Obamacare Shows Hospital Savings as Patients Make Gains

Photographer: Brendan Smialowski/AFP via Getty Images

While much of the focus on Obamacare has been on the government rush to open insurance exchanges by Oct. 1, 252 hospitals and physician groups across the U.S. have signed up to join the administration’s accountable care program, in which they share the financial risk of keeping patients healthy. Close

While much of the focus on Obamacare has been on the government rush to open insurance... Read More

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Photographer: Brendan Smialowski/AFP via Getty Images

While much of the focus on Obamacare has been on the government rush to open insurance exchanges by Oct. 1, 252 hospitals and physician groups across the U.S. have signed up to join the administration’s accountable care program, in which they share the financial risk of keeping patients healthy.

Less than five months before the Affordable Care Act fully kicks in, hospitals are improving care and saving millions of dollars with one of the least touted but potentially most effective provisions of the law.

While much of the focus on Obamacare has been on the government rush to open insurance exchanges by Oct. 1, 252 hospitals and physician groups across the U.S. have signed up to join the administration’s accountable care program, in which they share the financial risk of keeping patients healthy.

Under the program, hospitals and physician practices take responsibility for tracking and maintaining the health of elderly and disabled patients. If costs rise beyond an agreed upon level, hospitals may become responsible for reimbursing the government. If they cut the cost of care while maintaining quality, hospitals share in the savings. The government expects the savings may be as much as $1.9 billion from 2012 to 2015. Early indications suggest they are starting to add up.

“We’re providing better care because we’re keeping people out of the hospital,” Kenneth Davis, president of Mt. Sinai Hospital in New York, said in a telephone interview.

Mt. Sinai has reduced emergency room visits by 54 percent among high-risk patients. Similarly, New Jersey’s Hackensack University Medical Center saved about $16 million last year on care of about 11,000 Medicare patients who are part of the hospital’s accountable-care program. And at Coastal Carolina Health Care in New Bern, North Carolina, monthly emergency room visits dropped to 340 in February from 521 in April 2012.

Growing Evidence

Less than 10 percent of Medicare’s 51 million beneficiaries are treated by accountable-care groups, according to the U.S. Centers for Medicare and Medicaid Services. And the federal government has not yet weighed in with data to support the growing evidence that these new groups are saving money or improving health care.

Still, broader indicators suggest that changes spurred by the law, including formation of the accountable-care groups, are improving the health system, said Jonathan Blum, deputy director of the Medicare agency.

The proportion of Medicare patients who were readmitted to a hospital within 30 days of a discharge fell by one percentage point last year to about 18 percent, the first significant decline in five years. And the growth of national health-care spending per person in the U.S. dropped to about 3 percent a year in 2009 and has remained at that level, half the pace that health costs grew in 2007.

“There is something fundamentally changing in health care,” Blum said in a telephone interview. “Hospital admissions are being better managed and are being reduced.”

‘A Watershed’

The ACO program works by offering hospitals two options of incentives. Hospitals can take on risk immediately, in which case they get 60 percent of any savings -- and potentially face losses -- or they can forgo taking on risk in the first three years and decide after that whether they want to continue the program. In that case, they get a 50 percent portion of the savings during the first three years.

“I think it is a watershed,” said Bruce Merlin Fried, a partner at the law firm Dentons in Washington who serves as general counsel to the National Association of Accountable Care Organizations. “There’s no going back.”

At hospitals and physician practices who have signed on, individual patients like Gerald Medlin, 69, are seeing a higher level of service and better care. When Medlin’s health began failing in January, his daughter, Beth Medlin-Jackson, found herself in a bind. Her dad, suffering from kidney failure, respiratory illness and dementia, lives by himself in New Bern, North Carolina. She lives in San Diego.

Eyes and Ears

Medlin’s physicians at Coastal Carolina Health Care, a participant in the accountable care program, assigned Debbie Sutton to take charge of him. Sutton’s job, which exists only because of the health law, is to manage care for patients considered at high risk of hospitalization. She made sure Medlin’s hospital doctors and his primary-care physician were coordinating care, that Medlin kept up with his prescription medicines and that his daughter was in the loop. “She’s kind of the eyes and ears on the ground there,” Medlin-Jackson said in a phone interview.

