High Hopes for ACOs: When Work & Life Intersect

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My wife, Sarah, and I welcomed Charlie Kraus into our lives a little more than four months ago and what an awesome 120 days it has been!  We love our little guy so much and can’t imagine life without him.

There is much to be thankful for but looking back at early pictures of Charlie (the one above is taken of Charlie in my arms just an hour after he was born), I am reminded about the wonderful healthcare experience we had from start to finish provided by the good folks at Massachusetts General Hospital.   From the initial pregnancy diagnosis to when we left the hospital with Charlie in tow, Dr. Kristen Eckler and her team made us feel like the health of Sarah and Charlie was their one and only concern.  The nurses at MGH were amazing and always gave us the comforting sense that they were “all over it”.  It was what healthcare delivery (pun intended) should be – a perfectly coordinated and customer friendly experience.   And, as a result of their great work, we now have this little guy who brightens our lives each and every day.

What a cute little elf

My reflections on the wonderful experience we had at the MGH contrasts to that of my sister who just two weeks after Charlie’s birth had a hip replacement procedure at another top academic medical center in Boston.  Let’s just say that my sister had a pretty horrible experience.  From the get go, she was really ambivalent whether she should have a hip replacement at such a relatively young age,  but a “leading orthopod” convinced her it was the right thing to do and that “she would be back to new” in no time.  Unfortunately,  once the “sawing, hammering, and screwing” was done, the orthopod was nowhere to be found.    On top of this, the rest of my sister’s care felt discombobulated and uncoordinated.  I distinctly remember visiting one night and one of the nurses asking my sister what medications she was allergic to and had been given during the prior shift and thinking to myself, “why is this nurse asking my sister who is doped up on pain killers”?!?.   Thank god I was there to translate but what would have happened if my sister was alone and mentally or physically incapable of properly answering as many patients in our system are? To add injury to insult, it turns out that my sister has had some complications related to her surgery that, four months later, have left her far from “back to new”.

So why is it that two family members who went to two top-flight hospitals and were treated by two overly qualified doctors had two extremely different experiences?

Is it that Sarah, Charlie and I were just lucky?  Or maybe our OBGYN was just more compassionate and caring than my sister’s orthopod?

Maybe?   But, more likely to my mind, it all comes down to incentives.  Medicine is a business after all.

Incentives in a ‘fee for service’ healthcare system

What do I mean by different incentives? Weren’t each of the doctors and hospitals reimbursed in the same ‘fee for service’ manner?

The answer is yes but the underlying motivations for the OBGYN group to provide high quality care and customer service to my wife and I were stronger.   For starters, there is a probability that my wife and I may have another child.  On top of this, most of our friends are of child-bearing age.   And one thing I know for sure is that gossip about a bad child birthing experience at a Boston based hospital is more viral than any online social network I know of.

Put this in contrast to my sister who statistics show is unlikely to have another orthopedic procedure over the next two decades and who doesn’t have a lot of friends who are of the age to need a reference to a doctor or hospital for a hip procedure.   By the time her reference really matters, the doctor in this case will most likely be retired and resting comfortably.

So even though both got paid under the same reimbursement schema, which doctor/health system do you think was more likely to be hyper-focused on high quality care and a top-notch customer experience?  As with any business, incentives matter in healthcare.

The Year of the Accountable Care Organization (ACO) – why the rules of the healthcare game will change in 2013 and beyond.  

Some have cynically joked that ACO stands for “awesome consulting opportunity”.

An ACO is defined as “a group of health care providers who integrate clinically and financially to provide coordinated care and chronic disease management to a group of patients regardless of the setting in which the care is delivered.  The individual doctor’s and organization’s payment is tied to achieving quality of care goals and outcomes that result in cost savings.”

That’s a lot of words but what does it all mean and how will it actually improve care?

To me, the ACO movement is all about changing the rules of the game to compensate doctors and health systems in terms of the output (i.e., the quality of care and ultimate health/recovery) rather than the input (i.e., the visit or the surgical procedure).   Think back to my sister’s orthopod;  in the new ACO world, the doctor in this case would  not have been paid until it was clear that my sister was truly “back to new”.   In such a reimbursement schema, the doctor would care as much about the coordination  of post-surgical care such as managing the nurses and physical therapists as he would the actual surgery.   And, to my mind, every patient including my wonderful sister would be better for this type of reimbursement arrangement.

There has been a lot of studies conducted in recent years that speak to the rise of accountable care organizations and why they will improve the quality and cost of healthcare provided in our country.  I was excited to read a recent Oliver Wyman report (http://www.oliverwyman.com/media/OW_ENG_HLS_PUBL_The_ACO_Surprise.pdf) that predicted that roughly 10% of patients in the U.S. will be treated under some type of ACO reimbursement arrangement by the end of 2013.   Closer to home, Beth Israel Deaconess Medical Center CEO, Kevin Tabb, recently told me that 60% of the patients they treat are now under some type of risk arrangement and BCBS of Massachusetts is one of the leading payers when it comes to promoting pay for performance.  And, at BVP, we have seen an increase in the number of companies  – both large Fortune 500 (Aetna, United, Cigna, etc.) and smaller venture backed (Evolent Health, Remedy Systems, Valence Health) – that are pursuing payment reform opportunities.

So, as we sit here at the beginning of 2013, it sure feels like we are at a tipping point of the ACO movement.   And I, for one, am looking forward to a future driven by different incentive arrangements.

Providing accountable and coordinated care where it is most needed

We at BVP are clearly big believers in the accountable care movement and we recently made an investment in a company called Health Essentials that is pioneering care coordination for frail, elderly patients.   The need for coordinated care is most acute among this segment of the population who tend to be medically complex and chronically ill; these patients often have multiple illnesses, take numerous medications, and see many different doctors.   Historically, care had been completely uncoordinated for this segment and, not surprisingly, medical waste and error has been highly prevalent.  As a result, this segment which is just 15% of the total population remarkably accounts for 75% of the cost in our system.

Founder Kim Phan started Health Essentials to revolutionize the healthcare experience for the frail and elderly and she has done so with much success.  Today, Health Essentials  is a highly profitable, high growth post-acute care coordination company that partners with most of the leading medical groups and health plans in the Western part of the country.   We at BVP are very excited to be part of the Health Essentials team and are big believers that the company’s model of care can be successfully and profitably expanded across the nation.

Our investment in Health Essentials is the first of what we hope will be many in accountable care so if you are an entrepreneur in this area,  BVP would love to meet with you to learn more about your company and business plan.

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