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Accountable Care Organizations: The Gathering Storm?

Those of you who’ve read this blog for any length of time know that I have been a pretty strong advocate for healthcare reform. This has been primarily motivated by my passion for universal coverage, but also with my frustration with the cost of the current healthcare system, the generally crummy outcomes, and the overall level of fragmentation in the whole affair.

Even today, I had to repeat blood tests on a cancer patient who came to the ER. He had had blood tests at the cancer center ACROSS THE STREET before presenting, but, so sorry, our computers don’t talk to theirs and it’s after 5pm now, so forget about getting those results. 

So it’s with a mixture of enthusiasm and dread that I consider the coming onslaught of accountable care organizations (ACOs). What are ACOs? They’re the buzzword of the day, that’s for sure. Everybody knows they’re the next big thing. They’re coming. We’ll all be in an ACO by next Tuesday for sure. It’ll be nirvana. Right?

Sorry, I’m still not clear what they are. Why are they coming again? Definitions vary a bit, but in general ACOs are an effort to reduce the cost and increase the quality of care by:

  1. Eliminating the traditional fee-for-service payment model
  2. Integrating the delivery of healthcare
  3. Shifting financial risk onto healthcare providers

The idea being that if healthcare providers (meaning hospitals, clinics and physicians) are all, as one, responsible for decreasing the cost of healthcare delivery, they are more likely to band together in a way that will improve care and thereby decrease excess costs. Something similar was tried in the 90s — capitation — in which the risk was simply offloaded to doctors. This failed because there was no effort to include other healthcare stakeholders and because physicians rebelled against this model.

Similarly, the hospitals have long been incentivized to reduce the cost of care through the Inpatient Prospective Payment System, but that does not involve physicians and still is linked only to a single inpatient admission. The envisioned reforms differ because they will provide only a single payment, bundled among all involved providers, and the payment will extend beyond a single site of service, but be for an entire “episode of care.” A necessary prerequisite for such bundled payments is that there needs to be an entity designated to receive and distribute these payments.

That’s an ACO. The Patient Protection and Affordable Care Act (PPACA) authorizes Medicare to begin pilot programs in ACOs and bundling starting in 2012, with a clear eye towards making this a national model. My view had been that this would necessitate that physicians all become hospital employees, but this is not necessarily the case. It does require closer relationships and partnerships between physicians and hospitals, however. An article in Health Affairs by Elliot Fisher (considered the originator of the ACO concept) outlined possible models:

1. Integrated Delivery Systems. Integrated delivery systems involve a common ownership of hospitals, physician practices, and—in some cases—an insurance plan. Some examples are Kaiser Permanente, Group Health Cooperative of Puget Sound, and Geisinger Health System. These systems typically have aligned financial incentives, electronic health records, team-based care, and resources to support cost-effective care.

2. Multispecialty Group Practices. Multispecialty group practices usually own or have a strong affiliation with a hospital. Examples of this type of arrangement include Mayo Clinic and Cleveland Clinic. They usually do not own a health plan but, rather, have contracts with multiple health plans in their areas. Most have a long history of physician leadership and highly developed mechanisms for providing coordinated clinical care.

3. Physician-Hospital Organizations These organizations are a subset of the hospital’s medical staff. One example is Advocate Health in Chicago. Most were formed in the 1990s in response to managed care pressures to negotiate with health plans. Some function like multispecialty group practices, focusing on reorganizing the delivery of care to achieve more cost-effective coordination. Although they may be less well suited than integrated delivery systems or multispecialty practices to qualify as ACOs, many could structure themselves to meet the criteria for that type of organization.

4. Independent Practice Associations. Independent practice associations consist of individual physician practices that came together largely for purposes of contracting with health plans. Over time, however, many of these have evolved into more-organized networks of practices that are actively engaged in practice redesign, quality improvement initiatives, and implementation of electronic health records. One example is Hill Physicians Group, in Northern California. Such organizations could qualify as ACOs, and that might encourage other independent practice associations to evolve similarly, given sufficiently strong financial incentives and technical assistance.

