Building a network

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Accountable Care Organizations at the University of Rochester Medical Center and Syracuse’s St. Joseph’s Health have partnered to form an alliance in a shift toward value-based care and population health. The venture is expected to grow into a statewide network of physicians.

Called Concordia Healthcare Network LLC, launched some four months ago, the organization is a joint venture of URMC’s Accountable Health Partners ACO and St. Joseph’s ACO, CNY Accountable Integrated Medicine. So far, it has recruited similar organizations in three upstate markets—the Capital District, Binghamton and Cortland County. 

The fledgling alliance, which took 18 months of planning, has not yet fully calculated the number of patients it covers but Concordia chair Robert McCann says the St. Joseph’s and URMC ACOs alone cover some 800,000 patients. McCann also heads the AHP ACO and is Highland Hospital’s chief of medicine.

He estimates that the addition of patients covered by the alliance’s charter recruits— St. Peter’s Health Partners’ ACO in Albany, Lourdes Hospital’s physician network in Binghamton and the federally qualified Cortland County health center, Family Health Network of Central New York—bring the number of patients Concordia currently serves to as many as 1 million. 

The organization plans to recruit other health care organizations around the state with the goal of forming an even larger alliance. The group is dedicated to pursuing a goal of value-based care, a data-dependent approach that prizes close monitoring of key measures such as blood pressure, cholesterol and other such risk factors. It especially seeks to keep patients suffering chronic ills like Type 2 diabetes and hypertension from suffering the worst effects of their conditions. 

Concordia’s two founding health systems state the purpose of the alliance as “to help other health systems, hospitals and provider groups transition to value-based care.” 

But is value-based payment and population health enough to reverse or slow a medical inflation rate that for several decades has outpaced the consumer price index? 

Accountable Care Organizations

First formed as a feature of the 2010 Patient Protection and Affordable Care Act, better known as Obamacare, ACOs are physician organizations meant to improve care quality and access while holding the line on reducing costs.

As the ACO model was initially proposed, value-based care was supposed to stand in opposition to, and eventually replace, fee for service, the provider reimbursement model that has defined U.S. health care for nearly a century.

Under fee for service, doctors, other clinicians and hospitals are reimbursed on a piecework basis, getting paid fixed amounts for each office visit, procedure or imaging scan. Critics have long assailed fee for service as a main driver of health care cost increases, reasoning that the system perversely incentivizes providers to do more but does not reward them for providing better care.  

In contrast, value-based care was initially conceived to incentivize quality rather than quantity of care. That goal is expected to be achieved using a system known as population health in which close monitoring of a given physician or hospital’s patients’ outcomes yields data used to determine how providers should be paid. In a value-based system, doctors are supposed to be paid for performance, not for simply piling up office visits, operations or other procedures.

Bitterly opposed by the Republican Party, the ACA initially did not enjoy wide acceptance. Over the roughly four years it has been in effect, the act has been partially undone by the GOP but has also seen its popularity rise despite a continuing siege in which Republican governors’ state attorneys are pressing lawsuits against and a GOP Congressional majority has stripped it of a key feature that required all U.S. residents to enroll in a health insurance plan.

Rebranding as CINs

In a move that seems calculated to avoid too closely linking with Obamacare, Concordia is rebranding its member ACOs as clinically integrated networks or CINs. The name change does not alter the basic structure of the physician organizations. 

Such networks, tied to value-based provider contracts that at least partly base providers’ pay on their patients’ health outcomes, are on the rise as U.S. private and government payers are increasingly looking to value-based payment schemes as a primary weapon to fight rising costs.  


“Payers, including (the Center for Medicare and Medicaid Services), view value-based contracting as way of the future. They see such models as a way to improve quality, patient health and patient satisfaction while cutting costs,” Healthcaredive.com reported in February.

Such payment schemes are not entirely new. Whether provider networks that make up the Concordia alliance are called CINs or ACOs, they in some ways echo the HMO model, a design that beginning in the 1970s and through the 1980s insurance companies touted as the key to cutting health care costs while ensuring quality care. 

