Cure Michigan

Metro Detroit’s large, nonprofit hospitals get an infusion of private sector competition


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The University of Michigan Health System, St. John Health, and the DMC are also in the process of creating ACOs.
Meanwhile, U-M Health System is finishing its participation in a five-year national demonstration project launched by the Centers for Medicare and Medicaid Services (CMS) that preceded the ACO model.

The project’s goal was to improve care and reduce costs for the treatment of Medicare patients with heart conditions or diabetes, or who underwent cancer screenings. Overall, the project included 10 groups nationwide. An August 2009 report on the project showed U-M Health System saved CMS nearly $3 million over its target by improving the coordination of care for patients who were transitioning from the hospital to home care or another setting, and reducing unnecessary treatments and readmissions.

The University of Michigan performed best overall out of all of the groups in the pilot, U-M’s Pescovitz says. “That particular pilot and others position us ideally to create an ACO.”

Insurers are also rolling out programs to support the structure. The state’s largest insurer, Blue Cross Blue Shield of Michigan, last year introduced a Patient-Centered Medical Home model. The offering designates physician practices as “medical homes” to coordinate care across all health provider settings.

It’s no small undertaking. Practices are redesigned to be more efficient, provide higher-quality care based on the latest medical evidence, and offer services like 24-hour phone access for patients. The model also requires that practices make extensive use of technology, including e-prescribing, maintaining electronic health records, and securing communication between different providers.

The Blues has designated 1,800 physicians as “medical homes” among 5,000 doctors working toward the goal, says Thomas Simmer, Blue Cross senior vice president and chief medical officer, making it the largest such program in the nation. In July, the practices that showed the best performance across the entire continuum of care received a higher set of fees. “It’s a watershed event,” Simmer says.

Early analysis of the data indicates that designated practices are showing improvements. According to the Blues, the practices have a 2.6 percent lower rate of adult inpatient admissions than nondesignated practices, and a per-member per-month cost that is equally lower.

Meanwhile, ER visits are 1.4 percent lower compared to others, while radiology usage was 2.0 percent lower and pediatric ER visits were 2.2 percent lower.

It’s too early to attach dollar savings to the lower usage rates, Simmer says, but even small percentage point movements are meaningful, as the practices cover about 2 million patients. “This isn’t a project; it’s an ambitious program,” he says. “It’s the future of health care.”

But if the future is happening now, key details have yet to be figured out, providers say. “We’re in a cross between business as usual and creating a structure for health care reform,” St. John’s Maryland says.

Sticky logistics of how, exactly, relationships between different providers will be structured to make the organizations work have yet to be ironed out, as do specifics regarding how hospitals and other providers will be paid for their services.

“You’re hearing a lot in the press — ‘We’ve created an ACO,’ ” says physician services group Medical Network One CEO Ewa Matuszewski. “You may have created a new legal entity, but you have to have many competencies in place to truly have an ACO.”

Internal operations need to be restructured, she adds, and legal regulations that govern how hospitals interact with physicians must be rethought. “How do you know that the relationship you have with a health system and other organizations is correct? The biggest [question] right now is, who is going to address concerns of antitrust, fraud, and abuse? These are legal issues that go with these ACOs, and we have to be really judicious. The window is short; Medicare has designated its program for 2012.”

And, if ACOs truly do their job, hospitals may see fewer patients enter their doors, says St. John Chief Strategy Officer Robert Hoban.
“Health care reform is bringing changing care and a changing experience for patients,” he says. “But to work, reimbursement has to change; it has to be based on care and management.”

Reimbursement for health care providers has usually centered on “units” of care: See a patient for a checkup and receive a set rate in return; send that patient for an MRI, and the radiology department will bill for that unit of care. And if it is still done that way, reimbursement is shifting toward bundling patient services together across the spectrum of care, Hoban says.

Hospitals could do well under that type of reimbursement, he adds. But how quickly the pay will catch up isn’t clear.

Lutz says 2014 is a long way away. But, he adds, “if hospitals can thrive (in the interim), they should get better with health care reform.”

At least one thing will remain constant. “There’s always heavy competition,” DMC’s Duggan says. “There are going to be a lot of changes; physician and hospital alignment is being forced by the feds. The systems that handle that well will do well.”

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