The tax on medical devices affordable care act commonwealth fund

In the five years since the Affordable Care Act was passed, the nation's attention has shifted from the law's insurance market reforms and the bumpy rollout of healthcare.gov to the success of the marketplaces in covering millions of previously uninsured Americans. Far less attention has been paid to the parts of "Obamacare" that target problems with how health care is delivered and paid for, many of which become apparent when people receive their insurance card and seek out care.

These problems run deep and wide. For starters, there are the enormous costs of providing care in the United States, which place untenable burdens on patients and families, on employers, and on federal, state, and local government. Then there are the many Americans, disproportionately poor and minority, who are not getting the care they need to manage their health and avoid emergency rooms and hospitals. There are problems with communication and coordination among health care providers, compromising the quality of their patients' care and driving up costs still further. And there are the social ills, like poverty and unstable housing, that have an outsized effect on health yet all too often are left unaddressed. 1

Health care providers and others interested in fixing such problems run into daunting obstacles. Chief among them is a reimbursement system that tends to reward physicians and hospitals who are treating patients with acute conditions rather than those who are focused on preventing those conditions, or slowing their progression. Finding technological solutions and funding to improve communication among clinicians, avoid the duplication of tests and services, and improve outcomes for patients is also a challenge—especially for safety-net institutions working on razor-thin margins.

The Affordable Care Act, or ACA, takes multiple, complementary approaches to reforming our health care system. Some of these are intended to boost primary care, so providers can focus more of their attention on the sickest "high need, high cost" patients who account for much of the nation's health spending. Others seek to change the way hospitals, physicians, and other providers are paid, to promote greater collaboration and prudent use of health care dollars.

As illustrated below, the law includes a vast array of reform initiatives. The stories that follow spotlight just a few.

Holding Providers Accountable
for the Quality and Costs of Care

Paying health care providers for each and every test, procedure, or office visit—as is often the case in the U.S.—ends up rewarding the delivery of more and more services, often without regard to the benefit. And it goes a long way toward explaining why health care spending now consumes nearly 18 percent of the U.S. economy—twice the level seen in other high-income countries. Despite all the resources we devote to health care, as a nation we don't fare any better. Just slightly more than half of Americans, for example, receive the care recommended by national guidelines. 2

Maria Montaño learned to control her diabetes with help from her health coach, Herval Hernandez, who works in tandem with social workers, nurses, and physicians to help patients better manage chronic and costly conditions. Photos by Frank Martinez III

Many of the payment reforms in the ACA seek to reverse these incentives by rewarding providers who produce better patient outcomes at lower cost.

Maria Montaño, age 68, is part of the ACA's grand experiment to reshape health care in the U.S. She lives near McAllen, Texas, where the average cost of caring for a Medicare beneficiary was twice the national average. Montaño has had diabetes for 20 years. She lives alone, cannot read, and often has trouble taking her medications. Even though she had been getting her blood sugar level tested every few months, her condition began spiraling out of control last spring.

Things began to change for Montaño after her physicians at Donna Medical Clinic joined the Rio Grande Valley ACO. The ACO, or accountable care organization, is a network of 19 primary care practices located in the southernmost tip of Texas. The practices—some with just one or two doctors—banded together to participate in Medicare's Shared Savings Program, which allows providers to share in the savings they generate by keeping patients like Montaño healthy and out of hospitals and emergency departments. It was a gamble for the practices, because they opted to take on risk as well: if they failed to reduce costs for patients, they would have to pay significant penalties to the federal government. But taking on greater risk also made the practices eligible for greater financial rewards.

An accountable care organization (ACO) is an entity formed by providers—for example primary care physicians, hospitals, specialists, and nursing homes—that agree to work together and take responsibility for the quality and total costs of care for a designated patient population.

As of May 2014, there were 626 ACOs in U.S.*

To receive shared savings, ACOs must:

The Donna Medical Clinic's strategy was to focus more resources on patients with high needs like Montaño. That meant longer office visits, not only with doctors and nurses but also with social workers and health coaches like Herval Hernandez, who spend time with patients explaining medications and ways to control diabetes through better nutrition.

