A new study in JAMA (by McWilliams et al.) looks at the Medicare expenditures of patients seeing providers enrolled in the BCBS of Massachusetts version of the ACO (Alternative Quality Contract or “AQC”). The AQC model covers only commercial lives and all of the relevant providers had FFS reimbursement from Medicare during the time of the study (several later became ACO Pioneers). The study tests whether providers rewarded to be more efficient for one pool of patients (BCBCMA commercial HMO lives) will take the same approach to care with other patients irrespective of payer.
The study found a significant reduction in medical costs among Medicare enrollees treated by AQC providers the second year after AQC was launched. At that point, the reduction in Medicare expenditures (relative to a control of non-AQC providers) was 3.4%, matching very closely the reduction in expenditure in commercial lives covered by the AQC for the same cohort of providers and by the same second year time frame (estimated at 3.3% in a separate study in Health Affairs by Song et al.). Such a tight alignment is remarkable but probably a statistical fluke: the error bars around both savings estimates are quite large even if there is good confidence to reject the null hypothesis in each case.
More important is that the care categories where savings were achieved (vs. the non-AQC controls) were similar across both Medicare and commercial lives. The most important categories where savings were achieved for Medicare enrollees were (per
Table 2 in the McWilliams et al. article):
- minor/ambulatory procures and endoscopy
- a catch-all “other O/P services” (which actually delivered the largest savings of 7% vs. baseline) and
- E&M office visits
For the AQC commercial lives, key savings were found in (per Exhibit 2 in the Song et al. article):
- labs and
- facilities-based outpatient care.
Savings being found in the same care categories (basically) suggests that broad changes in specific care practice were driving the savings.
In one key aspect, however, the experience of Medicare patients and commercial patients covered under the AQC differed: quality. The commercial lives saw across-the-board, statistically significant increases in quality metrics while Medicare beneficiaries only saw a significant improvement in LDL screening (albeit a less complete set of metrics were evaluated for the Medicare). The JAMA authors speculate that payer-supported data analytics may be critical to supporting the quality improvements and this makes a lot of sense. It may also be that the HMO benefit design applicable for the commercial risk lives under the AQC model allows more tools (through the PCP relationship) to manage the patient rather than just managing the utilization.
- A payer with enough mindshare among providers (such as BCBSMA which has about half the commercial market in Massachusetts) can indeed affect the care practices of a provider (e.g. by a complex and innovative reimbursement arrangement). However, that payer should also expect its competitors to enjoy much the same utilization benefits in parallel.
- Therefore: there may be little competitive advantage in terms of cost in taking the lead in indirectly influencing provider care practices. Indeed, there may be a mild disadvantage since “taking the lead” will require money and executive time.
- While improvements in quality specific to the payer may be significant, they do not seem large enough to support a sustained competitive advantage for a health plan. (And we would also hypothesize that quality improvements will spread out on an all payer basis over time.)
- That leaves two ways for payers to achieve competitive advantage in managing utilization in a world of ACOs and other risk-based reimbursement strategies designed to incentivize providers to deliver more efficient care:
- Direct interventions on cost buckets which remain untouched by the provider’s internal care process changes. For example: allow the new reimbursement mechanisms to “float all boats” on outpatient costs, but focus direct management attention on inpatient professional and facilities charges where there were no significant reductions (either on the commercial or Medicare lives).
- “Crowd out” free riders by securing a sustained, disproportionate share of membership in the panels of high performing providers. For example: if a payer has 70% of the panels of high performing providers, other payers can only free ride on the remaining 30%. Better that, than vice versa. Indeed, because high quality, cost-effective providers are scarce and their care models slow to leak elsewhere, disproportionate access can be a very sticky source of advantage. The best way to achieve disproportionate share is to put these high-performing/high potential providers in the center of a narrow network (whether in a stand-alone payer’s products or in an insurance offering owned by the provider) – the kind of network strategies we very logically now see proliferating across the country
One can expect that the McWilliams et al. result may help persuade those few still sitting on the fence about high performance network strategies to make the jump.