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Accountable care 101

April 2013

Published in the April 2013 issue of Today’s Hospitalist

In recent columns, we’ve explored various Medicare reforms designed to improve quality of care and reduce cost. These include new buzz phrases like pay for performance, value-based purchasing and an obtusely named program that we’ve dubbed “you break it, you fix it” (Medicare’s hospital-acquired conditions and present on admission indicator reporting program).

This month, we’re tackling accountable care organizations (ACOs), which seem to be popping up all over, including in my own hospital system. Giving us a quick education is Aaron Bloomquist, vice president of ACO and payer strategy at HealthEast Care System in St. Paul, Minn.

How will ACOs change what we’re already doing?
ACOs require a much higher degree of clinical integration, including sharing clinical and financial information among providers, providing robust care management, and reducing practice variation. Other features include performance measurement and financial incentives related to improving outcomes and reducing the total costs of care.

The Patient Protection and Affordable Care Act of 2010, which required the Centers for Medicare and Medicaid Services (CMS) to implement ACOs for Medicare beneficiaries, has recently made them hugely popular.

So how does this change our lives as hospitalists?
Hospitalists always have the best interest of their patients in mind. But sometimes the interests of their employers “hospitals “can create problems. Obsessive attention to hospital length of stay, for example, can lead to discharges before all the necessary outpatient pieces are in place. This can increase the total cost of care if transitions go poorly.

But how do ACOs fix this?
ACOs are legal entities that apply to the CMS for the
opportunity to serve in a shared savings incentive arrangement. The CMS “attributes” Medicare beneficiaries to an ACO based on patients’ historical utilization of primary care services through providers who contract with an ACO.

ACOs must have a minimum of 5,000 beneficiaries attributed to them to be eligible for Medicare’s shared savings program. Each ACO is responsible for the total cost of care, which theoretically eliminates a lot of short-term incentives that exist when health care is split among multiple organizations and providers.

So cutting corners on the inpatient side, even if it saves money in the short-term, is actually bad because it can increase costs elsewhere in the ACO?

How are ACOs different from the much-reviled HMOs of yesteryear?
HMOs were driven by insurance companies and answered to Wall Street. ACO governance is largely controlled by physicians, especially primary care physicians. Also, the CMS requires ACOs to have a Medicare beneficiary on their board.

The CMS recognizes various types of ACO providers. In general, ACOs involve partnerships between hospitals and other health care organizations such as outpatient clinics.

But this is still about money to some degree.
Yes, but ACOs don’t realize financial benefits unless quality metrics are also met. HMOs focused exclusively on cost management. Quality was rarely, if ever, measured or discussed. Another important distinction between ACOs and HMOs is access to care. ACOs aren’t gatekeepers. Patients can choose to see any provider they wish. ACOs aren’t allowed to restrict access or choice through referral or utilization management programs.

You mentioned financial incentives. What’s that all about?
The CMS created one-sided and two-sided incentive models that are part of a shared savings program. One-sided models involve sharing in financial savings, but not losses. Two-sided models entail sharing in both. ACOs, especially smaller ones, will likely opt for the one-sided model, at least initially. The two-sided model, however, offers greater potential reward “if you can stomach the risk.

What are the specifics?
The shared savings program is designed to beat the national trend in health care expenditures, which lately have been increasing. The CMS requires a minimum savings rate, which ranges from 2% and 3.6% depending on the number of attributed beneficiaries, before anything is payable. And this is all contingent on also meeting quality metrics.

The shared savings distribution models are unique to each ACO and will vary, but most programs have pools set aside for physician and hospital services. Distribution from those pools will be based on contract terms between the ACO and the providers.

In our ACO of 15,000 attributed beneficiaries with a minimum savings rate of 3% achieved, we estimate that individual providers could earn between $3,000 and $5,000 on average. While that amount will certainly vary from ACO to ACO, the idea is that there may be additional revenue opportunities.

How important are hospitals in the overall ACO structure?
It’s projected that most of the savings potential for ACOs is in reducing inpatient utilization. Hospital administrators can expect ACOs to work on reducing ED visits, preventable or avoidable admissions, and readmissions.
Most of the care coordination in ACOs will happen through primary care physicians. But because PCPs don’t see inpatients anymore, hospitalists will need to tightly coordinate care with outpatient providers and manage patients’ transition after discharge.

Hospitalists should expect to be more involved in better patient education at discharge, making sure office visits are scheduled within three days of discharge, and seeing that patients are assigned to a medical home or a health care coach, as necessary.

Reducing unwarranted practice variation in the hospital will be another big priority. And I expect ACOs to look to hospitalists to recommend opportunities to provide better outcomes and control the total cost of patients’ care, as opposed to the cost of just one episode.

Some big names in the business community recently predicted the failure of ACOs in a Wall Street Journal article. What’s your take on that?
No one thinks that ACOs are the silver bullet that will solve the health care crisis. I agree that some, if not many, ACOs will be unsuccessful, at least in terms of financial savings. That said, I believe that ACOs are a step in the right direction. Innovation is messy, and ACOs will certainly evolve over time as successes and failures inform service delivery models.

The commentators you referred to argue that we need other solutions to right-size health care. Their proposals include shifting care to less expensive settings like “minute clinics”; encouraging providers to practice within their full scope of practice, rather than making referrals to specialists; and making better use of technology. Frankly, this is exactly what ACOs are designed to do.

David Frenz, MD, is a hospitalist for HealthEast Care System and is board certified in both family medicine and addiction medicine. You can learn more about him and his work here.