Innovation as Seen Through Eyes of Thought Leaders; First in A Series

Accountable Care Organizations: A Major Innovation

Interview with William DeMarco, President and Founder, Pendulum Healthcare Development Corporations

Accountable care organizations at their heart are about aligning provider financial incentives with patient needs for better and lower-cost care…The right direction for health-care policy is to build on ACO successes through further steps to reward low-cost innovation, while steering support away from health-care providers who are unwilling to change.

Elliot Fisher, Mark McClellan, and Stephen Shortell, “The Real Promise of ‘Accountable Care,’”Wall Street Journal, March 5, 2013

Preface

William DeMarco has been a health care consultant for over 30 years, first in Minnesota, now in Rockford, Illinois. He specializes in advising physicians on managed care issues – how to approach, organize, and implement them. Five years ago, he founded Pendulum Healthcare Development Corporation for the express purpose of helping physicians organize Accountable Care Organization (ACOs). DeMarco thinks of ACOs are a major innovation emphasizing a big idea – allowing physicians to lead and coordinate care across the medical care spectrum while increasing their incomes and those of participating hospitals by meeting quality outcome and cost targets. This effort requires sophisticated data analysis. DeMarco and his firm have created a data analysis center to help physicians and hospitals analyze outcomes and cost without necessarily building an interactive electronic medical record system.

Q: Tell us about yourself, your firm, and your ideas of Accountable Care Organizations as a major innovation.

A: I am president and chief executive officer of Pendulum Healthcare Development Corporation in Rockford, Illinois. We have been in business since 2008.

Q: What is your primary focus?

A: Our main focus is to build and manage ACOs. ACOs are something needed to bring together the patchwork parts of our fragmented healthcare system. There are many  services outside the normal physician and hospital loops that need to be contracted for. Our firm brings expertise, data, and sometimes capital to the table to make ACOs work for the benefit of all parties – hospitals, physicians, and Medicare patients.

Q: From a previous conversation, I gather you also concentrate on transitional care services and payment after Medicare patients leave the hospital – the transitional phase after they leave the hospital and return home.

A: That’s correct. Today the state of California released a study indicating that if everyone was doing coordinated transitional care,  California would save $110 billion. This kind of care is a serious business and a serious opportunity. Physicians and hospitals should work together to develop networks of non-hospital and non-physician referrals after discharge. After discharge, most of these patients would like to be at home as long as they can.

Q: Managing this chronically ill population in their homes must be a real challenge.

A: Yes, and you’ve got to do it so you don’t break the bank. There are many new innovations and technologies that make this possible.

Q: What are these innovations and technologies?

A: Well, one thing we did early on was to separate through the use of data on various diseases to identify those categories of disease and patient behavior that needed coordination. We have identified those at high risk and how they can best be reduced to a low risk category. We separate patients into high risk, low risk, and those who are well and address their needs appropriately to make their conditions manageable. Many of these patients need that smiling face – a nurse practitioner, a physician assistant, a case manager – at their door. For the worried well, we offer principally telephonic support.

Q: There’s another approach as well. American Telecare in Eden Prairie, Minnesota, has developed a bedside audiovisual device, operated by patients over ordinary phone lines, that allows physicians and nurses and others to visualize patients directly, to take their vital signs, and even listen to their heart and lungs.

And of course, Skype technologies are becoming commonplace

A: Yes, Kaiser Permanente recently signed a contract with Telmedx to monitor patient care. Telmedx has had considerable positive trial periods which have encompassed “KP on call” which is a subsidiary of Kaiser. In San Diego alone,  Kaiser has over 600,000 members in which KP on call receives over 60,000 nurse triage calls a month. From this 24,000 are referred to the emergency room in which Kaiser projects average $1,000 per visit. The rest are treated outpatient or at home. Kaiser believes that with the addition of video triage ER utilization can be reduced by 9,600 encounters monthly.. it’s a combination of things, making the right connections with the right people based on the patients mental state and competencies.

Q: How do you identify these categories?

