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Trend | Operations Management

Treatment of Addiction: Incentivizing Recovery, Not Relapse

Trend | Operations Management

Treatment of Addiction: Incentivizing Recovery, Not Relapse

Substance use disorder has too often been treated as an isolated infectious disease. The ARMH-APM, a proposed alternative payment model, aims to restructure provider incentives to promote more appropriate treatment of the disorder as a chronic disease.

A prospective new approach to treating patients with substance use disorder, the Addiction Recovery Medical Home Alternative Payment Model, promises to revolutionize addiction care by restructuring healthcare providers’ incentives to deliver such care.


For generations, people have been plagued by addiction. It has ravaged communities, families, and health systems. It has cost incalculable lost lives and economic opportunity—and has seen many unjustly prisoned. Yet it persists.

In 1784, Benjamin Rush, a physician and signer of The Declaration of Independence, labeled chronic drunkenness “a distinct progressive disease.” And this early insight applies as well to the today’s ongoing opioid crisis, which the National Institute on Drug Abuses reports claimed 47,000 American lives in 2017 alone—more than motor vehicle accidents or gun-related deaths. Addiction is a condition that persists despite the energy, resources, and capital being allocated to drive solutions and assistance into our communities. 

The landmark Surgeon General’s report  Facing Addiction In America , published in 2016, synthesizes decades of research and clear protocols about what works in screening, intervention, treatment, and recovery support. The report’s sixth chapter, “Health Care Systems and Substance Use Disorders,” includes a strong call to action to integrate and coordinate addiction health services across a long-term continuum of care, as is done with other chronic disease models.

The chapter notes,Because substance misuse has traditionally been seen as a social or criminal problem, prevention services were not typically considered a responsibility of health care systems; and people needing care for substance use disorders have had access to only a limited range of treatment options that were generally not covered by insurance.”

A 2017 report outlining results of a national survey in drug use by the Substance Abuse and Mental Health Services Administration (SAMHSA)—a division of the U.S. Department of Health &amp; Human Services (HHS)—underscores the challenge the United States faces with addiction treatment. The report points to the existence of an addiction treatment gap, evidenced by a set of persistent statistics that are nothing short of alarming. In 2017, about 20.7 million people aged 12 or older required substance-use treatment (almost 1.5 times the number requiring treatment for any kind of cancer). Yet 18.2 million of those who needed treatment had not received any specialty care for a substance-use-related problem in the previous year. That means of the more than 20 million Americans who meet medical criteria for substance use disorder, only about 12 percent, or 2.5 million people, received any specialty medical care at all for what is now the leading cause of death for those under 50. These statistics represent an 88 percent addiction treatment gap.

Moreover, as the death toll from this preventable and treatable condition continues to rise, the addiction treatment gap remains unchanged, even after the federal government has allocated billions of dollars toward it in recent years, mandating and expanding insurance coverage for the condition in most third-party insurance products through provisions of the Mental Health Parity and Addiction Equity Act (2008) and the Affordable Care Act (2010). 

Nonetheless, as discouraging as these circumstances may seem, there also is good reason for healthcare finance leaders to view them as an opportunity for improvement. Seizing that opportunity must start with changing how we understand and treat addiction.

The Need for a New Understanding of Addiction Treatment

When people speak of addiction treatment, they most often refer to rehabilitation, or “rehab,” services. Rehab consumes most of the dollars that our nation currently spends on addiction treatment, amounting to more than $35 billion dollars annually. The problem is that most specialty addiction treatment services in the market today are designed to treat addiction as essentially an isolated infectious disease—or as an acute event—ignoring the fact that it is a chronic illness, because it persists. Simply put, the U.S. healthcare system invests billions of dollars a year to stabilize people with addiction using fragmented short-term interventions, which are not well suited to the nature of the condition.

Further, much of our current medical response to addiction occurs in fragmented centers that are incapable of delivering coordinated care because they are disconnected from the mainstream healthcare system.  Patients migrate in and out of these settings, where they all too often do not receive tools or resources to manage their chronic disease over time, and where there are rarely any linkages, including shared records, with other providers participating in a network or continuum of care.

If the United States is to meaningfully tackle the challenge of addiction, it needs a new approach. It is time for the nation to respond to addiction for the chronic disorder that it is—like diabetes, hypertension, and chronic constructive pulmonary disease. Like many cancers, it can take years of medical interventions to achieve remission. Many of the 23 million people living in recovery today profess that addiction is a life-long ailment they manage on daily basis.

