CAP­TURED

ACOS tak­ing hold de­spite loose def­i­ni­tions, with dif­fer­ent meth­ods—and vary­ing re­sults

Modern Healthcare - - Front Page - Me­lanie Evans

ACO-like crea­tures roam­ing the pri­vate insurance mar­ket Ex­clu­sive sur­vey vary in size, com­po­si­tion, struc­ture and fi­nan­cial per­for­mance

Ac­count­able care or­ga­ni­za­tions, a fash­ion­able name for a loosely de­fined fix for U.S. health­care, is the cen­ter of de­bate, gos­sip and con­jec­ture among pol­i­cy­mak­ers and the health­care lead­ers. But the murky state of the model and poorly re­ceived draft reg­u­la­tions in­tended to clar­ify the sketch in­cluded in the health­care re­form law have not de­terred plans among some hos­pi­tals, med­i­cal groups and pay­ers to make ac­count­able care some­thing real, rather than mere as­pi­ra­tion.

In­deed, the re­sults of Mod­ern Health­care’s first sur­vey of ac­count­able care or­ga­ni­za­tions pro­vide a snap­shot of 13 ac­count­able care or­ga­ni­za­tions in the wild that ex­ec­u­tives say could re­duce med­i­cal er­rors and waste with fi­nan­cial in­cen­tives for qual­ity and lower costs.

They in­clude ev­ery­thing from fledg­ling al­liances to de­tailed agree­ments. Some al­ready track qual­ity and spend­ing un­der con­tracts with com­mer­cial in­sur­ers. Oth­ers have yet to com­plete physi­cian ar­range­ments. A few have poured cap­i­tal into an­cil­lary busi­nesses. The wide-rang­ing mix of ini­tia­tives is no ac­ci­dent; ac­count­able care emerged from the na­tion’s health re­form de­bate as a largely untested and loosely pre­scribed op­tion to over­haul hos­pi­tal and physi­cian pay­ment and de­liv­ery.

But as health sys­tems, med­i­cal groups and other providers scram­ble to draft strate­gic plans and cap­i­tal bud­gets around a work­ing model of ac­count­able care, such un­cer­tainty could prove an ad­van­tage or sig­nif­i­cant risk.

Dr. El­liott Fisher, di­rec­tor of the Dart­mouth Col­lege Cen­ter for Pop­u­la­tion Health and a pro­po­nent of ac­count­able care, said some flex­i­bil­ity is needed to al­low the model to take hold across the highly frag­mented health­care in­dus­try.

Ac­count­able care, Fisher said, of­fers fi­nan­cial in­cen­tives for hos­pi­tals, doc­tors and other providers to more closely co­or­di­nate med­i­cal care.

Mar­kets with com­pet­i­tive or highly in­de­pen­dent providers would likely need more time and options to develop ac­count­able care than large health sys­tems with an ex­ist­ing net­work of em­ployed physi­cians, he said.

Providers who agree to join these en­deav­ors are vul­ner­a­ble to costly missteps that could put fi­nances and pa­tients at risk. “Or­ga­ni­za­tions will come to­gether and try things, and they will en­counter re­sis­tance and make mis­takes,” said Sara Singer, an

as­sis­tant pro­fes­sor of health pol­icy and man­age­ment at Har­vard Univer­sity School of Pub­lic Health.

Some mis­takes will be sig­nif­i­cant, in­clud­ing a fail­ure to man­age fi­nan­cial risk, as was the case dur­ing the man­aged-care ex­pan­sion dur­ing the 1990s, Singer and health pol­icy ex­pert Stephen Short­ell wrote this month in the Jour­nal of the Amer­i­can Med­i­cal As­so­ci­a­tion.

“The important thing is to learn from those mis­takes,” Singer said.

Mod­ern Health­care’s sur­vey in­cluded re­sponses from 13 groups that re­ported ACOs large and small, in var­i­ous stages of de­vel­op­ment. In South Carolina, an ef­fort won’t be fully up and run­ning for two years, one of­fi­cial said. In Ari­zona, Cal­i­for­nia and Illi­nois, op­er­at­ing ac­count­able care or­ga­ni­za­tions have months of data or first-year re­sults.

