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What Might Alex Azar’s Tenure at HHS Bring to Health System Reform and Healthcare IT Policy?

January 25, 2018
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Alex Azar faces a raft of choices to sort through around health system reform and federal healthcare IT policy issues

When the U.S. Senate confirmed President Trump’s choice for his second Health and Human Services Secretary on Wednesday, it ushered in a new era at the Department of Health and Human Services (HHS). Alex Azar, a relative unknown in federal healthcare policy circles, is best known for serving as president of Lilly USA, the American division of the Indianapolis-based Eli Lily and Company, from January 2012 through January 2017; he had been at Lilly since June 2007, when he joined the pharmaceutical company as its top lobbyist and as its senior vice president of corporate affairs and communications.

In fact, this is not the first time Azar has worked at HHS; he served as the departments General Counsel from August 2001 through July 2005, and then in July 2005, he was confirmed by the Senate to become Deputy Secretary of health and Human Services, under Secretary Mike Leavitt, serving in that role until January 2007, when he went over to Lilly. As Deputy Secretary, Azar oversaw daily operations at the agency, whose budget is $1 trillion a year, and which encompasses more than 79,000 employees.

Meanwhile, the vast bulk of attention, during his confirmation hearings last month, focused on drug pricing, with Azar finding himself on the hot seat over issues of what many in the U.S. perceive to be exorbitant, out-of-control pharmaceutical prices. Certainly, as the senior federal official with the most power to impact drug pricing policy, Azar was not spared rigorous questioning on that subject.

But the broader question is, where might Azar take HHS, policy-wise, in terms of ongoing health system reform, as well as, of course, federal healthcare IT policy, with regard to the interests of healthcare IT leaders?

A focus on cost control?

A November 13 profile in USA Today might offer some insight in that regard. According to USA Today’s Maureen Groppe, “When Alex Azar had to rush his three-year-old son to the emergency room for a cut near his eye in 2006, the attending physician asked Azar if he wanted a plastic surgeon called in. ‘How much more will that cost?’ Azar asked, only to be looked at ‘as if I were from Mars.’ Azar wasn’t trying to have his son treated on the cheap,” Groppe reported; “he just wondered whether in this case a specialist could do anything more for him than the attending physician.”

What’s more, the USA Today profile noted, “It turned out that the stitches his son received from the plastic surgeon were exactly the same as what the attending physician would have done—but at a much higher cost. ‘It’s absurd to me that one of the largest segments of our economy is organized and operates in such a way that consumers have no real ability to learn about price or quality,’ Azar said in a speech when he was the No. 2 official at the U.S. Department of Health and Human Services during the George W. Bush administration,” Groppe wrote.

“If Azar is confirmed, he is likely to resume his focus on the cost of health care—and how to get more value out of the system—which captured his attention both during his past stint at HHS and while a top executive at Eli Lilly, the Indianapolis-based pharmaceutical giant,” Groppe wrote. And she quoted Mary Grealy, head of the Health Care Leadership Council, a free-market-focused advocacy group, as stating that “I’m just absolutely sure that he would continue to drive that.”

Alex Azar testifying before the Senate Finance Committee in January

Reading the tea leaves

Any speculation around what kind of HHS Secretary Azar will prove to be, is complicated by the fact that he lacks the very public record of statements and policy positions that Tom Price, his predecessor, had brought to the job when he was nominated. Price, who had practiced for many years as an orthopedic surgeon, then went on to represent Georgia’s sixth congressional district, from 2005 to 2017. During that time, Price was outspoken in his convictions that physicians are oppressed by over-regulation. And when he became HHS Secretary, Price was very open about the fact that he was hoping to undo as many regulations as possible, especially around physician practice-related policies. Not surprisingly, Price was moving HHS and CMS (the Centers for Medicare and Medicaid Services) away from mandatory bundled payments.

