Accountable Care Organizations: A New Health Care Delivery Model That May Improve Quality and Affordability

ACO’s require quality management with a high degree of data analytics targeted to applicable populations of patients. It is of note that the Pro Pharma Quality Management Program™ has had 6 years of remarkable success achieving the outcomes of an ACO without the formal trappings. For those who are interested in the Pro Pharma Quality Management Program™, we are posting a separate blog with slides used by Dr. Stern in a national presentation in San Antonio last year.

At the heart of the ACO issue is the notion that the continuum of care can be managed. The organization able to do so would be rather large and complete with most specialties and facility types. Ingenix is pushing the consultancy from their unique ability (part of United Health's empire that has United Health and Redden Anders actuaries among other assets) to manage data and reporting from their SLC location.

I've had chats with Pivot Health and others....most are wondering how an ACO would function and if it would be much different than an HMO; perhaps a new model will be forthcoming. On the other hand, experience shows we are certainly able to assist with the issues of managing patients along the medical axis of the care continuum.

Be well out there,

Paul Ridgely
Senior Field Management Consultant
Pro Pharma Pharmaceutical Consultants, Inc.


"Most of our assumptions have outlived their uselessness."
— Marshall McLuhan


Now law, the Patient Protection and Affordable Care Act of 2010 provides new incentives to stakeholders across the health care system – from health plans to physicians and hospitals – to consider new care delivery models that have the potential to both enhance the quality of care and reduce costs.

One promising idea – the creation of Accountable Care Organizations (ACOs) – is facilitated under the Medicare Shared Savings Program provision of the health reform legislation. ACOs are comprised of groups of providers that share the risk and assume accountability for their patients’ health across the continuum of care. These organizations also monitor treatment outcomes and costs, and receive incentives for efficiency and adherence to evidence-based medicine protocols.

“Studies have shown that medical errors in our current system contribute to 100,000 preventable deaths annually, with billions in associated costs,” according to Eric Cahow, senior director, Government Programs Management and Strategy at Ingenix Consulting. “Currently, more than half of chronically ill patients in the United States do not receive care consistent with evidence-based guidelines. With more than 16 percent of our gross domestic product consumed by health care services, it is clear that we need to consider new ideas.”

The Patient Protection and Affordable Care Act of 2010 states that an ACO “promotes accountability for a patient population and coordinates items and services under [Medicare] parts A and B, and encourages investment in infrastructure and redesigned care processes for high quality and efficient service delivery.”

Under the statute, ACOs may include group practices, individual practitioners, hospitals, partnerships or joint venture arrangements between hospitals and ACO professionals, as well as other groups deemed appropriate by the Secretary of the Department of Health & Human Services. To serve Medicare recipients, ACOs are required to have a minimum of 5,000 Medicare fee-for-service beneficiaries; those that meet quality-of-care goals and reduce patient costs receive a share of the savings they earn for the Medicare program.

ACOs provide needed incentives to promote change

ACOs can help participating organization achieve their clinical and financial performance objectives. However, before joining or forming an ACO, providers should have a clear understanding of where and how they fit into the health care system.

Fee-for-service is the predominant model in the U.S. health care system. This means providers are paid for every unit of service, similar to piecework in a garment factory, Cahow explained, and a provider’s revenue increases as utilization increases. As such, there are few incentives to coordinate across the silos of primary care, specialty care and hospital care.

“The ACO model creates different incentives for primary care physicians to drive proactive care management,” said Cahow. For example, if reducing utilization is the goal, he noted, an ACO may incent providers – including hospitals – with bonus payments when they achieve a pre-determined benchmark such as lower hospital admissions while sustaining or improving the quality of patient outcomes.

All can benefit from ACO model :

All participants in an ACO – health plans, employers, providers and patients – are accountable for their own contributions to health and wellness, treatment decisions and payment. In Cahow’s view, “health plans and insurers must commit to tracking quality outcomes, establishing fair measures of those outcomes and rewarding providers for achieving them. Employers must consider programs and working conditions that optimize employee health. And individuals must commit to taking more responsibility for their own health-related behaviors and the costs associated with them. All of this can be built into the ACO’s structure.”