Ad­vo­cate Health Care in Oak Brook, Ill., re­ported the sur­vey’s largest ac­count­able care or­ga­ni­za­tion, by num­ber of par­tic­i­pat­ing doc­tors. In Jan­uary, the health sys­tem and Blue Cross and Blue Shield of Illi­nois launched an ACO with 3,900 physi­cians and 350,000 en­rollees and the health sys­tem’s 10 hos­pi­tals.

The small­est re­spon­dent by the num­ber of physi­cians (30) was the South­east Texas Ac­count­able Care Or­ga­ni­za­tion in Hous­ton.

Health sys­tems seek­ing to build an ACO must per­suade the cor­rect num­ber and mix of physi­cians to join.

In John­son City, Tenn., the Moun­tain States Health Al­liance has spon­sored trips for lo­cal in­de­pen­dent physi­cians to nearby in­te­grated health sys­tems to learn more about ac­count­able care, said Dr. David Moul­ton, an in­ter­nal medicine physi­cian with State of Franklin Health­care As­so­ci­ates.

Moul­ton said the 65-physi­cian med­i­cal group, com­posed largely of pri­mary-care doc­tors, is con­sid­er­ing Moun­tain States’ pro­posal for an ACO. State of Franklin, though a ma­jor pri­mary-care provider in the lo­cal com­mu­nity, does not have the es­ti­mated $1.8 mil­lion needed to

build an ACO and would need a well-funded part­ner to do so, Moul­ton said. “You know you’re go­ing to have to have part­ners,” he said.

But ac­cess to cap­i­tal in­vest­ment won’t be enough, Moul­ton said. Pri­mary-care doc­tors fear hos­pi­tal-em­ployed spe­cial­ists will dom­i­nate ac­count­able care con­tracts and lead­er­ship. He said the doc­tors will seek “to be treated in a fair way.”

Turf wars and IT

New fi­nan­cial in­cen­tives could in­ten­sify ex­ist­ing con­flicts be­tween hos­pi­tals and physi­cians should one party ex­ploit ac­count­able care to boost mar­ket power, health pol­icy ex­perts Singer and Short­ell cau­tioned in their jour­nal ar­ti­cle. Singer, in an in­ter­view, said growth to gain mar­ket clout con­trib­uted to fail­ures in the 1990s dur­ing the push to slow health spend­ing through man­aged care. Hos­pi­tals and med­i­cal groups in ac­count­able care net­works also face an­other fa­mil­iar risk from the era of man­aged care: fi­nan­cial losses should they fail to curb health­care costs.

In­for­ma­tion tech­nol­ogy has im­proved in the past decade, but it’s un­clear if tech­nol­ogy can meet providers’ needs and evolve rapidly enough to keep pace, Singer said. She and Short­ell warned that hos­pi­tals and health sys­tems risk un­der­es­ti­mat­ing the cost and po­ten­tial dis­rup­tion caused by adop­tion of in­for­ma­tion tech­nol­ogy, which could un­der­mine their abil­ity to track qual­ity per­for­mance within ACOs.

“What will mat­ter in the long run is the re­silience of the or­ga­ni­za­tions and the part­ner­ships,” Singer said, “and their abil­ity to try, test, re­fine and im­prove on a path to mak­ing it work.” How or­ga­ni­za­tions learn when ef­forts fail will mat­ter, she said, but those lessons could come at a price.

“I think it is cer­tainly valid to sug­gest that some of the mis­takes could be quite costly,” she said.

Suc­cess will de­pend on sev­eral fac­tors, Fisher said, in­clud­ing hefty fi­nan­cial in­cen­tives tied to qual­ity mea­sures and free­dom for pa­tients to choose providers. Those el­e­ments are safe­guards for pa­tients against providers with­hold­ing care for purely fi­nan­cial rea­sons, he said.

It is be­cause of qual­ity in­cen­tives, Fisher said, that fed­eral pol­i­cy­mak­ers have al­lowed more lee­way for var­i­ous al­liances be­tween hos­pi­tals and doc­tors as long as ACOs pro­duce re­sults, he said.

