Accountable Care Organizations: Par for the Course

Betty Jo was one of my favorite patients as a medical student. This 71 year old widow, with an obsessive zest for golf, was also one of my best teachers. It took this affable elderly woman to demonstrate the United States health system’s fragmentation before I truly understood the magnitude of the problem. She was a motivated patient who was lost in the shuffle between doctor visits. Miscommunication was the norm between my preceptor and Betty Jo’s other providers. She had 20 medications scribbled on an old piece of yellow legal paper, but nobody knew what she was actually taking, not even Betty Jo. I was embarrassed by her care which resulted in poor outcomes, deteriorating health, and multiple hospitalizations.

Like Betty Jo, over half of Medicare beneficiaries have five or more chronic diseases¹. Chronic illnesses require new and innovative ways to deliver care. A 10 minute appointment slot that culminates with a blood draw and limited free samples of necessary life-saving medications represents a failure of our pre-ACA system. Running from one doctor’s appointment to the next, getting each of her diseases treated individually is proving ineffective. The quality of care is poor, costs are exponentially rising, treatment regimens are uncoordinated, medical tests are redundant, hospitalizations and emergency room visits are frequent, and the patients are unhealthy and unsatisfied with their care.

For Betty Jo and the other 47 million Medicare enrollees, Title III of the Affordable Care Act (ACA) hopes to provide an answer². Title III establishes a shared savings program with organizations, known as Accountable Care Organizations (ACO), which will take responsibility for all aspects of Medicare patients’ care, including quality and cost. ACOs will bring together groups of doctors, other providers, and hospitals under one network³. ACOs that agree to manage all the health needs of at least 5,000 beneficiaries for no less than three years will roll out this spring ⁴.

The most exciting aspect of an ACO is that it will create an environment conducive to clinical innovations. ACOs will liberate providers from the chains of fee-for-service, and pay them in ways that promotes creativity and innovation in care delivery. Practices will finally step outside antiquated delivery models and start utilizing group visits, team based care, longer patient visits, and technology to maximally enhance patients’ health. Specifically, in a world where non-communicable diseases are the most salient health problem, this new model of care will integrate all components of the care delivery chain, improving health outcomes, and keeping patients, like Betty Jo, out of the hospital and on the golf course.

ACOs show promise and are being touted by some as the solution that will revolutionize health care delivery across the U.S., but I see three challenges ACOs must overcome to achieve effects of that magnitude: (1) primary care physician (PCP) shortage, (2) inaccuracy and inexperience assessing quality, and (3) inability to reach rural and other underserved populations.

The PCP shortage creates a barrier for successful implementation of ACOs. At the center of the ACO model are PCPs who are essential for providing access into the network, and then coordinating and integrating care with others in the medical neighborhood. Specialist providers are good at treating illness once the patient is already sick, but the goal of an ACO is to keep patients healthy and to reduce both specialty care and hospitalizations⁴. PCPs are specifically trained to provide comprehensive care focused on keeping the patient healthy. When prevention, health maintenance, and routine care fall short, they are experts at connecting patients with appropriate specialty care when needed. ACOs will ask more of PCPs, but with too few providers available, it will limit the capacity of ACOs⁵.

The second major challenge moving forward will be to determine what quality indicators are important and how these metrics are measured. As payment and shared savings are tied into quality control, it will be critical to ensure that the metrics accurately reflect the care being provided. A recent report from the Inspector General discusses how quality measures from electronic databases are often too blunt and are unable to provide useful information on targeted outcomes⁶. Quality measures must be able to tease out the direct effects that providers have on patient outcomes, but the science of measuring this will take time to fully mature. Lastly, many practices have limited or no previous experience with monitoring quality data⁷. For these practices, operating under new quality and cost incentives will feel like making their way in the dark.

