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Looking at the Lessons of McAllen in a New ACO Context: What's Changed

May 9, 2015
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A Commonwealth Fund blog this past week speaks to revolutionary changes taking place these days in healthcare delivery and payment

I found a blog on The Commonwealth Fund Blog site this past week to be a very important one to read. In the blog, by Dominique Hall and Mark A. Zezza, Ph.D., entitled “McAllen, Texas: Tailored Solutions to High Spending Are Needed,” the authors, who are, respectively a former program associate for the CommonWealth Fund’s  Program on Delivery System Reform and assistant vice president, delivery system reform and cost control, at The Commonwealth Fund, comment on the new article In The New Yorker by Atul Gawande, M.D., whose 2009 New Yorker article about healthcare delivery in McAllen, Texas became the closest thing to a sensation that could emerge out of the healthcare policy world.

As Hall and Zezza note, “The findings from subsequent research on spending trends throughout Texas, for private health insurance as well as Medicare (including several  Commonwealth Fund-supported studies), demonstrate a key lesson: to be effective, efforts to contain healthcare costs need to be grounded in local conditions.”

As they further note, “An in-depth look at cost data for McAllen identified home health and other postacute care services as major drivers of high spending. Shortly after Gawande’s article was published, a research team from the University of Texas School of Public Health (UTSPH) poined out that Medicare home health use in 2007 was 4.63 times higher in McAllen than in El Paso, a demographically similar area of Texas, and 7.14 times the national average. Moreover, McAllen Medicare beneficiaries were also more  likely to be seen by more than 10 physicians near the end of their lives—a strong indicator of uncoordinated care.”

Still, Hall and Zezza note in their May 6 blog, “More recent UTSPH research shows McAllen looking much more like the rest of the state: whereas in 2008, per Medicare enrolle spending in McAllen was more than 40 percent above the state mean, in 2012, per-enrolle spending was about 16 percent higher. This reduction in spending has been driven largely by reductions in postacute care spending.” They further note that “It’s likely that both local activities and federal healthcare reform contributed to this change.” They specifically point to “the proliferation of accountable care organizations (ACOs) created under the Affordable Care Act as a major factor in curbing costs. For example, two ACOs in the McAllen area, Rio Grande Valley ACO Health Providers, LLC, and Rio Grande Valley Health Alliance, LLC, have been high successful at reducing spending for their Medicare patients.”

Farzad Mostashari, M.D., the former National Coordinator for Health IT, made the point in an interview with me back in September, when he discussed some of the research he and his colleagues were conducting at the Brookings Institution on this very topic—the influence of ACO development on curbing excessive outpatient care-based costs. Dr. Mostashari—who with Bob Coker, M.D., had penned an important op-ed in The New York Times on the subject, underscored both in that op-ed, and in his interview with me, that it is physician leadership and management that make all the difference in ACO success.  As Mostashari and Coker wrote in their Times op-ed of the McAllen situation, “Compared with places like El Paso, McAllen had worse health outcomes, despite spending twice as much per capita on Medicare.

The problem was that doctors in McAllen were responding to reimbursement incentives in the American health care system that rewarded activity rather than value. The more procedures and visits a doctor billed, the more he got paid.” But they found that once physicians had established functional ACOs in that area, things changed quickly, and for the better. Indeed, Dr. Mostashari believed so much in the physician-driven ACO concept that he revealed to me in that September interview that he was leaving Brookings and hanging out his shingle as a consultant specializing in helping doctors to develop and run physician-led ACOs.

Meanwhile, back at The Commonwealth Fund, bloggers Hall and Zazza note in their May 6 blog that, “As McAllen demonstrates and as evidenced by a recent Institute of Medicine report analyzing national health care spending trends, postacute care services are a major driver of spending for the predominantly elderly population covered by Medicare. For the predominantly nonelderly privately insured population, these services are less of an issue since younger people are less likely to need them. Instead, spending is driven more by negotiated prices for inpatient hospital services, because, unlike Medicare, private insurance plans cannot set standardized prices across geographic areas.”

In other words, as the Commonwealth Fund bloggers note, it is very important to examine the details of these kinds of situations to come to some clarity. One huge element in all this is the drive towards population health management and the creation of ACOs, whether in contracts with public or private payers. Not only are these kinds of programs changing incentives, they’re doing so through the use of data, analytics, and data-driven performance improvement at the care delivery and care management levels, where it really makes a difference.