Primary care doctors were assumed to serve as so-called gatekeepers, approving or turning down patients’ requests for treatments. Patients seeking treatment by a specialist, looking for imaging scans or access to a host of other non-primary services could only do so if they first got a referral from their primary care physician. Failure to get a refferal could result in a claim denial by the HMO.

To make sure that primary care doctors performed their gatekeeper duties well, insurance companies offered a financial carrot, keeping back a percentage of physician’s fees. Amounts withheld were paid to doctors at year’s end, after the insurer surveyed claims data to ascertain that the doctor had indeed managed patients’ care well. If an insurance company had quibbles, it would keep back part or sometimes all of the withhold.

By the 1990s, it became clear that HMOs were often not working as planned. Patients widely complained that insurance companies arbitrarily denied claims, sometimes denying vitally needed care on what seemed to many to be flimsy or financially motivated grounds. Press accounts often cast HMOs as heartless bean counters more focused on their bottom lines than the health of patients they were supposed to serve. 

Doctors were not always happy either. In the Rochester area, several thousand doctors sued the dominant insurer, Excellus Blue Cross Blue Shield in 1999, claiming the Blues wrongly withheld at least $10 million in fees the insurer should have paid to doctors, After a ten-year court battle, the doctors won more than $50 million through a combination of court ordered payments and a final negotiated settlement.

While HMOs initially cut the rate of health care cost increases, the system eventually overwhelmed them, sending premium increases and medical inflation on a renewed upward path. Insurance companies have kept a sort of HMO skeleton as a framework for some plans but no longer keep back withholds and largely dialed back primary care referral requirements. 

A focus on population health

ACOs also try to encourage doctors to manage care well by offering a financial incentive. In a system known as gain sharing, instead of withholding fees, ACOs offer a bonus payment to doctors whose patients do well in measures such as blood pressure control.

While the financial incentives HMOs once offered and the value-based payments ACOs currently offer are similar, proponents of the newer value-based model argue that population health is a key difference.

Advances in information science have made population health into a tool to accurately measure physicians’ effectiveness, McCann says. More importantly, it is a tool that is directly employed by health care providers and not by insurance companies. Clinicians get to say what works, not actuaries. 

While population health offers clear benefits, it does not come cheap. The initial cost of information technology needed to mount a population health system can run to the tens of millions of dollars with millions more added for ongoing maintenance and upgrades. Forty percent of insurers surveyed in the February Healthcare Dive report said technology challenges would keep them from embracing value-based contracts.

Where it has been applied—nationally by the federal government in Medicare HMOs, across New York under a Medicaid reform that is transferring administration of Medicaid from county social services agencies to private managed care plans and locally by private payers like Excellus and MVP Healthcare—value-based schemes have not yet managed to completely supplant fee for service.

In fact, fee for service will never go away, McCann told me several years ago. That prediction has so far proved accurate. When I asked him recently whether he still believes it to be true, he said he that he does.

Why might that matter? As medical technology grows ever more sophisticated, the minute classifications and distinctions between procedures needed to determine exactly how much to pay providers have proliferated wildly. 

That proliferation adds lots of administrative expense as providers are required to hire more billing specialists to keep track of an increasingly labyrinthine and ever less comprehensible medical billing system. 

When I spoke with a number of area doctors last year for an article on the decline of private practice, the one complaint was frustration with the expense and day-to-day headaches of managing the ever-larger back office staff needed to stay ahead of insurers’ billing systems. Further complicating the picture is the fact that each private or government payer has its own unique system, doctors said. 

However, Kristin Mucitelli-Heath, St. Joseph’s Health’s administrator of regional health initiatives, is optimistic. Continuing advances in medical information software will introduce efficiencies that will go a long way toward containing such costs, she predicts. Still, Mucitelli-Heath concedes, the degree to which gains in technology will be able to offset upward spiraling administrative costs our current health insurance climate demands remains an open question.

URMC’s sprawling medical complex, which includes several Rochester-area hospitals and more than 1,000 doctors employed by URMC or allied with it through AHP, has been operating under multiple value-based contracts with Excellus Blue Cross Blue Shield for the better part of a decade. It has realized savings as well as improvement in care through its value-based contracts, McCann says.       