Meanwhile, might Azar’s tenure mark a distinct break with Price’s, at least on the mandatory bundled payment front? On January 11, I noted in a blog a portion of the January 9 confirmation hearing, in which Senator Mark Warner (a Democratic senator from Virginia) had questioned Azar closely about bundled payments. “And I would hope,” Warner said, “that we would realize that some of those pilots may—and I know you might have a disagreement on this one—might include mandatory pilots, because, too often, those who are in the voluntary system, are the ones who have already been able to bring about efficiencies, and we need to force more [innovation] into the system.”

Azar’s response? “Senator, we actually don’t disagree there. I believe that we need to be able to test hypotheses, and if we have to test a hypothesis, I want to be a reliable partner, I want to be collaborative in doing this, I want to be transparent, and follow appropriate procedures; but if to test a hypothesis there around changing our healthcare system, it needs to be mandatory there as opposed to voluntary, then so be it.”

As I noted, that was a rather surprising answer to that question, in that context. So, for those who were hoping that Azar’s tenure might push health system reform forward a bit faster, that exchange in his Senate Finance Committee hearing, might well be seen as a positive note.

Meanwhile, in a November 14 article in Becker’s Health IT & CIO Review, Julie Spitzer wrote that there are “seven implications the nomination has for health IT,” speaking of Azar’s nomination. Among them, Azar “helped establish the ONC [Office of the National Coordinator for Health IT] while he served as general counsel at HHS during the Bush administration.” Meanwhile, David Brailer, M.D., the first National Coordinator, was quoted as telling POLITICO’s “Morning eHealth” newsletter that Azar had been “an unflinching supporter of health IT...He immediately got what we were doing, why it was important.”

Another implication, Spitzer wrote, was this: “According to Jodi Daniel, HHS' first senior health IT counsel and ONC's policy director, ‘[Mr. Azar] addressed the need for coordinated legal strategy across HHS to promote adoption of health IT and related efforts such as ePrescribing and standards for digital health information. As deputy secretary, he had responsibility for establishing ONC pursuant to the executive order,’” according to an interview she gave to POLITICO’s Morning eHealth newsletter. Spitzer also quoted Susan DeVore, CEO of the Charlotte-based Premier Inc., as saying in a statement that Mr. Azar "appreciates the need to have access to healthcare data and interoperability of health information systems."

So while there’s not a huge paper trail to refer to when evaluating the potential trajectory of Alex Azar’s tenure at HHS, we do have a few clues, per all of the above.

Meanwhile, we are left with several key questions, among them:

>  On a fundamental level, how will Azar be looking at the healthcare industry and its component segments—the provider segment (hospitals, physicians and physician groups, integrated health systems, and all of the post-acute care types of organizations), the payer segment (health insurers), the purchaser segment (which of course includes his own department; both the public and private purchasers—governments and employers—of healthcare), and other segments, including pharmaceuticals, pharmacy benefit management companies, and the like?

>  And within that landscape, will Azar be looking at the opportunities to move the industry forward, from more of a politically conservative, free-market-oriented perspective, or from more of a progressive, interventionist perspective, or some middle-way perspective? He is a Republican working for a Republican administration, but there are hints that he may bring a more nuanced approach to the position than Dr. Price did.

>  More specifically, how will internal healthcare system reform evolve forward under Azar? He might take a very hands-off approach to the broad set of issues, leaving much of the operational decisions to Seema Verma at CMS. On the other hand, he might as easily take a more interventionist approach, particularly if he believes in actively pushing cost control.

> Within the context of internal health system reform, to what extent might Azar choose to push forward accountable care development, the value-based payment system under Medicare, and readmissions reduction penalties/incentives?

>  When it comes to healthcare IT, Azar, who helped assist in the birthing of the ONC, has many options at hand. It’s anybody’s guess as to how interventionist he will be when it comes to federal healthcare IT policy.

>  And, when it comes to the “conclusion” of the meaningful use process—everyone’s still wondering exactly what will happen in that regard.

