Time keeps on ticking into the future

Yesterday, the Department of Health and Human Services dropped a major proposed rule on how it interprets the Stark Act.  The Stark Act prohibits self-dealing in Medicare unless there are clear exceptions.  Yesterday’s proposed rule is in response to Accountable Care Organizations (ACO) asking for more clarity as to how they should interpret the Stark Act when they redesign care pathways under the ACO regulations.  This is a reasonable ask.  And my colleagues at Duke-Margolis are going through the proposal right now and so far, this is a reasonable draft.

I want to highlight one thing from the pre-amble:

HHS has taken two major regulatory swings at the Stark Act. The first had a published proposed rule in 1992. That rule went live in 1995. the second major rule-making episode started in 1998 and was finalized in 2007. There have also been smaller Stark Act rule-makings as part of the regular fee schedule, compliance and fraud and abuse efforts.

This July, we looked at an overly optimistic timeline for rule-making and system deployment on complete rebuilds:

Plumbing matters.  Complexity matters for project timelines and launch dates.

I’m going to give a set of scenarios that are in the 95th percentile of GOOD NEWS.  

Major Revamp

Any major revision of the US Healthcare system will need significant rule making from federal agencies.  The federal agencies need to take what Congress has written and figure out how to actually make it work.  The ACA had several hundred instructions of the “Secretary Shall…” and those ranged from when open enrollment periods should be, to how calories were to be counted, and what the de minimas allowable actuarial variation in metal bands could be.  Rule making (at least rule making that will stand up in court) requires notice and comment.  Let’s be super-optimistic and say the major rules are drafted in six months.  This is fast….

Once the draft rule is completed, it has to go through internal governmental review and then it goes out to the public for notice and comment for at least thirty days.  Here the public can comment on the proposal rule.  Some of those comments will be insightful, evidence based and useful, others will be rote repetitions of ideological direction.  The rule making entities has to read and respond to all the comments.  A good rule making process will use this as an opportunity to learn and adjust.  This learning process will take another four to six months to produce a final rule that is neither arbitrary nor capricious.

We’re at a year now….

In the ACA, rule-making took several years. The Medical Loss Ratio (MLR) rule took two years for the initial rule to be finalized. The preventive services rule took two years. The initial rule-making on exchange/marketplace construction only took nineteen months from draft publication to finalization.

Rule-making takes time.  It takes time when it is an expansion of a pre-exisiting rule to deal with new policies and programs.  It takes time for new rules to be created for brand new policies.  It takes time to develop rules that will give a program a decent chance of success while standing up to legal scrutiny.

When thinking about the timelines for major system transformation, standard rule making will eat up a couple of years.  This is important to remember when thinking about transitions.

Change spills over

Last week at JAMA Surgery, a great team from Harvard published an article that looked at the spillover of practice changes from Medicare Fee for Service to Medicare Advantage due to a bundled payment program.(**)

It is unknown whether participating hospitals change care patterns only for patients subject to the payment bundle or if changes spillover onto care for other patients undergoing joint replacement. Spillovers to Medicare Advantage (MA) patients would indicate that clinicians have a consistent approach to discharge planning regardless of payor and would suggest Medicare’s payment reforms have had a broader societal effect….

In hospitals affected by the CJR program, the use of institutional post–acute care differentially decreased by 2.1% (95% CI, −3.9% to −0.2%; P = .03) among MA patients and 2.3% (95% CI, −4.0% to −0.7%; P < .01) among traditional Medicare patients

What does this mean?

  • Docs and hospitals respond to incentives if they are sufficiently big and powerful enough
  • Docs and hospitals don’t selectively change practice patterns
  • Creating the counterfactual for estimating savings is hard

The Comprehensive Joint Replacement (CJR) program is a Medicare effort to bundle payments for the entire episode of care for a knee or hip replacement.  The surgical team is giving a big check and from that check, all services associated with a joint replacement have to be paid for. If the surgical team can  keep costs underneath the lump sum, they profit.  If  costs stay above the lump sum, the surgical team eats a loss.  This program does a good job of cutting out expensive outliers and squeezing post-acute care spending.  It has lowered direct, traditional Medicare costs by about 3% compared to the normal fee for service payment method.