A: We look at the claims data to separate the serious claims from the nuisance claims, and we take a hard look at those patients who are frequenting the emergency room and being readmitted to the hospital. We reduce the number of ER visits and readmissions by managing their problems at home. We do this by being proactive. We look at the patient’s ability to take care of themselves and behavior at following clinical directions. Dementia can be a problem because people forget what they do and want to please interviewers. Lack of pharmacy adherence is the leading cause of readmissions , so we bring pharmacists into the treatment loop in an active teaching versus passive role as the one filling prescriptions.

Q: How can you control the patient’s behavior?

A: That’s one of those things that has to be figured out that have not been done before. We must learn to manage chronically ill -patients outside the hospital walls and physician offices to prevent ER and hospital readmissions. Many patients will change their behavior if they are given choices and good information in a non-threatening manner. Some patients need further “on hands” therapy and communication.

Q: As you know, ACOs are the lynchpin of Obamacare and the great hope of achieving Medicare savings. ACOs involve changes in both physician and patient behavior, which isn’t easy, as Christensen and his Harvard colleagues pointed out in the February 19 Wall Street Journal “The Coming Failure of Accountable Care.”

Also there’s profound skepticism among physicians. In s Physicians Foundation survey of 40,000 physicians,  68% said ACOs are a “bad idea.” A survey of hospital executives indicated 39% thought hospital-physician relationships would “deteriorate” under the ACA scenario as first advanced by CMS,  According to an AHA study,  there’s great concern among hospitals about how much it would cost to hire lawyers and accountants to set up these organizations and to avoid antitrust issues.

How does one overcome these biases against ACOs?

A: I have great respect for Clayton Christensen, but I think he is wrong about ACOs. I would agree with the doctors and Christensen when one looks at the old regulations. But the new regulations are less onerous. There are fewer hoops to jump through. The number of ACOs are growing rapidly. There are 320 ACOs now. Many are owned and managed by physicians. I would also note that large integrated care organizations have lowered costs and produced better results.

As far as the American Hospital Association study of how much ACOs would cost, especially the IT costs, their numbers, in my opinion and my experience, were hugely inflated.

As for hospital-physician relationships, I think physicians have to take a leadership role, and hospitals have to acknowledge that leadership and provide them with capital and other resources to make the ACO work. The way the legislation is written gives primary care physicians a leadership role in governance of these new organizations.

Q: Today in Health Leaders Media, I was reading an article “Inside an ACO-Like Partnership.” The article described how a one year old partnership between Philadelphia-based Independence Blue Cross and Abington Health resulted in “substantial sums” paid to hospitals and doctors above traditional payments when Abington Health providers met quality and savings targets. As I read that, I said to myself, ”My God, that higher payment must involve a tremendous data collection system to justify increased payments.” Does it?

A: Absolutely. Government will not pay the ACO unless it meets the 33 measures and 5 domains of ACOS are reported and analyzed , and they must meet at least 80% of targets. Our firm  brings a sophisticated data system to the table. Hospitals and physicians simply do not have the data systems to meet government requirements for payment. Many of the ACOs we work with do not have interoperable EHR systems. We supply them with the data needed to gain payments through data we acquire through data registries and claims analysis.

Physicians having EHRs is not now a requirement to form an ACO. EHRs are ideal, but most physicians don’t have them,and many EHRs are not up to the job anyway. They can outsource the data requirements to us. I recently went to a state governors meeting, and they realize in the future physicians and hospitals should be paid on the basis of bundled payments and quality outcomes and costs rather than by fee-for-service. Paying for and managing the total cost of care will be the model for paying for Medicare and Medicaid services.

Q: What, fundamentally, is the big innovative idea here?

A: The big idea is shared savings with physician and hospital bonuses for delivering savings for defined patient populations.

Q: It’s clear you regard ACOS  as a major innovation.

A: Yes, I do. ACOs are a major innovation because they address the total cost of care not only by reducing excess utilization but by improving outcomes. ACOs also reward hospitals and physicians by paying them managing and coordinating care outside the walls of hospitals and physician offices.