Accountable Care Organizations Prepare for "Pathways to Success" Program

^{By Edan Stanley}

Lynn Barr, CEO and founder of Caravan Health, a mission-driven company bringing population health to life by building accountable care organizations, discusses the Medicare Shared Savings “Pathways to Success Program” and explores the potential ramifications for ACOs as the application cycle deadline quickly approaches.

Please tell us about yourself.

My name is Lynn Barr, and I'm the CEO and founder of Caravan Health. I began this company back in 2013, where I was working with rural providers across the country. I was the CIO in a rural hospital. I couldn't figure out how we could participate in managed care, because we were so small.

I thought we needed to start pooling rural providers together. We found an ACO [accountable care organization] to be a really good vehicle to do that. We started these affiliated, or what we now call collaborative, ACOs back in 2014.

After a few months, the hospital board looked at me and said, "You're the IT person. Why don't you just take the services and get them out of the ACO, so we can talk about patients and not all this stuff." I did, and that's how we formed Caravan Health.

We took this idea of driving local patient care, of collaboration, about supporting physicians, and about using nurses to deliver care because we didn't have any doctors. We created this ACO program that CMS [the Centers for Medicare & Medicaid Services] funded through the ACO Investment Model (AIM), and suddenly we had 150 health systems.

Those initial 150 rural health systems—that are most of which are still with us today—have saved $26 million in the first year, $54 million in the second year, and we haven't got our third-year results yet, but it saved about $80 million so far, and has made dramatic improvements in quality.

Our results were so amazing that suddenly urban providers started calling us. Now we work in both urban and rural areas. We have 630,000 attributed Medicare beneficiaries, about 250 health systems across the country of all sizes, and are now launching statewide ACOs in Mississippi, Florida, Idaho, and Texas.

Can you explain what the Medicare Shared Savings program currently does and what the Pathways to Success add-on rule is going to bring?

The Medicare Shared Savings program allows health systems, physicians, and hospitals to look at their population as a whole, and to move from one patient at a time, one intervention at a time, to thinking about how do we make this whole population healthier, how do we improve the quality of life for everybody that we treat, and change our orientation from reactive care to proactive care.

It's been a wonderful journey. It's changed how we deliver care and has changed the conversation in really stunning ways. We're excited about that.

The new program is a natural evolution of the rules. The government feels it is really important for providers to take risk. If there's risk in that program, they're going to pay more attention to it, and they're not wrong.

We're moving 100,000 lives into Pathways for Success in July, and we anticipate moving another 200,000 lives in Pathways in January of next year. We're sharing the risk with our providers, so I’ve got to tell you, we're taking it more seriously, too.

We took it really seriously before, obviously by our results, but it does give you pause when you think about what you're doing, and how you can't let people go. Everyone has to do the work. You can't enable free riders. You can't enable people.

Everyone's busy. Everyone has got too much to do, but this is really important. We've all got to work really hard on this, because this is the future of our payment.

Can you please talk about why the July 2019 deadlines are so important?

July will be a big month for the Shared Savings Program. The first cohort in Pathways to Success kicks off in July of this year. ACOs that started in 2016 were faced with a choice—either join Pathways in July or get out of the program. We are really pleased that so many decided to give it a try. That July cohort may even have an advantage with their benchmark calculation because of high flu season costs in 2018. There are also important deadlines coming in July. Providers that want to switch over to Pathways from the old program, or those that want to join for the first time, will have to submit a notice of intent to apply in June and turn in a full application between July 1 through July 29. If they don’t apply in July, they can’t join Pathways until 2021.

What are the main concerns with the new rule from ACOs about shortening the length of time available to assume downside financial risks?

A lot of us have grown used to having up to six years with no downside risk. In Pathways they still have at least a year or two with no downside risk. It could be hard for the new entrants. They're going to have to really prepare much more than in the past. They're going to have to take it a lot more seriously.

That is the whole purpose of CMS moving this quickly. They need to see the savings, because the trust fund goes broke in 2026. They need to see the savings, so they're pushing providers to be more engaged and work harder and faster on achieving those savings.

It will be challenging for people to achieve those savings, but not if they do the work. The funny thing about this is that everyone knows what needs to be done.

We all know that we need to provide prevention, wellness, and chronic care management services for our patients. We need to identify our high-risk patients, and do chronic care management for them. We need to appropriately code their chronic conditions, and we need to better control post-acute care.

Everybody knows that's what you have to do. Why is it that so many people don't do it? Because it's hard to change. If you have to go into risk, and you don't do those things, you're going to write a check.

Maybe this will be the impetus people need to implement the programs that have been proven to work. If they implement those programs, they will not write a check. If, and I'm going to give one caveat to that, if they have enough lives in their ACO to escape statistical noise.

Can you highlight what ACOs should be doing to prepare for these changes?

Let's talk about the scale issue. The only concern we have about the long-term viability of this program is that providers are too small to take risks. It was really interesting in recent testimony from MedPAC, the Medicare Payment Advisory Commission, to Congress about their concerns about MIPS, for example.