It is particularly fascinating to speculate on certain specific aspects of how Azar might help shape federal healthcare IT policy. For example, as a former senior executive in the pharmaceutical industry, he worked very hard to avert federal government intervention in drug pricing. But how will he shape the relationships between CMS and ONC with healthcare IT vendors? Some in the industry believe that the industry needs firm leadership from HHS and its component agencies, around issues of interoperability—that, to be explicit, IT vendors need for the federal government to weigh in heavily on interoperability and strongly guide vendors forward in that area. Again, we’ll have to see what happens.

Frankly, I could see Azar going in either direction. On the one hand, in the wake of the early stages of meaningful use, many in the healthcare IT industry have expressed the general sentiment that federal healthcare officials need to let providers and vendors essentially sort things out themselves. On the other hand, some in the industry—including some vendor executives—are asking HHS/CMS/ONC officials to be far more prescriptive in how they want issues like interoperability to be resolved; there is a real impatience in some sectors with the idea of allowing the path forward on interoperability to remain vague and muddled at the federal healthcare IT policy level.

The bottom line in all this is that no one really knows exactly how Alex Azar’s tenure as HHS Secretary will evolve forward, either around internal healthcare system reform issues, or around federal healthcare IT policy issues. But what is clear is that now can genuinely be seen as an inflection point around both sets of issues at HHS. And the next moves will be Azar’s. Stay tuned!


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Healthcare Groups to CMS: ACOs Need More Time in One-Sided Risk Models

October 17, 2018
by Rajiv Leventhal, Managing Editor
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A new survey from NAACOS also reveals that many ACOs would likely have not entered the MSSP under revised policies laid out in a proposed rule by CMS

Healthcare associations have written to the Centers for Medicare & Medicaid Services (CMS), urging the agency to reconsider its proposed regulation that would push accountable care organizations (ACOs) more quickly into two-sided risk models.

About two months ago, CMS dropped a rule that proposed sweeping changes to the existing Medicare Shared Savings Program (MSSP), by far the most popular federal ACO model with more than 560 participants. At the center of the proposed rule, called “Pathways to Success,” is a core belief that ACOs ought to move more quickly into two-sided risk payment models so that Medicare isn’t on the hook for money if the ACO outspends its financial benchmarks. Indeed, when ACOs are in a one-sided risk model, they do not share losses with the government when they overspend past their benchmarks, but they do share in the gains.

Specifically, in the rule, CMS is proposing to shorten the glide path for new ACOs to assume financial risk, reducing time in a one-sided risk model from the current six years (two, three-year agreements) to two years total. This proposal, coupled with CMS’ recommendations to cut potential shared savings in half—from 50 percent to 25 percent for one-sided risk ACOs—will certainly deter new entrants to the MSSP ACO program. So far, the proposed rule has been met with varying degrees of scrutiny.

What’s more, the proposal looks to redesign the program’s participation options by removing the traditional three tracks in the MSSP model and replacing them with two tracks that eligible ACOs would enter into for an agreement period of no less than five years: the BASIC track, which would allow eligible ACOs to begin under a one-sided model and incrementally phase-in higher levels of risk; and the ENHANCED track, which is based on the program’s existing Track 3, providing additional tools and flexibility for ACOs that take on the highest level of risk and potential rewards. At the highest level, BASIC ACOs would qualify as an Advanced Alternative Payment Model (APM) under the Quality Payment Program.

ACOs Need More Time, Stakeholders Say

Now, in public comments sent to CMS, stakeholders are officially making their stances known. Yesterday, groups such as Premier, Inc., the National Association of ACOs (NAACOS), and the American Medical Group Association (AMGA) wrote to the federal agency, sharing the consensus opinion that ACOs should be afforded more time in one-sided risk models before they are required to take on downside risk.

NAACOS, an association comprised of more than 360 ACOs across the U.S., wrote to CMS that ACOs entering the program should be able to remain in a shared savings-only model for four years with an additional fifth year available for those that demonstrate superior performance. The association pointed to data that shows that of the 142 ACOs that earned shared savings payments in 2017, 36 percent had losses in one of their first two years of the program, illustrating the need to allow ACOs adequate time to prepare for risk.