The last major impediment to successful implementation is that ACO models will be difficult to adopt in rural health clinics (RHCs) and Federal Qualified Health Centers (FQHCs). One out of five Medicare recipients lives in a rural area and in 12 states over 50% of the Medicare population is rural⁸. RHCs will not have sufficient startup capital or enough patients to justify bearing financial risk for their care. Even with the subsidies and tiered risk-bearing which was negotiated last October, it is feared that the financial incentives will not be enough unless the total potential savings is increased⁷. FQHCs serve 1.4 million Medicare beneficiaries and face a similar situation. It will require extra incentives for them to take responsibility for the outcomes of this inherently high risk population⁹.

Despite these challenges, ACOs show promise for delivering better health care to patients like Betty Jo. Betty Jo’s primary care provider will finally have the time and tools he needs to coordinate and integrate care effectively and ultimately keep her healthy and out of the hospital. This will encourage clinical innovations that are patient-centered, more efficient, and higher quality; all this will cost Betty Jo, as well as the overall health system, less¹⁰. Private insurers have already shown interest in negotiating ACO-like contracts, so non-Medicare patients will benefit as well¹¹. For Betty Jo, her future looks bright and her new biggest concern will the bogey she just got on the 18^th hole.

References:

1. Accountable Care Organizations: Improving Care Coordination for People with Medicare, Healthcare.gov; November 16, 2011

2. State Health Facts, “Total Number of Medicare Beneficiaries 2011,” Kaiser Family Foundation; February 2012

3. McDonough, J., Inside National Health Reform; University of California Press; New York 2011

4. Gold, J., “ACO is the hottest three letter word in health care,” Kaiser Health News; October 21, 2011

5. Centers for Medicare and Medicaid Services website; https://www.cms.gov/ACO/, accessed February 19, 2012

6. Levinson, D., “Adverse Events in Hospitals: Methods for Identifying Events,” Department of Health and Human Services; March 2010

7. Berwick, D., “Making Good on ACO’s Promise: The Final Rule for the Medicare’s Shared Savings Program,” The New England Journal of Medicine, 365:19; November 10, 2011

8. Kaiser Family Foundation, “Percent of Medicare Beneficiaries Residing in Rural Counties, by State, 2010,” February 2012

9. MedPac, “Federally Qualified Health Centers,” MedPac Report to Congress; June 2011

10. Merlis, M., “Accountable Care Organizations,” Health Affairs; July 27, 2010

11. Fisher, E., McClellan, M., and Safran, D., “Building the Path to Accountable Care,” New England Journal of Medicine; 365: 26, December 29, 2011

Ezekiel Predicts the End of Insurance Companies by 2020

Ezekiel Emanuel boldly proclaims that insurance companies will be extinct by 2020 in last week's New York Times article. He believes that Accountable Care Organizations (ACO) will push them out of the market. It will be interesting to follow his prediction over the next 8 years to see if he is correct.

Emanuel explains that ACOs will eventually bear all the financial risk for patient care when they are implemented which will eliminate the need for insurance companies. ACOs, which will be composed of groups of doctors, other providers, and hospitals, will work together to provide the full range of patient care. Eventually, he sees patients paying a flat rate directly to ACOs, who, in turn, will provide all services needed. The advantage of the ACO model is that it incentivizes providers to keep the patient healthy and focus on prevention, rather than provide care only at the point of illness. Additionally, it will integrate care for the patient, creating better collaboration between different providers.

At the moment, 60% of insured citizens under age 65 in the U.S. are insured through their employer. In these cases, the financial risk falls on the employer, not the insurance company. This leaves the insurers there to help with processing claims and to provide negotiating power with hospitals and doctors. However, ACOs will charge a flat premium, which should reduce the amount of administrative work required to process and file insurance claims on a case by case basis. In situations where insurance companies take on financial risk for patients’ health – such as small businesses and individuals – they have enough market power to cherry pick healthy patients, charge high premiums, and deny patients’ claims. When ACOs start being implemented, insurance companies will be competing with ACOs for these patients. This will infuse better competition and should reduce the need for patients to hassle with insurance companies over coverage.

