New Health Care Models Offer Alternative to Fee-for-Service Care

Ryan White, a 2011-12 California Endowment Health Journalism Fellow and a freelance writer, will be blogging for Reporting on Health during the 2012 National Health Journalism Fellowship July 22-26 in Los Angeles. Follow his and other posts about the fellowship on Twitter at #nhjf12.

For southern California’s CareMore medical group, necessity was the mother of innovation.

When a band of some 20 doctors first formed the group in Downey, Calif., 16 years ago, the plan was to approach major insurers like Blue Cross and offer to take over medical care of some percentage of the insurer’s members for a set price or monthly fee. So patients would go to CareMore for everything from immunizations and diabetes treatment to an emergency room visit and subsequent hospital stay.

The business model proved difficult for the company in its first few years. “We were at the verge of bankruptcy, and we just had to figure out what we were doing wrong,” said Dr. Ken Kim, chief medical officer, in a panel discussion before the 2012 National Health Journalism Fellows.

After the company managed to retreat from the brink of financial ruin, the organization decided to basically become an insurance company itself, rather than contract its services to other insurers. But it would be an insurer with a model for delivering care baked inside of it. The move would allow CareMore (purchased by WellPoint last year for $800 million) to begin developing its own rules for how it managed care for patients, and it wasn’t long after when both quality of care and finances began to improve for the company, according to Kim.

But first, they had to identify the problems with how they had been dealing with patients. When Kim and his colleagues pulled 150 charts of some of CareMore’s sickest patients, several patterns quickly became evident. Perhaps most importantly, the doctors noticed a lack of coordination. That typically meant that primary care doctors, specialists, nursing home staff and the family had little to no discussion about how to manage a patient’s health. Given that CareMore’s average patient age is 75, even short lapses in proper care could result in hospitalization.

“These are frail patients with lots of chronic diseases, and when they’re admitted to the hospital for any reason, that means something bad is about to happen,” Kim said, adding that a quarter of patients admitted to a hospital at that age will die in any given year. Because most hospitals operate on a fee-for-service model, Kim said, there aren’t strong financial incentives for the hospital to ensure the patient gets the best care and avoids being readmitted. “A lot of times (hospitals) have to bill to survive,” he said.

CareMore, part of a new and growing trend of provider networks called Accountable Care Organizations, decided it would rethink how it managed patients. “CareMore will own the coordination of the patient, at least when they come into the hospital,” Kim said. “We’re going to own that patient until that chronic disease is taken care of, or they die.”

The organization is seeing results: CareMore’s readmission rate is 10 percent, compared to 19.6 percent for Medicare fee-for-service models, according to Kim.

But what exactly does owning the patient’s care mean? Many of the solutions CareMore has adopted might seem like common sense in any world other than health care. After creating a wound management program that relies heavily on nurses and “tender love and care,” Kim says CareMore now has an amputation rate for diabetic patients that’s 66 percent lower than Medicare fee-for-service models.

CareMore providers also began visiting the homes of “noncompliant” patients. In one home, they found a patient with rheumatoid arthritis had stopped taking her meds because her arthritic hands couldn’t open the prescription bottles collecting in her home. “As a health care organization, we have to take the responsibility of helping the patients be compliant,” Kim said. “What do we have to do? We basically have to go into their homes.”

Complimentary taxi rides, a home physician program, early intervention teams, a program to make sure new patients don’t suffer a lapse in their meds — these are all part of broader strategy of coordinating care, minimizing hospitalizations and lowering costs.

“We believe in a competent generalist being the quarterback of the patient’s care,” Kim said, expressing his belief that the fee-for-service model that predominates today results in poor quality care, perverse incentives and unsustainable costs.

Are ACOs and lump-sum payments among the most promising solutions for curbing runaway health care costs? It’s too soon to say, but organization’s like CareMore appear to be on the right side of several key health care trends. As Mary Agnes Carey, senior correspondent for Kaiser Health News, explained to NHJF fellows this week, starting in 2013 Medicare payments will be reduced for hospitals with high rates of potentially preventable readmissions. The Affordable Care Act also carves out space for bundled payment plans, where hospitals receive payment for an entire episode of care (a hip replacement, say), rather than billing for each individual test and procedure.

And yet even while ACOs and bundled payments may make inroads in the years to come, fee-for-service is still dominant model in health care, even assuming the survival and implementation of the Affordable Care Act.

“I really think that unless they get rid of fee-for-service, this Accountable Care Organization model will not work,” Kim said. “You can’t reward doctors or institutions for not taking care of patients well, and that’s what fee-for-service is in my opinion.”

Image by myfuture.com via Flickr