Oregon’s Magical Thinking Meets CCO Reality

In September of 2011 we wrote an article called Oregon’s Healthcare “Transformation”, about the Beaver State’s efforts to solve the problem caring for the poor (and eventually everybody) by encouraging the development of “Coordinated Care Organizations” (or “CCOs”) for Oregon’s Medicaid program.  CCOs appear to literally be “Accountable Care Organizations” or “ACOs” with a different name, just as ACOs are simply Health Maintenance Organizations (HMOs) with an updated label slapped over all of the signs, advertisements and letterhead.

The underlying theory behind CCOs is that it’s not resource utilization that is causing healthcare costs to rise.  Instead, all of those increasing healthcare expenses are due to the fact that care is “uncoordinated” because everyone is paid separately.  Clinicians are therefore failing to address each patient’s every need at the exact time that it should be addressed, thus causing bad things to happen.  It’s a bit like the proverb For Want of a Nail, but in this case it’s the absence of a single global capitated payment that is causing all of those expensive emergency rooms visits.

For want of a global capitated payment, the social worker was unhired.

For want of a social worker, the appointment was unkept.

For want of an appointment the prescription was unwritten.

For want a prescription, the medication was untaken.

For want of a medication, the illness was untreated.

For want of a treatment, the symptoms were unchecked.

For want of breath, the patient went to the ER.

All for want of a global capitated payment system.

In order to keep all of these bad things from happening, CCOs are supposed to combine the resources of an ordinary clinic with a hearty helping of social work, mental health practitioners, additional office staff, just-in-time care and the sort of love we used to expect only from our mothers:

Each Mid-County clinic team has a doctor and family nurse practitioner, each with a clinical medical assistant; a registered nurse; a team clerical assistant; and a third clinical medical assistant to track appointments, preventative measures, prescriptions and other information for team patients.

The team also has access to psychiatric nurse practitioners and social workers at the clinic. Team members work together in the same room and huddle twice a day…

When a patient like Anderson shows up, the team knows her health history, her medicines she’s taking and what tests she needs. Sometimes the team will call her in for a test. She can call the team directly and often, if needed, get in to see someone on the same day.

Of course the same type of if-only-we-had-this-everything-would-be-dandy story could easily be told for any of the many top-down trends and mandates that are currently working their way down the governmental chain of command, including electronic medical record systems, “quality” measures, pay-for-performance, recommending that people avoid screening tests and the like.  The only real concerns that the public should have are: (a) whether any of these stories are true; and (b) whether the measures proposed by these distinguished academic thinkers are practical in implement in the real world.

One of those practical issues that we brought up in our previous post had to do with how it was possible to provide all of these enhanced services given the fact that Medicaid payments are already so low that they don’t even cover a clinician’s overhead costs:

So why don’t all doctors do this for their Medicaid patients?  The answer, of course, is that they can’t.  Medicaid doesn’t pay them enough to cover their basic overhead, let alone retain whole teams of social workers and administrative personnel.  If it did, they wouldn’t have to have stopped seeing Medicaid patients in the first place.  Moreover, Medicaid doesn’t pay them for many of these activities (such as coordinating with other providers), at all.  And to add insult to injury, Medicaid is one of the worst of all insurers to accommodate in terms of administrative overhead.  It’s not our healthcare providers who have failed these patients; it’s the insurance system that the government itself created.

All of which brings us back to the promised transformation of the Oregon Health Plan.  Having essentially created the problem of underinsured patients who receive all of their care in emergency rooms, how can CCOs now succeed where the rest of OHP has failed?

The answer is money.  In medical and even social terms, CCOs are nothing particularly innovative or revolutionary; they’re just clinics with more resources than their private counterparts.  The real difference is that the state and federal governments are presumably making a commitment to fund them in a responsible manner.  If not, they’ll be held hostage to the same unsustainable business model that has characterized the OHP for the past decade.  Patients will fall through the cracks, and ER visits will once again be the norm, and the next transformation will have to come up with yet another new catch phrase.