This distinction matters. Managing a chronic disease takes well-coordinated care teams, health systems, family and community support systems, and increasingly, economics that reward the medical infrastructure for coordinating and connecting these resources well. This is where healthcare leaders can begin to see the clinical advantages, and the potential financial benefits to their organizations, from treating addiction as a chronic disease.

The historic separation of addiction and general health care is costly, and a recent study of world health settings shows that the presence of a substance use disorder often doubles the odds that a person will develop another chronic and costly medical illness, such as arthritis, chronic pain, heart disease, stroke, hypertension, diabetes, or asthma. 

Of the 88 percent of people noted in the SAMHSA report who met medical criteria for substance use treatment but did not receive specialty treatment, 94 percent of them did not think that they needed treatment. The nation’s approach to addiction has been organized passively, where providers sit back and wait for patients to become ready to seek help. Then, when patients do not seek out care for their addiction, or when they do not sustain recovery after receiving treatment for the problem as if it were an isolated infectious-disease event, they are blamed, and not the system for failing to meet the needs of individuals with a chronic disorder. 

To solve this problem, the hard truth that the fault lies with our current system for treating substance use disorder must be accepted, and adequate treatment and long-term recovery support must be provided if we are to improve outcomes and increase efficiency in our systems. 

First Steps Toward Meaningful Change

The time has come for a cost-saving systemic overhaul of how we engage, treat, and support people on a person-centered pathway to recovery (of their choice) in the United States. A good place to start might be to follow the example of others in the chronic healthcare management. Consider how that might work.

For one, it would require an end to business as usual. The nation must stop creating incentives for maintaining a system fueled by volume and the highest-acuity services and, instead, begin to invest in a value-based model for care of addiction across all parts of a continuum. With 18 million people falling through the cracks, it is urgent that we determine how to fill these cracks. 

Health systems should start by looking at processes in their own organizations and asking a few key questions:

  • Do we collect data regarding the numbers of people who die from overdoses or alcohol-related causes in our community within 90 days of interacting with our organization?
  • Do we gather data on what percentage of visits to our emergency department (ED) that are related to alcohol and other drugs? 
  • Do we collect data on the percentage of patients identified in the past year by our primary care providers as having a substance use disorder? 
  • How does the health system respond when a patient presents with an alcohol or other drug problem in the ED, or when patients’ family members contact a pediatrician or primary care physician to raise concerns about the patient’s substance use disorder, or when the police pick up someone for a DUI or public intoxication and bring them to the hospital?
  • Do healthcare providers across the health system assertively engage, connect with, and embrace patients with substance use disorder in the same way they do patients with heart disease or diabetes? 
  • If the answer to the last question is no, is it partly because the providers lack financial incentives to do so?

A longer-term focus on helping patients manage the many care transitions in their recovery journey could provide the key to markedly improving recovery rates and serving more people in need. For example, a 2008 study demonstrated a patient in sustained recovery for one year can see remission of the worst symptoms of a substance use disorder, and a 2007 study found sustained recovery for five years can reduce risk factors close to population health baselines. Despite research telling us what is possible, however, many payers have been a long way from providing payment for models that can incentivize these types of outcomes for addiction. The good news is, the tide is beginning to turn. 

A New Approach: The ARMH-APM

A consortium of major insurers, health systems, subject matter experts, and other diverse stakeholders, called the Alliance for Recovery-Centered Addiction Health Services, is spearheading efforts to drive a revolution in addiction care through restructuring provider incentives. In a partnership that includes the national not-for-profit organization Facing Addiction with NCADD, Inc., and the healthcare values firms Leavitt Partners and Third Horizon Strategies, the alliance published on Sept. 7, 2018, the Addiction Recovery Medical Home Alternative Payment Model (ARMH-APM), as a prospective value-based payment longitudinal model for the industry. The ARMH-APM is a consensus-learning model representing an attempt to establish a structure that promotes integrated patient care capable of producing improved outcomes for patients, insurers, and health systems by aligning all incentives. Four critical areas of focus are required to achieve this goal.

Developing care recovery teams. The initial focus should be on developing care recovery teams, each led by a care coordinator and augmented by a peer recovery coach, a primary care physician, and addiction specialists, counselors, pharmacists, and other specialists.

Team-based care is a critical factor for managing chronic disease. The ARMH-APM model establishes protocols and requirements for how a care recovery team should engage each patient in care, with a focus on sustaining interactions and support through the patient’s recovery journey. The premise is that, through this collaborative structure, the patient can be engaged as a partner with a trusted team of recovery specialists who can support his or her recovery across a continuum of care.

