CureMD: First of all, many congratulations on setting up Aledade. It's great to see you give back to the healthcare community with your expertise and knowledge. How did you think of jumping onto the ACO bandwagon?
Dr.Farzad: My whole career has been about population health, and using technology to bring data to doctors in order to help them make better decisions. The goal for me has always been achieving better health for an entire population. We’ve learned that technology is necessary but not sufficient. To achieve those goals we also need to have a business model for physicians to focus on prevention, outcomes, and keeping people healthy.
So when I was in the administration and the ACO model was being debated and rolled out, I was really excited, not only for health insurance reform, but to begin to create business models that empowered providers to use the tools that we now have to focus on prevention, population health, and outcomes.
Many of the disjunctions have to do with a lack of a business case for prevention. You’re trying to measure quality, make a list of all your patients, get patients copies of their records, etc. And none of these appear to make business sense for doctors struggling to pay their bills with flat reimbursement. But if you change the context, where outcomes for patients count for more than the volume of services provided, that changes everything. And I’m just so excited to work with, and to grow, those areas in the healthcare systems where the incentives are now aligned to do the right thing for patients and what, frankly, primary care doctors and others have wanted to do their whole careers but have been stymied by a toxic reimbursement system.
CureMD: Why do you think that the ACO model is poised for success in the future?
Dr.Farzad: For the last 9 months, I’ve done research on ACOs – Physician-led ACOs particularly. My first analysis of the 29 out of 114 Medicare Shared Saving Programs ACOs that earned shared savings in Year One had three main findings:
- 21 of the successful 29 ACOs were physician-led. Everyone expected big systems like hospitals would be best positioned to benefit from ACOs. But we’ve learned that the beating heart of an effective ACO is primary care and the partners they choose to work with.
- Many ACOs failed because they didn’t understand the rules, the implications of the regulations around things like patient attribution and risk adjustment.
- The use of health information technology to understand the full picture of their patients was another key factor for success. A lot of ACOs didn’t even use the claims data available to them. Those are gems that ACOs have to use.
But fundamentally, the underlying success factor was the ACOs having physician engagement. The reason we believe this model will succeed is because the best people to take charge of healthcare are physicians. Not health plans, not hospitals, not anyone else. It’s the physicians who are trusted by patients who can reclaim their traditional role of quarterbacks of healthcare, with modern tools.
CureMD: I’d like to talk about the crash of the pioneer ACO model specifically but first of all when it comes to physicians, talk about their preparedness. How prepared do you think physicians are from a switch from volume to value based care?
Dr.Farzad: They have the will, but they don’t have the means. This is not easy, this is new, different. Most physicians have spent 20 years trying to run an office where finances are clear; to make more money, you have to see more patients in less time. And it’s getting to a point where it’s not possible; you can’t keep squeezing patients into less and less time.
They understand that something has to be done. What they don’t know is how, in particular for small practices. That’s what we’re doing, I’d rather work with people who have the will and give them the tools to let them flourish in the new payment models.
CureMD: Getting back to pioneer ACO program. Independent audit reports 9 out of 32 organizations that registered dropped out after the first year. Why wasn’t it as successful as planned?
Dr.Farzad: Early days. What you call ‘dropping out’, many of them actually moved to other programs. It is very difficult to make changes in large organizations, with many different, sometimes conflicting priorities. Creating almost an insurgency within the organization is difficult for the part that wants to bring change but may be structurally at odds with the rest of the organization.
Second observation: In many cases if you’re an organization already providing high quality at low cost, beating your own baseline can be difficult, particularly over time. That’s an additional challenge.
Look, we need many shots on goal for this movement from volume to value, but I’m focusing on helping smaller primary care practices that don’t have the advantages of capital, organization and market leverage that the bigger organizations have.
CureMD: Apart from the ACO model, any other primary care model that you think is poised for success?
Dr.Farzad: There are lots of different ways. Patient Centered Medical Homes can be a foundation, particularly the CPCI program (Comprehensive Primary Care Initiative) where there’s an element of Shared Savings --which is critical. There are integrated delivery network and employee models.
Then there are the Direct Primary Care models, which preach a radical redesign of practice. I respect these efforts, but that isn’t a real option for a vast majority of doctors who are practicing today. They don’t have the interest and ability to start all over again. I believe that we need a pathway for these practices to transition from the current practice and payment model to a future. And I believe the ACO, the Shared Savings program is perfect for regular practices to make that transition.
CureMD: Specifically talking about the financial models as far as ACOs are concerned it seems to be more beneficial for independent primary care doctors as opposed to hospitals. What’s in it for hospitals and in the future how will the ACO program work for them?
Dr.Farzad: The existing ACO program says you must have primary care doctors and you may have other participants. In my opinion, that’s the right policy.
I do agree with you that it’s easier to save money for healthcare when the savings are not coming from your income. Primary care physicians can increase the volume and intensity of primary care services even as they reduce other costs in the system (procedures, admission, etc).
But I will say that forward-looking hospitals also recognize that they need to transition from volume to value, and they need to become higher-quality, lower-cost partners in the system. The squeeze on Medicare reimbursements and linking of reimbursement to total quality and reducing admissions is going to be a big pressure.
Narrow networks will be a big feature of health plans. Hospital executives will think “Am I being left out of a network on an exchange because I’m seen as being too high cost?” Every forward-leaning hospital will look to reduce costs and increase value, and partner with community physicians.
CureMD: On a broader level, relating to the Affordable Care Act and its significance so far, did you before and do you now see potential in it to change the healthcare industry?
Dr.Farzad: Much of the Act is around insurance reforms. And one of the less-appreciated impacts can be the growth of consumer choice in the networks that they choose to get care from -- that could impact delivery in a major way.
But the Act also opened many doors in terms of payment reforms and value based purchasing. The CMS just put out the Physician Fee Schedule proposed rule for 2015. Notable in that was the drive towards data transparency, and the full-on push from in terms of volume to value for everyone. Even for people who don’t participate in ACO or alternative payment models there’s now going to be a potential swing for every provider from about 4% less up to 4-5% more reimbursement based on measure of total cost and quality.
The Innovation Center is funding lots of pilots, but one of the most significant ways in which the Act moved forward: Medicare ACOs are now available for any group of primary care physicians from Alaska to Alabama
Dr.Farzad: There’s an enormous amount of change that’s coming to healthcare, and everyone will have to demonstrate their quality and efficiency if they want to keep their patients, and justify any increase in reimbursement. During this difficult transition period, those who can use data to take better care of their entire patient population will be the winners. The ACO program offers a unique opportunity to learn how to do this – at low risk.