Starting last June, Hernandez called Montaño at 8:00 a.m. every day to check on her and help her figure out how to time insulin doses. Once a week, Montaño's daughter also reported her mother's blood sugar levels to Hernandez. In less than five months, Montaño's health improved dramatically—with her levels of HbA1c, a measure of how well diabetes is controlled, dropping from 15.87 to 7.2. "He really cared about how I was feeling," Montaño says.

Rio Grande is one of 405 accountable care organizations in Medicare's Shared Savings Program. 3 Some, like Rio Grande, are networks of individual physician practices; others are led by large group practices or by hospitals partnering with other providers, such as nursing homes.

To bring down spending, these organizations often focus on preventive care or on improving management of chronic conditions at home. Partners in an ACO are also encouraged to look for savings in their business operations. Could they negotiate better prices for supplies or medical devices? Could they turn to lower-cost staff, such as nurses and medical assistants, to provide care that doesn't require a physician?

Alan Kurose, M.D., Coastal Medical's president and CEO, talks with staff about their key role in improving care. "Every person who works at Coastal has an opportunity to touch the lives of our patients," he says. Photo by Bill Gallery

The Centers for Medicare and Medicaid Services (CMS) offered loans to some physician-led and rural ACOs to help them get up and running. One of these is Rhode Island's Coastal Medical, a medical group with primary care practices across the state, which used the funds to hire additional staff and convene team conferences to review how complex patients are faring and agree on next steps. 4 It also created Coastal 365, a clinic that's open year-round, including on evenings, weekends, and holidays.

In 2012, its first year, Coastal Medical saved $7.2 million. Half of that went to CMS, while some was returned as repayment for the loan. That left about $1 million for the ACO, which reinvested part of those savings and distributed the rest to all its employees—from receptionists and office managers to nurses, pharmacists, and physicians.

Not all ACOs in the Medicare Shared Savings Program fared as well. Only 52 actually earned shared savings after their first year or 18 months. 5 The rest either failed to achieve enough savings to qualify for bonuses or had costs that exceeded their spending targets. In a few cases, ACOs forfeited at least a portion of their shared savings by not meeting benchmarks for quality of care or not reporting data on all 33 quality measures.

Some ACOs struggled with program changes the government made mid-course, including revisions in savings targets. ACOs that did well out of the gate tended to have made investments in the information technology systems, data analytics tools, and staff needed to identify at-risk patients and monitor their care. Montefiore Health System, based in the Bronx, New York, is a good example. In 2011 it was selected for Medicare's Pioneer ACO program, which is similar to the Shared Savings Program but designed for organizations with experience working with a set budget.

Montefiore Health System helps sponsor the Tour de Bronx, a free bicycling event designed to encourage physical activity and interest in the sport by touring bike-friendly sites in the community. Photos courtesy of Montefiore Health System

After two years, Montefiore had achieved $27.4 million in shared savings, more than any of the other 32 Pioneer ACOs. "When people ask why we've been successful," says Kate Rose, Montefiore's senior director for public policy and government relations, "I say one reason is because we think about the work that needs to happen before a person gets medical care and the work that needs to happen after."

Montefiore's investment dates to the 1970s, when the local economy took a nose dive and many primary care physicians fled the Bronx. Left to care for patients who were often poorer than the general population, the health system created its own network of primary care clinics and hired a cadre of care managers to attend to patients' often considerable nonmedical needs, such as safe housing, nutritious food, transportation, and social supports.

More research is needed to see if the investments in better care management going on across the country will improve outcomes. But there are some promising signs. One study found that patients in Shared Savings ACOs noticed improvements: they reported that they had more timely access to care, and that their primary care physicians were more informed about their specialty care. And patients with multiple chronic conditions rated their care higher overall than before. 6 Still, ACO participants are making investments that may take years to achieve significant impact.

Paying for Value

The Medicare ACO programs are one way the ACA promotes greater accountability among providers for the cost and quality of care. The law also imposes penalties on hospitals when patients develop preventable infections at higher rates, or discharged patients have to be readmitted for avoidable conditions. There are signs the penalties are having an impact: the Department of Health and Human Services (HHS) reported that 50,000 fewer patients died in U.S. hospitals between 2010 and 2013 from postsurgical wound infections, dangerous drug reactions, and other "adverse events." And $12 billion was saved as a result. 7

The health reform law is testing other payment reforms as well.