Forming integrated and coordinated community-based treatment and recovery networks. Such networks must be able to accompany patients through their entire recovery processes, encompassing all appropriate clinical settings (emergent, withdrawal management, inpatient rehabilitation when necessary, intensive outpatient, and primary care) and all community resources required to meet a patient’s needs in every phase of the recovery journey. This network should be clinically integrated and promote seamless care transitions in partnership with a care recovery team’s care coordinator. The flow of clinical information within the network should be unimpeded, with consent from the patient to share an interoperable medical record (to ensure compliance with regulatory requirements regarding the confidentiality of medical records of patients with substance use disorder, under 42 CFR Part 2). The network’s organizer also should function as the risk-bearing entity and adjudicate payment for services throughout network participants.

Unfortunately, few quality measures exist today that are useful for gauging the efficiency of addiction health services or the success in achieving recovery over time. However, the ARMH-APM proposes several process requirements for the participating parties across the model’s payment, network, and care team domains. Any application of value-based payment model should consist of established measures based on these requirements that ensure fidelity to the model. 

Developing a treatment and recovery plan. This plan should encompass not only physical and psychological health needs, but also housing, employment, family, medications, and other social determinants of health and well-being. The plan should enable the team to manage disruptions in the recovery journey, intervening when there is a reoccurrence of symptoms, and provide the flexibly to adjust the treatment and recovery plan.

All recovery-oriented systems of care should be focused on building a patient’s external and internal recovery capital, derived from myriad sources, most of which transcend health care and focus on various social and economic determinants. Consider just a few examples of the types of questions that must be addressed:

  • How can our care team support a person to secure safe housing or find employment? *     How can the team help an individual advance his or her education? 
  • Can the team link a patient with an informal community of recovery support close to where the patient lives or connect the patient to a faith-based organization of his or her choice? 

Creating a multiyear economic model that rewards the system’s performance. This model also should clearly establish that addiction, like any chronic condition, must not be treated as an acute episode with responses akin to those used for infectious diseases. In effect, health plans must begin to provide incentives for promoting recovery and avoiding relapse.

At the core of the ARMH-APM is a multifaceted payment model that carves out financial resources for addiction treatment and recovery services. The payment and its underlying calculation transcend three different phases of a patient’s recovery:

  • Pre-recovery and stabilization
  • Recovery initiation and active treatment
  • Community-based recovery management

The first phase of the ARMH-APM remains under a fee-for-service model, given its higher volatility and unpredictability. However, the latter two phases, which comprise a five-year period, are remunerated through risk-based payments to a risk-bearing provider entity. Case rates for episodes of care payments are derived through risk stratification using retrospective patient claims and adjusted in later months with decreased clinical acuity and reduced risk factors. 

The model itself was established specifically with Medicaid and commercial insurers in mind, and the insurers and providers that retain flexibility to adjust the way they implement the model to meet the specific situational and population dynamics. The alliance is pursuing several pilot sites for evaluating the model and obtaining insights on how it might be refined to ensure its effectiveness as a value-based payment approach for addiction treatment. The alliance expects to begin applying lessons from the pilots as early as in the summer of 2019.

A Call to Action

Solving the nation’s problems with addiction is not easy. There are so many obstacles to overcome, but healthcare industry leaders must be motivated by the common pain of the nation’s citizens and the business community. We have an opportunity to conceive of, construct, and deploy an integrated system for addiction health services that will save countless lives and produce tremendous economic value.

What’s required from the industry’s leaders? Commitment and persistence. 


Greg Williams, MA, is executive vice president, Facing Addiction with NCADD, Inc., New York.  He is a person in long-term recovery from addiction, and an award-winning documentary filmmaker for  The Anonymous People  and  Generation Found . Williams also was campaign director and an executive producer of the UNITE to Face Addiction rally on the National Mall on Oct. 4, 2015, and he played an integral role in bringing together the national alliance to release the ARMH-APM. 

David E. Smith is founder, Third Horizon Strategies, and Medicaid Transformation project executive, AVIA, Chicago. Previously, he was chief client strategies officer and a partner with Leavitt Partners. He also is co-founder. Health Care Council of a Chicago; serves on the board of the Sinai Hospital System and HIMSS North America; and is on the Founder’s Council of United States of Care.

About the Authors

Greg Williams
MA
David E. Smith

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