Senior Fellow Alexandria Margolis (Poland 2011) wrote “Aligning Incentives: Funding Care for Our Most Vulnerable Elders” as part of the 2015 Humanity in Action Philanthropy and Social Enterprise Fellowship.
Today 68 percent of U.S. adults age 65 years and older have two or more chronic conditions (2).
The United States has long predicted a “silver tsunami” of baby boomers, where adults 65 years and older would grow to an unprecedented 20 percent of our population (1). As life expectancy has increased, so has the prevalence of chronic illness – long-term, incurable conditions such as heart disease, diabetes, and dementia. Today 68 percent of U.S. adults age 65 years and older have two or more chronic conditions (2). As these illnesses advance, many people face complex co-morbidities, frailty, and functional impairment.
For many older adults, this means that the most fundamental of tasks – “activities of daily living” such as bathing and dressing – can become barriers to dignity and independence. Automobiles and single-family homes – the very things that symbolized independence for many post-war baby boomers – today result in 12.1 million people 65 years and older living alone and at least one million permanently homebound (3). On average, older adults juggle multiple physicians per year and numerous prescriptions. These burdens also affect the 29 percent of us who act as caregivers for our loved ones (4).
Our country faces a shortage of providers specialized in geriatrics and other high-cost, high-need populations, while those who specialize in primary care face a high risk of burnout (5). Fragmentation smothers the efforts of many well-meaning health professionals, whose long hours and heroic efforts don’t translate to outcomes for patients and families at the population level.
5 percent of the population makes up nearly half of our health care costs (6)
Individual medical compliance is clouded by realities like how the patient may be unable to read the labels on their medications, placing them at risk to error, or hear and comprehend instructions provided by their doctor. Even the most brilliant medical school graduates are often overwhelmed by and unprepared to help with such intertwining social complexity – nor is that the most effective use of their medical degrees.
As a result of health care’s share of GDP, policy makers and providers are now paying attention to the 5 percent of the population that makes up nearly half of our health care costs (6). Innovative models of care have developed across the country to close gaps in care and increase access to care to prevent high-cost emergency department visits, hospitalizations, and multiple readmissions.
As a Project Manager at the North Shore-LIJ Health System (North Shore-LIJ – now Northwell Health) in New York, I contributed to the development of several innovative models: home-based primary care, community paramedicine for 24/7 in-home response, and programs to move palliative care upstream from hospice to outpatient and home-based settings. For many non-profit health systems, our best ideas were the most difficult to defend during budget season.
To understand why, follow the money.
To understand why, follow the money. Medical reimbursement is defined by specific diagnosis codes that establish which procedures, services, and medical devices can be billed. This fee-for-service model has rewarded distinct medical interventions rather than a “whole person” approach. It often promotes high-tech interventions that the patient and family may not fully understand the burdens of while providing no or little payment for many low cost interventions that can maximize quality of life.
Medicare is leading the way in replacing fee-for-service payment with global, value-based payment.
Medicare is leading the way in replacing fee-for-service payment with global, value-based payment. This method will “bundle” entire procedures to stimulate coordination between its included services or “capitate” payment (i.e. “per patient per month” rate) to place providers at financial risk for achieving a comprehensive set of quality outcomes and keeping costs below premiums. This is a tremendous change for most of the health care industry, and therefore payment models will not shift quickly; meanwhile, few health systems can afford to make the upfront investment needed today to build what will be paid for tomorrow.
Thus many of the most innovative and effective programs, the ones trying to do the “right thing” for their patients, simply operate at a loss. As my work increasingly became about grant writing and fundraising to close budget gaps and justify program expansion, I decided to study the role of philanthropy in catalyzing and scaling programs like mine. I expanded my investigation to any type of funding model, in which I included the Center for Medicare and Medicaid Innovation, to ask can we align profit with what patients and families actually want and need? “Can we apply that formula to the highest-risk, most expensive Medicare patients who are also our most frail and vulnerable seniors?”
Health care services and products that serve older adults have a moral responsibility to prioritize not only the beneficiary’s longevity or sum years, but their health and quality of life for the years they have.
It seems to me our highest cost populations present the highest potential for savings; my experience in the healthcare industry leads me to believe these savings can correlate with higher quality of life and satisfaction (compared to higher cost interventions, such as a hospitalization, for example, which typically result in lower satisfaction). I believe that health care services and products that serve older adults have a moral responsibility to prioritize not only the beneficiary’s longevity or sum years, but their health and quality of life for the years they have.
