Tough lessons about accountable care

As Oregon transforms how it delivers care to 780,000 Medicaid patients, it hopes to generate better outcomes at lower costs. The problem for Oregon hospitals is that these goals conflict with the traditional aim of boosting revenue through ER visits and inpatient stays.

The altered approach to Medicaid patient care began in 2008, and hospitals in each of the state’s 15 coordinated care organizations (CCOs) saw an increase in ER visits initially. Since then they have endeavored to keep patients healthy and out of the hospital. One of these health systems, Silverton Health, based in Silverton, Ore., has wrestled with the unique financial issues in this environment for four years, ever since it joined Willamette Valley Community Health, a CCO in northwest Oregon.

An independent organization with a 49-bed hospital and 15 ambulatory care facilities in the Willamette Valley, Silverton gets a capitated payment for each of the 13,000 Medicaid beneficiaries it serves. For this capitated payment, Silverton Health must provide all the care each patient needs. If costs are higher than the capitated payment, the health system loses money. If costs are lower, it gains.

Silverton’s capitated payments from the Oregon Health Authority (OHA) represent about 20 percent to 25 percent of its annual revenue. Most of its remaining income comes from fee-for-service payments and self-paying patients.

Initially, the 13,000 Medicaid patients served by Silverton Health used the emergency department in substantial numbers, just as they did in all of the state’s 15 CCOs. But since then, Silverton has provided care in less costly settings, such as physicians’ offices. Today, Medicaid beneficiaries at Silverton Health are using the ER at a rate of 37 visits per 1,000 member months, 19 percent below the OHA target of 44.1 ER visits per 1,000 member months, and 39 percent lower than the statewide average of 61 visits per 1,000 member months.

“We can provide a full network of care whether it’s in the hospital or with primary care physicians or specialists,” said Dan Jessup, CFO of Silverton Health. “It’s one of the reasons we’re successful. We have to look at the entire continuum of care rather than look only at hospital inpatient stays or ED visits.

“Now we have to look at how to improve the delivery of care because not only have we flattened out reimbursement but we also have expanded access to care for more patients.”

Sarah Fronza, executive director of accountable care for Silverton Health, agreed, saying, “Our role is to treat people in the most adequate, most appropriate, lowest cost settings. Usually, that will be primary care. Treating patients with chronic conditions or mental health problems in the emergency department is not effective.”

But as Fronza acknowledged, using lower-cost settings for care delivery can affect hospital revenue negatively. “So the question is: How do we build up primary care delivery so we can give patients the right access when they need it, but not put the hospital out of business?” she said.

Like many CCOs (and accountable care organizations generally), Silverton Health has invested in data systems and hired healthcare navigators to assist patients in getting the tests and procedures they need, and help prevent avoidable ED visits.

“When I started here, Sarah told me about how our navigators did things that we didn’t bill for,” Jessup said. “My first response was, ‘They have to go.’ But she explained how the navigators help us save money by intervening early rather than waiting until a condition is acute when it might be more expensive.”

Having the systems in place to improve care and control costs is not enough to keep Fronza from worrying that costs could still rise sharply for unknown reasons. “Are we going to see a rise in claims because there has been a pent up demand?” she asked.

Jessup has similar concerns, saying he wonders how many newly insured patients will be unable to pay for hospital care out-of-pocket. “Under the Affordable Care Act, a lot of patients will have insurance but they may have trouble making a $5,000 deductible payment when facing a big hospital bill. As a result, we can expect to see bad debt and charity care rise,” he said.