However, moving to an ACO model can be challenging. Adversarial relationships between some stakeholders are one of the primary obstacles to ACO success. “For ACOs to work well, each organization has to operate on a foundation of trust, transparency and good communication,” Cahow suggested.

Performance measurement is one of the linchpins to building this foundation, equalizing relationships between provider participants and payers, who can access qualitative and quantitative clinical performance and utilization data on their ACO partners. For example, ACOs can provide reports on the utilization of MRI services or the percentage of diabetic patients admitted through the hospital. “Facilitating access to this type of data across a group of ACO participants may support collaborative solutions to achieving group objectives,” said Cahow.

“Transformational improvement is the foremost objective to establishing an ACO,” said Cahow. “This requires committed physician leadership, an enduring culture focused on quality and a strong level of comfort with innovation and systems integration.”

Establishing an ACO requires planning, support

Evaluating whether or not an organization is a good fit for ACO participation involves careful planning, analysis and technical and management support. Ingenix Consulting already is supporting number of ACO development projects, with advanced analytics to assess clinical and financial performance in the current system, and consulting expertise to inform design, implementation and operation.

“Ingenix Consulting provides management consulting to help players determine if an ACO is right for them,” Cahow said. “If so, we can help them establish the right relationships and provide the actuarial, financial and care management support they need to get started.”

Although health care reform may seem daunting, he continued, now is the time to engage and evaluate opportunities to participate in health care delivery models that may become part of the backbone of the future health care system.

“Participating in an ACO involves taking some risks,” noted Cahow. “Investment choices are always difficult. But with the legislative call to action, change is no longer just over the horizon. Ingenix Consulting can help clients decide where they want to go and how to take those first steps toward achieving their long-term goals.”

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1 Sec. 3022, Patient Protection and Affordable Care Act, Pub. L 111-148.

Article location: http://www.ingenix.com/thoughtleadership/innovations/04292010/

Craig S. Stern, PharmD, MBA
President
Pro Pharma Pharmaceutical Consultants, Inc.

Rx per 1000 Patient Ratios are Greatest for Those with Part D Coverage

The following table identifies benchmark utilization for Medicare Part D. The data is from SDI and applicable to 2009. The data may be useful to compare plan utilization /1000 for the MMA Part D book of business. We would be interested if others have compared their numbers to these and found agreement/lack of agreement.

Note: There is no way to vet or validate this information, but we have no reason to believe that it is inexact. The Total column is directly from SDI and does not appear to sum all of the values in each row.

U.S. prescription drug sales hit $300 bln in 2009

This article provides benchmarks for drug spend 2008/2009. Be aware that you can find different benchmarks depending on the source. For example, the IMS figures come from sterilized ambulatory prescription data, while AARP and the National Association of Chain Drug Stores (NACDS) often provide different information from other sources. It is a good practice to ask for the source of data before quoting the results.



(Reuters) - U.S. prescription drug sales climbed by 5.1 percent to $300.3 billion in 2009, easily outpacing the 1.8 percent growth rate seen in 2008, according to data collected by IMS Health.

HEALTH

While the growth rate was far stronger than that seen the previous two years, it still represents historically low levels, said IMS, a leading provider of prescription drug data.

Over the past 50 years, the U.S. prescription growth rate dipped below 5 percent only three times, including in 2007 and 2008.

"Despite the severity of the economic environment, the demand for prescription pharmaceuticals remained strong," Murray Aitken, senior vice president of IMS Healthcare Insight, said in an interview.

"Patients continued their therapies, perhaps more than many had expected, and as a result we saw an increase in spending, taking the market to $300 billion," Aitken added.

Helping to fuel the growth was a 7.5 percent rise in demand for specialty pharmaceuticals used to treat complex, chronic conditions that now make up 21 percent of U.S. market value.

Sales of targeted biotechnology medicines, such as Roche's cancer drugs Avastin and Herceptin, grew by 9 percent in 2009.

