Finding the Upside in Downside Risk

Heritage Medical Systems’ Wagar emphasized the need for strong financial planning, capacity-building, and “a culture of service, quality, and urgency.”

And Marshfield Clinic’s Dr. Murali shared what he considers the core critical success factors, which include the following: the need to have congruent access to data—claims, EHR [electronic health record], and analytics (around baseline cost trends, risk corridors, and attribution, among other elements); control of both ambulatory care and acute-care facilities in key markets; contracts involving business rules that work for all payers; the development of care management programs that help to lower the total cost of care; among those, successful population risk stratification processes, the inclusion of the management of socioeconomic factors, control over the post-acute spend for attributed patients; and some control over pharmaceutical and procedure spending, especially on the commercial side.

What those three medical group executives shared at the APG Conference in San Diego in April speaks to some of the overarching issues facing medical group and integrated health system leaders, as they move further into value-based contracting, particularly into downside/two-sided risk.

Vision, networks, culture, and continuous performance improvement—all data-driven

What the true industry pioneers are finding, fundamentally, is that strategic vision, very strong provider network-building, cultural change, and continuous clinical and operational performance, facilitated by and driven by the leveraging of data and analytics, are all absolute critical success factors.

And the fact that the Marshfield Clinic Health System is a rurally based system and is succeeding brilliantly at risk-contracting is one very encouraging example. Another one is a health system anchored by a public (county) hospital. How can a public hospital system succeed under risk? The folks at MetroHealth in Cleveland are making it happen.

The work that Drs. Chehade and Kaelber and their colleagues at MetroHealth have been pursuing has evolved forward over several years, with some startling results. Chehade noted that “In the first year, 2014, we overspent by 2.1 percent. In the second year, we came under, by 1.7 percent, still didn’t achieve any savings. 2016, we came under by 8.1 percent. And in 2017, when we moved from one-sided to two-sided risk, we were 10.2 percent below our benchmark.” Meanwhile, in one commercial risk-based contract that MetroHealth is involved in, which is actually with Cuyahoga County on behalf of its employees, “We were able to stay at 7.36 percent below the established benchmark in 2017, and shared half of that savings with the county,” Chehade said.

Indeed, with regard to the 100,000 patients attributed to MetroHealth in the Ohio Comprehensive Primary Care (CPC) Program, a Medicaid managed care program, Chehade reported that “We were at $385 per member per month” in member costs when “the official results just came out, and there was only one provider lower than us in cost in the state, and that was a very small physician group.” That program’s measures include service and access, efficiency, clinical quality, and total cost of care.

Looking at the results of both the MSSP and the Medicaid Ohio CPC Program, Chehade said, “We’ve got to be doing something consistent. We’re not just doing things for one patient population,” he underscored. “We’ve put processes in place that we can take from one population to another. We built a robust infrastructure, including a Population Health Innovation Institute, focused on results,” and which has about 140 people working in it.

And, as Chehade told Healthcare Innovation in an interview shortly after he and Kaelber had left the stage in Cleveland, “The challenge is truly knowing your data, and committing yourselves to do the work and invest. That’s what gave us the confidence. If we’re going to do those things, and invest, we might as well go for risk, as long as the reward becomes larger.” Very importantly, he added, “The second factor is understanding your share of wallet for a particular population: how much money is spent inside your organization versus outside it? So if you’re trying to decrease total cost of care, you can more than make up for that loss of revenue through shared savings and through maintaining patients within your organization. That becomes a very positive cycle that will even help you within fee-for-service [payment arrangements]; but it’s especially important when you’re doing two-sided risk, when the rewards are high.”

Looking at the nationwide landscape around risk 

Looking at the nationwide healthcare market, industry experts agree: the leaders of patient care organizations looking to succeed in the new world of risk-based contracting need to start at the top—by understanding what strategies their organizations are working towards, and how they’ll align incentives to get there.

“Ultimately, the goal is to align incentives, making sure we all have the incentives to create more coordinated healthcare, better experiences, lower cost, higher quality, with patients, providers, and payers as the stakeholders,” says Jeremiah Reuter, vice president, provider actuary services, at Optum Advisory Services, a division of the Eden Prairie, Minn.-based Optum, “an information and technology-based health services business,” as the company’s website describes it. “Providers taking risk is just saying, how do we incentivize providers to be cost- and quality-conscious, versus just repairing health?” says the Denver-based Reuter. The challenge, he adds, is that “Providers aren’t real risk-bearing entities. So providers need to transform their businesses to be risk-bearing entities; and you need actuaries” to do that. Crucially, Reuter says, “Risk adjustment and coding accuracy are very important, managing care is very important; and quality is very important. And attribution remains a huge issue,” he adds.

