May 23, 2011
The Advent of ACOs
By Maura Keller
For The Record
Vol. 23 No. 10 P. 20
The latest initiative to streamline Medicare costs and boost the quality of care is nearing its debut.
Many of the issues facing the healthcare system relate to controlling costs while improving quality. Enter accountable care organizations (ACOs), coordinated systems of collaboration designed to closely connect groups of providers willing to take responsibility for improving overall health status, care efficiency, and the experiences of a defined patient population.
A Combined Effort
According to Mansoor Khan, ScD, CEO of DiagnosisOne, the current trajectory of Medicare costs is unsustainable and will eventually cause major upheavals in American society if left unchecked. To try to redress the situation, Congress has embraced the concept of value-based purchasing and enacted it into law through the Affordable Care Act of 2010.
As Khan explains, the act contains several provisions with the goal of improving quality and placing Medicare on firmer footing. “The methods are to expand value-based purchasing, broaden quality reporting, improve the level of performance feedback, create incentives to improve quality, improve beneficiary outcomes, and increase the value of care,” he says.
Value-based purchasing links payment directly to the quality of care provided. The concept is that under these provisions, providers of Medicare services will continue to receive traditional fee-for-service payments but will also be eligible for additional payments based on meeting specified quality and savings requirements.
“Accountable care organizations are the mechanism that has been created by Congress to achieve this goal. Specifically, an ACO allows groups of providers to work together to manage and coordinate care for Medicare beneficiaries and to share in any savings generated by their efforts,” Khan says. “The benefits to providers include the ability to better manage their patients and to increase their reimbursements.”
According to Ken Perez, who directs MedeAnalytics’ healthcare policy research and serves as senior vice president of marketing, there are two types of ACOs: Medicare ACOs, which will be framed by the Shared Savings Program, and commercial ACOs, in which a commercial payer provides financial incentives for quality and cost performance.
“An ACO is usually a collaborative effort between hospitals and primary care providers and is typically an alternative to Medicare Advantage plans,” says Anil Kottoor, president and CEO of MedHOK. “They create an integrated care network and establish clinical protocols that allow for proactive patient monitoring, thereby reducing costs and improving quality.”
Think of ACOs as mini managed care plans in the Medicare fee-for-service payment world, meaning all participating providers would continue to bill Medicare individually. “However, the ACO would coordinate reducing costs and improving quality so that a year or two out, when the Centers for Medicare & Medicaid Services [CMS] reconciles the costs of the members, participating physicians and hospitals would share in any savings,” Kottoor says.
The CMS hasn’t launched a formal program to promote the establishment of ACOs, in part because the agency was focused on drafting the proposed regulations that were issued March 31.
“However, HHS [Health and Human Services] Secretary Kathleen Sebelius has emphasized the important role she thinks ACOs will play in healthcare reform, indicating she plans to integrate the concept into Medicaid and commercial health plans,” Kottoor says. “CMS Administrator Dr. Donald Berwick is also a huge fan of ACOs and has indicated a desire to see 100 to 300 Medicare sites established nationwide. The law calls for those sites to be set up as early as 2012.”
Wes Champion, senior vice president of Premier Consulting Solutions, expects the CMS Innovation Center to initiate additional pilot programs that may test new payment models and care delivery systems based on accountable care principles.
“These are positive first steps toward overcoming fragmentation in healthcare and will allow doctors and hospitals to work cooperatively to improve quality, reduce costs, and enhance the care experience,” Champion says.
Given the delay in publishing the proposed rule, Champion says organizations will have to understand the requirements and evaluate their participation in a matter of months to meet CMS deadlines. “This is a significant task, as the rule is vast, addressing critical issues such as shared savings payments, beneficiary attribution, participation requirements, claims and other data exchange, quality and efficiency measures for assessing ACO performance, and more,” Champion says.
Premier Consulting Solutions supports the CMS’ decision to allow ACOs to not only contact but also provide additional benefits and services to beneficiaries, including disease management programs and condition-specific education. “These services will provide tremendous value to beneficiaries and will give the ACO the flexibility needed to direct and improve care,” Champion says. “However, in the final rule, we will urge CMS to be more expansive in allowed communication and services provided to beneficiaries to include pay for travel, technologies, seminars, copay waivers, etc. These services do not serve a marketing function and are essential to improve care quality, provide convenient choices, and enhance overall compliance with recommended care.”