Bundled Payments for Care Improvement

The Bundled Payments for Care Improvement initiative aims to reduce the wide variation in quality of patient care across the U.S. That variation means a lot of Americans aren't receiving treatments that are recommended by national guidelines. It also means costs are often much higher than they should be.

Like the ACO programs, the bundled-payment approach encourages physicians, hospitals, and nursing homes to work together to improve outcomes for Medicare beneficiaries and reduce their health care costs. Providers receive a lump sum sufficient to cover all the care required for, say, a hip or knee replacement, or for treating a heart attack. Providers that manage to keep expenses below a target and meet performance benchmarks can keep all or some of the savings, with a higher share going to those that are willing to assume the cost of going over budget. The Medicare program benefits, too, since the bundled price is lower than what it would otherwise pay if physicians, hospitals, and nursing homes billed separately for services, facility fees, and supplies.

The 6,600 providers that have joined the program choose to accept bundled payments from a list of nearly 50 conditions and procedures. 8 Some participants are focused on improving the quality and efficiency of care within hospital walls, while others concentrate on what happens during and after a hospital stay, or strictly after.

How a bundled payment works

Baptist Health, a five-hospital system in San Antonio, joined the bundled-payment program when it began late in 2013. It has already had success in a Medicare demonstration designed to test the model--receiving bundled payments for 28 orthopedic and nine cardiovascular services, working closely with physicians to develop clinical protocols and standardize the use of devices and implants to achieve greater discounts from suppliers. In all, Baptist saved $9 million over three years. 9

"Before that, the cost of doing the same case across five hospitals could vary greatly. Even the same physicians performing the same procedures at two of our hospitals had different costs," says Michael Zucker, chief strategy officer for the health system.

As part of the Bundled Payments for Care Improvement initiative, Baptists' physicians are now working to reduce variation, improve quality, and cut costs. If they are successful, they will receive a share of the savings on a quarterly basis. A recent focus has been reducing the use of blood products during joint replacement surgery, which carries risks to the patient in addition to extra costs. Because of efforts like this, infection rates have come down, and quality metrics related to surgical care have improved.

Bundled-payment programs present some challenges for participants. For one, divvying up payments based on providers' respective contributions entails a complicated and time-consuming review of claims. And some payers find it difficult to reach consensus on the services that should be included in a bundle. But as payers and providers gain experience with bundled payments and come to realize their savings potential, this novel way to pay for care may gain traction.

Strengthening Primary Care

In addition to promoting efficiency and fostering greater collaboration across providers, the ACA also seeks to strengthen primary care. Whether practicing in a doctor's office or a community health center, primary care clinicians are often the first contact we have with the health care system. They diagnose and treat problems before they become serious, promote healthy behaviors, and coordinate care with other providers. With good primary care, patients can often avoid hospital stays and costly visits to specialists.

The health reform law aims to strengthen and transform primary care practice in a number of ways. We report here on three reforms.

The Commonwealth Fund’s Melinda Abrams talks about how the Affordable Care Act is testing new models of care delivery and payment that emphasize quality, efficiency, and accountability.

Comprehensive Primary Care Initiative

Operating in seven regions around the country, the Comprehensive Primary Care Initiative encourages commercial insurers to join forces with Medicare and other public programs to ensure that primary care providers have the money and support they need to deliver more intensive services to their sickest patients.

In the Cincinnati-Dayton area where Ohio borders Kentucky, nine public and private insurers covering nearly 220,000 patients came together to offer monthly care management fees to 75 primary care practices, some in Kentucky. Anthem Blue Cross Blue Shield, which had already partnered with Humana and UnitedHealthcare to support physicians who needed to hire additional staff to help at-risk patients, said bringing Medicare and other payers into the mix meant that nearly all patients in participating practices would be eligible for enhanced care, should they need it. Within 18 months, the program brought down medical costs by 2 percent compared with expected trends for Anthem's patients, says Barry Malinowski, M.D., the company's medical director. "We are improving the quality of care, and with that I believe we are going to see continued reductions in costs."