So far, those Excellus contracts, known as Accountable Cost and Quality Agreements have succeeded at cost containment, says Jim Redmond, Excellus regional vice president of communications.

“Our ACQA providers are managing health care spending to lower levels than their non-ACQA peers, resulting in over $100 million of efficiency savings that we passed on to our members in 2018,” he says.

ACQA (pronounced aqua) contracts now account for 70 percent of Excellus’ commercial agreements. Such contracts cover 1,700 providers and hundreds of thousands of patients enrolled in Excellus’ commercial plans, Redmond says.

The high-deductible shift

Another factor that could counter cost savings that value-based payments wring out of the system is a shift to high deductible insurance. 

First introduced in the 1990s, high deductible health plans offer lower premiums but increase enrollees’ out-of-pocket expenses, sometimes dramatically. In such plans, insurers don’t start paying benefits until patients pay deductible amounts. On the low end, deductibles can be in the $1,500 range but they can also reach levels as high as $5,000 or more. Ideally high-deductible plan enrollees have set aside money in special health savings accounts fed with pre-tax dollars. 

In 2006, deductibles accounted for less than 30 percent of U.S. consumers’ health care spending. By 2016 the slice of health care spending on deductibles topped 50 percent, a 2018 study by the Henry J. Kaiser Foundation’s Peterson-Kaiser Health-System Tracker found. 

“Often an employee and their dependents will never reach their deductibles in a given year while others may have costs that far exceed it,” the study concluded.  

Last August, an American Journal of Managed Care report found 60 percent of adults aged 18-64 were then enrolled employer-sponsored health plans. Between 2007 and 2017 enrollment in traditional plans among that group declined from 85 percent to 56 percent as enrollment in high-deductible plans grew. Lower income, younger and less educated enrollees accounted for most of the increase in plans not linked to an HSA, the AJMC report found.

A December 2018 study conducted by the Employee Benefit Research Institute found a number of positives in high-deductible plans but also found that some 30 percent of enrollees skipped care to avoid the expense.

So far, URMC’s data has not shown any meaningful negative effect from high deductibles on its ACQA contract operations, McCann says.

Still, St. Joseph’s Health’s Mucitelli-Heath says, whether value-based contracts and population health will ultimately hold the line against high deductibles is an open question. 

According to Excellus’ Redmond, value-based payments and population health have helped Excellus rack up $1 billion in savings between 2013 and 2017 but they are not the only cost-saving measure the insurer is employing. 

“We are also partnering with local providers to use a new ‘Health Waste Calculator’ to analyze our members’ claims data and identify specific areas that show the greatest opportunity to reduce unnecessary tests and services that can add costs and possibly lead to worse outcomes,” Redmond says.  “We also work to reduce utilization through workplace wellness initiatives, promotion of telemedicine as a more convenient and cost-effective alternative to emergency room care, and benefit designs and incentives that promote healthy living.” 

McCann predicts that by linking health systems and clinics across the state the Concordia alliance will amplify the cost-saving and health benefits value-based payments and population health bring to individual members, creating “a whole greater than the sum of its parts.”

A side benefit the alliance might also offer is shoring up members’ bottom lines. In addition to whatever clinical benefits that might be achieved by linking member CINs, the network will serve as conduit to transfer patients among its members.

Such transfers are not a primary goal for the alliance. Even so, Mucitelli-Health says competition among providers to lure patients is a fact of life for U.S. health care organizations. On the revenue generating front, being part of a network like Concordia will not hurt. 

One thought on “Building a network

  1. “a medical inflation rate that for several decades has outpaced the consumer price index”.
    It would be helpful is we tracked a separate inflation rate for labor-intensive industries (health care and education being the most prominent). These are fields where labor figures prominently in costs, labor is highly skilled, and, most importantly, reducing labor costs is not necessarily a positive. For instance, we don’t generally regard it as a good thing if class sizes are larger, or doctors are seeing more patients per day. There are certainly opportunities to save costs in administration and more automation in processes, but the quality of service suffers when we try to get inflation down by increasing labor “productivity”. Yet when considering inflation, we see failure if costs in these fields don’t track with highly automated industries like manufacturing or even food production. We are comparing apples to oranges and patients and kids suffer as a result.

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