There are intriguing incentives and penalty provisions built into healthcare reform that make ACOs appealing to providers. “For example, the law calls for reductions in reimbursements to physicians and hospitals for hospital-acquired conditions, readmissions, and poor quality outcomes,” Kottoor says. “Whether they are part of an ACO or not, physicians and hospitals are going to have to increase their focus on increasing quality and reducing utilization or they will see some major realignment in the revenues they receive from Medicare.”
Because of their potential to meet these objectives, ACOs have great appeal. “The concept may appear, at best, to be a break-even prospect in the first couple of years, but providers may nonetheless participate because of the potential doing so can have on reducing the impact of payment reforms,” Kottoor says. “It’s a new paradigm. ACOs may wind up being necessities because, without them, providers will lose a similar or greater amount of money due to changing compliance and reimbursements.”
The only drawback, according to Kottoor, is ACOs’ mixed track record. “Success is really tied to how integrated the ACO is in the first place, how committed the participant providers are to the goals of reduced costs and improved quality, and how active they are in tracking patients from a clinical standpoint,” he says.
One of the biggest hurdles facing ACOs is gaining the necessary commitment from all parties to be active in clinical integration. “That is because if you’re going to be a fee-for-service ACO, your opportunity to do a lot of utilization management in the form of authorizing services will be more limited,” Kottoor says. “Case management, disease management, and clinical integration take on a much greater role.”
A sound technical infrastructure for clinical integration must be established. As Kottoor explains, most doctors’ offices do not yet have an EMR, and they are not yet fully committed to technology as a means of tracking patients and intervening in their care. “That needs to be overcome or, over the long-term, the savings and quality won’t be there,” he says.
Starting an ACO
What is the best way to lay the groundwork for a successful ACO?
According to Khan, organizations will need not only a solid IT infrastructure but also the right kind of infrastructure. “The type of continuous quality improvement envisioned in the ACO model requires comprehensive clinical decision support [CDS] at the point of care, not to mention population-, practice-, provider-, and patient-level reporting to determine whether the encounters are successful and compliant,” Khan says. “CDS and analytics must support the clinical and administrative needs of an ACO seamlessly, based on one evidence-based platform that satisfies multiple stakeholders at many touch points in the care process.”
To create an ACO, Khan says providers must be able to accomplish the following:
• form a legal structure that allows them to receive and distribute payments for the shared savings to the participating providers;
• be willing to become accountable for the quality, overall care, and cost of the Medicare beneficiaries assigned to them;
• enter into an agreement with the government for a minimum of three years;
• have a sufficient number of providers to service at least 5,000 Medicare beneficiaries;
• have an infrastructure that includes clinical and administrative systems;
• have the CDS processes and systems to promote evidence-based medicine and continuously improve care; and
• be patient centered and have the CDS systems to provide patients with individualized care plans.
Another key step in evaluating whether to be an ACO is to convene a meeting among executive leadership. “They must consider baseline questions, such as ‘Do we fit the statutory definition of an ACO?’” says Chet Speed, vice president of policy for the American Medical Group Association. Assuming the answer is yes, Speed says there are several other matters that need to be addressed, including the following:
• Does the provider have the appropriate culture to move forward?
• Do physicians and midlevel providers work well together?
• Is the leadership, both clinical and administrative, committed to being accountable on quality and cost?
• Does the provider have the appropriate IT infrastructure to collect and submit quality and cost data to the CMS?
• Are there sufficient IT professionals capable of analyzing clinical data to ascertain care gaps and redesign clinical processes?
• Does the financing make sense?
• Can inpatient admissions and emergency department visits be reduced without financial repercussions?
“Ultimately, if you’re not willing to commit to ensuring a high level of operational and clinical effectiveness and integration, you don’t belong in the business of an ACO,” Kottoor says.
In DiagnosisOne’s opinion, there are two additional hurdles to forming ACOs. The first is putting together a team with the leadership and management structure that meets the regulations governing ACOs and includes the elements necessary to provide the required services. “This requirement also means that the organization must have the financial and management resources needed to execute on this plan,” Khan says. “The second is deploying the IT tools and infrastructure needed to create and deploy the evidence-based medicine and patient engagement processes needed to succeed as an ACO and to generate the savings that will justify the creation of the ACO.”
The costs of creating ACOs will depend in large part on the IT infrastructure selected by the ACO to implement the clinical and administrative processes required.
“Based upon the experiences of the participants in the CMS Physician Group Practice [PGP] demonstration, which was the model in many ways for the ACO law, the costs are quite high,” Speed says. “Start-up and maintenance costs averaged more than $1 million dollars for the PGP participants. None of these costs were reimbursed by CMS, and these expensive infrastructure requirements may pose a considerable burden and barrier for future participants.”