To this same point, Premier recommended in its comments to allow at least three years in an upside-only model for new ACOs entering the MSSP. And AMGA similarly wrote that CMS should allow ACOs to have the option to remain in an upside-only track for three years, rather than the two years that CMS has proposed.

Additionally, all three groups are also urging CMS to reverse its proposal on cutting potential shared savings in half—from 50 percent to 25 percent for one-sided risk ACOs. NAACOS specifically believes in “reversing the agency’s proposal to reduce the shared savings rate from 50 to 25 percent for ACOs in shared savings only or low risk models. Instead, NAACOS recommends that shared savings rates should be 50 percent for Basic Levels A and B, 55 percent for Basic Levels C and D, and 60 percent for Basic Level E.”

Similarly, AMGA wrote that “CMS’ proposal of a 25 percent shared savings rate for Basic Levels A and B further weakens what are already nominal financial incentives. The shared savings rate should be no less than 50 percent for upside-only ACOs.  Upside only low revenue ACOs should receive higher earned shared savings, for example, 75 percent or 80 percent.” Premier noted much of the same in its comments, attesting that the shared savings rate should be increased to 50 percent.

Will ACOs Stay in the MSSP?

At the core of the debate around the new proposal is if one-sided risk MSSP ACOs are saving the government enough money to warrant more time in these upside-only risk arrangements. CMS Administrator Seema Verma has been steadfast in her comments that these ACOs are not saving Medicare any money. In fact, she said in a press call following the proposed rule’s release in August that “[Upside-only] ACOs have no incentive, at all, to reduce healthcare costs while improving outcomes, as they were intended.” Verma also said she believes that the proposed changes outlined in this rule will result in $2.24 billion in savings to Medicare program over next 10 years.

On the other side of the savings argument are NAACOS and others, who attest that one-sided risk ACOs are saving Medicare significant money, to the tune of $1.84 billion in gross savings over the span of 2013 to 2015. To this point, some healthcare stakeholders fear that the CMS proposals, if finalized, will deter ACOs from staying in the MSSP, as well as prospective new ones from joining. But the federal agency, to this point, seems to be fine with these ACOs leaving the MSSP if they are unwilling to take on more risk.

A new poll from NAACOS, in conjunction with its comments to CMS, has revealed that 60 percent of ACOs who were surveyed oppose the proposed rule, while 27 percent are in favor. For the research, 127 current MSSP ACOs’ responses were included.

The NAACOs survey found that the four biggest challenges in the proposed rule, as noted by the surveyed ACOs, were: reducing the shared savings rates for one-sided risk ACOs; requiring more risk sooner for “high revenue ACOs,” which are typically hospital ACOs; shortening the shared savings-only timeframe for all new and some existing ACOs; and the proposed risk adjustment cap of plus or minus 3 percent, applied across the five-year ACO contract agreement period.

According to the research, after weighing the collective proposals in the rule, almost half of ACOs reported they are likely to continue participating in MSSP. While more ACO respondents report being likely to continue, more than a third report they are unlikely to continue.

What’s perhaps even more concerning to NAACOS is that a high number of ACOs, 60 percent, reported they would be unlikely to begin the MSSP if their ACO was not already participating and if they were evaluating the program under the revised policies.       

ACO contract agreements typically renew at the start of the calendar year, so it would be expected that CMS, after weighing the comments, would finalize the rule by January.

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CMS Announces 1,300 Participants for New BPCI Advanced Initiative

October 10, 2018
by Rajiv Leventhal, Managing Editor
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The new bundled payment initiative is voluntary, will qualify as an A-APM, and builds on the original BPCI model that ended in September. However, CMS has admitted that the first initiative did lose Medicare money

The Centers for Medicare & Medicaid Services (CMS) has announced that nearly 1,300 hospitals and physician group practices have signed agreements with the federal agency to participate in the Administration’s Bundled Payments for Care Improvement—Advanced (BPCI Advanced) model.

The participating entities will receive bundled payments for certain episodes of care as an alternative to fee-for-service payments that reward only the volume of care delivered.

