By Ray Niekamp
It’s the second largest check most businesses write: health care. The United States spends two-and-a-half times more to insure its citizens than other countries – to the tune of $2.4 trillion a year. But Americans are not necessarily any healthier than citizens whose countries spend far less. The health care reform law signed in March by President Obama aims to put 30 million more Americans on health insurance and hold down costs. But that is the basic problem.
“What got us here was a loss of understanding of where our costs are coming from,” said Dr. Spencer Berthelsen, the CEO of Kelsey-Seybold Clinic in Houston. Kelsey-Seybold’s “Kelseycare” plan aims to identify those costs, and put measures in place to control them. It’s a system called an “Accountable Care Organization,” or ACO, and Dr. Berthelsen says it’s the next big thing in health care.
The founder of Kelsey-Seybold, Dr. Mavis Kelsey, patterned the clinic after the famed Mayo Clinic in Minnesota. A number of doctors with different specialties under one roof bring all of their expertise and resources to bear to solve patient problems. “Other examples of ACOs include Scott & White in Central Texas, Kaiser Permanente in California, and the Cleveland Clinic in Ohio,” Berthelsen said.
“We offer a higher value for healthcare services in an accountable fashion,” he added. The ACO is based on four characteristics: an evidence-based approach to medical care, using the body of medical evidence available in clinical trials from the past 50 years; heavy investments in information technology to organize data so that caregivers have the most accurate information available; and quality and cost reporting — the ability to actually report on costs and how quality is affected.
Those characteristics distinguish ACOs from traditional plans such as PPOs. “A PPO has none of those four characteristics,” Berthelsen said. “They may have investments in electronic medical record systems, but there’s no requirement that they follow an evidence based practice, and it’s largely left up to their own judgment. There’s no requirement for reporting of quality of costs–only the total premium or the expected costs in the case of a self-funded employer. PPOs also have no accountable form of payment, and since they are fee-for-service based, the providers are incentivized to provide more healthcare services, irrespective of whether or not it’s beneficial for patients.”
Furthermore, said Berthelsen, accountability can only be measured by coordinating the care for a defined population. “That requires patients and employers to make a selection that they are going to be taken care of by their chosen ACO. Caregivers operating in the traditional system don’t know what patients are actually active, so they can’t be held accountable for their outcomes.
“Also, we are better equipped to handle wellness initiatives because we know which patients have not yet received preventive services such as mammograms, colonoscopies, and immunizations, and we can alert them to receive these procedures. Since a PPO has no defined population and individuals commonly rotate between physicians, they have now way of knowing what procedures need to be taken to prevent future problems.”
Pay for physicians is another differentiator. Kelsey-Seybold pays its doctors partly on salary, partly on performance. That eliminates the temptation to order a battery of tests or procedures that may not be necessary. It’s those unnecessary procedures that drive up medical costs, and have not been shown to improve patients’ overall health.
“Because we have a defined population combined with an electronic medical record system, we’re better able to see all of the procedures and tests that any one patient has received,” Berthelsen said. “Right off the bat, we can eradicate much of the redundant testing that goes on in the traditional systems because of lapses in the health record. This is a huge driver of increasing healthcare costs.”
A 2009 study by Hewitt Associates that evaluates the quality and the cost of care in many of our nation’s healthcare institutions found Kelsey-Seybold to be the most cost-effective of all plans offered in the Houston area. “Last year, we were 19 percent more efficient than the average PPO, the dominant form of insurance in Houston,” Bethelson said, “and we consistently rank superior in terms of the quality of our services.”
Other Houston-area providers are looking into the Accountable Care model, including Methodist, St. Luke’s Episcopal, and Memorial Hermann. Berthelsen welcomes the competition. “We believe that ACOs are the only proven model that moderates cost and elevates quality and therefore advances value, which is what we’re all really after,” he said. “In any one community there should be more than one ACO — enough to develop a competitive environment. Without that competition, there’s no impetus to improve beyond where we are today.”
But even the presence of multiple competitors is not enough. “To be successful, we need to have the willingness from the purchasers of healthcare to distinguish between the highest value of all the ACOs in that market, and direct their people to those organizations.”
There’s another reason to encourage other organizations to move to the Accountable Care model. It’s to prevent government involvement in health care costs. “Price controls or premium controls are based largely on issues created by PPOs, and not based on quality and cost reductions that we’ve been able to demonstrate through data on a defined population,” Berthelsen said.
Insurance companies appear to be favorable to ACOs. “Employers have been reluctant to change anything in their current plan structures. But if we don’t change, we’re going to continue to see double digit increases in cost from one year to the next,” warned Berthelsen. “The prediction is that we’ll continue to have a nine percent increase in costs where inflation is approximately three percent.”
Businesses interested in adopting an ACO for their employees should have little trouble. “Typically, these offerings can be made along side a traditional PPO,” Berthelsen said. “The reason that they would want to take advantage of an ACO is that they would get a richer amount of benefits at a lower out of pocket cost both from the employer and the individual side and better data. HEB is a great customer of ours. And in fact, they’ve expressed interest in us expanding to San Antonio. Currently, we have over 50 percent of all the HEB employees, and they have the same out of pocket premium as other plans.”
With all the benefits of Accountable Care, why would any insurance plan be opposed? Some health care providers are reluctant to see the need to change, said Berthelsen, or they benefit by the current system. But that system rewards on a host of services that don’t relate to value.
“Of all the different types and styles of practice right now, the only one that has been successful at controlling costs are the ACOs,” Berthelsen said. “We think that accountable care concepts will become more of a movement across the country, and it will answer many of these questions about doing more with less — we know we can do it.”
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