The push from Wash­ing­ton

Congress au­tho­rized Medi­care to of­fer ac­count­able care pay­ments un­der the 2010 Pa­tient Pro­tec­tion and Af­ford­able Care Act, one of sev­eral pay­ment re­form pro­pos­als to be tested un­der the law.

South­east Michi­gan Ac­count­able Care, based in Dear­born, Mich., and At­lantic ACO, based in Mor­ris­town, N.J., aren’t sched­uled to start un­til Medi­care be­gins ac­count­able care pay­ments in 2012.

Dr. David Shulkin, vice pres­i­dent for At­lantic Health Sys­tem and pres­i­dent of the Mor­ris­town Med­i­cal Cen­ter, said he hopes to see the sys­tem’s ac­count­able care net­work well-po­si­tioned to qual­ify for the Medi­care pro­gram. “I don’t want to sound Pollyanna-ish,” he said. “It re­ally is clear to us that health­care is go­ing to change and there is go­ing to have to be lead­er­ship” from doc­tors and health sys­tems, he said.

Many lead­ers in the health­care in­dus­try sharply crit­i­cized pro­posed rules for Medi­care ac­count­able care, but fi­nal rules have not been re­leased. Still, At­lantic Health con­tin­ues to re­cruit doc­tors to par­tic­i­pate once Medi­care of­fers three-year con­tracts, he said. At­lantic Health agree­ments re­quire doc­tors to elec­tron­i­cally share pa­tient-care data; meet cri­te­ria for mean­ing­ful use of in­for­ma­tion tech­nol­ogy; and re­port spec­i­fied qual­ity mea­sures.

“If we were to wait un­til the fi­nal rules are pub­lished and then give our­selves time to an­a­lyze and de­cide based on the fi­nal rules, we would not have enough time,” Shulkin said.

Com­pet­ing on price

The ma­jor­ity of Mod­ern Health­care sur­vey re­spon­dents re­ported form­ing ACOs fol­low­ing pas­sage of the law, though ground­work for some be­gan prior to the Af­ford­able Care Act amid in­creased pres­sure to curb health spend­ing, said ex­ec­u­tives with sur­veyed ACOs.

“With lim­ited dol­lars ahead of us, we’re go­ing to have to man­age the health of our pop­u­la­tion,” said Den­nis Von­der­fecht, pres­i­dent and CEO for Moun­tain States Health Al­liance, a health sys­tem that owns eight hos­pi­tals in two states.

Moun­tain States board of direc­tors ap­proved strate­gic plans for an ac­count­able care group two months after the law passed, he said. Moun­tain States moved to con­vert an ex­ist­ing provider or­ga­ni­za­tion, In­te­grated Health So­lu­tions Net­work, into an ac­count­able care or­ga­ni­za­tion in April.

“The fact is we’re run­ning out of money for health­care,” Von­der­fecht said. “The in­cen­tives will have to change our way of op­er­at­ing within that new en­vi­ron­ment.”

Med­i­cal groups and hos­pi­tals have seen pres­sure to curb costs in­ten­sify as the re­cent re­ces­sion and weak econ­omy forced law­mak­ers to

Early re­sults

grap­ple with state and fed­eral bud­get deficits. Mean­while, the Af­ford­able Care Act stag­gered sig­nif­i­cant changes over sev­eral years with a mas­sive health insurance ex­pan­sion sched­uled for 2014.

“Hav­ing a price com­pet­i­tive prod­uct is go­ing to be crit­i­cal” for Ad­vo­cate Health Care start­ing in 2014, said Dr. Lee Sacks, ex­ec­u­tive vice pres­i­dent and chief med­i­cal of­fi­cer for the health sys­tem.

Ad­vo­cate and the Illi­nois Blues agreed to a three-year ac­count­able care con­tract. Sacks said the part­ners hope to earn a fi­nan­cial re­turn as they de­sign pro­grams to man­age pop­u­la­tion health. Lower costs would bet­ter po­si­tion the health sys­tem for up­com­ing insurance ex­changes, he said, where low-and mid­dle-in­come house­holds can buy sub­si­dized insurance plans start­ing in 2014.

