What is it like to actually build an accountable care organization (ACO) from the ground up? And what kinds of calculations go into the decision to participate in any of the available federal ACOs sponsored by the Centers for Medicare and Medicaid Services (CMS). Leaders from the Henry Ford Health System in Detroit shared a wealth of insights on Monday morning, during the Population Health Symposium, one of numerous pre-conference symposia held at the Sands Convention Center in Las Vegas, as part of the annual HIMSS Conference.
Bruce K. Muma, M.D., CEO of the Henry Ford Physician Network (HFPN), and Matt Hussman, the HFPN’s director of analytics, shared insights with their audience around how they and their colleagues ultimately made the decision to participate in the Next Generation (Next Gen) ACO program under CMS.
The Henry Ford Physician Network is a 2,000-plus network of physicians, some of them employed by Henry Ford Health System, and others independent. It overlaps with the Henry Ford Medical group, a 1,300-employed physician and scientist group within HFHS.
Despite the large size of the Henry Ford Health System—the integrated system encompasses eight hospitals, 200 care sites, 30,000 employees, a durable medical equipment company, home healthcare, and pharmacy, and a service area with 1 million residents of southeast Michigan—“Despite the fact that we’re a really large health system, we really struggled over the decision to take on two-sided risk,” Dr. Muma told the audience on Monday.
“Henry Ford was an early adopter of value-based concepts,” Dr. Muma said. “We formed our first ACO in 2010, a year after the ACA [Affordable Care Act] was passed. The early intent was to create an ACO that would be attractive to commercial payers from a narrow-network standpoint. We had reached a size of 40,000 covered lives over a period of four years; but to be honest, in the overall scheme of things, considering the size of our service population, that didn’t end up being that huge a deal,” he said.
“Still,” Muma continued, “when the Pioneer ACO model came along, we looked at that. But we chose not to pursue it, because of the financial model. The formula wasn’t conducive to success; the shared savings threshold looked pretty steep to us.” In fact, he said, “Probably the biggest reason we didn’t do Pioneer was the adverse impact of the IME and DSH payment pass-through,” he said, referring to the federal Indirect Medical Education and Disproportionate-Share Hospital Adjustments to Medicare Inpatient Payment Rates under the Medicare program. “Those pass-through payments were not taken out of the formula, so we would automatically be designated as a ‘highly inefficient performer’” under that system. Further, he reported, “We opted not to pursue the MSSP [Medicare Shared Savings Program] opportunity in 2014 and 2015, because the same pass-through problem persisted.”
But, “Finally, when the Next Gen model came along and the pass-through problem was solved, we chose to go forward,” Muma explained, and on Dec. 21, 2016, HFPN signed a two-sided risk contract covering 21,000 attributed Medicare beneficiaries, in the Next Gen program.
“We really struggled with the decision” to go forward, Muma said. “The biggest risk was a $35 million downside. Even as a $6 billion [in annual health system revenues] system, sending CMS a check for $35 million would have taken a really big bite out of our contribution.” What’s more, Henry Ford Health System is a safety-net health system that serves an aging, underserved, inner-city population, he noted. But, he said, the opportunity to leverage strategic partnerships in the region, and to learn how to be successful with value-based care, was appealing enough to overcome those hesitations, he said.
In making the momentous decision to join the Next Generation ACO program, Muma, Hussman, and their colleagues knew from the start that they needed to engage in some scenario-based strategic thinking around the risk/reward calculations involved. So, Muma said, “We did an intensive sensitivity analysis, looking at how CMS might view our level of efficiency” as a participant in the Next Gen program. “We looked at best-case, moderate or average, and worst-case efficiency scenarios. In the best-case scenario, we found that we were looking at the possibility $11 million-shared savings check. On the other hand, if we let healthcare spending go up 3 percent—which is simply the national rate of annual medical inflation, we’d have to write a check to CMS for $4 million. The middle-of-the-road scenario gave us a $2.2 million gain. In other words, those calculations were based on a decreased total spend of 3 percent; an increased total spend of 2 percent; or staying at the same rate of spending.”
Meanwhile, Muma said, “We realized that this Next Gen ACO contract really would be a tipping point for Henry Ford Health System. As one of the speakers earlier this morning stated, if a health system has 30 percent or more of their volume based on risk, that’s a tipping point, and this took us from the mid-20s to about 33 percent. So that was a tipping point.”