HCI3 Update from the Field – The Trough is Shrinking

Submitted by francois.debrantes@hci3.org on Friday, September 13, 2013 - 02:59

Newtown, CT – September 13, 2013

The fight between the medical industrial complex and the innovators is now in full swing – Several studies this week highlighted the manner in which the medical industrial complex feeds itself and the growing reactions of payers to counter the naturally bad fee-for-service incentives. First, the spotlight was on ED visit use and the associated fees charged. Unsurprisingly, much like with DRGs, there has been a consistent shift to higher intensity. As a result, Medicare is considering doing away with the tiers and using a flat rate for all ED visits. Of course, the feeders are crying foul, not least of which is IHC complaining that, as a result of such a policy, ED visits might not be able to use bioengineered skin substitutes to treat diabetic skin…which would result in greater diabetic amputations (seriously folks, that's the argument of the pigs at the trough!!). A second study looks at the continued high rate of admissions to the ED and back into the hospitals post-discharge. Kocher and colleagues identify a high rate of these visits related, but in the past not directly linked to the index hospitalization. We have called these Potentially Avoidable Complications for some time and often highlighted the opportunity for cost reduction and quality improvement they represent. One would think that in an era of "accountable care organizations" there would be heightened awareness of and need to reduce these unnecessary ED visits but we have to remember that only a fraction of these health systems are in real "ACO" arrangements. The rest are still chained to FFS/volume-based payments. Contrast these organizations with the more nimble ones that are getting ready to play in the new market.

What this means to you – A study by Meredith Rosenthal of small independent practices in Rhode Island participating in a Medical Home pilot shows that these practices can, in fact, reengineer care to reduce ED visits and ambulatory care sensitive hospitalizations. For practices like those in bundled payment arrangements, the difference between past costs (including hospitalizations and ED visits) accrues to them. They benefit from better patient management in the same way the patient does. And they can do it without the encumbrances of the large health care organizations. Some larger organizations are also realizing that being nimble and focusing on high value services is the new market reality. Orthopedic practices have started to band together to offer a bundled price to employers. The signal from CalPERS, WalMart and others is crystal clear but not everyone is hearing it. As more providers and payers enter into these bundled arrangements, important legal questions have arisen. Our past work attempted to answer many, and a new report published by RWJF provides very clear and important guides on how to structure these payment arrangements. The contrast between the banding of ortho practices to offer bundles (including post-discharge warrantees), small practices adapting to reduce unnecessary ED visits, and the medical-industrial complex that balks at any reduction in the depth of the trough couldn't be more striking. The latter better get ready for lean times, because the trough is shrinking, and rightfully so.