The cost of care for Medicare patients in the region did not drop in the first year, but Richard Shonk, M.D., chief medical officer for the organization overseeing the region's initiative, says he expects that to change in year two because of data showing a 14 percent decline in hospital admissions for patients with chronic conditions. "I tell everyone that's the metric to watch because if team-based care is going to have any impact, it's going to be for patients with chronic diseases. If they are managed better, that is where we should see further reductions in hospitalizations," he says.

For Utica Park Clinic, a large group practice in Tulsa, Okla., participation in the initiative has led to much closer partnerships with insurers, including Blue Cross and Blue Shield of Oklahoma, which has given the practice access to its robust claims database. "We can now go patient by patient and identify those patients in a practice with a specific illness, and begin to manage those people as a group, instead of hearing about them after their third or fourth hospitalization," says Jeffrey Galles, D.O., chief medical officer. The extra funding has also allowed the clinics to surround patients with social and behavioral support services and to develop educational videos, like one on grocery shopping for people with diabetes or hypertension.

While Medicaid provides coverage to large numbers of low-income Americans, more than half its spending goes to the care of just 5 percent of beneficiaries. 10 Some of these patients struggle with complex or multiple chronic conditions like heart disease, or with issues like substance abuse or depression. Caring for patients grappling with both physical and behavioral health conditions can be quite costly, because one poorly controlled condition can exacerbate another. 11

Recognizing this, the ACA allows state Medicaid programs to designate certain providers as "health homes" that integrate physical health, mental health, and substance abuse services. 12 These sites provide hands-on care management to patients, with the federal government paying the lion's share of the costs of these extra services for two years.

For the Crider Health Center, a Missouri clinic that became a health home in 2012, the financial support enabled it to hire seven nurse care managers for 1,500 patients with depression, bipolar disorder, schizophrenia, or other conditions, often compounded by chronic medical conditions. The nurses meet with patients before their psychiatric visits to perform routine health checks, like monitoring cholesterol levels, and to identify gaps in care. They also convene meetings with primary care physicians, behavioral health professionals, and community support workers to discuss those with the most complex health problems. This team approach can help clinic staff learn, for example, that a patient hasn't been taking her medication because she's more worried about paying her utility bill, or that a certain antipsychotic medication is interfering with another patient's metabolism, complicating efforts to control his diabetes.

"In the U.S. we're very used to treating behavioral health and physical health separately," says Cindy Luce, senior director of outpatient behavioral health. "Now we're saying you have to connect the head to the rest of the body."

After federal funding ran out in 2014, Missouri opted to continue to support Crider and the state's other health homes. A progress report had shown the model was working. In their first 18 months, the state's 28 health homes based in mental health clinics had reduced costs among 18,408 patients by more than $23 million, in part by helping patients avoid disease complications.

But the level of state funding for health homes enables Crider to hire only one nurse care manager for every 250 patients. "We're doing this well with that ratio," says Nancy Gongaware, Crider's senior vice president for outpatient health care. "Do you have any idea what we could do if the ratio was much less than that?"

Independence at Home

Sylvia Trujillo was so desperate to have her 68-year-old mother Carolyn enrolled in the Independence at Home demonstration, she moved from one part of the District of Columbia to another, in the catchment area served by the MedStar Washington Hospital Center's house calls program. In the years leading up to the move, her mother was in and out of the hospital every month or so, as Trujillo struggled to find a physician who could manage her multiple, cascading health problems. These included diabetes, depression, and early dementia, as well as a rare genetic disorder that prevented her body from processing copper, which led to a host of health problems including multiple falls. "She easily saw 20 to 30 different physicians, because no one could figure out what was going on," Trujillo says. Between taking her mother to appointments, shuttling medical records from one clinic to another, and trying to keep each physician informed about the work of the others, Trujillo was exhausted. Having the option of home visits from a team of providers who coordinated her mother's care changed both her and her mother's lives. The MedStar team began to reduce her mother's medications and monitored her closely to address problems before they became bigger ones. With this personal attention, her mother steadily improved to the point where she had only one hospitalization in the last year. "One day, I'm going to add up all the money this program saved Medicare," Trujillo says.

