Managing Risk Without Scale

In 2012, I was visiting a hospital in a small city in the Southwest and I learned a unique perspective on the scale needed for value-based care. We discussed the hospital’s strategy to succeed as an accountable care organization (ACO)—it was all about being small and knowing the hospital’s population. It did NOT include building a big, integrated delivery network with experience in managed care, but rather leveraging the hospital’s deep community connections and existing integration with local schools, police, churches and community organizations.

At the time, this was antithetical to the prevailing wisdom that scale was necessary to manage the health of a population. Today, we have plenty of examples that challenge this wisdom: initiatives in small and rural communities are yielding impressive results improving access while showing signs alternative payment models can make rural health care more sustainable. The clearest proof is in the most recent release of CMS Medicare Shared Savings Program (MSSP) data.

Rural ACOs Quickly Reduce Cost 
Rural ACOs have proven that critical access hospitals, rural health clinics and rural providers can be successful in value-based care with a small number (<10K) of covered lives. As shown in the table below, for ACOS that were formed in 2016, rural ACOs outperformed their peers and quickly realized savings while maintaining lower utilization.

We do not know precisely how each of these rural ACOs reduced utilization and created savings; the data alone do not answer those questions. We will be monitoring future results closely to see what sets the winners apart in this area. Meanwhile, these data do show rural markets should not be overlooked by health systems with a regional geographic footprint as they evaluate their glide path to risk.

But even if we look beyond ACOs, we find examples of rural providers’ successes in value-based care. These success stories yield a common set of lessons.

Lesson 1: Scale Is Different in Rural Communities
The average critical access hospital has 6,000 ED visits per year, while the average for all hospitals is just over 30,000 per year. Rural providers have been able to significantly decrease avoidable ED visits by targeting just a small group of patients with multiple recent visits, chronic health issues and social factors negatively impacting their health—and the ED staff at small hospitals can often identify these patients without expensive analytics. One program used just 4 very hands-on care coordinators working with 25 patients each. They reduced readmissions for these 100 patients by an impressive 67%. These are the kinds of results all value-based care providers are seeking, and this is how rural markets are turning the idea of scale on its head.

Lesson 2: Communities With Limited Care Options Are Hungry for Care Coordination 
Rural hospitals struggle with patients who leave the market for care that is available locally. The rural ACO that earned the most savings in 2017 did not expect its success in MSSP to also solve its problem with leakage. It was pleasantly surprised when its clinic volumes increased by 7% and its outpatient surgery volumes increased by 25%. Through patient satisfaction surveys, this ACO learned that its community deeply valued the care coordinators and follow-up calls that were implemented as part of MSSP. The increased clinic and surgery volumes were from not only patients benefiting from care coordination but also their neighbors who heard about and valued the hospital’s new approach. Word spreads quickly in small towns and, in this case, that was great for both value-based care and fee-for-service success.

Lesson 3: Rural Hospitals Committed to Value Look at Acquisition Differently
Rural health systems have been using the phrase “a primary care health system” to signify the shift away from inpatient care and surgery and to refocus their enterprises on preventive care, convenient access options and high-touch chronic care for those who need it. One rural organization in Pennsylvania was so internally focused on these goals that University of Pittsburgh Medical Center noticed its success and inquired about potential partnership/affiliation. For this provider, which traditionally was committed to independence, integrating with a bigger system made sense with its shift to a focus on value.

Evaluate Your Options
We previously made the case that there is mutual benefit for health systems partnering with rural hospitals, and partnerships around value-based care are no different. In another post, my colleague Tawnya Bosko outlines 8 competencies for success in value-based care:

These are fundamental considerations when evaluating potential rural partners. However, an alternate approach is to look for the absence of any of these core competencies and target markets with poor access, weak integration and high utilization. Most reimbursement models in value-based care focus on improvement (eg, risk scores, total cost, utilization), so identifying low-hanging fruit can be as valuable as identifying high-performing organizations for partnership opportunities.

Rural Partners Can Help on the Path to Value-Based Care

Value-based care could be the sustainable future rural hospitals and communities crave. The positive short-term impact of care coordination activities on fee-for-service volumes can be one way to make rural institutions more viable today while preparing for tomorrow. Health systems are missing an opportunity if they do not consider both rural markets and rural partners when evaluating future value-based care initiatives.


Sources: Shared Savings Program Accountable Care Organizations (ACO) Public Use File. April 2018. American Hospital Association Rural Health Care Leadership Conference. February 4–7, 2017, and February 4–7, 2018, Phoenix, AZ. Trustee Magazine The Rural Advantage: Challenges Abound, but Accountable Care Organizations Move Forward, January 1, 2013. Rural Policy Research Institute Medicare Advantage Enrollment Update 2017. August 2017. American Hospital Association Trendwatch Chartbook 2016 Supplementary Data Tables, Utilization and Volume, 2016. Sg2 Analysis, 2017.

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