A key goal of ACOs is to drive continuous improvements in the quality of care, an area where HIT figures to play a large role.
“ACOs will need to create seamless processes that provide real-time, evidence-based guidance to care providers—whether they be in an inpatient environment, an ambulatory environment, or a home care environment—measure outcomes, compare outcomes against desired goals, and then modify the evidence-based guidelines as needed to further improve outcomes,” Khan says.
To accomplish this, ACOs must carefully select an IT system that will be at the heart of its efforts to generate savings.
It is not an overstatement to say that data constitutes an ACO’s “engine,” Perez says. “Health IT plays a critical role, providing the infrastructural ‘plumbing’ to enable the robust, comprehensive, and transparent performance measurement system critical for a successful ACO,” he says. “Health IT must meet the formidable clinical and financial analytic needs of an ACO. Clinical analytic needs include outcomes tracking, comparisons of care paths—to determine best practice—a longitudinal view of the care process, and performance reporting and benchmarking, with data aggregated from all stakeholders. Financial analytic needs include evaluation of effort and resource consumption as well as financial reporting and modeling.”
Kottoor adds that HIT is the glue that holds the ACO concept together. “To be successful, an ACO must tie hospitals and physicians together so that they can share, in real time, clinical and administrative information,” he says. “They need to be able to track patients to know where they are along the continuum of care at any point in time and intervene. That is essential.”
But as Kottoor points out, the problem is that unless they own a managed care plan, most primary care physician associations and hospitals don’t have the administrative or clinical IT infrastructure necessary to facilitate that kind of information sharing. They will need to find cost-effective solutions that can be deployed quickly to close that technical gap.
“This is critical because while the members are technically still in a fee-for-service environment, the ACO is effectively acting like a health plan and standing in CMS’ stead in terms of fulfilling numerous requirements,” Kottoor says. “ACOs will need to have the capacity to collect enrollment and eligibility information to know who their members are, and they need to be able to transmit that information to the members’ individual primary care physicians. They are also going to need to have utilization management, case management, disease management, and clinical software or, again, they are not going to generate the cost savings and quality improvements necessary for success.”
It’s also important to note that even if an ACO saves money, there is no guarantee of payment unless it can prove quality was impacted. “That is a fundamental tenet of the ACO section of the reform act,” Kottoor says. “ACOs must be able to track quality indicators and demonstrate improvement over time.”
What the Future Holds
Kottoor says many organizations contemplating becoming ACOs don’t fully understand HIT’s impact on their success, in part because hospitals and physicians have primarily been providing care while health plans have been paying for that care. Up until now, the entities have been completely separate.
“That won’t be the case in ACOs,” Kottoor says. “It’s going to require a sea change in terms of what physicians are going to have to do. It’s a different approach requiring different systems and different types of patient monitoring.”
Champion adds that there are legal barriers that stand in the way of ACOs, although most of these have been addressed in the proposed rules. For example, outdated laws bar hospitals from sharing efficiency savings with doctors unless they are employees. “These policies need to change so that loose hospital-doctor cooperatives can operate as an ACO and function like teams on behalf of patients while still preserving independent ownership and autonomy,” he says. “Provided that the final rule is structured as proposed, we believe CMS has gone a long way toward clearing these barriers and has provided appropriate assurances as to the legality of these coordination approaches.”
Perhaps most importantly, Champion says there are many unknowns in the ACO world. How will payments be divided among doctors, specialists, nurses, and others providing care? What financial benefits will flow to patients? How should ACOs be organized and led? How fast can ACOs be implemented given the cultural, financial, and operating changes required?
“The only way to answer these questions is through experimentation,” he says. “ACOs have the potential to flip priorities back into the healthcare system to shift the focus from treating the sick to keeping people healthy. Although we don’t yet have all the answers, we’re finally on to something that will create a better, more sustainable future.”
— Maura Keller is a Minneapolis-based writer and editor.
ACOs vs. RHIOs
As Anil Kottoor, president and CEO of MedHOK, explains, in many ways the clinical integration that accountable care organizations (ACOs) must achieve is similar to the task facing regional healthcare information organizations (RHIOs) and the Nationwide Health Information Network (NHIN) initiative.
In effect, a properly run ACO will create its own captive health information exchange, whereby everything a healthcare organization needs to know about a patient from a clinical and an administrative standpoint can be shared between ACO staff and the hospital. Through the download of fee-for-service data and other information, ACOs hope to create a complete clinical profile of each member, which is also the goal of RHIOs and the NHIN.