Like the health home program, the Independence at Home demonstration targets a subset of high-need, high-cost patients who accrue large expenses—in this case, elderly Medicare beneficiaries with chronic conditions and functional limitations. 13 Because these individuals are often too sick or disabled to visit their doctors, physicians have a hard time detecting and responding to changes in their health status—such as difficulty breathing or weight gain—that can snowball into medical emergencies. The demonstration, involving just 17 medical practices, is testing whether making house calls and providing additional oversight to these patients will lead to better outcomes and lower costs.

The practices rely on teams of geriatricians, nurse practitioners, and social workers, among others, to make homes visits, during which they check patients' conditions, review medications, assess the safety of their living conditions, and try to catch problems before they worsen. Those sites that save money for Medicare—above 5 percent of the predicted cost of caring for patients using more traditional methods—will receive 80 percent of the additional savings. Many sites are hopeful they'll hit the mark. Oregon-based HouseCall Providers, for instance, saw hospital readmissions for its patients drop to 7 percent last quarter, down from 17 percent in 2012.

Another participant, Washington, D.C.–based MedStar Washington Hospital Center, aims to help patients wishing to spend their last days at home do so without concern they may be deprived of services. MedStar serves an elderly, mostly African American population. National figures suggest about 70 percent of African Americans die in hospitals and only 6 percent at home, in part because of their historical underuse of hospice services. But in MedStar's house calls program, 60 percent die at home, while 25 percent die in the hospital and 15 percent in inpatient hospice programs. "They die where they want with dignity and comfort. They also happen to not be in the super high-cost institutions," says George Taler, M.D., director of long-term care for MedStar.

Taler is hopeful this demonstration will be expanded to radically reshape care for the elderly. "If this goes national, we are going to be using the home and the nursing home far more than we are going to be using the hospital, and doctor's offices will be for ambulatory patients, as they were designed to be," he says.

The Next Five Years, and Beyond

The effects of the Affordable Care Act are just beginning to be felt in physicians' offices and hospitals around the nation. Although it's not possible to link these changes directly to the ACA, several recent trends suggest that U.S. health system performance is already improving.

First, national health care spending has grown far more slowly than usual in recent years, rising only 3.6 percent in 2013, the lowest annual increase since the Centers for Medicare and Medicaid Services began tracking this statistic. This historic slowdown was a factor in the Congressional Budget Office's decision to revise down its 10-year projection of the federal costs of the ACA's coverage provisions by $142 billion. Between 2015 and 2019, these costs will be 29 percent lower than the agency originally projected in 2010.

There have also been improvements on several important measures of health care outcomes. From 2007 to 2013, there was a 33 percent drop in 30-day readmissions (per 1,000 Medicare beneficiaries). The number of hospital admissions for health conditions that should be manageable in outpatient settings dropped by 27 percent for beneficiaries ages 65 to 74. And between 2012 and 2013, there were decreases in several types of hospital-acquired infections.

Whether these improvements are attributable in whole or in part to provisions in the ACA, they are good news for patients.

Five years removed from the Affordable Care Act's passage and just a few years since many of its health care delivery system reforms got off the ground, it's far from clear what kind of impact we will see. These reforms are still in their testing phase, as experts try to figure out the best way to achieve the overarching goal of better care at lower cost. The law's multifaceted approach reflects the reality that there is no single path forward, that no single innovation will work everywhere, in every environment.

Still, these stories from the field are examples of early progress. When taken together with reform efforts already under way in every state in both the public and private sectors, they suggest the ACA is beginning to move care delivery in the right direction. Will the nation be able to maintain, even accelerate, this momentum? Will the leadership, resources, and commitment be there to ensure success? Will patients agree to play a bigger role in decisions about their care and their health? In the coming months and years, we should begin to get answers to these and other key questions. Stay tuned.

Notes

Affordable, quality health care. For everyone.
Copyright © 2015 The Commonwealth Fund