According to CMS, the model participants include 832 acute care hospitals and 715 physician group practices—a total of 1,547 Medicare providers and suppliers, located in 49 states plus Washington, D.C. and Puerto Rico.  Of note, BPCI Advanced qualifies as an Advanced Alternative Payment Model (Advanced APM) under MACRA, so participating providers can be exempted from the reporting requirements associated with the Merit-Based Incentive Payment System (MIPS).

BPCI Advanced will initially include 32 bundled clinical episodes—29 inpatient and three outpatient.  Currently, the top three clinical episodes selected by participants are: major joint replacement of the lower extremity, congestive heart failure, and sepsis, according to CMS.

Back in January, CMS announced the launch of the voluntary BPCI Advanced model, noting that it “builds on the earlier success of bundled payment models and is an important step in the move away from fee-for-service and towards paying for value.” CMS Administrator Seema Verma stated yesterday in the announcement of the model’s participants that “To accelerate the value-based transformation of America’s healthcare system, we must offer a range of new payment models so providers can choose the approach that works best for them.”

Verma added, “The Bundled Payments for Care Improvement – Advanced model was the Trump Administration’s first Advanced Alternative Payment Model, and today we are proud to announce robust participation.  We look forward to launching additional models that will provide an off-ramp to the inefficient fee-for-service system and improve quality and reduce costs for our beneficiaries.”

Last year, CMS officially finalized a rule that cancelled mandatory hip fracture and cardiac bundled payment models. Verma has said in the past that she doesn’t think bundled payment models should be mandatory, a sentiment that some industry experts wholeheartedly agree with.

In contrast to the traditional fee-for-service payment system, in this new episode payment model, participants can earn an additional payment if all expenditures for a beneficiary’s episode of care are less than a spending target, which factors in measures of quality. Conversely, if the expenditures exceed the target price, the participant must repay money to Medicare.

How Did BPCI Fare?

The original BPCI initiative ended on September 30, and BPCI Advanced picks up where it left off, starting on October 1, and running through the end of 2023. This prior initiative included three models that tested whether linking payments for all providers that furnish Medicare-covered items and services during an episode of care related to an inpatient hospitalization can reduce Medicare expenditures while maintaining or improving quality of care. Model 2 episodes begin with a hospital admission and extend for up to 90 days; Model 3 episodes begin with the initiation of post-acute care following a hospital admission and extend for up to 90 days; and Model 4 episodes begin with a hospital admission and continue for 30 days.

According to CMS, the evaluation from these models revealed that BPCI Models 2 and 3 reduced Medicare fee-for-service payments for the majority of clinical episodes evaluated while maintaining the quality of care for Medicare beneficiaries. It also should be noted that spanning over the two years that participants were able to join the risk-bearing phase of the initiative, 22 percent of Model 2 participants, 33 percent of Model 3, and 78 percent of Model 4 participants ended up withdrawing. Most BPCI participants were in eithers Model 2 or 3; in 2017, just five hospitals belonged in Model 4, in which Medicare makes a prospective payment for the episode.

CMS noted in its report of the BPCI initiative, “Despite these encouraging results, Medicare experienced net losses under BPCI after taking into account reconciliation payments to participants.  Technical implementation issues, including the specification of appropriate target prices, contributed to these net losses. We are optimistic that Medicare will achieve net savings under a new episode- based Advanced Alternative Payment Model, BPCI Advanced, because it addresses the challenges BPCI experienced.”

To this point, a report from the Lewin Group, a healthcare consulting firm, found that in the most popular track of BPCI, Model 2, Medicare lost more than $200 million ($268 per episode) from 2013 to 2016. In Model 3, Medicare lost slightly more than $85 million ($921 per episode) over that same time period, according to the report.

Moving toward BPCI Advanced, the federal agency points out some key differences between the original model and the new one, such as:

  • BPCI Advanced offers bundled payments for additional clinical episodes beyond those that were included in BPCI, including, for the first time, outpatient episodes.
  • BPCI Advanced provides participants with preliminary target prices before the start of each model year to allow for more effective planning. The target prices are the amount CMS will pay for episodes of care under the model.
  • BPCI Advanced qualifies as an Advanced APM and is eligible to earn the 5-percent bonus in the Quality Payment Program.