Hackensack University Medical Center, meanwhile, has been hiring nurses to identify high-risk patients. Those patients are now instructed to call their nurses directly when they feel ill, instead of their doctors’ offices. That’s because physicians’ offices often recommend that such patients make unnecessary visits to the emergency room, where they are likely to be admitted to the hospital, said Peter Gross, chairman of the HackensackAlliance ACO’s board of managers.

High Rate

“We have a very high admission rate at the ER, about 40 percent, which is probably too high,” he said in a phone interview.

Mount Sinai Hospital in New York employed a multimillion-dollar supercomputer called “Minerva,” originally built three years ago for genomic studies, to mine patients’ medical claims data and identify those at highest risk to be admitted to the hospital, said Davis, the hospital’s president.

A dozen care coordinators hired starting last year by the hospital work with patients identified by Minerva to make sure they fill prescriptions, take their drugs and make it to doctors’ appointments. The coordinators also help patients take steps to monitor their conditions, such as weighing themselves daily if they suffer from congestive heart failure, a condition for which weight gain is an indicator of increasing severity.

‘Right Foods’

The powerful computer system is a key to success. Programmers developed an algorithm to identify patients at the highest risk of being admitted to the hospital, Davis said. The supercomputer, built with parts from Dell Inc (DELL). and Data Direct Networks, contains hundreds of terabytes of memory. Minerva applies that computational power to consider indicators including patients’ life-threatening health conditions, their age, medications they use, where they live and whether they live alone, Davis said.

“We do this for impoverished communities with frayed social networks,” Davis said. “Are they buying and eating the right foods, taking their medicines?”

Accountable care is not a new idea. It was tried with limited success in the 1990s as part of the drive to cut costs through Health Maintenance Organizations, closed networks of doctors and hospitals managed by insurers. This time, advocates, say, there’s a greater chance of success.

Davis said that earlier coordinated-care efforts often failed because they were largely run by insurance companies, and the programs weren’t perceived to be in the best interests of patients.

‘Adversarial Situation’

“It was an adversarial situation from Day 1,” he said. “There was no sense that decisions were being made in the patient’s best interest rather than in the interest of saving money.”

Under the U.S. health reform law, Medicare’s accountable-care program requires hospitals and doctors to show they are improving or maintaining the quality of their care before they are paid any bonuses, Blum said. More powerful technology will also help. And unlike in the ’90s, today’s programs are backed by a new law, providing “some surety that the agency will have a commitment to the program,” Blum said.

Still, critics say health providers aren’t likely to do any better today than 20 years ago.

‘Expensive’ Work

“This stuff is expensive to do. It’s very people-intensive,” said Lawton Robert Burns, the chairman of the Health Management Department at the Wharton School of the University of Pennsylvania. “The handful of programs that work -- and they’re just a handful -- you have to get nurses and other people like that in front of the patient, not through electronic means, working with the patient, coaching, hovering. That’s what it takes and it’s very costly.”

There also have been no scientific studies showing whether cost savings reported by hospitals and doctors are attributable to the new programs or some other reasons, Burns said.

“It could be a temporary fluctuation. It could be random,” he said. “They don’t know, but they’ll take credit for it.”

At Coastal Carolina, care manager Sutton insists it’s different this time. The physician group of about 50 doctors signed on with the Obama administration more than a year ago to become an accountable-care organization and hired care managers, including Sutton in July. With degrees in business and nursing, she focuses on the sickest and costliest of Coastal Carolina’s patients.

“We’re kind of a missing piece of the puzzle,” Sutton said in a phone interview. Each day, she meets or calls some of the 85 patients under her watch, making sure they make doctors’ appointments, take medications and stay out of the hospital unless necessary.

“Being a business person, I like people being accountable to me,” she said. “I make the patients accountable to me. It works.”

To contact the reporter on this story: Alex Wayne in Washington at awayne3@bloomberg.net

To contact the editor responsible for this story: Reg Gale at rgale5@bloomberg.net

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