Incentivizing medicine [Westchester County Business Journal (NY)]

Prompted in part by the Affordable Care Act, health care providers nationwide are beginning to rally behind a novel concept being rewarded for keeping people out of the hospital.

Under a provision of the health care law, doctors, hospitals and other providers who serve Medicare patients now have the option of forming accountable care organizations (ACOs), which present a framework for ultimately replacing the fee-for-service system with a pay-for-performance arrangement.

This shift represents one of the most significant changes to affect health care providers since the law was enacted, panelists said at an April 26 roundtable, "Can Hospitals Make the Difference," hosted by the Westchester County Business Journal and sister publication the Fairfield County Business Journal.

ACO movement grows

Providers or groups of providers who serve at least 5,000 Medicare beneficiaries were able to begin applying for status as ACOs under the Medicare Shared Savings Program in January, with the first ones offidally starting in April.

The private sector has also joined in the movement, with a number of regional medical care providers forming ACOs for their commercially insured patients.

Whereas previously, more procedures would mean more tevenue for doctors and hospitals, providers that choose to form or join an ACO are encouraged to avoid any unnecessary duplication of services and to prioritize patient satisfaction, resulting in shared savings for the ACO and the insurance provider.

"There is an enormous amount of money at stake for organizations to become more economically efficient in their cost of care, said Simeon Schwartz, CEO of WestMed Medical Group in Purchase. "The goal of the accountable care organizations is to take waste out of the system."

The formation of ACOs - a topic that was covered on just seven of the 900-plus pages of the Affordable Care Act - is "fundamentally reorganizing the entire health care delivery system," Schwartz said.

Also speaking at the panel were Dr. John Crowe, president of Orthopedic and Neurosurgery Specialists P.C. in Greenwich, Dr. John Murphy, CEO of Western Connecticut Health Network, with locations throughout Fairfield County, Jon Schandler, president and CEO of White Plains Hospital, and Mike Weber, president and CEO of Health Quest in LaGrangeville.

"The financial incentives that were structured in a fee-for-service environment I think just led us down the path of, 'The more stuff you do, the more money you make,' " Murphy said.

Now, though, "We have to focus and celebrate empty beds in a hospital as opposed to full beds in a hospital. The incentives have to lead the way ... I think the incentives have to reward keeping people well."

More consolidating

One year ago, less than 1 percent of WestMed's patients were covered by some form of shared savings model. By July, Schwartz projected between 40 and 50 percent of the practice's patients will fall into that category, a transition he said he had expected to take "decades."

Similarly, at White Plains Hospital, every new managed care contract is a pay-for-performance contract, Schandler said.

"We are, as hospitals, going to be much more accountable for our costs, for our quality (and) for our results," he said. "So based on our quality, based on patient satisfaction, based on our efficiency, there are incentives built into contracts."

The Affordable Care Act has prompted other changes as well, namely the consolidation of smaller practices into larger medical groups or hospitals as efficiency becomes paramount.

"It makes it much more difficult for us to adapt in the same way as the group that has 200-plus doctors or a hospital because we're under the same pressure to increase our efficiency, to increase computerization," Crowe said.

However, Crowe said the trend might have been inevitable. Asked whether the era of small practices is drawing to a close, he said, "I think the answer is yes, but again, I'm not sure it's because of Obamacare."

Rebates coming

Health insurance companies are expected to rebate more than $140 million to New York state individuals and businesses by August for failing to meet medical loss ratio (MLR) requirements outlined in the Affordable Care Act, according to a new report.

Under the MLR provision, insurers are required to spend 80 percent of all premium income from individual and small business plans and 85 percent of all premium income from large group plans on health care claims and quality improvement activities.

Insurance rebates to individuals and businesses are projected to hit $1.3 billion nationwide, not including California, according to a report by the Kaiser Family Foundation, a nonprofit health care analysis group.

In New York state, 70,000 people enrolled in three separate coverage plans will receive $10.5 million in rebates, the report states.

Additionally, in the small group market, 38,000 people enrolled in two separate plans will receive $4.8 million in rebates, while in the large group market nearly 900,000 people across seven plans will receive $127.2 million in rebates.