If rurally based integrated health systems can thrive in risk-based contracts, and if public hospital-based health systems can thrive in risk-based contracts, what about academic medical center (AMC)-based health systems? Well, the leaders at UC San Diego Health, the San Diego-based academic health system, are quite determined to find out—and they’re investing time, effort, and resources in the venture; indeed, UC San Diego Health in October 2017 opened a Population Health Services Unit, led by a group of executives, including Parag Agnihotri, M.D., chief medical officer for population health services, and Duncan Campbell, COO, population health services. Their team is helping the organization to manage several risk-based contracts, including a Medicare Track 1 Plus contract, covering 31,000 lives under the MSSP program, which they first joined on Jan. 1, 2018, on the standard three-year contract.

And what has the experience been like? “For most providers who get into an MSSP contract, the first year is the most difficult, because you’re still catching up on data,” Campbell says. “They base their benchmark on three years of historical data leading up to your participation. They send you monthly files,” he says, “but the data is difficult to interpret, and you don’t have everything at your fingertips. Year 1 is a foundational year for us, and we’re bringing in analytics tools” from major vendors, including from their EHR vendor. And, leveraging those tools, he says, “We’re just starting to drill down into areas we can reduce cost, reduce clinical variation, and start to improve the overall quality of care.”

In that context, Campbell says, “One of the difficulties for any academic health center is that you probably have the best of the best subspecialists, which means that you’re attracting some of the sickest patients in the community—transplant patients, very acute oncology patients. And when you’re in any risk model, you want a breadth of patients. We get some, but not as many as, say, Kaiser. So our strategy is to expand beyond our traditional borders and create a clinically integrated network.” And, adds Agnihotri, “Academic medical centers are being left behind because other healthcare systems are creating their own networks and trying to limit the choice of those patients, and payers are trying to create narrow networks. But the AMCs are picking up on value-based care. We’ll drive the change around value-based care, and over the coming years, AMCs will be leaders in value-based care going forward.”

A moment of truth in Boston

It’s encouraging that academic-based health systems like UC San Diego Health are moving forward with value-based contracting. But those who have gained considerable experience with risk-based contracting have significant concerns about the ongoing challenges they’ve faced in their participation in the Medicare ACOs and others. One who has words of caution is Barbara Spivak, M.D., president and CEO of the Mt. Auburn Cambridge Independent Practice Association, or MACIPA. “We have to look at the different levels of challenge,” says Dr. Spivak, whose organization was one of the original 32 ACOs in the Pioneer ACO Program in 2012, 2013, and 2014, and which later rejoined the Medicare initiative in Track 3 of the MSSP in 2017 and 2018. In fact, Dr. Spivak notes, “We had to drop out because they changed their benchmarking methodology, and our budget dropped by 10 percent, and we were never going to make 10 percent savings on that contract. Every year you’re in this, you continue to watch things,” in terms of the benchmarks and requirements for Medicare ACOs.

“Clearly, working with the government is challenging, in that the data comes very late, and that some of your performance is not really predictable,” Spivak says. “For example, the risk coding adjustment, which can make a very big difference in your performance, doesn’t come until the year is out. And that makes it very hard to really know how you’re doing as the year is going on. In our commercial contracts, we ‘fix’ things, and get more real-time data as the years is going on. With Medicare, it’s very hard to do that.” Fundamentally, she says, a lack of clarity and predictability looms large over her organization’s participation in Medicare accountable care work.

Meanwhile, in the midst of Medicare program changes, MACIPA has also been working through organizational changes. As of March 1, Mt. Auburn Hospital, MACIPA’s affiliated hospital, joined the new Beth Israel Lahey Health system, as an affiliate of that combined health system’s clinically integrated network. “All of our care management operations will remain in place; and hopefully, we’ll end up even buying some services from the system, to enhance our care,” says Spivak, who adds that size and scale really do matter when evolving forward one’s participation in ACO and other value-based contracts.

CMS puts the pedal to the metal

All of these strategic developments for patient care organizations are taking place in the context of an intensifying emphasis on two-sided risk on the part of Seema Verma and other officials at the federal Centers for Medicare & Medicaid Services (CMS). Verma and other senior federal healthcare policy officials have been making increasingly vehement statements about their intention of pushing more and more participating ACOs into downside risk, and pushing hospitals and physician groups, more broadly, further into value-based payment in general. What does all of this mean in the next few years? The picture is clear, says Blair Childs, senior vice president of public affairs at the Charlotte-based Premier Inc. “Remember, it’s not just in MSSP; the BPCI—the Bundled Payments for Care Improvement Initiative—moved everybody immediately to two-sided risk. So I think all the models are moving in that direction. With bundled payments, it happened when they restarted it, in October 2018.”