Prescriptions dispensed through retail channels, such as pharmacies, through mail-order and at long-term care facilities, grew 2.1 percent - twice as fast as in 2008 - to 3.9 billion prescriptions.

Tempering the total dollars spent on U.S. prescriptions was a rise in the use of cheaper generic medicines, which in 2009 accounted for 75 percent of all dispensed prescriptions, up from 57 percent five years earlier. Despite their relatively inexpensive cost, generics still accounted for $74 billion in 2009 sales.

The total number of generic prescriptions dispensed in the United States increased 5.9 percent in 2009, while those for branded drugs fell by 7.6 percent

The shift toward generics is likely to accelerate by 2012, when several major products, including the world's two biggest-selling medicines - the cholesterol fighter Lipitor and the blood clot preventer Plavix - face competition from cheap generics. Lipitor is sold by Pfizer Inc and Plavix by Bristol-Myers Squibb Co and Sanofi-Aventis.

"We still see that when a product goes generic almost all of the prescriptions, 90 percent or so, are dispensed in their generic form," Aitken said.

Antipsychotics remained the top-selling class of medicines in the United States with $14.6 billion in sales, about equal to 2008 revenue.

Acid reflux drugs, such as AstraZeneca's Nexium, were the second-biggest therapeutic class by sales at $13.6 billion, with prescriptions up 5 percent.

Lipid regulators, which include cholesterol and triglyceride lowering drugs, were still the largest class by prescriptions, growing 5 percent to 212 million prescriptions dispensed. But U.S. sales declined 10 percent to $13.6 billion as the majority of cholesterol fighters are now available as generics, pushing the class to third in sales.

Antidepressants ranked fourth in 2009, growing 3 percent to $9.9 billion, IMS said.

"The thing that surprised us compared with what we might have expected a year ago was how the overall demand held up during a year that in many other parts of the economy we saw declines in demand," Aitken said.

"The higher growth than the prior year we think is notable and underscores the resilience of pharmacotherapy in today's healthcare equation."



COMMENTS

Apr 01, 2010 2:54pm EDT

Consumers of health and life insurance should understand that prescriptions purchased at the drugstore could harm your chances of getting insurance coverage.

According to BusinessWeek, an untold number of people have been rejected for medical coverage for a reason they never could have guessed: Insurance companies are using huge, commercially available prescription databases to screen out applicants based on their drug purchases.

https://www.annualmedicalreport.com/prescription-analytics-corporate-databases-track-whats-in-your-medicine-cabinet/

Health experts, like Doctor Kate Atkinson of Amherst, worry that insurance companies make incorrect assumptions by analyzing prescription records, because many drugs have multiple uses. Dr. Atkinson told the Washington Post, “I had a patient on Amitriptyline for migraines and they were denied life insurance because it’s also an antidepressant. I had to explain it wasn’t being used for depression.” Another patient was on Prozac — not for depression, but for menopausal hot flashes. “I wrote an appeal letter, and they still wouldn’t give it to her.”

“When an insurer makes an online query about an applicant, Ingenix or Milliman’s servers scour the data and within minutes or less return reports to a central server at the company. The server aggregates the information going back as far as five years, including the drugs and dosages prescribed, dates filled and refilled, the therapeutic class and the name and address of the prescribing doctor. Then comes the analysis. One software tool provides insurers a “pharmacy risk score,” or a number that represents an “expected risk” for a group of people, such as 30- to 35-year-old women who have taken prescription drugs…Higher scores imply higher medical costs.”

We commonly receive questions about average pricing contract language. The following is a response to the usual contract language.

PBM contract language often refers to the use of average, rather than per-claim, pricing for drugs. The average pricing issue does not preclude the fact that there are other pressing and relevant issues that need to be addressed from both the contract and audit/accounts payable screening of invoices pre-payment. These issues are the plan/purchaser’s (“plan”) responsibility, and are not open to the discretion of the PBM, but rather to how the plan/purchaser requires implementation of the business rules for claim adjudication. The following summarizes those issues that are not resolved regarding the average pricing language.

