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My last newsletter was so popular, I’ve decided to continue with this theme of focusing on how the U.S. Healthcare system works.

Many of you have likely heard of, or belong to, ACO’s (Accountable Care Organizations) and are not entirely sure what they are. I know I wasn’t.

“ACO’s are groups of doctors, hospitals, and other health care providers who come together voluntarily to give coordinated high-quality care to the Medicare patients they serve.”

“ACO’s were introduced as a delivery model initiative supported by the Affordable Care Act (ACA) of 2010…”

CMS mumbo jumbo. What does all of that mean?

To understand ACO’s, you have to understand the problem they intend to address:

Fragmented Care

Example: A patient’s PCP finds a suspicious breast lump. That PCP sends her to a women’s center for a mammogram. Then, she’s sent to a different facility for a biopsy. That biopsy is then sent to a pathologist at yet another facility. She then goes to a breast surgeon at another facility and gets a lumpectomy. Finally, she goes to yet another facility for chemotherapy and radiation. (Taken from source listed below)

If you were counting, that’s 6 different facilities - all of which may have little to no connection to each other and do NOT have access to each other’s records. Therefore, they might repeat tests which increases costs and delays care. Remember, 2010 was before the time of ubiquitous EHR’s (another initiative of the ACA).

Furthermore, most hospitals and doctors were being paid under a “fee for service” model meaning you get paid when you DO things to patients. So, doing less and preventing costly care didn’t make you more money.
Quite the opposite.
Quantity > Quality.

So, how do you incentivize low-cost, high-quality care?

Capitation

Capi what?

Capitation is “a payment arrangement…that pays a set amount for each enrolled person assigned to them, per period of time, whether or not that person seeks care. The amount of remuneration is based on the average expected health care utilization of that patient, with payment for patients generally varying by age and health status.”

I know, more mumbo jumbo.

In plain language: There’s a fancy calculation that determines how much money it’s expected to take care of each individual patient. That expected cost is determined by demographic information and comorbidities. The ACO gets paid that amount.

If it costs you MORE than that to care for the patient → Your loss.

If it costs you LESS than that to care for the patient → Profit!

The expected payment from the insurance company is typically LESS than what would be expected if you added all the services together under a fee for service model. So, the ACO model is ideally a win-win-win for all.

How is that expected cost calculated?

Claims data (which relies on documentation and submitted codes). These can be captured inpatient and outpatient.

As I’ve discussed many times before, this is one of the reasons you get hounded (by people like me) about being as specific as possible in your documentation and (especially for you outpatient docs) submitted codes as they carry more weight and therefore increase the expected cost to care for that patient.

So, this year’s data predicts next year’s payments. See this example from the ACC CVSummit presentation:

Same patient but more specific documentation / codes changed the “Per member per year” payment from $9,765 → $30,429.

That’s a chunk of change.

You may notice some acronyms on there:

HCC & RAF

HCC stands for “Hierarchical condition category.” Simply put, these are groups of diagnoses that impact the expected cost to care for the patient. This is captured through a numerical score called the “Risk Adjustment Factor” (RAF) which is used to determine the calculated dollar amount (as you can see in the above picture).

Plot twist:

They RESET every year!

On January 1 each year, they reset back to 0 and they must be “recaptured” in order to ensure the ACO gets paid its due for caring for that sick patient (note that some HCC’s do resolve).

This is also why many organizations prioritize the Medicare Annual Wellness visit to confirm that these conditions are still present (in addition to using that opportunity to discuss health maintenance, etc., that sometimes aren’t discussed during acute episodic visits throughout the year).

Back to ACO’s

So, wrapping this all up, if you can get a group of doctors, hospitals, etc. to all work together and operate under this capitated model while sharing the same EHR and reducing costs and improving quality and efficiency, the payer, the patient and the ACO win.

But one last thing…

Gamification

It doesn’t take a stretch of the imagination to see that this model is susceptible to being gamed via data mining.

This was the source of the False Claims Act violation and whistleblower cases against Kaiser Permanente suggesting they were encouraging doctors to document diagnoses that weren’t clinically relevant, falsely elevating patients’ risk scores and subsequently resulting in increased payments.

But it’s not just hospital systems.

Medicare Advantage plans operate under a similar payment model where CMS pays them based on risk scores. This was the source of my concern in my recent post on LinkedIn where a Medicare Advantage company, out of the blue, sent a nurse to visit my mother and seemingly diagnosed her with PVD of which she has no risk factors, no symptoms and has never received treatment for.

Some risk adjustment coders say this nursing visit can’t be used for risk adjustment as there’s no physician present, but something must be up as that story about my mother is extremely common (just look at the comments on that post). Dr. Ronald Hirsch has been writing about these home visits since 2014, and the OIG has had their sights set on MA plans for a decade. However, little has changed.

Let’s talk more about what’s going on with these home visits in the CDI and Coding Village.

Want to expand on this topic or tell me that I’m wrong (certainly possible)? Join the discussion in your CDI and Coding Village and lock in our exclusive launch price for life (Discounted price ends August 5th 11:59 CST).

That’s all for now. Don’t hesitate to ask questions as they help inspire future issues!

Cheers,

Robert

Thanks to Laura Samson, RN BSN CCDS, and Jason Jobes for editing this newsletter!

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Sources:
1. What is an Accountable Care Organization (ACO)? (youtube.com)
2. The ABC's of ACO's (youtube.com)
3. virtual.acc.org/uploads/cvsummit/handouts/cvsummit_2022_43-141_PracticalApproachtoHCCCapture.pdf
4. Kaiser Permanente risk-adjustment whistleblower case unsealed | Phillips & Cohen (phillipsandcohen.com)
5. Medicare Advantage insurance firms accused of data-mining patient records and submitting false bills - The Washington Post
6. Medicare Advantage Fraud & Risk Adjustment Fraud Whistleblowers (phillipsandcohen.com)
7. It’s All About the Money – When is a Doctor Not a Doctor? (archive.org)
8. How to Correctly Capture Patient Risk for Value-Based Care Programs | AAFP
9. Accountable Care and Accountable Care Organizations | CMS
10. Medicare Value-Based Payments Explained - YouTube