Emanuel also breaks down the difference between ACOs and HMOs in a very concise manner. First, ACOs and HMOs are similar such that patients are members of the organization and members pay a flat fee. In other words, payment is not done on a fee for service manner in either of these models of care. However, Emanuel emphasizes that ACOs will be local groups of providers, not large national corporations like many HMOs, so ACOs will be able to better respond to local patient needs. Also, ACOs will be financially incentivized to keep patients healthy rather than only getting paid to treat the sick. Lastly, he points to the advancements in electronic medical records as well as the science of care integration as improvements since the HMOs’ day.

Personally, I am not fully convinced that insurance companies will be extinct by 2020. It may be that I do not understand ACOs to the depth that Emanuel does. But, maybe in the end, ACOs will become large enough that they will just take over coverage responsibilities as well. Time will only tell.

BWC

Renegotiating Reimbursement: Good Policy or Good PR?

Yesterday Partners Health Care, Massachusetts largest health system, voluntarily disposed of its current contract with Tufts Health Plan and renegotiated a new four year agreement that is expected to lower the health reimbursements they receive by about $105 million dollars over the next four years.

This is significant.  In a conversation I had with a Partners executive two months ago he shared that the Partners negotiating team often leaves their contract meetings with groups like Tufts feeling "proud" of the deals they are able to strike with health insurers.  My impression was that Partners, with the largest market share of any hospital system in Massachusetts, knows it can throw its weight around and does quite willingly.

Not any more.  Partners' decision to rework its contract with Tufts, following a similar renegotiation last year with Blue Cross Blue Shield that is estimated to save $240 million dollars, was likely due to the following.

• Altruism: although not likely the biggest factor, Partners CEO Gary Gotlieb did state that one reason for accepting smaller increases in reimbursements going forward is the growing burden of health care costs on families and businesses.
• Government pressure: the political environment in Massachusetts, and in many areas of the country, is such that all hospitals understand that costs must be cut voluntarily or else the government is likely to do it for them.  With Massachusetts congress toying with rate setting as a way to control out of control medical costs, hospitals would rather be a part of a pre-emptive solution.
• ACOs: Partners was recently announced as one of 32 Pioneer ACOs set to begin this year.  As part of the agreement, ACOs commit to generating at least 50% of their revenue from business models similar to that of the Pioneer Medicare program.  This can only be accomplished through agreements with insurers, employer health plans, and/or Medicaid (called "Participation of Other Payers" in the CMS Pioneer ACO Fact Sheet).  As part of Partners' new agreement with Tufts, approximately 70% of the patients in the plan will now be reimbursed via a global payment structure, shifting significant risk to Partners and forcing them to find ways to contain costs for all their patients, not only the Medicare population.  This is exactly the goal of the ACO, and to the extent that Partners' participation in the Pioneer program is influencing this new agreement with Tufts, the ACO model is succeeding.

Whatever the reasons, I applaud any move by hospital systems to voluntarily forego future payment.  Additionally, I applaud any move toward global payments and the taking on of risk by hospital and physician groups.  However, scale must always be kept in perspective.  While $105 million dollars is no small amount, with an annual budget of over $8 billion dollars and capital expenses totaling $3.2 billion dollars over 5 years, it doesn't seem like so much.  Additionally, there has been little talk of where the $105 million dollars in "cuts" to Partners bottom line will come from.  The hope is that money will be saved through care coordination and a focus on the high utilizers or perhaps a reduction in capital investments year over year.  I imagine that if savings do not materialize, however, chronically underfunded mental health and substance abuse programs will instead be on the chopping block, and this would be an unwelcome result.

Despite my significant skepticism of the hospital market environment in Massachusetts and at the risk of being duped by what may turn out to be simply a PR move, I am encouraged that, whether it be altruism, the political environment, government policies, the market at work, or some combination of these, the system appears to be working.  At least for today.