Editor’s note: This post is part of a Health Affairs Blog symposium stemming from “The New Health Care Industry: Integration, Consolidation, Competition in the Wake of the Affordable Care Act,” a conference held recently at Yale Law School’s Solomon Center for Health Law and Policy. Links to all posts in the symposium will be added to Abbe Gluck’s introductory post as they appear, and you can access a full list of symposium pieces here or by clicking on the “Yale Health Care Industry Symposium” tag at the bottom of any symposium post.
Under the leadership of our CEO, Bernard J. Tyson, Kaiser Permanente has an ambitious growth agenda. One component of this agenda is growth in new geographic markets.
More than 20 years ago, Kaiser Permanente entered a number of new geographic markets. Some of these efforts were unsuccessful, and led to the organization exiting certain areas. However, since those earlier efforts, the U.S. health care market has changed, as a range of internal and external pressures has refocused the industry on integration, coordination, and accountable care. These changes have led to new opportunities and challenges for Kaiser Permanente and other health care providers, as they examine how best to adapt to the new environment.
Provider organizations across the country increasingly recognize the difficulty of surviving long term in a fee-for-service system. More importantly, they realize that such a model does not produce the best patient and population outcomes. Provider efforts to move towards a population-based model often include combinations that increase consolidation and result in employment models for physicians.
Legal experts in antitrust issues often focus on the high unit prices that may result from consolidation. However, this focus may miss the broader strategic intent of these changes: designing systems of care for the increased integration and coordination needed to offer a lower total cost of care for a population, rather than to impact the unit cost of each service provided.
Organizations face significant risk and challenges as they work to navigate the transition from a fee-for-service model to a population-based, accountable care model. Payers whose entire business model is based on fee-for-service and providers who lack population management capabilities have major gaps to close in making this transition.
In addition, providers wanting to experiment with risk-based payment models and population health management must grapple with the reality that their accountable care business represents a fraction of their overall business. Most such providers are stuck straddling two different payment worlds. So long as accountable care contracts are a small minority of a provider’s revenue stream, those contracts can’t fundamentally change the business model. There may be a tipping point, about 30-40 percent of a provider’s business, that must be risk-based to justify the resource investment and culture needed to build a successful accountable care infrastructure. Consolidation may allow organizations to ease these barriers.
Consolidation can also improve structural alignment for accountable care. Although community-based hospital systems have taken the lead in organizing Accountable Care Organizations (ACOs) in the U.S., the most successful ACOs are based on strong, multi-specialty group practices, or on highly organized physician networks with strong physician leadership. Until a health system is able to individually incentivize its providers based on quality and the total cost of care, the pay-for performance or upside risk-taking at the corporate level will not change the practice of medicine.
Often, although hospital systems are able to obtain medical staff participation in the ACO, the physician practices’ relationships, organization, collaborative models, and economic engine remain rooted in volume. To be successful in this transition, top-line leadership must share a vision of absolute commitment to a risk-based model so they can develop the incentives that drive the transition to accountable care. Leaders must also be able to develop an organizational structure that supports this vision.
Kaiser Permanente offers both care and coverage to more than 10 million members and the multispecialty group practice is at our core. Having a right-sized delivery system with a prepaid insurance model allows us to deliver coordinated, integrated, affordable care to our members. Our physician organization is built on the core tenants of population management, peer-based teamwork, and continuous improvement — a unifying theme among providers, either hospital-based or physician-based, that have begun to make the transition from fee-for-service to population care.
There has been much concern that the provider consolidation will reduce competition, increase prices, and hurt health care consumers. However, I believe that the opposite will prove to be true. Industry fragmentation has been terrible for consumers; they aren’t getting good quality care, and they certainly aren’t getting affordable prices. Consolidation and organization of the delivery system to support population management and accountable care creates the potential for more productive competition based on quality outcomes, access, and lower total cost of care. Although the concern around consolidation can have merit, combinations that maintain a minimum of two or three competitors in a market can ultimately deliver better value to consumers.
from Health Affairs Blog http://ift.tt/1SoaV2X
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