Medicare Spending Up, Medicare Shared Savings Requires Risk

January 20, 2016 - Medicare spending is on the rise as the sizable impact of high-priced drugs on healthcare spending evolves. Accountable Care Organizations (ACOs) appear to be either in, out, or somewhere in between on the financial risk spectrum. Will ACOs take on higher risk levels or remain at a more comfy status quo? Healthcare providers, concerned with rising Medicare Part B costs, are apparently welcoming greater levels of flexibility in value-based care payment models. Optimism regarding the Medicare Shared Savings Program allegedly resounds but for how long and at what revenue cycle cost?

RevCycleIntelligence.com caught up once more with Bill Melville, Market Analyst for Decision Resources Group, to discuss ACO provider risk, what to possibly expect regarding upcoming Medicare challenges, the greater impact of high-cost medications on the healthcare industry, and a few predictions for new CMS Medicare developments.

RevCycleIntelligence.com: What do you expect healthcare providers’ greatest Medicare challenges will be for 2016?

Bill Melville: For providers, the ACO segment ends up topping all things. We've got some dropping in, some entering, some moving into different levels, some dropping out.

The way the ACO works is eventually you have dual-sided risk. At some point with the Medicare Shared-Savings Program, you've got to have more people taking risk or ultimately it's sort of a lost venture.

The more advanced providers are looking at accepting some risk through this Next-Generation ACO. Some in the Pioneer ACO model just weren't seeing savings. There's a handful staying in the Pioneer ACO, which has a more aggressive risk.

That's the issue – if you're in an ACO, are you going to get to the point where you can take risk, or are you going to keep going as is?

What gives me optimism is one of the new entrants into the standard Medicare Shared Savings Program, these sort of rural ACOs, which is nothing new. It's really tough to pull together providers and Medicare fee-for-service members and patients to make an ACO in a lot of the places they're operating.

It's easy to do one in an urban area, but it’s a lot harder to do one in rural Idaho or South Dakota. But they are now putting ACOs where they would've had trouble operating otherwise.

RevCycleIntelligence.com: Looking at Medicare from a revenue cycle lens, what’s the key focus right now?

BM: When you look at what people are paying for Medicare Part B every year, you think, "It doesn't go up that much.” But Medicare costs are going up pretty rapidly.

Everybody knows about the Hepatitis C drugs, but the next generation cholesterol drugs are a major cost concern.

Yes, you can go get a generic form of Lipitor for a few dollars. But the next generation blockbuster cholesterol drugs do even more but cost several thousand dollars for a monthly prescription. The costs go up exponentially from the typical cholesterol drug, the statin that we see used now.

For example, it's very hard for pharmacy companies to partner with Part B on quality initiatives. It was similar to what they ran into with ACOs and a conflict of interest between hospitals.

Those rates are pretty much as high as they can go. You end up with good old utilization restrictions and only giving things to the sickest people, but that runs into other problems, whereas the hepatitis C drugs come up because it's like a lot of the restrictions where only the sickest people can get those drugs.

The challenge is they're effective, but only a small segment of the population can get them because they're so expensive. And usually they're people that already have severe liver disease. It’s getting harder to find where you can bend that cost trend, if anywhere.

More of the drugs coming down the pipeline are just very expensive compared to what we're used to. The biosimilar markets are not going to be the cost savings they were when brand drugs went to generics. The importance of drug-dispensing can't be understated going forward.

RevCycleIntelligence.com: What are your predictions for upcoming CMS Medicare developments?

BM: Medicare's investigating all sorts of payment models and different initiatives. They've got a value-based insurance design initiative that's going to be in a few states in 2017.

The amount of experimentation is a good sign CMS is willing to try out different models, and different disease-specific things.

In Medicare Advantage, there's talk of giving programs more latitude on benefits for certain chronically ill populations.

Those kind of things could have a big impact going forward for Medicare. If you're using something like value-based insurance design, where you do generics and low-cost supplies and testing for people with chronic diseases, that can have an impact, as we've seen in the private sector.

It's good to see CMS is not staking everything on one model going forward with Medicare. There's an acceptance not every model is going to work in every place and that they need to keep trying new things.