If payment can be a powerful tool to force accountability, then how does reimbursement get tied to new metrics of success that reflect the human being behind each health care decision, and reward for outcomes that matter to us and our loved ones such as increased days at home or decreased suffering and unwanted care?
These are large questions with a myriad answers. My research approach was to speak with representatives from a variety of mission-driven organizations and reflect on their range of answers:
Our health care delivery models at North Shore-LIJ partnered with the leading advocacy and educational organization specialized in the seriously ill, the Center to Advance Palliative Care (CAPC). CAPC is a national organization supported by foundations, private philanthropy, and membership affiliated with the Icahn School of Medicine at Mount Sinai in New York (7).
Palliative care is a medical specialty that focuses on “providing relief from the symptoms and stress of a serious illness – whatever the diagnosis (8).” It represents a radical shift from diagnosis-based treatment to managing the quality of life of a person, but its strong association with hospice and cancer care has limited its expansion to clinical settings and patient populations where it can provide tremendous benefit. CAPC strives to set the standard in palliative care best practice, and overpower its stigma by promoting widespread adoption.
The most powerful tool lies in developing palliative care’s business case.
Palliative care certifications and designations will encourage adoption of national guidelines and standards; many for-profit health plans, nursing homes, and hospice agencies have the resources to compete for these accolades, which can drive quality improvement. However, Director, Diane Meier, MD, and I discussed that the most powerful tool lies in developing palliative care’s business case. Today fee-for-service reimbursement does not cover much of what makes palliative care distinct: in-depth communication concerning treatment options, advance care planning, and family caregiver support, for example – but these are the tools proven to prevent hospitalizations and improve satisfaction.
Today most health system activities revolve around the physician or mid-level provider because they are among the few who can bill.
CAPC is motivated to document palliative care’s return on investment, which also involves a willingness to explore new clinical models. Today most health system activities revolve around the physician or mid-level provider because they are among the few who can bill, but Meier argues “the [staffing] pyramid needs to be flipped;” we need more community health workers, nurses, and social workers operating under mid-level providers and physicians who can address social determinants – as long as “EMR operability” allows for communication, she added.
This leaves us with capitation and risk arrangement as the “only way to fund a rational health care system,” Meier said. Advanced payment has to be made available and be flexible enough to cover the whole scope of how care is delivered, not only the fragments.
The Commonwealth Fund is in the business of studying health care delivery, and how to improve it. As a private foundation based in New York, it supports independent research and makes grants. Melinda K. Abrams, Vice President for Health Care Delivery System Reform, was careful to differentiate its mission from charitable organizations, which provide a service, while “philanthropy is meant to think about systems.”
“No one will ever have all the money they need to fund it all.”
The Commonwealth Fund will not provide grants to simply sustain a program that serves clinically complex, frail patients, for example. Even a demonstration, such as the Center for Medicare & Medicaid Services (CMS) Independence at Home model, is not something they would sponsor. “No one will ever have all the money they need to fund it all, but we can give people a North Star,” Abrams stated. The Commonwealth Fund does this by publishing to educate and stimulate innovation; by translating these programs and models into terms that will translate to health system leadership (i.e. framing information so it aligns with existing quality and financial goals); and cross-referencing innovative ideas with regulatory barriers and payment to influence policy.
Neither the policymaker, health system, nor payer has the time/money amidst their “day jobs” to follow every thread of our health care system and untangle it to its most efficient, optimized state. Abrams explained, “Foundations have the luxury…to support people in stepping back and thinking about the problem because they are outside the system and have an endowment.” The Commonwealth Fund can afford to take the time to identify solutions, profile their strengths and weaknesses, and spread these concepts to health systems and funders. Their research and support facilitates the adoption of evidence-based strategies to improve outcomes and lower costs across the health system.
While high-impact, neither CAPC nor the Commonwealth Fund solve for access to upfront capital. As a state/local foundation, the California HealthCare Foundation (CHCF), directly funds projects that support California’s health care system. Thousands of similar foundations exist across the nation, which help non-profit providers to build and improve services. I wanted to speak with CHCF specifically to understand more about their experimentation with program-related investing.