Keely Macmillan, the general manager of BPCI Advanced for Archway Health, a Massachusetts-based company that helps providers get started in bundled payment programs, says she is happy with the level of participation so far. She did add that one thing her company noticed immediately, regarding the participant list, was the popularity of joint replacements and cardiac bundles. “Research coming out in the last few months has proven that these bundles do particularly well, and we’re excited to help our participants and see others industrywide continue to drive improvement in the new program,” she says.

Meanwhile, Clay Richards, president and CEO of naviHealth, a post-acute care management company based in Tennessee, and which is a BPCI convener, notes that its hospital and health system partners saved more than 8 percent, or approximately $2,000 per episode, which translates to more than $83 million in the BPCI initiative. “With the increase in BPCI Advanced participation, we expect the impact to be even greater,” says Richards.

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On the Road to Risk, Summit Medical Group is Driving in the Fast Lane

October 2, 2018
by Rajiv Leventhal, Managing Editor
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Dr, Jeffrey Le Benger, M.D., CEO of Summit Health Management and Summit Medical Group, discusses how his organization is succeeding in a mostly value-based care environment

At Summit Medical Group (SMG), the oldest independent multispecialty physician group in New Jersey, Jeffrey Le Benger, M.D., has been providing high-level leadership for 16 years. With more than 800 providers at 70 locations, multiple comprehensive ambulatory care campuses and a strategic partnership with MD Anderson Cancer Center, SMG handles more than 1.5 million patient visits annually. Its officials believe that its performance is marked by a sustained enhancement to clinical quality and patient outcomes, ongoing participation in emerging value-based reimbursement initiatives and meaningful cost containment.

Indeed, after devising and refining a highly effective practice management and patient care model at SMG and extensively studying the condition of mid-range and large-scale independent physician groups nationwide, Dr. Le Benger spearheaded the formation of Summit Health Management (SHM) in 2014 to share SMG’s formula for success via strategic partnerships and customized managed services contracts. Now, Le Benger serves as chairman of the board and CEO of Summit Health Management and Summit Medical Group.

SHM is now poised to become a national organization, with the aim to positively impact the delivery of patient care across the country, as Le Benger envisioned, with the 2017 establishment of a major agreement with the Bend Memorial Clinic in Oregon and an alliance with Arizona Primary Care Physicians (APC) that resulted in the formation of Summit Medical Group Arizona. 

In a recent interview with Healthcare Informatics, Le Benger outlined the progress and evolution of his organization and how it is continuing to plunge ahead into the world of risk and value-based care. Below are excerpts from that discussion.

How is your organization progressing when it comes to taking on risk for your patients?

We are at a point in which 65 percent of our patient base is based within risk-based contracting, and it’s a continuum, so you have fee-for-service and then percent to premium is on the other side. And then there are all aspects of risk in in between; there is pay-to-play, shared savings, and full risk. Most of our contracts that have upside and downside risk have a shared savings component. But as soon as we increase the size of our attribution and can mitigate our risk more evenly, then we will look to go to percent to premium as a group.

Jeffrey Le Benger, M.D.

Can you detail the ACO (accountable care organization) work that you’re involved in?

We are a part of the Trinity Health ACO [which serves patients in Illinois, Michigan, New Jersey and Ohio], and are in the Centers for Medicare & Medicaid Services (CMS)’ Next Generation ACO Model. Over the past two years we have received shared savings and we do take on upside and downside risk. The issue with Next Gen is that you are benchmarked against yourself [rather than against outside ACOs], so you have to improve [internally] every year. In Medicare Advantage, you are benchmarked against the community that you have the product within. So the house always wins. The government knows that shared savings pushes the envelope, but the cost to create that savings far outweighs the savings they get in a trend demonstration.

What are your thoughts on the recent CMS proposed rule for ACOs? Do you think it’s too aggressive or fair?