Sacks said providers agreed to man­age health spend­ing and are eli­gi­ble for bonuses based on sav­ings, should the ac­count­able care or­ga­ni­za­tion prove less costly than the lo­cal mar­ket.

He de­clined to pro­vide de­tails of how much providers must save to earn bonuses or the per­cent­age of sav­ings that could be awarded, cit­ing a con­fi­den­tial­ity agree­ment.

The ac­count­able care in­cen­tives dif­fer from prior Ad­vo­cate physi­cian con­tracts that in­cluded pay-for-per­for­mance agree­ments.

Sacks said prior agree­ments, which awarded up to 10% of health spend­ing as bonuses, re­sulted in con­flict­ing in­cen­tives for physi­cians. Bonuses re­warded qual­ity gains, but in­cen­tives did not off­set lost rev­enue as providers im­proved op­er­a­tions, he said. None­the­less, those con­tracts pro­vided ex­pe­ri­ence and tem­plates for the ac­count­able care con­tract, which ex­panded to in­clude hos­pi­tals, he said.

Build or buy?

While many ac­count­able care or­ga­ni­za­tions are be­ing as­sem­bled through al­liances among physi­cians, hos­pi­tals and pay­ers, some sur­vey re­spon­dents have ex­panded into new busi­ness lines to pre­pare for ac­count­able care.

In Ten­nessee, Moun­tain States launched its own health ben­e­fit com­pany after talks to launch an ACO with com­mer­cial health plans failed.

The sys­tem switched its own work­ers into CrestPoint Health, its newly cre­ated health ben­e­fit man­ager, after the health sys­tem dropped a na­tional in­surer that previously man­aged em­ployee health ben­e­fits in July.

Robert Slat­tery, pres­i­dent and CEO of Moun­tain States’ In­te­grated Health So­lu­tions Net­work, said the sys­tem even­tu­ally hopes to de­sign em­ployee health ben­e­fits with in­cen­tives for work­ers who ac­tively mon­i­tor their health and treat­ment options. In New Jersey, At­lantic Health Sys­tem be­came part owner of a com­pany that will man­age IT and fi­nan­cial re­port­ing for its ACO, Shulkin said.

As an owner, the health sys­tem will be able to ex­ert con­trol over the com­pany that it would lack as a cus­tomer, he said. Such in­flu­ence will mat­ter as ac­count­able care evolves, he said. Shulkin de­clined to name the com­pany or the price of the deal, but called the in­vest­ment “sig­nif­i­cant.”

Un­til we see some tan­gi­ble re­sults, we’re just pump­ing money into some­thing that hasn’t any proven ben­e­fit to so­ci­ety. Stay tuned.”

Ad­vo­cate was not the only sur­vey re­spon­dent with an op­er­at­ing ACO, and some are even fur­ther along in the ex­per­i­ment.

Nor­ton Health­care, which is head­quar­tered in Louisville and owns four Ken­tucky hos­pi­tals, and in­surer Hu­mana ended the first year of an ACO test in June. The pi­lot is one of five or­ga­nized by Dart­mouth Univer­sity and the Brook­ings In­sti­tu­tion. The ACO in­cludes 176 doc­tors and 6,026 Nor­ton and Hu­mana em­ploy­ees, ac­cord­ing to the sur­vey.

Blue Shield of Cal­i­for­nia is mid­way through the sec­ond year of its ac­count­able care pi­lot with Catholic Health­care West and Hill Physi­cians.

Dur­ing the first year, the San Fran­cisco-based Catholic Health­care West and the med­i­cal group saved $16 mil­lion.

Kris­ten Mi­randa, vice pres­i­dent for provider net­work man­age­ment for Blue Shield of Cal­i­for­nia, said the sav­ings elim­i­nated an es­ti­mated 9% to 10% in­crease in health spend­ing for 41,500 Cal­i­for­nia Pub­lic Em­ploy­ees’ Re­tire­ment Sys­tem en­rollees.

