Understanding the "Pathways to Success" Program

During this discussion, we talked to Lynn Barr, CEO and founder of Caravan Health, and she shared insights into the Medicare Shared Savings “Pathways to Success" Program.

Podcast Transcript:

First Report Managed Care: Please just tell us a little bit about yourself.

Lynn:  My name is Lynn Barr, and I'm the founder of Caravan Health. I began this company back in 2013, where I was working with rural providers across the country. I was the CIO in a rural hospital. I couldn't figure out how we could participate in managed care, because we were so small.

I thought what I needed to do was to start putting rural providers together. We found the ACO to be a really good vehicle to do that. We started these affiliated, or what we now call collaborative ACOs back in 2014.

We started one in 2014, and after a few months the board looked at me and said, "You're the IT person. Why don't you just take the services and get them out of the ACO, so we can talk about patients and not all this stuff." I did, and that's how we formed Caravan Health.

We took this idea of driving local patient care, of collaboration, about supporting physicians, about using nurses to deliver care because we didn't have any doctors. We created this ACO program that then CMS funded through the ACO investment model, and suddenly we had 150 health systems.

Those 150 rural health systems that are most of which are still with us today have saved us 26 million in the first year, 54 million in the second year, and we haven't got our third year results yet, so it saved about $80 million so far, and have made dramatic improvements in quality.

Our results were so amazing that suddenly the urban people started calling us. Now we work with both urban and rural providers. We have 630,000 attributed Medicare beneficiaries, about 250 health systems across the country of all sizes, and are now launching statewide ACOs in Mississippi, Florida, Idaho, and Texas.

First Report Managed Care: That's incredible. The growth is really impressive.

Lynn:  Thank you. We're tired.

[laughter]

First Report Managed Care: Can you briefly explain what the Medicare Shared Savings program currently does, and then maybe lean into what the Pathways to Success add-on rule is going to bring?

Lynn:  Sure. The Medicare Shared Savings program allows health systems, physicians, and hospitals if they're participating as well, to look at their population as a whole, and to move from one patient at a time, one intervention at a time, to thinking about how do we make this whole population healthier, how do we improve the quality of life for everybody that we treat, and change our orientation from reactive care to proactive care.

It's been a wonderful journey, and it's changed how we deliver care has changed the conversation in really stunning ways. We're excited about that.

The new program takes the existing program, and is a natural evolution of the rules. The biggest thing from the government's perspective is they feel it's really important for providers to take risk. If there's risk in that program, they're going to pay more attention to it, and they're not wrong.

We're moving 100,000 lives into Pathways in July, and we anticipate moving another 200,000 lives in Pathways in January of next year. We're sharing the risk with our providers, so I got to tell you, we're taking it more seriously, too.

We took it really seriously before, obviously by our results, but it does give you pause when you think about what you're doing, and how you just kind of can't let people go. Everyone has to do the work. You can't enable free riders. You can't enable people.

Everyone's busy. Everyone's got too much to do, but this is really important. We've all got to work really hard on this, because this is the future of our payment.

First Report Managed Care: I know you're moving a significant amount of people over in July, and another in January, but is there anything else more specifically related to the July 1st deadline that makes it so important?

Lynn:  Yeah, the ones that started in July are actually going to get a lot of benefits. Their benchmark is going to be heavily weighted by the 2018 flu season. Those that were able to get it done are going to reap the rewards, because they had a good benchmark year.

Of course, there were also all the 2016 starts that either had to go into the program in July or had to get out. That was tough for them. January, it'll be more of a regular cycle.

First Report Managed Care: What are the main concerns from ACOs about shortening the length of time available to assume downside financial risks with the new rule?

Lynn: A lot of us have been in the program for six years. They still have a year with no downside risk. It's going to be hard for the new entrants. They're going to have to really prepare much more than people have in the past. They're going to have to take it a lot more seriously.

That is the whole purpose of CMS moving this quickly. They need to see the savings, because the trust fund goes broke in 2026. They need to see the savings, so they're pushing providers to be more engaged and work harder and faster on achieving those savings.

It will be challenging for people to achieve those savings, but not if they do the work. The funny thing about this, Edan, is everyone knows what needs to be done.

We all know that we need to provide prevention, wellness, and chronic care management services for our patients. We need to identify our high-risk patients, and do chronic care management for them. We need to appropriately code their chronic conditions, and we need to better control post-acute care.

Everybody knows that's what you have to do. Why is it that so many people don't do it? Because it's hard to change. If you have to go into risk, and you don't do those things, you're going to write a check.

Maybe this will be the impetus people need to implement the programs that have been proven to work. If they implement those programs, Edan, they will not write a check. If, and I'm going to give one caveat to that, if they have enough lives in their ACO to escape statistical noise.

First Report Managed Care: That leans perfectly into my next question. That was, can you highlight what ACOs should be doing to prepare for these changes. I think you listed a lot of that. Is there anything else?

Lynn:  Let's talk about the scale issue. The only concern we have about the long-term viability of this program is that providers are too small to take risks. It was really interesting in recent testimony from MedPAC, the Medicare Payment Advisory Commission, to Congress about their concerns about MIPS, for example.

They said we've got to find a way to pool these providers. You can't judge cost and quality on a one-doctor level.

