For hospitals, the mantra of late has been to "break even on Medicare," but that may get more and more difficult as budget hawks on both sides of the aisle continue to eye significant cuts to provider payments.
Even as elements of the Affordable Care Act that are designed to reshape care delivery begin to take hold, there are rumblings among policymakers and others about exploring new tactics for fixing what ails the system. The most recent, and one of the most high-profile attempts, comes from the Bipartisan Policy Center — a think tank founded in 2007 by four former Senate majority leaders. The group released a report Thursday detailing some sweeping changes to potentially fix Medicare, and the rest of the health care industry. I'm not going to give you the entire blow-by-blow of the 142-page document, but one key element involves the idea of creating "Medicare Networks" to try and bend the cost curve. They would offer the expected benefit of improved coordination, while adding new wrinkles, such as better patient engagement.
The proposal also involves freezing payments starting in 2017 to providers that stick with the fee-for-service model. Some may be upset about that change, but Washington has to do something to help speed up the industry's move to the second curve, says G. William Hoagland, senior vice president of the center. The American Hospital Association did not have a comment in time for this blog's Monday morning deadline.
"For those who want to stay in a fee-for-service-type delivery system, they're not going to be happy," Hoagland says. "But the whole goal here is to encourage them to move away from that into these accountable care organizations, or, as we call them, Medicare Networks."
These beefed-up ACOs would replace the current ones in the Medicare Shared Savings Program and include several key shifts from the old approach. Providers would receive stronger incentives to participate, including full payment updates. Plus, hospitals and health systems would have the chance to receive reimbursement for more innovative care models, such as enhanced primary care and patient education.
Medicare Networks would offer a double-sided risk, according to the report, where providers would still share in savings, but also bear the brunt in the form of decreased reimbursements if costs outpace targeted numbers.
One of the most critical elements of the revised approach, though, is increased patient engagement. Medicare enrollees would be able to decide whether or not they want to enroll in a network, stick with a fee-for-service provider or sign up for the Medicare Advantage option. The latter would restrict patient choice, offer fully capitated payments rather than following the Medicare payment schedule, and place risk on insurers rather than hospitals. Networks would also share savings with enrollees as an extra incentive, offering premium discounts of at least $60 each year for the first three years, and varying afterward depending on the performance of the network.
Gail Wilensky, a senior fellow of Project HOPE, is skeptical about accountable care organizations and their long-term effectiveness, partly because of the lack of patient engagement. But the thrust of the proposal, giving patients more choices, does seem to make sense and appears to be steering things in the right direction, she adds.
"I'm not convinced ACOs are an institutional change that will make a long-term difference," says Wilensky, who ran Medicare and Medicaid programs in the early 1990s. "As they're currently designed, the biggest problem is that they ignore the patient's involvement. Patients aren't actively choosing, they're not directly involved in a way that incentivizes them to participate, and I think it's hard enough to do this without having some kind of an enrollment model."
Another gripe Wilensky has with ACOs is the heavy focus on primary care, almost to the exclusion of specialty providers, where much of the money often goes. The BPC proposal would give hospitals the chance to form a network themselves and involve any variety of providers they like, from post-acute facilities to mental health institutions.
Each Medicare Network would have its own internal governance process, like a board of directors, that's elected by members. They'd enter into a contract with CMS, which would include setting a target for spending, and providers would collect incentive payments if they hit that goal.
The proposal offers a slew of other recommendations that the authors claim could save an estimated $560 billion, including a suggestion to eliminate the sustainable growth rate formula, lopping off about $138 billion in costs. It's too early to say when or if policymakers will take up the suggestions, but Hoagland hopes it might be up for consideration this summer.
"It's a bold, innovative proposal and, as we've said so many times, it's not going to please everybody, but compromises hardly ever do," he says. "I think it's a good model for Congress if they really want to do something about controlling health care costs in the public arena."
Nancy Chockley, the president of the National Institute for Health Care Management, respects the authors — who include former Senate majority leaders Tom Daschle and Bill Frist, M.D. — and thinks they're off to a good start.
"The authors have a tremendous amount of credibility and are politically seasoned," Chockley told me by email last week. "On the other hand, the political environment is so poisonous and it is always the safe bet in Washington to say nothing will change, even when you wish it would. The Medicare super networks are interesting and resemble what we are seeing in the non-Medicare markets. There is a lot of activity but things remain largely unproven. We do know more coordinated care in general lowers cost and improves quality so this looks like a good and doable idea."