We are a large group of [nearly] 900 providers that is fully integrated and not consolidated, so pushing into risk is not an issue. We are already capable of handling more risk in the organization. But when you have a consolidated network, or an individual doctor or smaller group, the amount of data analytics that’s needed to manage risk is financially unaffordable. For a hospital institution, I think you will find that they will have a hard time on the payment schedule as they move towards risk on fair market value. So the small practices will have to figure out how they will consolidate into a larger group to help defray some of their costs for the data analytics they need to do in order to take on risk.

How are you currently handing MACRA/MIPS?

We are in an advanced alternative payment model (A-APM) since we are in Next Gen, though we still have physicians who come on that are required to do MIPS. For us, we have the data analytics to handle it and we have achieved a fair amount of savings in MIPS. Now they are moving to bundling programs, so we can manage that with the data analytics that we have. The government has demonstrations to see what makes sense and what doesn’t, and then you have all these practices figuring out how they could justify moving in and out of all the programs, and where the best economic value is. And it doesn’t mean you will have the best quality outcomes, but rather you are looking to move to the program where you see the best economic value.

How are things progressing with Summit Health Management?

[In 2014], we broke out all of management from Summit Medical Group and we started Summit Health Management. It started with 500 employees, and we have full coding compliance, we audit within it, as well as having all revenue cycle, accounting, and MSO (managed service organization) services within it. Also within it is a large population health department that we offer services to the three groups that we have MSA agreements with: Summit Medical Group New Jersey, Summit Medical Group Oregon, and Summit Medical Group Arizona. So we can scale the commitment and the resources within the management company to the three groups in order to run what is needed in that organization for its value proposition.

Each location is different, so we are ahead of the curve with upside and downside risk in New Jersey, with 65 percent of our population at full risk. In Oregon, it’s a little bit of shared savings and a little pay-to-play, and in Phoenix, besides the MSSP (Medicare Shared Savings Program) product and managed Medicare, on the commercial side it’s only a little pay-to-play. So we are able to adjust and scale what’s needed in the different organizations in the management company.

What are the keys to having 65 percent of your patient population in New Jersey at full risk?

It has to do with the governance and leadership of the organization, and how we structured the culture as an all-for-one. We also don’t differentiate in how the doctor sees a patient from the PPO world versus the HMO world. In all of our products, we heavily manage the sickest percent of the patient population, and we decentralize preventative care in the organization. We see it as “payer-blind” in terms of how we compensate within the organization. So they do not know who is a fee-for-service patient and who is an HMO patient because we don’t want to make a distinction on how they care for the patient. And that was culturally how it was developed in the group.

And on the back end, yes, sometimes we do a little more care management for one [side] or the other because it’s [needed], but we do try to manage all patients the same way. We know that all of our payers will eventually move to higher risk, so when you are in the fee-for-service world, these payers know what the total cost is because claims adjudication is still based in a fee-for-service world.

[Essentially], you are still putting in individual claims, but you are rolling up all those costs and then comparing it to your total costs to the total costs on the outside. If you cannot demonstrate savings to a payer, even in a fee-for-service world, they will go after your rate structure, and you essentially will be at risk because you will lose revenue if they decrease your reimbursement in that program.

How important are payer-provider relationships? Have they improved in recent years?

You cannot look at your payer relationships as adversarial when you are in a large group practice. Think of them as your partners, because as all insurers move to high-deductible or employer-based [plans], you have to look at how you achieve savings moving forward. When you look at shared savings, who is benefitting in the shared savings? It has to either be either the employer, the insurance company, the beneficiary, or the provider.

We are in a full-risk contract with Horizon Blue Cross Blue Shield in New Jersey, and they are a very good partner. We have more than 60,000 attributed lives who are at full risk with Horizon in the state, and we have seen that we have lowered the cost of care with this product over the past five years, and we have consistently beat the market in lowering the cost of care. So the payer is happy, the employer base is happy and the individual, who might not realize it, is happy because we look at the sites of service and we lowered the out-of-network or deductible cost for that patient.

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