This letter asks if practice patterns are different for people covered by traditional Medicare who are now in this CJR bundled payment model and people who are covered by Medicare Advantage who are not in the payment model.

They find that in hospitals that were required to accept CJR bundles, there were fewer post-acute care claims for all people covered by any Medicare payment stream.  Once a hospital is in CJR, practices change for everyone.  This makes sense and it aligns with previous knowledge that once a patient is under treatment, clinical practice is usually fairly consistent across payers unless there is a payer intervention.

However, it makes estimating the actual effect of the program harder as there are now direct savings from the Medicare FFS program and then indirect savings in Medicare Advantage.  I would also hypothesize that these practice changes cascade to privately insured, Exchange insured and Medicaid patients as well but that is not shown in this study.  There has been good evidence that Medicare Advantage has “spill-over” effects once the a certain amount of market share in a county is gained.  I think that this paper adds to the growing evidence that payment reform in traditional Medicare also has dynamic spill-over effects into Medicare Advantage.  This is good news in the quest for value even as it makes the program evaluator’s job a whole lot harder.







** Wilcock AD, Barnett ML, McWilliams JM, Grabowski DC, Mehrotra A. Association Between Medicare’s Mandatory Joint Replacement Bundled Payment Program and Post–Acute Care Use in Medicare Advantage. JAMA Surg. Published online October 02, 2019. doi:10.1001/jamasurg.2019.3957

New Jersey and the policy counterfactual for outreach

New Jersey has a Democratic trifecta since January 2018. The legislature and governor have been active.

  • Reinsurance waiver funded by
  • State based mandate
  • Transitioning to a State-Federal Partnership exchange

So what are the effects?

This is a bit convoluted.  New Jersey projects that without the policy changes, that started in 2019, 2020 premiums would be 30% higher in 2020 than they are in 2019 instead of the 8.7%.

The transition to their own exchange is also having impact:

One of the big advantages of a state running their own exchange is that they don’t count on federal advertising or outreach funds.  Instead, locally raised money can be spent locally to achieve state objectives.  In 2018 and 2019, New Jersey had a “small” dose of navigator and advertising dollars.  In 2020, the navigator dose will be six times larger and potentially better targeted.  The same may be true for advertising dollars where there will be more spent and potentially spent more effectively.

The theory of change is that this will lead to more enrollment and lower premiums than if New Jersey had stayed on Healthcare.gov.  The idea is that the most marginal buyers who are currently flipping a coin and having it come up tails and therefore they are deciding to not buy any insurance are relatively healthy and cheap to cover folks.  Advertising and navigation assistance will change the weight of the coin and push at least some of these marginal decision makers into the ACA pool where they will cost significantly less than average which brings down premiums.  California claims that their advertising and outreach delivers massive premium reductions through this mechanism.

From a causal identification strategy point of view, the boundary states provide a lot of potential matched pairs for a difference in difference analysis.  Pennsylvania and Delaware are constant Healthcare.gov states with no changes in governing structure since 2017.  Maryland and New York run their own exchanges.  Maryland will be changing their enrollment process by easing administrative burden next year.  Since New Jersey has rolled out some of the policy changes in stages (mandate/reinsurance 2019, more advertising/navigation 2020…) dis-entangling impact should be easier than if all of this happened at once.

New Jersey should be the source of a dozen really cool papers by 2023 that will bring insight into what drives individual market enrollment.

