Why Different Health Systems Treat The Same Kind of Patient Differently

ACOs may be the answer to striking the right balance between utilization and clinical outcomes, but separate Part D coverage throws a wrench into the works.

Richard G. Stefanacci, DO
Donald Ohioma, MS

There are many variables that providers must take into account when considering different types of treatments for a patient. Treatment will, of course, vary with a patient’s age, overall health, and sometimes gender. Patient preferences are another variable, including those with financial implications, such as the out-of-pocket expense. But even if those factors are all the same, treatment can vary with the health care system. Why? Because depending on how the system is organized and operated, physicians, nurses, and clinicians will have a different set of incentives that affect treatment choices, utilization, site of service, and myriad other decisions.

Richard G. Stefanacci, DO

Richard G. Stefanacci, DO

When providers take on financial risk, they have the ability to look beyond their typical volume-based focus. Take for example those providers participating in CMS’s Comprehensive Care for Joint Replacement program. In this program, hospitals, physicians, and post-acute care organizations are held responsible for the total cost of care outside of their silo of inpatient lower extremity joint replacement. The joint replacement program utilizes a model of bundled payments and quality measures to maximize efficiency from admission through discharge and recovery. Some hospitals participating in the program are intentionally increasing the length of the in-patient hospital stay for joint replacement patients by 2 to 3 days and then discharging the patient straight home, thereby bypassing the high cost of the rehabilitation facility or skilled nursing facility. There’s some irony here; the goal for decades has been to decrease lengths of stay.

Donald Ohioma, MS

Donald Ohioma, MS

There’s no question that when providers are reimbursed on a fee-for-service basis, utilization tends to be greatest. We also know that health care systems that pay providers on a fee-for-service basis tend to have the highest costs because both utilization and the intensity of services increase. Less clear is how fee-for-service payment affects clinical outcomes compared with other payment systems and incentives.

Are ACOs the answer?

Accountable care organizations (ACOs) may be a way to both optimize utilization and yield better outcomes. While ACOs are incentivized on quality and cost performance, there is a blindspot for the CMS ACOs. They are not responsible for the costs of drugs covered by Medicare Part D plans in their total cost of care, but they are responsible for the costs of negative outcomes if medical treatment is inadequate or goes awry. This split incentivizes the ACOs to use drugs and vaccines aggressively, in contrast to the Part D plans that have an incentive to push back on utilization. Consider vaccines. They are paid for by the Part D plan, but the cost of caring for a patient with shingles or other vaccine-preventable diseases is borne by the ACO. As a result, ACOs are inclined to promote vaccination—a good result.

ACOs also have an incentive to promote screening and early treatment. Hepatitis C infections can result in extremely expensive medical treatments. The cost of a liver transplant easily exceeds half a million dollars. The new antivirals, like sofosbuvir (Sovaldi), could save an ACO millions in health care expenditures but be an added expense for a Part D plan. In other words, the CMS ACOs have the freedom to use Medicare Part D without worrying about the cost. It’s a little bit like stepping back into the days of fee for service and overutilization.

In the end, insurers and their patients need to be aware of the variety of care systems that exist to assure that utilization is appropriate for each patient without regard to the incentives of their providers.

Richard G. Stefanacci is the chief medical officer for the Access Group and a member of Managed Care’s Editorial Advisory Board. Donald Ohioma is a project coordinator for the Government Policy Systems team of the Access Group.


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