But as the Oregon Health Authority clearly figured out, the popular appeal of a government healthcare program with a cool new name is hard to resist.  Large and small hospitals, clinics and physician groups signed up for the CCO program in droves.  In just over six months, dozens of different consortiums had applied to be recognized as Medicaid CCOs – many of them representing the richest, smartest and most sophisticated private health systems in the state.  Eleven were immediately certified as CCOs, four were asked to resubmit their applications later, and two out-of-state publicly traded companies, Centene Corporation and United Healthcare sent letters of intent to apply for CCO status.  Rumors of their participation incensed local healthcare advocates, health systems and some legislators who figured that they were going to corner this chic new market for themselves; so outsiders could just butt out.  Oregonians had found the holy grail of healthcare and they were going to drink its sweet life-giving wine all by themselves.

Much of this wine happens to be provided by the Federal government in the form of a $1.9 billion Medicaid dollars and waivers that will pay for CCOs to be set up and operated over the next five years.  It seems that Oregon was looking at a $600 million deficit in its own state Medicaid funding for 2013 alone and would have had to slash benefits across the board if the Federal dollars hadn’t come through.  Fortunately the Oregon CCO plan forwarded by Democratic Governor John Kitzhaber fit perfectly with the ACO approach favored by the Obama administration and the Affordable Care Act, and Department of Health and Human Services Secretary Kathleen Sebelius signed off on the deal.  In return “…Kitzhaber promised officials that Oregon would within two years be able to document improved health outcomes and a 2 percent reduction in overall Medicaid costs.”  With the Governor’s success in bringing home the Washington bacon, the folks representing Oregon’s brand-new CCOs were ecstatic.

Well, at least until now.

It’s amazing how fast chickens can come home to roost.  This week, Oregon’s new CCOs were shocked, shocked, to learn that they would not be receiving any additional money to provide all of the new “coordinated care” services that they have obligated themselves to provide.  As described by The Oregonian newspaper:

Now, members of the new groups are crying foul after a directive Thursday that they’ll receive no new funds for the additional responsibilities they’ve agreed to take on — mental health care, prevention efforts, quality measurements and new patient-care staff, among others.

They say the success of the reforms is at risk because revamping the care of 600,000 people takes money.

“We’re stunned,” said Janet Meyer, interim CEO of a consortium of Portland-area hospitals and other providers called the Tri-County Medicaid Collaborative.  “That wasn’t the impression we had been given throughout the process.”

But the new groups simply have to be more creative, says Oregon Health Authority Director Bruce Goldberg,  who is overseeing the reforms. “There are no additional dollars,” he said…

The state asked the new care groups to submit rate requests based on their projected costs, but on Thursday informed the groups that those requests should be no greater than last year’s rate, which itself was an 11-percent cut…

The state’s mandated CCO rates — about $250 per member per month, in some cases — are about 20 percent less than what the groups requested based on costs…

The health authority’s Goldberg points out the new groups were spared the 2 percent cuts other Oregon Health Plan providers face. While he maintains that CCOs were informed that there would be no new funds, Meyer disagrees. “The (CCOs), without exception, were pretty surprised about the directive we were given yesterday.”

Having personally attended one of the lectures that Director Goldberg gave to Oregon physicians last year, we have to back him up on this one.  When we directly asked him how it was anyone could possibly provide all of the additional services provided by the CCO model when clinicians couldn’t even meet overhead expenses on their Medicaid patients, he simply replied that providers “would have to get creative”.  He was very careful not to promise anything.

That’s what qualifies as government leadership in healthcare reform these days: admonitions to the private sector to “get creative”, while simultaneously dictating exactly which services it is to provide, and how.

Still, it’s hard to shed a tear for Ms. Meyer and her colleagues from Tuality, Providence, Legacy, Oregon Health and Sciences University, Kaiser and Adventist health systems.  They really did expect to be paid extra so that they could expand their staff, process more patients and tap into a guaranteed stream of state and federal revenue – all in the name of “saving” money for the taxpayers.  No rational private-sector CEO would give a green light to a project like this unless it was expected to expand – or at least maintain – his company’s existing profit margins.  It hardly matters that most of these participants are non-profit institutions; for them “non-profit” is a tax status, not a business plan.  Now that the rug has been pulled out from under them, it will be fascinating to see just how creative they intend to become.

We predict that one of two things will happen.  The most likely event is that the Oregon Health Authority will drastically reduce the level of goods and services that CCOs are required to provide, down to the level of, uh, well, the services that are currently provided to Medicaid recipients by everyone else.  Except for having the feds cover Oregon’s budget deficit and Medicaid recipients covered by a global capitated payment to modern-day HMOs, nothing will change.  The other possibility?  That all of those certified CCOs will disappear faster than a government budget surplus.