Dartmouth-Hitchcock ACO excels on pioneer attitude towards payments

New Hampshire ACO's goal is to have capitation make up 70 percent of reimbursements, dropping fee-for-service from its current 50 percent to 30 percent.

Dartmouth-Hitchcock Medical Center, located in rural Lebanon, New Hampshire, generates $1.3 billion in annual revenue operating in the northern corner of the state. And while it's not in an ideal location for a population health model, according to chief financial officer Robin Kilfeather-Mackey, 19-year veteran of the health system's finance department who assumed the CFO role in 2010, the world-class health systems is excelling as an accountable care organization.

Sixty percent of New Hampshire's population lives in the southern portion of the state, Kilfeather-Mackey said, not in the Upper Connecticut River Valley, where hills, farmland and forests surround Dartmouth-Hitchcock's large campus. But the hospital's 400 beds have an 80-percent occupancy rate, a percentage unheard of in most rural areas, owing to the high quality of care offered by the health system, one of the Centers for Medicare & Medicaid Services' Pioneer ACO programs.

And there lies one of the greatest challenges for Kilfeather-Mackey and the rest of the organization's C-Suite.

[Also: What you need to know before starting an ACO]

The Pioneer ACO Model aligns incentives to improve health outcomes and achieve cost savings for Medicare, providers and patients. Dartmouth-Hitchcock has done that in its first year as a Pioneer ACO, hitting all 33 quality benchmarks while saving $1.7 million and keeping $1 million.

But Kilfeather-Mackey is not satisfied, saying that the health system still needs to find ways to "optimize the brick and mortar" to allow for an effective population health strategy outside the walls of the hospital.

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One answer may be delivery asset diversification, which would help the organization to serve patients at the highest level of care they need, where they need it – which may be outside of the hospital setting.

Another is through affiliations with other healthcare systems. Dartmouth-Hitchcock's partnerships include subsidiaries Cheshire Medical Center and New London Hospital in New Hampshire; and Mt. Ascutney Hospital and Health Center in Vermont.

The efficiencies generated by such relationships were obvious: Dartmouth-Hitchcock helped boost New London Hospital's low occupancy rate by diverting patients with less acute care needs to its facilities.

Dartmouth-Hitchcock has also been in discussion with three other health systems in two bordering states: Fletcher Allen in Vermont and Eastern Maine Medical Center and Maine Medical Center in Maine, according to Kilfeather-Mackey.

"We're trying to find the right opportunities," Kilfeather-Mackey said. "There are many things we can do together to lower cost."

Building on population health

Joint ventures to aid population health efforts may be critical to the evolution of ACOs. In fact, Kilfeather-Mackey believes the Pioneers were rewarded in the program's first year simply for reporting all 33 quality measures. In other words, it was "pay for reporting," not "pay for performance," she said. And as CFO, her challenge has been to develop strategies to generate greater cost savings that are sustainable in the long term.

"We remain concerned about certain aspects of the Pioneer methodology that may disadvantage ACOs in rural markets," Kilfeather-Mackey said. Dartmouth-Hitchcock physicians already operate on a lean model and the hospital's Medicare spend is about 20 percent lower than rest of country, she said.

[Also: How to engage patients and reduce ACO costs]

As other health systems that signed up for Pioneer have shifted to shared savings, Dartmouth-Hitchcock is eyeing 2016, when CMS moves to the Next Generation ACO model, a program that addresses some of Kilfeather-Mackey's concerns. However, the end game is capitation, planned for 2017 or 2018.

"This is a natural evolution," Kilfeather-Mackey said. "Not sharing the risk, but taking on the risk." Still, the estimated cost of the infrastructure needed for capitation is $6 million, she said.

Under capitation, the payer gives the money to Dartmouth-Hitchcock up front. The hospital then decides how to best spend it on patient care.

Currently, Kilfeather-Mackey said, "We don't think we're getting paid for value to patients. We don't get paid for healthy patients."

Dartmouth-Hitchcock's goal is to have capitation make up 70 percent of reimbursements, dropping fee-for-service from its current 50 percent to 30 percent, she said.

The challenge is navigating the shift while administering and funding the health system's infrastructure for a mixed portfolio of payment models that may or may not provide adequate reimbursement.

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The health system is also involved in a shared shavings program in Vermont called OneCare VT, as well commercial ACOs and other commercial risk sharing programs, and governmental value-based purchasing programs. Dartmouth-Hitchcock even co-owns an insurance product with Harvard Pilgrim Health Care and EHS.

"It's a lot," Kilfeather-Mackey acknowledged. "Each model has different attribution models, quality measures, performance criteria, and administrative structures. Creating a single infrastructure, team and toolset has been impossible to accomplish up to this point and we are currently in the process of designing what a single infrastructure could look like, although we're confounded by the specific legal requirements of certain models and the various partners and states involved."

To accept capitated payment, Dartmouth-Hitchcock must assure it has the correct type of assets to assemble the network needed to service the newly covered lives.

"So we have been taking actions to enhance our affiliate network and further diversify our care continuum assets," she said.

Twitter: @SusanMorseHFN