Investors often support advanced technologies with low health care value. CHCF seeks entrepreneurs whose products have the potential to improve care for the underserved.
Barbara Lubash, a board member and healthcare investor, explained why many successful pilots supported by grant dollars fail to gain traction. Non-profit providers often have no incentive to take their innovation to scale: “Why would they take all the hospitals they’re competing with and get them to adopt it?” Entrepreneurs, on the other hand, will “go out of business if what they build isn’t adopted.” To close this chasm, they created the CHCF Health Innovation Fund.
Investors often support advanced technologies with low health care value. CHCF seeks entrepreneurs whose products have the potential to improve care for the underserved. In 2010, a fetal monitoring technology called Lifewave promised applicability for high-risk pregnancies, but was struggling to raise funds; CHCF saw its potential savings and impact for Medicaid patients and chose to invest (9). This investment was driven by “mission fit.”
Since grants traditionally result in zero financial return, program-related investing is “capital efficient.” Lubash describes, “When that money comes back – should you make money – it has to be re-deployed for your mission.” The Foundation can now use that return to support another grant. Today CHCF has an investment portfolio covering products designed in the commercial market to bring to Medicaid or proven effective with the underserved in another state for expansion to California, and products focused on the underserved that are not likely to be funded by investors.
Slow adoption and low reimbursement have historically stifled the ability of venture capital or commercially acquired funds to invest in the Medicaid market.
The Medicaid market is typically “10 years behind other industries for technology, etc. – but,” Lubash said, “these are the people who are most vulnerable and need it the most.” While CHCF advances its philanthropic mission, entrepreneurs also gain access to the Medicaid market and early adopters. Slow adoption and low reimbursement have historically stifled the ability of venture capital or commercially acquired funds to invest in the Medicaid market. Program-related investing opens this door and may present the opportunity to achieve sustainability and scale more so than a typical grant-funded initiative.
[Disclaimer: Alexandria joined Alignment Healthcare in August 2015.]
Alignment Healthcare is a start-up based in California that addresses access to capital in the core of its business model. Its advanced clinical model and analytics capabilities exemplify the population health platform that every provider and health plan are pursuing today, but its partnerships are designed to “align” incentives. To explain, first a little background on Medicare Advantage.
Medicare Advantage remains the strongest opportunity to fully align payment, benefit design, and care delivery.
In 2010, the Affordable Care Act cut reimbursements for Medicare Advantage, and experts predicted enrollment would decline. Since then, however, Medicare Advantage enrollment has exceeded expectations; in 2014, 30 percent of all Medicare-eligible beneficiaries – 15 million people – chose private plans (10). Since 2010, the Centers for Medicare and Medicaid Innovation (CMMI) has continued to pursue value-based demonstrations that inch closer toward full capitation and benefit design; but Medicare Advantage remains the strongest opportunity to fully align payment, benefit design, and care delivery.
Through Medicare Advantage, the federal government pays a private insurer a per-member per-month (PMPM) payment and places the insurer at financial risk to profit or lose depending on whether the member’s medical bills are lower or higher than the payment the insurer collected from the government. The insurer thus has an incentive to help the member avoid high-cost services, such as inpatient stays, but this eats away at how hospitals and health systems have historically stayed in business: by billing the federal government directly for services rendered. This conflicting set of incentives has left many health systems and insurers across the country in a stalemate.
Alignment Healthcare partners with the Medicare Advantage insurer to access its members, along with their PMPM revenue. Alignment Healthcare also partners with local providers to help care for these members at a cumulative cost that is lower than the cumulative PMPM payments, and share in the profit savings generated. As a result, Alignment Healthcare builds a partnership that extends the community-based, primary care models that improve the health of Medicare populations and enhance quality-of-life and patient experience.
In healthcare, no entity is more influential than the Centers for Medicare & Medicaid Services (CMS). In 2011, Medicare and Medicaid paid for 63 percent of the nation’s inpatient hospital costs (11). As the single largest payer for healthcare in the United States, it provides benefits for 90 million Americans (12). Since high cost, high need patients are overwhelmingly old and frail, and therefore dually covered by Medicare and Medicaid, CMS is the leader in transforming healthcare delivery for this population (13).
As the single largest payer for healthcare in the United States, it provides benefits for 90 million Americans (12).
