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Live from iHT2-Vancouver: UVA’s Rick Skinner Explains the Calculus of ACO Development

September 18, 2015
by Mark Hagland
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The journey into successful ACO development is a long one, Rick Skinner of the University of Virginia Health System, told his binational audience Thursday in Vancouver

The journey into population health management is a long, complex, and challenging one, regardless of the specific advantages any patient care organization might bring to it: that was the key message delivered on Sep. 17 by Rick Skinner, the chief information and technology officer of the University of Virginia Health System, which encompasses an academic medical center, medical school, nursing school, and other entities, all based in Charlottesville, Virginia. Skinner delivered a plenary session address entitled “Managing the Health of Populations: Many Approaches,” at the Health IT Summit in Vancouver, being sponsored by the Institution for Health Technology Transformation (iHT2, a sister organization of Healthcare Informatics), and offered his audience a nuanced view of the development of accountable care organizations (ACOs) in the United States, from the perspective of the senior healthcare IT leader at a health system that has developed one.

In his initial comments to the binational audience at the Rosewood Hotel Georgia in downtown Vancouver, Skinner began by asking a question that lies at the heart of ACO development in the United States. “With so much talk about population health management in the U.S., Canada, and across the world,” he asked, “are we really talking about managing the health of a population, or is what we’re really addressing the utilization of healthcare services, by the members of that population?” In fact, Skinner offered, utilization management really is at the core of U.S. efforts in this important area. “Oh, yes,” he said, “we want everybody to be healthy; but what we really want to do is to reduce their expenditures of expensive healthcare services, not because we’re cheap or mean, but because we have to reduce the overall cost of healthcare. And every jurisdiction I know of, including Canada, is facing that problem. No one has a model of the cost, quality and service needed” from any overall national healthcare system.

Describing his organization’s plunge into the ACO world, through its creation of Well Virginia ACO, which was created under the aegis of the Medicare Shared Savings Program (MSSP) for ACOs, and which takes care of 20,000 Medicare beneficiaries, Skinner noted that there are complex reimbursement strategies at play for an organization like his, “a traditional academic health center whose main bread and butter is very sick patients needing very specialized care. However, against the backdrop of the evolution of the U.S. healthcare system and payment model,” he quickly added, “we knew we had to gain some experience managing the health of an entire population. We had some advantages having an employed physician group and house staff; we don’t work with a large number of payer organizations; and we’ve had a comprehensive electronic health record with wide-scale adoption, for over five years, so we had the tools to do this,” he noted.

The strategy, Skinner explained to his audience, was to reduce fee-for-service payments from the Medicare program by somewhere between 2.0 percent and 3.5 percent, knowing that if successful, the University of Virginia Health System could lose up to $5.3 million in Medicare fee-for-service reimbursement, but hoping that, “Along with an overall reduction in fee-for-service Medicare volume, if there’s unmet need” in the communities the health system served, a gain in “some specialized patients” being able to be treated within the health system’s capacity, “would offset that.”

Of course, he noted, “The challenge with all these different payment models is aligning the incentives of the entire organization when going from a volume-based model to a model that has more to do with the longer-term provision of healthcare to members of a population.”

An early analysis of Well Virginia’s ACO population revealed some interesting findings, Skinner told his audience. That was particularly true of his and his colleagues’ findings around chronic illness. Looking at three of the most prevalent chronic diseases, they found that over 30 percent of the ACO’s population had been identified as having diabetes; 18 percent had identified congestive heart failure (CHF); and 68 percent had identified hypertension. Meanwhile, 25 percent had both diabetes and hypertension; 15 percent had CHF and hypertension; 9 percent had diabetes and CHF: and 8-9 percent had all three major chronic illnesses—a daunting prospect indeed.

Not surprisingly, Skinner and his colleagues found that “The top 10 percent of the people in that cohort” of those ACO members identified as having one or more of those three chronic diseases “account between 70 and 80 percent of the total costs of the cohort.” Interestingly, he noted that when he worked for an Ontario heath system, Skinner and his colleagues had found similar results with that health system’s population (and the Well Virginia ACO’s statistics generally match those of other health systems around the U.S., regarding the percentage of healthcare costs for the top 10 percent of patients.

So what does the treatment of patients with those diseases cost Well Virginia ACO on an annual basis? The following, according to Skinner: diabetes: $47.4 million; CHF: $59.8 million; hypertension: $95.2 million. Treating ACO enrollees with both diabetes and CHF costs Well Virginia ACO $27.8 million annually; treating those with CHF, $59.8 million; those with hypertension, $95.2 million; those with both diabetes and CHF, $27.8 million; those with both diabetes and hypertension, $41.2 million; those with both CHF and hypertension, $51.8 million; and those with all three chronic illnesses, $25.3 million annually.

Plunging into ACO development