Health Care Incentives and Penalties Seek to Decrease Costs, Improve Care


A major frustration for any physician is watching a noncompliant patient deteriorate, particularly one with a long-term condition like kidney disease. So the turnaround New York City’s Mount Sinai achieved through an accountable-care-style program with a 53-year-old patient on dialysis with poorly controlled diabetes and heart problems provides a hopeful example.

Esther Redd was a frequent emergency room visitor who was hospitalized seven times in the first five months of 2013. After the hospital brought to bear resources from its Preventable Admissions Care Team (PACT) during her seventh admission, Redd avoided rehospitalization at Mount Sinai for the rest of the year.

The hospital mines the electronic health records of all patients admitted and uses its own predictive algorithm to automatically calculate their risks of readmission. When a hypertensive emergency led to her seventh hospitalization in May, Redd was singled out for intervention by the PACT. Over a two-year period, among 600 highest-risk patients, the program reduced 30-day readmissions by 43 percent and emergency room visits by 51 percent.

The incentives and penalties in the Affordable Care Act designed to improve the efficiency of care spawned the PACT as a pilot program. Although separate from Mount Sinai’s accountable care organization (ACO), the PACT shares many characteristics with its ACO, and began as the organization geared up to adjust to the Affordable Care Act’s new incentives, including those for ACOs. Some 10 percent of Medicare patients are in ACOs and private insurers have agreements with more than 200 ACOs, so Mount Sinai’s experience is instructive.

Social worker Derrick Williams, MSW, spent more than an hour in Redd’s room discussing her situation. With her multiple ailments and a 13-year-old daughter to care for, Redd was feeling overwhelmed. “When I met her in the hospital, she seemed defeated. It was spiraling out of control,” Williams told Kidney News. Williams worked to get Redd the help she needed, including finding a primary care provider and another social worker to take over after his 35-day assignment was complete.

Some problems were relatively simple: One source of noncompliance was that Redd found her multiple-medication regimen too confusing. A first step was to intervene to convince Redd’s visiting nurse to organize her medications in containers that clarify when to take each.

Williams accompanied Redd to make sure she attended her dialysis appointments, and even more important, her cardiac appointments, because Redd had emotional difficulty with them. The primary care provider gave her a resource to call instead of heading for the emergency room.

The improvement has been dramatic, with Redd’s only hospitalization since she met Williams being at a different hospital for previously scheduled heart bypass surgery. Driving the change has been Redd’s better understanding of her conditions, along with the successful effort of Williams and his colleagues to empower her.

Finding the balance: better health care, lower cost

The Affordable Care Act includes provisions that allow providers to earn bonuses for better outcomes but risk penalties for yo-yo readmissions. In addition to the obvious goal of improving Redd’s health and care, Mount Sinai had a strong financial motivation for trying an innovative approach because it can reap rewards as a participant in the Medicare Shared Savings Program. From the PACT, Redd passed into Mount Sinai’s ACO, organizations that are being touted as a way to both improve care and lower health care costs. The hospital has invested heavily in its effort, hiring social workers and care coordinators who start their work while the patient is in the hospital. They then do what they can to improve compliance—making home visits, helping patients keep appointments, solving transportation challenges, aiding with benefits issues, and getting involved with housing issues.

“These are the things that we have found lead patients to fall through the cracks and have their illnesses not controlled and end up in the emergency room or in the hospital unnecessarily,” said Mark Callahan, MD, who heads that Mount Sinai effort that has grown into an ACO called Mount Sinai Care that serves more than 22,000 Medicare patients. One averted hospitalization can cover the cost of several months of a social worker’s salary, Callahan said. And based on the success of its program, Mount Sinai received a federal grant to fund some social workers.

Over its first 16 months in the Medicare Shared Savings Program, Mount Sinai was below its cost baseline and met all of its quality metrics, Callahan said. Diabetes patients in a related Mount Sinai initiative have experienced a 1.4 percent reduction in hemoglobin A1c levels, a three-pound weight loss, and a 40 percent increase in ophthalmology screening rates.

“We have been able to leverage hospital resources in ways that we weren’t initially aware of,” said Joji Tokita, MD, Sinai’s clinical director of nephrology. “Where we have applied resources from the ACO initiative, we have seen outcomes improve. We have seen patients stay out of the hospital. We have seen them able to avoid ER visits. We have seen improvements in patient [satisfaction].”

The Affordable Care Act contains incentives for greater adoption of electronic medical records, and Callahan and Tokita agreed that their ACO’s innovations would not be possible without the ability to tap electronic data for the number crunching essential to identifying high-risk, high-cost patients for intervention. This data mining can also be used to spot patterns and problems within an organization, such as departments where care is not being delivered appropriately.

Tokita said that on the patient level, the shared access afforded by electronic records offers advantages over traditional paper charts, which can be viewed by only one person at a time. He said that the ease of seeing a social worker’s notes on a meeting with a patient could lead to changing a dialysis schedule to fit better with a patient’s child care needs, for example.

Whether this apparent success can continue and be duplicated in other institutions remains to be seen, but Medicare and other payers are betting heavily on ACOs. Some 250 ACOs caring for more than 4 million beneficiaries are currently under contract with Medicare, a tremendous number for a program that is just three years old.

Like Mount Sinai, most ACOs participate in the Medicare Shared Savings Program, which allows providers to share in savings without facing penalties. Medicare pays an ACO a capitated rate determined by the expected costs of treating a certain population. If the ACO can meet the quality criteria and keep the cost below an assigned benchmark, it keeps a portion of the savings.

In contrast, in a major Medicare pilot project called Pioneer ACO, participants also risk penalties for not meeting goals. The program, which began with 32 large organizations that are considered some of the most experienced with capitation programs, reported mixed first-year results.

All 32 Pioneer ACOs met the program’s quality goals, exceeding industry benchmarks on 15 measures and outperforming managed-care plans on measures such as blood pressure and cholesterol control for patients with diabetes. Overall, compared with fee-for-service programs, the ACOs held down spending by half a percentage point, increasing 0.3 percent instead of 0.8 percent, and saving Medicare almost $90 million. But most of these savings came from a few providers. Although 18 of the Pioneer ACOs lowered their costs, only 13 did so enough to reach the level for shared savings. Fourteen actually had higher costs.

Given these results, nine ACOs left the Pioneer program. Seven of them moved to the shared savings program, but two dropped out entirely. One of the dropouts was Presbyterian Health Care of Albuquerque, NM, which issued statements explaining that, as an organization located in a low-medical-cost area, cutting costs enough to share in savings appeared to be an impractical goal.

Critics seized on these results to compare ACOs with previous experiments in cost-containment. Jeff Goldsmith, PhD, president of the consulting group Health Futures and an associate professor of public health at the University of Virginia, finds the early Pioneer ACO results comparable to those at the start of the Physician Group Practice demonstration program Medicare began in 2005. That program also provided bonuses for meeting spending reduction and quality improvement goals, but was abandoned as unworkable in 2010.

Others are more optimistic. “This is very different from the cost containment trends of the 1990s, and we see it as a sustainable change in the care delivery model,” said Karoline Hilu, MD, MBA, of the Advisory Board, a health-care consulting company based in Washington, DC. “We have seen our leading health care organizations shift their approach toward the identification of at-risk populations and patients” to better allocate resources among inpatients and others.

Mount Sinai’s Callahan said his organization is positioning itself for a future that may include changing financial models, but that will continue the concept of physicians and hospitals being at risk for quality measures and utilization. “Just about every major insurance company has talked with us about some kind of an ACO model for their patients,” he said.