An entire office, the Center for Medicare and Medicaid Innovation (CMMI) was created to grant hundreds of millions of dollars for such demonstrations and interventions. These include Independence at Home for home-based primary care, Medicare Care Choices to shift palliative care upstream of hospice, accountable care organization (ACO) models with payment structures edging toward full-capitation, and Health Care Innovation Awards to support specific projects.
“It may be many months into the demonstration before payment is made.”
However, CMS does not provide upfront capital for most of these endeavors. Melanie Bella, former director of the Medicare-Medicaid Coordination Office at CMS, explained, “It may be many months into the demonstration before payment is made.” This can make things very difficult for states or organizations, who operate on a financial year. Few question that Medicare and Medicaid interventions will pay out, but on what timeline? Further, how will we agree to what actually works and what will be the metrics?
“We need to invest in systems and people, but what is needed,” said Bella, “is bridge funding.” Bridge funding is upfront investment and infrastructure for entities who are asked to take a risk and test a new delivery or payment model. One example in which CMS has provided this is the Medicaid Health Home, for which states receive a 90 percent Federal Medical Assistance Percentage match for the first eight quarters the program is effective (14). States can use those initial dollars to build up the system that will achieve the goals of the demonstration.
This can be a complex role for government to play, however, as there must be a mechanism to get funds back relative to results. Bella suggested that the role of CMS might be to assess value or offer a seal of approval to which private capital can respond, with the goal being to attract more creative and flexible capital. As models are proven effective, government can become the permanent funder. One example of this today is housing, where private financing flows into government programs.
There is clearly no one strategy or part of our health care system that will deliver the solution for our frailest, medically complex patients. In fact, a universal theme across my interviews was health care’s nature as a “team sport.” The fragmentation caused by fee-for-service will have to be solved by integrated, coordinated delivery systems.
There is clearly no one strategy or part of our health care system that will deliver the solution for our frailest, medically complex patients.
This synchronicity needs to happen across a lot of stakeholders: patients and consumers; health systems and providers – non-profit and for-profit; payers – government and commercial; foundations and thought leaders; and even taxpayers.
To map these transactional relationships is twisted and complex: health insurance risk pools are spread across populations with varied individual utilization and cost; insurance payment does not reimburse providers for real health care costs and beneficiaries pay co-pays to providers with no understanding of full service charges; providers perform highly skilled services without needing to know their costs or the value of their coding; providers and health plans with non-profit status are tax-exempt while younger, working beneficiaries pay taxes which finance the government’s role as a payer; meanwhile private funding spurs products, technology, major gifts, and so on.
Health care does not easily accommodate a for-profit versus non-profit bifurcation. Recently, these questions have begun to manifest in legal cases. In 2015, Blue Shield of California, the third-largest health insurer in California by market share, lost its tax exempt status (15).
Meanwhile, as margins shrink for most hospitals and health systems they are also under scrutiny for the amount of charity care they provide to justify their tax-exempt status.
As the prevalence of chronic illnesses and frailty rises, health care stakeholders (and dollars) will increasingly focus on services that target social determinants of health, such as housing and transportation.
As the prevalence of chronic illnesses and frailty rises, health care stakeholders (and dollars) will increasingly focus on services that target social determinants of health, such as housing and transportation. Disruptive innovation at this scale – the very thing everyone I interviewed is trying to stimulate – will not fit into a neat container of “health care.”
To re-design our health care system, health care philanthropy, policy, and industry leadership must embrace “sector blur.” Mission-driven innovation might be sparked across sectors by metrics that are patient- and family-centered. This could become the new “bottom line” or cost-benefit analysis behind health care products and services. While hybrid approaches – profit and non-profit, public and private – will be the way of the future, this does not define how providers will be held accountable to such metrics, or by whom.
• • •
In addition to the interviewees mentioned, who generously shared their time to support my research, I would like to thank the interdisciplinary leadership team at the North Shore-LIJ Health System (now Northwell Health) who gave me the opportunity to explore funding for geriatric and advanced illness models: Kristofer L. Smith, MD, MPP; Maria Torroella Carney, MD; Mary R. Curtis, PhD; Maureen Hinkelman, RN; Lori Ann Attivissimo, MD; Christin Paglen, JD; Jonathan D. Washko, MBA, NREMT-P, AEMD; and Joseph Schulman, MPA.
Creative Commons photo (2007) by Tim Hamilton
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