What Is It Like in California?
December 19, 2010
Posted by chcablogadmin in : ACO Update
It is like being the hood ornament on a storm chaser’s car about to catch a tornado based on our interview with Steven Peiser, Associate Vice President, Contracting, Children’s Hospital Los Angeles and Children’s Hospital Los Angeles Medical Group. So, what has Children’s Hospital of Los Angeles done and what is it doing now? Here is what he told us. Hold onto your seat as we take a “ride” with Steve.
According to Steve, many believe that the California health care delivery system is what the federal health care reform legislation will eventually lead to nationally. Health care in California can be conceptualized as an ‘ACO ecosystem.’ California has 285 physician organizations, both integrated medical groups and Independent Practice Associations (IPAs), which have many of the characteristics described in the current national policy debate. These include primary and specialty care physicians who care for defined populations of patients, provide or arrange for hospital services, and publicly report data on their clinical and financial performance. California’s provider organizations vary in their conformity with the parameters discussed in the national debate, but many go beyond the minimum set of ACO activities to include preventive care, chronic care management and complex case management, often supported by clinical information technology and financed through partial or global capitation payment.
In California, a range of relationships exists between physician organizations and hospitals. Alignment of incentives between physician organizations and hospitals has and will continue to offer important opportunities for performance improvements across the entire continuum of care. Capitation has been vital to encouraging coordinated care by California’s providers, as it has forced financial discipline, and allowed for investment in the infrastructure necessary to manage care across the continuum of providers. Fee-for-service (FFS) payments do not offer the same incentives for providers. As a method of payment, capitation can be effective at encouraging coordinated care, but payment methods should vary across ACOs depending on an organization’s ability to assume risk. California health care providers, outside of capitation arrangements, also experience increased case rate formation and bundled payments for hospital and professional services. Case rate or bundled payments are often found in contracts for transplant, cardiac and orthopedic services.
Health plans have played a key role in the historical development of California’s provider organizations. In the early days of medical group formation, plans often acted in concert and adopted similar capitation payment parameters, which lessened the administrative burden on groups, and allowed providers to focus on delivering high quality care to enrollees. Health plans must be ready and willing to foster ACO formation along similar lines, as a critical mass of payers will be pivotal to their success. California’s experience with pay-for-performance (P4P) also highlights the benefits to ACOs of health plans working together. California has the largest non-government P4P program in the country; it includes seven health plans paying performance bonuses to 221 physician organizations based on uniform measures and results aggregated across plans. The aggregation of data across plans enhances data reliability and validity, and has engendered increased provider trust in performance measurement, as well as collaboration between health plans and physician organizations.
Health care reform has opened opportunities for significant collaborative discussions between hospitals, medical groups and health plans. “We are talking with everyone and looking under every stone for potential partner opportunities,” Steve said. The Hospital has taken a multi-pronged approach. It also has chosen to attempt to work cooperatively, rather than compete, with provider/medical group partners and health plans. Steps taken to date include:
- Preliminary development of a Children’s Hospital health care network. The goal is to build an infrastructure to support health care reform initiatives and to further align hospital and physician incentives. The focus is on the building of a pediatric primary care base in partnership with existing groups and practices to offer the full continuum of care for comprehensive pediatric services within the community and regionally.
- Working with two high profile medical groups (which employ or contract with both primary care and specialty physicians) focused on development of an exclusive pediatric referral relationship for approximately 100,000 commercial pediatric lives throughout the LA market. This will move the medical center and its medical group from potentially being commodity based providers into a relationship that is built on partnership and alignment. It will also promote the development of alternative reimbursement mechanisms for hospital inpatient and outpatient services.
- Developing a capability and gaining experience with different payment methodologies such as capitation, bundled payment, case rate and others.
- Creation of community-based ambulatory care centers located more conveniently for the families and referring pediatricians.
- Expansion of the hospital and medical group laboratory outreach programs. Currently the hospital has three laboratory outreach centers in the community.
- Partnering with community hospitals to manage their pediatric programs under CHLA’s license. This is better known as the “hospital within a hospital” concept.
- Our affiliated medical group (CHLAMG) has recently entered into an at-risk arrangement with a Federally Qualified Health Center (FQHC) located on the hospital campus to manage 8,000 MediCal lives.
- An increase in the robustness of the Hospital’s analytic and information technology capabilities to better focus on outcomes, quality measurement and development of an outpatient electronic medical record (EMR).
- Strategic discussions with managed care companies about options for collaboration.
- Investigating the potential of developing new partnerships with other children’s hospitals in the region.
California has a special program for children with chronic illnesses called California Children’s Services (CCS). CCS pays for care on a fee-for-service basis. The Hospital submitted an application to CCS to take on some form of risk for this population. The Hospital submitted its application jointly with a medical group. In the application, the Hospital included plans to form an ACO, create a specialty health network, and operate primary care programs in conjunction with medical group partners. The state reportedly has been vague about what they have in mind, but they are expected to make their final recommendations in February 2011.
Strategically, the Hospital’s approach is to work with, and to talk with many potential partners. They perceive that time is of the essence and are moving as quickly as possible. That is why they are devoting lots of attention to and pursuing many activities even while preparing to also open a brand new patient care tower this coming July.
MediCal accounts for 75% of the Hospital’s business. While managed care is generally more advanced in California than most other places, interestingly, MediCal managed care accounts for only 6.3% of the Hospital’s revenue; commercial managed care accounts for 19%. But the Hospital anticipates these percentages will grow, and recent changes in activity prove that belief is probably correct. MediCal managed care admissions and patient days have increased a lot in recent months, probably due to the state’s efforts to increase the percent of MediCal beneficiaries enrolled in managed care programs.
Editor’s Note: And, of course, the federal Patient Protection and Affordable Care Act (PPACA) is likely to spur even more managed care or managed care-like activity not only in the Medicaid and Medicare markets, but in the commercial markets also. That is because changes in Medicare payment arrangements have usually been adopted by commercial payers as well.
You may also access the newsletter (ACO Update_12-20-10) as a document to print and share within your hospital.
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[...] on market movements. (See “What’s it Like in California?” posted Dec. 19, 2010 in CHCA’s ACO Update). Dave Anderson from BDC Advisors provided national context following Steven’s presentation. [...]