One of the questions we've had all along is how big does an ACO need to be? CMS said 5,000 lives. We set up all of ours at 10,000 lives, and we were seeing swings in their results that were plus or minus 10 percent. I saved $10 million this year, lost $10 million the next.

How does that happen? That happens because we know healthcare spend is really noisy. The little ACOs have way too much noise to take risk. That's our biggest concern about how most of us are going to survive in all this.

85 percent of all ACOs have less than 25,000 lives. Our data suggests that you need 100,000 lives to be successful. Somehow, these ACOs are going to have to come together and pool their lives, just like insurance companies pool lives. Insurance companies pool patients.

Provider-based, value-based plans have to pool providers to get enough actuarial strength to be able to take risk, and to create a reliable income stream.

First Report Managed Care: Is there any concern for physician-led ACOs or smaller ACOs to exit the program because of these rule changes?

Lynn:  [sighs] Yes. Any successful ACO is a physician-led ACO. We take a little bit of exception, because we have hospitals in our ACOs, but they're physician-led, right? [laughs] Because otherwise, you don't get results. Even if a hospital is in there, if they're good, the docs are in charge. But I digress.

When you talk about these small physician ACOs, they are probably going to get out. If you've got 5,000 lives, your probability of writing a check to CMS is about 10 percent. The amount of risk that they have to take compared to the amount of dollars they have at risk, that risk/reward ratio doesn't make sense to them, and they don't have the capital.

What we see in the market is we see for-profit companies that are out there that are aggregating physicians, like Aledade. Thank God Aledade is out there, because I don't know who would take care of these PCPs otherwise. They're out there aggregating physicians.

We also work with hospitals to aggregate the physicians in their community, underwrite their costs, underwrite their risks, and partner with them on their population. Physicians are going to have to partner with...Everybody is going to have to partner.

It's not just physicians. The majority of the hospitals in this country do not have sufficient number of PCPs to take risks on their own. Everybody is going to have to come together somehow.

First Report Managed Care: How do you anticipate the new rule improving cost or quality of care for beneficiaries? Or to take that further, potentially lower or increase financial burden for payers and providers? It's a really broad question related to cost-effectiveness for all involved.

[laughter]

Lynn:  Right. It's a really good question. I think, actually, that quality in these programs are doing quite well, and none of this really targets quality anymore. If you get in the program, your quality goes up. Our quality scores for our new entrants typically go up 15 to 20 percent in the first year. Quality is a natural outcome of these programs, and I'm really happy about that.

From the cost perspective, boy, this is going to be challenging on all sites. There isn't a lot of profit here to be passing around from one to another. There's a lot of costs associated. There's costs on the payer's side and there's costs on the provider's side.

The amount of savings that we can generate on a patient is relatively small. Keep in mind that we're in fee-for-service, Edan. The idea that I can go to a provider and say, "Don't do this procedure," because two years from now you might get a check for half of it back, is never going to work. That's not where it works.

The only way we can be in these fee-for-service programs, we're in no control of the beneficiary, is to change patient behavior, which is hard, hard work, and it takes a long time. It's a very incremental process.

We can bend trend one to two percent, per year. Let's think about that. If I bend trend by two percent, per year, I've saved $200 for the ecosystem. That's the payer, the provider, me, the vendors, everybody is coming after $200.

Medicare gets half in our model. They get $100. That leaves $100 for the providers, and then they've got costs. Medicare's costs are probably higher than $100.

That is the issue at hand. The reason we're doing it is not about the economics of that $100. It's about the economics of trend. If we all bend trend one to two percent per year, the savings 10 years from now are tremendous.

That's where the real benefit will go, and it will go to the payers, but it will also go to the providers. If we don't achieve those savings, their only way for payers to deal with providers is cut their payment. If we do, we can continue to get paid a reasonable rate, learn how to reliably access value-based payments to supplement our income.

First Report Managed Care: This is another broad one, but overall, what would you say your main takeaways for ACOs are related to the new rules. If an ACO paid attention to anything related to this new rule and these new developments, what should it be?

Lynn:  What ACOs need to think about right now is what happens if you get out of the program. What is your back-up strategy? The other programs that are out there are experimental and do not cover your entire group of physicians. That's not where you want to go.

CMS is saying you must take risks. What providers don't talk about and they should be talking about is according to the macro legislation, by 2026, every year that a provider does not take risks, their Medicare reimbursements or their Medicare payments will be reduced by a-half a percent for the rest of their lives, tied to their provider identifier.

That half-a-percent will accumulate. Two years, it's a percent. 10 years, it's five percent. 20 years, it's 10 percent. Health systems that are not taking risks are not going to be viable by 2026. There's no other program for us to learn about and go into.

This one, at least it is fairly robust, well run by CMS, and it's stable, and particularly with these new rules. They're going to have to figure out how to make this work, because there's not back-up plan, and if you're not in risk, you're not going to be a competitive health system.

Within the next few months, when Seema Verma comes out with clear guidance on waivers, of Stark and anti-kickback for risk-bearing organizations, it's going to be game over. Because if you don't take risks, you can't work with the docs in your community, but your competitors can in a totally different way. Now is not the time to stop.