Banking on Health Care Coordination

Governor Kitzhaber and legislators are banking on increased coordination to improve patient outcomes and stem spiraling medical costs.A lot rides on the success of health reform ventures such as coordinated care organizations (CCOs), but not everybody knows what they are, including some of the people responsible for making them happen.

The Oregon Business Association honored 11 Oregonians this year for their contributions to CCOs, which are just being formed after winning legislative approval in 2011. One of the honorees said the task of CCOs is to fill in the white spaces between existing parts of the health care delivery system.

Senator Alan Bates, D-Ashland, talked about filling in the white spaces to ensure greater coordination in delivering health care services to improve patient outcomes and save money. He gave an example of a man who underwent extensive medical treatment for physical ailments, while his underlying psychological issues weren't diagnosed or addressed.

CCOs call for unprecedented levels of coordination between health care providers that are competitors. People seem to be playing well in the sandbox together now, but how it ultimately works out remains unknown.

Just as important is whether CCOs can help stem the tide of rising medical costs for low-income Oregonians as budget pressures build at the state and federal levels to find cuts in Medicaid and Medicare.

The predecessor term to CCOs — accountable care organizations — was first used in 2006 by Elliott Fisher, Director of the Center for Health Policy Research at Dartmouth Medical School, during a discussion at a public meeting of the Medicare Payment Advisory Commission. The term quickly gained credibility, reaching its pinnacle in 2009 when it was included in the federal Patient Protection and Affordable Care Act.  

Managing patients and costs under CCOs is very similar to an earlier attempt at managed care through Health Maintenance Organizations (HMOs), which were prominent in the 1970s. In fact, the charges of both are quite similar. Like HMOs, CCOs will be held accountable for providing comprehensive health services to a population within a prescribed budget, called a "global budget."  Sounds a lot like the old "capitation" system, which is out of favor because, to some, it looked like health care was rationed on the basis of money, not need.

CCOs face a tall order in Oregon that some experts believe may be beyond reach. Even after Governor Kitzhaber obtained a federal commitment to provide $1.9 billion over five years to help finance reform, there is still a huge budget gap — some say it is a budget cliff — based on a current analysis of Medicaid money and recipients. In the the second year of the 2013-15 state biennium, the funding gap is estimated at nearly $1 billion in state general fund dollars , not including the loss of federal Medicaid matching funds.

With such a funding gap, local and regional CCOs may be faced with decisions that previously were the province of state government — cut reimbursements to providers serving Medicaid recipients (which aggravates the cost shift to the private sector), cut benefits for recipients or drop recipients off Medicaid entirely. The latter choice runs smack against the governor's intention when he created the Oregon Health Plan 15 years ago to trim benefits when money is tight, not recipients. 

In the 2013 legislative session, the prospect of funding gaps may spur some legislators to believe even more strongly that a tax on large hospitals and a tax on commercial health insurance premiums should be extended. Both sunset in late 2013, so three-fifths majorities in both the House and the Senate legislators must vote to approve extensions.

When all is said and done, the governor has done  a very credible job of painting a vision for a health care policy change that prods providers to collaborate within CCOs and focus more heavily on prevention to keep Medicaid recipients out of expensive hospital care.

A couple months ago, Kitzhaber used an appearance before the Center for American Progress in New York to suggest that Oregon's model could serve as a blueprint for policymakers around the country who are struggling to find answers to one of the biggest drivers of nation's enormous debt.

"The reason they bet on Oregon is that there are a lot of elements embedded in the Oregon plan that can be a proof of concept and provide a road map as they try to transition the whole system in that direction," Kitzhaber said. "If every state adopts that same approach and inflation rate (medical inflation in Oregon must be held to 3.5 percent), it would save $1.5 trillion over the next 10 years."

Kitzhaber also said his ultimate goal is to expand the system so that 300,000 state officials and public school teachers are covered by the same system, instead of the Public Employee Benefit Board or the Oregon Educators Benefit Board. 

“The Oregon experiment is one of four or five around the country, which are absolutely pivotal to figuring out what’s going to succeed in transforming the system," Kitzhaber declared. "I think we have a very narrow window in which to make an orderly transition to a new health care system before politics and economics drive this into a purely reactionary posture."

An underlying principle of health care reform is that Oregon continue down the road of existing health care delivery without breaking the bank. The question soon will be is whether the bank has enough money in 2013-15 to give reform a chance to work in Oregon.


For another local perspective on health care reform, check out this Measuring Minds blog post featuring a small business poll in Oregon Business magazine.

For a national perspective on health care reform, check out this Under the Dome blog post on the confusion surrounding how the Affordable Care Act will effect small businesses.