The part­ners spent eight months ahead of the ACO launch iden­ti­fy­ing po­ten­tial sav­ings from un­nec­es­sary vari­a­tion in med­i­cal care, phar­ma­cies and other ar­eas, Mi­randa said. Now the part­ners face an­other chal­lenge: Find­ing ad­di­tional sav­ings has grown more dif­fi­cult, she said. “That’s the good news and the bad news.”

Sav­ings for the sec­ond year, now un­der way, are pro­jected to to­tal $7 mil­lion to $9 mil­lion and are ex­pected to de­cline fur­ther the fol­low­ing year, she said.

Among sur­vey re­spon­dents not yet un­der way with a pop­u­la­tion of pa­tients, some are busy lay­ing the clin­i­cal foun­da­tion for the pay­ment in­cen­tives. Pal­metto Health Qual­ity Col­lab­o­ra­tive, which has reached par­tic­i­pa­tion agree­ments with more than 200 doc­tors, will col­lect qual­ity data for one year be­fore adopt­ing fi­nan­cial in­cen­tives,

Op­ti­mistic and wor­ried

Lead­ers in the early wave of ac­count­able care say ACO in­vest­ments are risky, but so is the chance they could be left be­hind.

Ag­ne­sian Health­Care in Fond du Lac, Wis., made a sig­nif­i­cant in­vest­ment in in­for­ma­tion tech­nol­ogy after of­fi­cials agreed to form an ac­count­able care net­work with four other Wis­con­sin health sys­tems, said Steven Lit­tle, Ag­ne­sian’s ex­ec­u­tive vice pres­i­dent.

Fear­ful the hos­pi­tal could fall be­hind pol­icy changes, Ag­ne­sian ex­ec­u­tives be­gan work to pre­pare for ac­count­able care months be­fore the Af­ford­able Care Act be­came law, said Lit­tle, who was named to suc­ceed the hos­pi­tal’s re­tir­ing pres­i­dent and CEO next year. “We be­lieved in the prin­ci­ples of ac­count­able care,” he said.

Ex­ec­u­tives found the cost to go it alone daunt­ing, he said. When a Mil­wau­kee-based hos­pi­tal pro­posed a joint ef­fort, Ag­ne­sian agreed. No one “wanted to give up fi­nan­cial in­de­pen­dence, or in­de­pen­dence in gen­eral,” so to over­come po­ten­tial an­titrust hur­dles, the part­ners be­gan work­ing to­ward closer clin­i­cal ties, he said.

The five part­ners have nearly fin­ished re­port­ing cri­te­ria for qual­ity mea­sures that each will sub­mit to a joint repos­i­tory. The data will be­come the base for pro­posed ac­count­able care pay­ments with com­mer­cial in­sur­ers, pos­si­bly as early as 2013.

Lit­tle said he is not aware of an­other ar­range­ment sim­i­lar to the fivepart­ner ac­count­able care group in Wis­con­sin. “I don’t know that any of us know ex­actly where we’re headed with this,” he said. Nei­ther do in­sur­ers. Pay­ers, who fear health­care providers will gain lever­age as they con­sol­i­date in the name of ac­count­able care, are “skep­ti­cal of what our ul­ti­mate goal is” but have wel­comed of­fi­cials with the Wis­con­sin ACO dur­ing early talks, Lit­tle said.

Lit­tle said he is en­cour­aged and op­ti­mistic about the suc­cess of the en­deavor, but ac­knowl­edged he does worry about risks. “Un­til we see some tan­gi­ble re­sults, we’re just pump­ing money into some­thing that hasn’t any proven ben­e­fit to so­ci­ety,” he said. “Stay tuned.”

Moun­tain States Health Al­liance moved quickly to plan an ACO after the health­care re­form law passed, and its ex­ist­ing provider or­ga­ni­za­tion was con­verted into an ACO in April.

A pro­gram at At­lantic Health Sys­tem’s Gagnon Car­dio­vas­cu­lar In­sti­tute seeks to re­duce read­mis­sions, the type of ini­tia­tive that will be cru­cial to the suc­cess of its ACO.

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