5. Virtual Physician Organizations. Finally, a number of small, independent physician practices, many located in rural areas, can organize to become “virtual” physician organizations, such as Community Care of North Carolina. This process can be led by individual physicians in rural areas or by a local medical foundation, state Medicaid agency, or similar organization that can provide the leadership, infrastructure, and resources to help small practices develop disease registries; implement electronic health records; share information; and provide better-coordinated, cost-effective care. These virtual networks could qualify as ACOs and serve as models for other groups of small practices.

In our locality, we have both #1 and #2, and they do contribute greatly to high-quality, low cost healthcare in our community. I’ve seen the way the stakeholders and physician leaders work together, and it has led to some great results. It’s not clear to me whether this is scaleable — whether it can be translated into other communities where there is no tradition of collaboration between docs and hospitals, where caregivers at different sites view one another as rivals and enemies rather than partners in care. I don’t say this, by the way, as an indictment of other communities. Our locale is unusual in that there is one big hospital and one big multispecialty group and one big HMO. They partner by necessity, and there is little to no local competition. In other places, where there may be multiple hospitals competing with one another for business, multiple physician groups trying to play one off over another, surgicenters and free-standing ERs skimming off the cream, the economic environment may make it very difficult indeed to bring these players to the table together in an ACO.

The other concern I have is what this may do to emergency medicine as a specialty. About half of ER docs are already hospital employees or effectively hospital employees (faculty foundations and the like), and the remainder work for independent physician practices. As Myles Riner put it, ” EPs are going to have to find ways to share risk in ACOs as independent practitioners or as hospital employees without sacrificing significant income or undermining practice quality and autonomy.”  This represents a significant challenge. ER docs tend not to belong to the big multi-specialty groups that will bring significant clout to the table in the management of an ACO. We also are highly subject to leverage from our hospitals in contract negotiations. We are in a vulnerable position and risk getting squeezed between the big players in the formation of ACOs and the distribution of revenues.

What’s the old saying? “Democracy is three wolves and a sheep voting on what to have for lunch.”  The ER is small enough that we’re little more than a snack for the big guys, but we will be hard pressed to keep them from eating our lunch out of sheer opportunism. We are going to have to make a strong case for the value of our services in the episodes of care that pass through the ER. It’s also going to be difficult to resist the pressure to simply become hospital employees.  Hospitals may suddenly rediscover an interest in directly employing (and controlling) their ER docs when the financial risk is so greatly magnified as it will be under bundling payments for episodes of care. While there’s nothing wrong, per se, with being an employee, it tends to depress income. Physicians who are entrepreneurial, who are working for themselves tend to be more effective at running a lean practice and at effectively billing for their services. When this becomes outsourced to the hospital, practice bloat sets in and under-coding for ER physician services becomes the rule. For physicians who want to maximize their value and the return on the care they provide for their patients, it is best to be independent. The best advice I can give to ER docs (and frankly, any hospital-based physicians) who are considering how this is going to impact their practices is this:

  • Don’t Panic. The history of U.S. health policy is littered with the smoking carcasses of fads like these that never quite caught on. ACOs may become the national model in the future. But we’re still eighteen months away from pilot programs.  There’s a lot of time before we know what will happen, and this may very well come to nothing.
  • Develop a close partnership with your host institution. (Always good advice.) Demonstrate that you are aware of these macro-trends, and that you are prepared to work with them to maximize quality and efficiency.
  • Demonstrate that your practice adds value to the patient’s care.  Embrace protocol-driven care as a mechanism to improve consistency and quality and seek for ways to align the incentives of your physicians and the institution.
  • Encourage collaboration with community providers. If ACOs do become the default model in the future, practices which have already built relationships with their community partners will be better positioned to withstand the changes and perhaps even prosper.

Here are a couple of excellent (more detailed) primers on ACOs, from the blogs Health Reform Watch and The Health Care Blog: A Guide to Accountable Care Organizations, and Their Role in the Senate’s Health Reform BillPitfalls of PPACA – Accountable Care Organizations

*This blog post was originally published at Movin' Meat*


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