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Last Updated: 25 September 2014
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Kocher/Mostashari: McAllen - A Health Care Success Story

By Bob Kocher and Farzad Mostashari
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NEW YORK, September 25 - It may have been the most influential magazine article of the past decade.

In June of 2009, the doctor and writer Atul Gawande published a piece in The New Yorker called “The Cost Conundrum,” which examined why the small border city of McAllen, Tex., was the most expensive place for health care in the United States.

The article became mandatory reading in the White House. President Obama convened an Oval Office meeting to discuss its key finding that the high cost of health care in the country was directly tied to a system that rewarded the overuse of care. The president also brought up the article at a meeting with Democratic senators, emphasizing that McAllen represented the problem that needed to be fixed.

Five years later, the situation has changed. Where McAllen once illustrated the problem of American health care, the city is now showing us how the problem can be solved, largely because of the Affordable Care Act that Mr. Obama signed into law in 2010.

In his article, Dr. Gawande cited studies showing that patients in high-cost areas like the Rio Grande Valley, which includes McAllen, were much less likely to receive preventive services like cancer screenings or vaccines, but far more likely to be prescribed costly drugs, invasive procedures and expensive diagnostic tests. And they were not any healthier for it: Compared with places like El Paso, McAllen had worse health outcomes, despite spending twice as much per capita on Medicare.

The problem was that doctors in McAllen were responding to reimbursement incentives in the American health care system that rewarded activity rather than value. The more procedures and visits a doctor billed, the more he got paid.

The Affordable Care Act was designed to change that. One of its provisions created the Medicare Shared Savings Program, which rewards doctors for keeping their patients healthy. Participation in the program requires primary care doctors to create networks, called accountable care organizations, or A.C.O.s, to better coordinate patient care. These networks are reimbursed for delivering high-quality care below a baseline of historical Medicare costs.

In 2012, doctors in McAllen formed the Rio Grande Valley Accountable Care Organization Health Providers, and signed up for this experiment. The early results are in, and they are stunning: From April 2012 to the end of 2013, the Rio Grande Valley A.C.O. saved more than $20 million from its Medicare baseline.

(One of us, Farzad Mostashari, is the C.E.O. of Aledade, which works with primary care physicians to help them form A.C.O.s; the other, Bob Kocher, is a partner in the venture capital firm Venrock, an investor in Aledade. We are not involved in the Rio Grande Valley A.C.O.)

From the beginning, physicians in the Rio Grande Valley A.C.O. analyzed data from their electronic health records to identify — and then focus on — high-risk patients. Patients who couldn’t get to the office were visited at home; those who had trouble communicating with their doctors were given cellphones.

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Preventive care became a central focus. Doctors advised patients about diet and lifestyle changes that could prevent future health problems, and developed personal care plans for patients with uncontrolled diabetes. Patients who had recently had a hospital stay were scheduled for rapid follow-up visits to make sure that their recoveries were on track.

These changes didn’t just save money; they also improved patients’ health. From 2012 to 2013, the number of patients achieving control of their diabetes rose 11.8 percentage points. The number receiving vaccinations rose 12.2 percentage points.

This is not an isolated case. Today, more than 5.3 million Medicare beneficiaries nationwide are served by more than 360 A.C.O.s, which have helped hold spending hundreds of millions of dollars below Medicare targets for this period. Many primary care physicians — who are responsible for directing the vast majority of health care costs — are forming A.C.O.s, and more private health plans are setting up these reimbursement structures as well.

A continued slowing of health care cost growth will owe a good deal to this revolution in how we pay for medical care. It is a transformation that was sparked by the Affordable Care Act, and is now being played out throughout the country — even in the little Texas city of McAllen.

Bob Kocher was special assistant to President Obama for health care and economic policy from 2009 to 2010. Farzad Mostashari was national coordinator for health information technology at the Department of Health and Human Services from 2011 to 2013.

The above op-ed first appeared in the New York Times opinion pages on September 25.


Write Bob Kocher and Farzad Mostashari

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