Health-care executives and policy analysts reacted optimistically to a new method of paying groups of rural doctors, hospitals, and other health-care providers to coordinate care, but they are wary about the risk involved.
These groups—also known as accountable care organizations—will get advanced payments to build up their infrastructure and prepare to be paid based on patient outcomes under a new model announced Tuesday by the Centers for Medicare & Medicaid Services.
The model is intended to bring a more consistent income to health-care providers in rural areas. Many rural communities are facing a shortage of providers, fewer services in hospitals, and a lack of mental health services and other specialty doctors.
The rural payment models provide an “opportunity for them to identify what the problems are in their communities and figure out how to best address those issues,” Centers for Medicare & Medicaid Services Administrator Seema Verma said Tuesday in an interview with Bloomberg Law.
During the Covid-19 pandemic, “creating a stable cash flow, especially when patient volume is down,” is important, Mollie Gelburd, associate director of government affairs at the Medical Group Management Association, said.
A similar model saved $382 million in health-care costs over three years. Stephen Nuckolls, CEO of the North Carolina-based Coastal Carolina Health Care, said the new model is attractive to health providers because of that previous success, including those “substantial returns.”
He also pointed to the new model’s advance funding to each ACO of $200,000 plus payments per beneficiary.
Nuckolls said his organization used the advance funding in the earlier model to invest in advanced analytics to devise outreach strategies, monitor quality improvement, and other things to improve care coordination.
The upfront payments that the federal government will give the new rural ACOs is about the equivalent of what most ACOs that join national organizations that help create and support local ACOs—such as Aledade or Caravan Health—spend, said Patt Richesin, president of the Idaho-based ACO, Kootenai Care Network.
The funding in this model is a “good start,” Nuckolls said, and should be sufficient for many groups.
The upfront funding is a significant incentive to get providers to join the program, Gelburd said. Those initial costs can be a barrier for group practices that want to form an ACO.
Taking on Risk
Under the new model, the providers will take on financial risk for their patients. If the patients use less care than the payments, the providers will get to keep some of the savings. But if they patients use more, then the providers will be responsible for the cost.
However, an official with the National Rural Health Association sounded a more cautious note.
Being responsible for the costs if patients use more care could be a “speed bump” for rural communities considering participating, said Brock Slabach, senior vice president for member services.
It puts a burden on a hospital and provider groups that “could be too much for some to bear,” he said.
Mikelle Moore, senior vice president and chief community health officer of Utah-based Intermountain Healthcare, agreed that the idea of that financial risk is “really scary because their margins are so thin.”
A June study found that rural hospitals had a median profit margin of 2.7% in 2017, compared to 5.6% for urban hospitals.
CMS officials expressed interest in being proactive and changing the model as they get more data, Georgia state Sen. Dean Burke (R) said. Burke was part of a group of health-care providers who met with Verma and Center for Medicare and Medicaid Innovation Director Brad Smith at a White House meeting Tuesday.
Burke, who is also the chief medical officer at Georgia-based Memorial Hospital and Manor, said the officials also planned to give providers who join the ACO track a scorecard when they begin of where they stand, which will help them set goals.
Rural communities have a separate option for investing in their health-care systems. The CMS also plans to spend up to $75 million in 15 localities, at $5 million each, to enable them to rethink how they deliver care.
The 18-month planning period for participating rural areas will allow for wider community engagement in the process—not just hospitals—around what problems they want to address, Moore said.
Slabach thinks the applications for this “community transformation” track will be “pretty competitive.” He could see ACO networks that have already shown a track record of success wanting to apply for the funding to figure out their future strategies.
If an existing ACO is struggling to get traction in their community, the funding could be used to “create greater transformation” and get other insurers on board, Nuckolls said.
Richesin said she’s really interested in applying for this track because of the work she’s been doing for the past year around this issue for the Healthcare Transformation Council of Idaho. She said she could even see the state applying for the funding.
Richesin had many questions about the model though, including what it’s intended to cover, what things it could be used for, and what the performance measures would be.
A community could make good use of $5 million to transform their health-care system, Slabach said. However, Nuckolls said it may not be enough for larger health systems.