Q&A: 2012 Healthcare ABCs — ACOs, Bundled Payments and Case Managers

Tuesday, October 18th, 2011
This post was written by Patricia Donovan

Expect continued activity in accountable care, bundled payments and case management in the coming year, predicted Steve Valentine, president of The Camden Group, in an interview with the Healthcare Intelligence Network. Valentine will present during HIN’s eighth annual healthcare trends forecast on November 2 at 1:30 pm Eastern.

1. This time last year you advised the industry to prepare for bundled payments. Our own market research has found that 9 percent of healthcare organizations are experimenting with bundled or case rate payments. Where do you see this trend headed in 2011, and will the new CMS bundled payments initiative encourage more companies to explore this payment model?

(Steve Valentine): Medicare has requested that hospitals group any DRGs together and go for a case rate for that DRG or group of DRGs. This is somewhat of an expansion of its Acute Care Episode (ACE) project from two years ago. The difference is that the new program doesn’t allow economic incentives to be offered by hospitals and physicians to attract volume. Also, they can’t select one or two providers in a given market. There’s no ability to direct the market as there was in the ACE pilot.

We expect most health systems and hospitals will not participate, although many hospitals will address their costs in a bundled payment fashion, and begin to drive down their costs through much greater standardization. They’ll do so through clinical protocols, comanagement agreements with doctors, economic incentives and standardization of the devices to drive down supply costs.

Bundled payments will continue to grow. We expect more health systems to approach health plans to try to move Medicare Advantage and commercial insured individuals into bundled payments. But pure Medicare bundled payments won’t be as attractive to most, because you can’t direct volume or offer economic incentives.

2. You also encouraged companies to better manage utilization in 2011 through coordinated operational infrastructure and clinical processes. We’re seeing a lot more embedding of case managers within primary care practices – for example, 80 percent of medical homes have a case manager on site. What is the case manager’s contribution to utilization management?

(Steve Valentine):The case manager is very effective at accessing the most appropriate resources required by the patient in the clinical protocol being followed. There’s lots going on in the post-acute care arena, which traditionally has been woefully inadequate and poorly maanged. By embedding case managers back into the medical groups and the medical home, where they are accountable and responsible for the care across the continuum, these case managers are very effective at utilizing the most appropriate and least expensive medical resources to care for that patient.

The bigger trend we’re now seeing is evaluating is whether case management should be centralized between the health plan, the physicians and the medical group and the hospital, including post-acute care — centralized case management in one area, so we don’t have duplication of effort and have smoother handoffs. We are getting rid of this silo thinking where everyone is managing their part of the economic equation, but not the total economic equation.

What will this centralization look like?

(Steve Valentine:) A system office will work with all the various health plans. Only case managers in the health plans will be centralized, with the health plans like many large non-profit organizations (Bay State, Summa,Sutter and Sharpe come to mind) turning around and moving their case managers out of their plan and placing them into a central function with their physicians, with the hospital and at the post-acute.

Finally, even without a definitive rule on ACOs from CMS, a lot of companies are forging ahead with this model. Is there any danger in this approach?

No danger. Everyone was extremely disappointed with ACO regulations put out in June. They were a huge disappointment; they were politically correct but not designed to manage costs and resources. We have seen about 50 applicants for Pioneer; hard numbers for those coming in to interview are at about 35. Some have chosen not to participate, saying there’s not enough leeway in terms of managing the care.

ACO activity is now on the health plan side. Health plans have started to go to groups and health systems and look at types of ACO arrangements where they can manage this cost and trend. This approach will be appropriate for organizations that are already pretty good at managing care, that have the systems and IT in place. If your organization is not good at this, you probably want to avoid the ACO for a period of time until your systems get much stronger.

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