Ø Average pricing does not address contract requirements for –

o Situations where the AWP is inflated above Medicaid, above manufacturer published AWP, and above the reference database published AWP – all of these lead to both individual and average higher costs while discount guarantees are met.

o Situations where the generic MAC price is inflated above the FUL and the Medicaid MAC. This makes the average a larger number, but allows for the discount guarantees to be met.

o Drugs coded as brand that should be generic, generic drugs that should be on the MAC, multisource that don’t exist in benefits – these all implicate generic pricing as they are incorrectly priced so they affect all generic average prices.

o Situations where the U&C (e.g., $4 programs) is inflated above pharmacy published prices. This results in the plan paying more than a cash paying patient and improves the average making it easier to meet the AWP guarantee.

Ø Formulary coding, quantity limits, early refills, and COB for Medicare are responsibilities assigned to the plan. The amendment for average pricing does not implicate these benefit issues. The responsibility for benefit definition and what the PBM should use as business rules for claim adjudication are also assigned to the plan. As a result, the PBM cannot modify or apply rules that are other than what the plan requires without plan approval.

Ø Invalid claim administration where claims include invalid identifiers for doctors, pharmacies, drugs, and expired drugs

Ø Retrospective audits do not remove the responsibility for reviewing and remedying plan ongoing issues with the above listed items. Further, issues identified in the bimonthly/monthly invoices require reconciliation at each invoice period, and do not allow for future settlements for claim history outside of the invoice period. The plan has the discretion and the authority to define and ensure that the PBM is complying with plan current business rules for claim adjudication. This is not applicable to average versus per-claim pricing. As the fiduciary, the contract does not allow the PBM to make those decisions without the express approval of the plan.

Ø The retrospective audit process does not address the following issues that are not applicable to average pricing – reconciliation of each invoice, performance guarantees and applicable financial penalties (e.g., level of satisfaction with account client management, pharmacy network training to Count benefits and business rules), rebate reconciliation, network pharmacy audit results, and review of pharmacy network agreements for validation of pass-through pricing.

Note: The lack of oversight of average pricing allows a Pharmacy in the retail network to be paid at different AWP discounts and dispensing fees for brand drugs. This applies across the retail network and disadvantages a pharmacy for some drugs and advantages them for others. While this is not a direct contract with the plan, this is the source for potential pharmacy complaints and lack of compliance with the COB claims. This results in a decision for the plan to determine what parity rules they require for management of their retail network.

Craig S. Stern, PharmD, MBA
President
Pro Pharma Pharmaceutical Consultants, Inc.

The price of generic drugs can vary widely from one pharmacy to the next.

The price of generic drugs can vary widely from one pharmacy to the next.

This email has been circulating in cyberspace for some time. The contention is that Costco is much cheaper than all other pharmacies. Costco does advertise that they charge Cost + $1 which would make them cheaper than most other pharmacies, other than, perhaps, some of the discount $4 programs. However, this email confuses the raw drug material cost with the finished product tablet/capsule cost. The two are not equal any more than the cost of materials to make a suit is equal to the cost of a suit. The article should compare the direct price (DP), wholesale acquisition price (WAC), common third party contract price, and the pharmacy sales price (or usual and customary, also U&C) to compare pharmacy prices. At the end of the day, the third party contract prices are the same across all pharmacies in their networks, while the pharmacy U&C sales price is probably different.

At the end of the day, comparison shopping is always beneficial. However, what is more beneficial is to ask for a generic, or a generic or brand in the same therapeutic category at a lower price. This strategy provides the same clinical benefit at a lower out-of-pocket cost and a lower cost to the purchaser.


The Story

On Monday night (July 22), Steve Wilson, an investigative reporter for channel 7 News in Detroit, did a story on generic drug price gouging by pharmacies. He found in his investigation, that some of these generic drugs were marked up as much as 3,000% or more. Yes, that's not a typo . . . three thousand percent!

Mr. Wilson did a thorough research, and checked out all the major drugstore chains, discount chains, independent pharmacies, and even checked on some Canadian pharmacies. So often, we blame the drug companies for the high cost of drugs, and usually rightfully so. But in this case, the fault clearly lies with the pharmacies themselves.