ACO Success

Last week, CMS Admininstrator Verma was bragging in Health Affairs blog about the accelerated savings coming from the shared savings program:

overhauled the Shared Savings Program, which is Medicare’s main program for ACOs, under a final rule titled, “Pathways to Success.” The overhaul was based on an analysis of the program’s first six years of operation as well as lessons learned from testing of Medicare ACO initiatives by the Center for Medicare and Medicaid Innovation (Innovation Center); the first ACOs began participation under the redesigned Shared Savings Program in July 2019.

Pathways to Success will put ACOs on a quicker path to taking on real risk, with downside risk generally required after two years for new ACOs, while offering ACOs more flexibilities to coordinate care and innovate. For example, in the Pathways to Success final rule, the Centers for Medicare & Medicaid Services (CMS) implemented new statutory authorities increasing ACOs’ flexibility to offer telehealth services and incentive payments to beneficiaries for taking steps to achieve good health….
n 2018, the Shared Savings Program generated $739.4 million in total net savings across 548 ACOs. ACOs that received shared savings payments had decreases in inpatient, emergency room, and post-acute care spending and utilization, while ACOs that increased spending relative to their targets tended to show increases in these areas.

ACOs taking accountability for cost increases, or “downside risk,” continued to perform better than ACOs that did not; ACOs taking on downside risk showed an average reduction in spending relative to their targets of $96 per beneficiary, compared to $68 for ACOs that did not take on downside risk….
The performance data for 2018 also shows that ACOs led by physicians (which tend to be “low-revenue” ACOs since they provide mostly outpatient services) continued to perform better than ACOs led by hospital systems (which tend to be “high-revenue” ACOs since they provide inpatient and outpatient services). In 2018, low-revenue ACOs showed an average reduction in spending relative to targets of $180 per beneficiary, compared to just $27 for high-revenue ACOs.

This is good news.

Accountable Care Organizations were one of the major cost containment strategies built into the ACA. The idea would be that provider organizations with their front line knowledge of patients and needs would be able to save money while holding quality constant or better compared to fee for service Medicare. The first round of ACOs had modest but consistent success.

The major rule revision is normal policy making. A policy is proposed. It is implemented. Some things work as expected. Some things don’t work as expected. There are a couple of happy surprises and a couple of unhappy surprises. Learning happens. And then the policy making apparatus tries to shift implementation to take into account the learning that had occurred.

One of the big lessons from the first round was that moving further upstream of the healthcare spend produced bigger savings. Right now, post-acute care is the major piggy bank of ACO savings. From an economic and organizational point of view this makes sense. Post-acute care is seldom owned by the ACO stakeholders. Taking a dollar out of post-acute care spending makes the ACO contract holder better off. Taking a dollar of spending out of the stakeholder’s own practice puts the contract holder in a net loss position. This same logic applies to why physician led ACOs may be saving more money than hospital led ACOs. The docs don’t own the hospital so a dollar out of the hospital spend is pure gravy.

The next big step on ACOs is to get away from treating post-acute care as the only big piggy bank. I think there is a significant opportunity for ACOs, especially physician led ones, to focus on vulnerable populations and to also continue to redesign their care flow so that more people are kept out of the hospitals more often.

The ACO program is a modest success and it looks to be able to build on those successes going forward. This is good news.

DISCLOSURE: Last week, a team that I’m on submitted two manuscripts on ACO finances, management and serious illness care. Numerous Duke Margolis colleagues are constantly writing about and getting funded for work on ACO structures.

Wellness programs (maybe) going to the ACA exchange

Yesterday afternoon, CMS released a call for states to participate in a demonstration project to deploy wellness programs on the individual market.

  • Workplace wellness programs don’t change healthcare spending
  • Most benefits flow to people who were already in good health/shape/habits
  • Administratively a nightmare

My first thought that this is an invitation for cherry picking. Employer based wellness programs, in well controlled randomized evaluations, don’t work (Song 2019, Jones et al 2018). Or at least they don’t work in changing healthcare spending for people with moderate chronic diseases who are healthy enough to be employed enough hours to get insurance through work.

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