstone group can research to determine the specific cost savings down the line after the ACO has been in full oper