They said we've got to find a way to pool these providers. You can't judge cost and quality on a one-doctor level.

One of the questions we've had all along is how big does an ACO need to be? CMS said 5000 lives. We set up all of ours at 10,000 lives, and we were seeing swings in their results that were plus or minus 10%. Some saved $10 million this year, lost $10 million the next.

How does that happen? That happens because we know health care spending is really noisy. The smaller ACOs have way too much statistical noise to take risk. That's our biggest concern about how most of us are going to survive in all this.

Eighty-five percent of all ACOs have less than 25,000 lives. Our data suggests that you need 100,000 lives to be successful. Somehow, these ACOs are going to have to come together and pool their lives, just like insurance companies pool lives.

Provider-based, value-based plans have to pool providers to be able to take risk, and to create a reliable income stream.

Is there any concern for physician-led ACOs or smaller ACOs to exit the program because of these rule changes?

Yes. Any successful ACO is a physician-led ACO. We take a little bit of exception, because we have hospitals in our ACOs, but they're physician-led, right? Because otherwise, you don't get results. Even if a hospital is in there, if they're good, the doctors are in charge. But I digress.

If you've got 5000 lives, your probability of writing a check to CMS is about 10%. The amount of risk that a smaller ACO has to take compared to the amount of dollars they have at risk, that risk/reward ratio doesn't make sense to them, and they don't have the capital.

What we see in the market is we see for-profit companies that are out there that are aggregating physicians, like Aledade. Thankfully Aledade is out there, because I don't know who would take care of these PCPs [primary care physicians] otherwise. They are out there, aggregating physicians.

We also work with hospitals to aggregate the physicians in their community, underwrite their costs, underwrite their risks, and partner with them on their population. Physicians are going to have to work together; Everybody is going to have to pool their lives together to be successful.

It's not just physicians. The majority of the hospitals in this country do not have sufficient number of PCPs to take risks on their own. Everybody is going to have to come together somehow.

How do you anticipate the new rule improving cost or quality of care for beneficiaries? And, how could it potentially lower or increase financial burden for payers and providers?

I think, actually, that quality in these programs are doing quite well, and none of this really targets quality anymore. If you get in the program, your quality goes up. Our quality scores for our new entrants typically go up 15% to 20% in the first year. Quality is a natural outcome of these programs, and I'm really happy about that.

From the cost perspective, this is going to be challenging on all sites. There isn't a lot of profit here to be passing around from one to another. There's a lot of costs associated. There are costs on the payer's side and costs on the provider's side.

The amount of savings that we can generate on a patient is relatively small. Keep in mind that we're in fee-for-service. The idea that I can go to a provider and say, "Don't do this procedure," because two years from now you might get a check for half of it back, is never going to work.

The only way we can be in these fee-for-service programs, we're in no control of the beneficiary, is to change patient behavior, which is hard, hard work, and it takes a long time. It's a very incremental process.

We can bend trend 1% to 2%, per year. Let's think about that. If I bend trend by 2%, per year, I've saved $200 for the ecosystem. That's the payer, the provider, me, the vendors, everybody is coming after $200.

Half of the savings go back to Medicare in the current program. They get $100. That leaves $100 for the providers, and then they've got costs. Medicare's costs are probably higher than $100.

That is the issue at hand. The reason we're doing it is not about the economics of that $100. It's about the economics of trend. If we all bend trend 1% to 2% per year, the savings 10 years from now are tremendous.

That's where the real benefit will go, and it will go to the payers, but it will also go to the providers. If we don't achieve those savings, their only way for payers to deal with providers is cut their payment. If we do, we can continue to get paid a reasonable rate, learn how to reliably access value-based payments to supplement our income.

Overall, if an ACO paid attention to anything related to this new rule and these new developments, what should it be?

ACOs need to think about what happens if they get out of the program. What is the back-up strategy? The other programs that are out there are experimental and may not cover your entire group of physicians. That's not where you want to go.

CMS is saying you must take risks. What providers don't talk about—and they should be talking about—is according to the MACRA legislation, by 2026, every year that a provider does not take risk, their Medicare reimbursements will be reduced by a half percent for the rest of their lives, tied to their provider identifier.

That half-a-percent will accumulate. Two years, it's a percent. After 10 years, it's 5%, 20 years, it's 10%. Health systems that are not taking risks are not going to be viable by 2026. There's no other program for us to learn about and go into.

This Shared Savings Program is robust, well run by CMS, and the new rules make it stable. Providers are going to have to make this work, because there's no back-up plan, and if you're not in risk, you're not going to be a competitive health system.

Within the next few months, when CMS comes out with clear guidance on waivers, of Stark and anti-kickback for risk-bearing organizations, it's going to be game over. Because if you don't take risks, you can't work with the docs in your community, but your competitors can in a totally different way. Now is not the time to stop.