I was having lunch last week with a colleague and he made a comment we can all relate to. He said, “My big takeaway from business school was that change is hard.”
This comment, as well as the market turbulence of disruptive innovation and creative destruction came to mind when I read the article, Cornerstone: The Rise and Fall of a Health Care Experiment, in The New York Times. The article focused on the rise and fall of one accountable care organization (ACO). The ACO, North Carolina-based Cornerstone Health Care, adopted many progressive policies. They decided to pay physicians based on consumer outcomes; to pay physicians on quality of care instead of volume of care; and to coordinate consumer care across its 375 physicians and advanced practice providers.
But the results were not what you might expect. Many of the physicians (70 out of 228) left for other hospitals and two lawsuits were filed, “including one accusing the practice of gross mismanagement.” Within 18 months, Cornerstone was in a dire enough financial situation that it failed as an independent practice, and another local hospital stepped in and acquired it. Perhaps the perfect example of the dangers of being too far out in front of a market trend…
And Cornerstone isn’t alone in its struggles. Many ACOs in the market place simply aren’t winning at the game, with half of Medicare ACOs losing money and ACOs as a whole recording a net loss in 2016 (see The Problem With Risk – Not Everyone Can Be Above Average).
This churn in the ACO market (and some of the statements from the incoming head of the federal Department of Health & Human Services) might lead you to think that value-based reimbursement is likely to go away. But I don’t think so, and neither does Dr. Alan Muney, the chief medical officer for Cigna, who’s quoted in the same article.
“There is no Plan B,” Dr. Muney said. “We have to drive to value-based care because the fee-for-service system is unsustainable.”
That said, I don’t think the evolution of value-based reimbursement will be linear. It will demand the reinvention of models over and over again (see Tackling The Thorny Issue Of Behavioral Health ‘Value’ and The Value Challenge, Again). This will include the creative destruction of systems and organizations as roles in the value chain change. This is just a little of what we’re seeing:
- Health systems getting into the health insurance business (see ‘Diversified’ Insurance Companies and Where Are We With The ‘Kaiser-fication’ Of The System?) and getting out of it (see Health Systems With Insurance Operations Stumble In 2015).
- Health insurance companies merging and getting bigger — despite concerns (see American Medical Association Warns Pending Anthem-Cigna & Aetna-Humana Mergers Could Reduce Competition Significantly In 24 States and The Trickle Down Of Health Plan Mergers).
- Health care provider organizations merging and closing (see Make M&A Work For Your Organization and Unscrambling The Egg: A New Question For M&A).
- Accountable care organizations (ACO) are being formed, disbanded, and replaced by new ACOs in rapid succession (see CMS Announces 21 ‘Next Generation ACOs’ and Not All Medicare ACOs Are Winners).
What we do know is that reimbursement will move away from fee-for-service. What we don’t know is what that will look like. For more on preparing your organization for this transition, join my colleague Ken Carr next month at The 2017 OPEN MINDS Performance Management Institute in Clearwater Beach, Florida, where he will present a four-part series on preparing for population health management, covering consumer access, clinical performance optimization, financial management, and tech infrastructure.