With regard to that shift to two-sided risk, Childs notes that, in late March, 15 percent of participating patient care organizations dropped out of the BPCI program. Still, he says, “There is a widespread movement towards two-sided risk. And the question is whether it will be commercial ventures in two-sided risk or Medicare. And the calculation around Medicare fee-for-service has to do with two factors: with your benchmark, with how you measure your competitors; a variety of factors come into play. And so all of our members are moving towards two-sided risk, sometimes in Medicare Advantage or in direct contracts with employers; or they’re starting their own plans. This is a widespread reality, and I think everyone’s wrapping their heads around the fact that this is the emerging reality. And as we’ve discussed in the past, it is always very market-dependent.”

A long path ahead

In any case, all those interviewed for this story agree that a long path ahead faces providers, going forward in the risk-based world. “There’s a tension here, in that a lot of providers feel that their markets have not moved as quickly as they might have thought, into two-sided risk,” says Tomi Ogundimu, practice manager, research, at The Advisory Board Company in Washington, D.C. “A pretty significant amount of revenue is now being tied into value-based arrangements, but it remains diffuse among tens of thousands of contracts,” she says. “The organizations are deciding that one of their primary growth engines will be becoming first-advantage movers in aligning some of their initiatives to move further upstream in care delivery, reworking primary care models, and also extending longitudinal self-care management through digital tools, etc., to the end result of demand destruction through moving interventions upstream.”

Still, says Ogundimu, “Doing a good job at downside risk requires a lot of alignment across the continuum that might not be apparent in upside-risk arrangements. There is a lot of change management that has to take place in aligning care models from inpatient to outpatient,” she adds. “One clear example is in creating an enterprise-wide care management model that takes siloed care and case management from the hospital, and discharge planning and transition services, together with longitudinal patient self-management support and everything we do around post-acute care, to create a single, unified structure. At the end of the day, downside risk means we need to take a much more principled approach to our structures. And it’s really hard to take those legacy systems and create a unified care model where they’re truly managing the patients across the continuum, and quite frankly, extending that model out into the community where patients are.”

In the end, all those interviewed agree: success in downside risk-based contracts is doable. But it will require strategic vision, massive, sustained effort, skillful leveraging of IT and analytics to support care management and population health management, the creation of high-performing provider networks, and individual market felicity. Those making all of this work aren’t waiting for anyone’s permission or prodding, though—they’re plunging ahead and making all the key partnerships work, right now.

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Sidebar: Who’s Successfully Switching Into Downside Risk in the MSSP?  A New Study Examines the Issue

“Despite most accountable care organizations (ACOs) in the Medicare Shared Savings Program (MSSP) remaining in upside-only models, some ACOs have made the switch into risk-bearing tracks and/ or participated in risk-bearing Center for Medicare and Medicaid Innovation (CMMI) demonstration models such as Pioneer and Next Generation.” And just which ACOs are successfully making that switch? “On average, track switchers tend to be larger, more experienced, and more successful on program financial metrics. The difference between switchers and others on financial metrics is not explained by benchmark levels or ACO size. Track switchers were also more likely to serve high-population and metropolitan areas.” Those are the conclusions of a recent study by researchers at the Salt Lake City-based Leavitt Partners, who in February released a report on the subject entitled “Track Switching in Medicare ACO Programs: A Look at the Move to Downside Risk.” That white paper is available via the Leavitt Partners website.

One of the report’s authors, senior analyst Robert Richards, Ph.D., spoke with Editor-in-Chief Mark Hagland recently about the report. Below are a few excerpts from that interview.

What were you and your colleagues looking for in your research?

What we set out to do was to look at ACOs that had switched into higher levels of risk, which is the direction CMS wants ACOs to do, especially with Pathways for Success. So we wanted to look at ACOs that had already switched from upside-only into some sort of two-sided risk arrangement. As for whether the findings were surprising, the differences we found were generally not all that surprising. They tended to be larger, better-established, probably better-resourced ACOs, that were doing better in the program anyway. One thing that was a little surprising was the lack of difference around some of the market-level factors, such as uninsured rates, and public health-type measures like obesity prevalence.

CMS officials are becoming increasingly intense in their push to get providers into downside risk. Is there a danger in that strategy?

The one finding that seems relevant here is this: about 12 percent of the track-switchers that switched into higher-risk tracks, ended up dropping out of all Medicare ACO programs, compared to the quarter of all ACOs that stayed in track 1. So that means that the track-switchers have figured out how to pace their change. And it’s hard to say what’s cause and effect here, but the correlation is really interesting. The track-switchers tended to be more successful on all the financial metrics—gross level of savings per patient, earned share of savings the ACOs received, and even the savings to CMS. I would think that CMS would like to see more of those kinds of numbers, and focus on getting as many organizations as they can.

Might less sophisticated organizations then not be successful, if forced into higher tracks, sooner than they’re really ready?

As far as whether CMS is being too aggressive, I’m not sure whether that’s the case or not. I think that the results of the study do suggest that some kind of glide path is necessary. The track-switchers have tended to be in the program longer, and tend to be more experienced ACOs.