For example, if you had to buy a prescription drug, and bought the name brand, you might pay $100 for 100 pills. The pharmacist might tell you that if you get the generic equivalent, they would only cost $80, making you think you are "saving" $20. What the pharmacist is not telling you is that those 100 generic pills may have only cost him $10!

At the end of the report, one of the anchors asked Mr. Wilson whether or not there were any pharmacies that did not adhere to this practice, and he said that Costco consistently charged little over their cost for the generic drugs. They gave the link to Costco, which I will include here, so that you can go and check prices for yourself. www.costco.com Costco Online pharmacy

I went to the Costco site, where you can look up any drug, and get it's online price. It says that the in-store prices are consistent with the online prices. I was appalled. Just to give you one example from my own experience, I had to use the drug, Compazine, which helps prevent nausea in chemo patients. I used the generic equivalent, which cost $54.99 for 60 pills at CVS. I checked the price at Costco, and I could have bought 100 pills for $19.89. For 145 of my pain pills, I paid $72.57. I could have got 150 at Costco for $28.08.

I would like to mention, that although Costco is a "membership" type store, you do NOT have to be a member to buy prescriptions there, as it is a federally regulated substance. You just tell them at the door that you wish to use the pharmacy, and they will let you in.


Origins: As the popularity of this e-mail attests, the fact that one can find a wide disparity in drug prices from one pharmacy to the next was apparently surprising news to many people. And there's probably some truth to the notion that because we tend to view generic drugs as great "money-saving" alternatives to brand drugs, we often don't consider that the mark-up on generics can vary widely from one retailer to the next.

The basic facts laid out in the message quoted above are true. Steve Wilson, a reporter with WXYZ-TV in Detroit, conducted an investigative study into the cost of generic drugs at various pharmacies and other retail drug outlets and found quite a disparity between the highest and lowest prices

charged for certain generic drugs. For example, the Prescription Drug Price Comparison Chart available in conjunction with Wilson's report shows that a one-month supply of Fluoxetine HCL (the generic for Prozac), which wholesales for $1.48, varied in retail price from a high of $92.24 to a low of $9.69 just within the Detroit area.

Comparison shopping applies to generic drugs just as much as it does to food, clothing, DVDs, automobiles, or any other product. Those willing to do some hunting around get the best prices, and many drug comparison sites are available on the web to help consumers compare the costs of various drugs at different retail outlets before submitting their prescriptions (although medical insurance or HMO restrictions may limit which pharmacies a covered patient can use). Price differences between pharmacies can't necessarily be chalked up to nothing more than mere greed, however — some pharmacies offer additional levels of service (such as staying open 24 hours a day) and have to recoup the costs of those additional services by charging higher prices.

Although we can't guarantee that Costco always has the lowest prices on generic drugs, it is generally true that their pharmacy will fill prescriptions for non-members (but be prepared to pay by cash or ATM card rather than check).

Later versions of this message had the following table added to the beginning:
BIG RIP-OFF


The Cost of Prescription Drugs


Did you ever wonder how much it costs a drug company for the active ingredient in prescription medications? Some people think it must cost a lot, since many drugs sell for more than $2.00 per tablet. We did a search of offshore chemical synthesizers that supply the active ingredients found in drugs approved by the FDA. As we have revealed in past issues of Life Extension, a significant percentage of drugs sold in the United States contain active ingredients made in other countries.

In our independent investigation of how much profit drug companies really make, we obtained the actual price of active ingredients used in some of the most popular drugs sold in America. The chart below speaks for itself.





This chart is of dubious accuracy and has little relevance (other than an inflammatory one), as far more goes into the retail pricing of drugs than the raw cost of their active ingredients. Pharmaceutical companies expend money on the research and development costs of creating the drugs, plus the overhead costs of manufacturing, marketing, and shipping them; as well, pharmacies must sell drugs for more than their wholesale prices in order to cover the overhead costs of store operations (including pharmacists' salaries).