Will Accountable Care Organizations -- ACOs -- Increase the Value of Your Practice?
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David C. Kibbe, MD MBA Senior Advisor, American Academy of Family Physicians Chair, ASTM International E31Technical Committee on Healthcare Informatics Principal, The Kibbe Group LLC |
By now, you’ve probably heard some buzz about accountable care organizations, or ACOs. They represent an important re-structuring of health care delivery in the US, and are poised to take center stage in the debate about health care reform. Their success will likely depend on how well they can recruit primary care physicians, and, in turn, how well they coordinate care out of patient-centered medical homes. In this Doctor’s Notes, I’ll answer several basic questions about ACOs and their impact on physicians and medical practices starting this year.
What, exactly, is an ACO?
The term “accountable care organization” first appears within the health reform bill passed into law in 2010, the Patient Protection and Affordable Care Act According to the Centers for Medicare and Medicaid, CMS, an ACO is a new kind of provider organization whose members share responsibility for care quality, financial risk, and a common goal to improve health care delivery and the overall health status for a given population of Medicare beneficiaries
ACOs can be rewarded if their quality and patient satisfaction scores are higher than expected; they can also receive decreased reimbursement if scores are lower than expected. As a keystone in the Medicare Shared Savings Program, a summary of ACO features includes:
- ACO payments to begin January 1, 2012, with contracts to last a minimum of 3 years.
- Physician groups and hospitals eligible to participate, but primary care physicians must be included in any ACO group.
- Participating ACOs must serve at least 5,000 Medicare beneficiaries.
- Bonus potential will depend on Medicare cost savings, reaching quality metrics.
- Final rules for patient assignment, cost comparison methodology, bonus amounts, and minimum thresholds to be released during 2011.
- No penalties for failing to hit cost targets.
In short, ACOs are a re-invention of the health maintenance organization, HMO, with several new twists that are important to understand. First, ACOs will reflect the continuum of the current health care system -- from independent clinicians and hospitals, to small group practices, to partially or virtually integrated organizations, to fully integrated systems with common ownership and employment. Most early ACOs will combine both hospitals and doctors as part of their governance structure. However, as the figure below illustrates, there are various models of ACO structure and governance emerging, including stand-alone physician groups like IPAs.
Secondly, not all ACOs will receive global or capitated payments, also referred to as “per member/per month” (PMPM) payments. In fact, it is expected that in 2012 most ACOs will be incentivized through shared savings, bundled payments, and other alternatives to fee-for-service, while continuing to operate within a basic fee structure based on visits and procedures.
And third, ACOs are going to be held to quality, safety, and patient satisfaction standards that must be met before rewards are paid, a feature which will protect patients from being provided lower than appropriate levels of care, one of the big problems with some of the HMO experiences of the 1990s.
When will ACOs be recognized and payments to them start?
The timeline for ACOs is fast. The federal rules covering who can become an ACO, what payment methods will be permitted, how many patients must be included in a population, and so on, will be released by CMS sometime in the late spring of 2011. Payments to qualifying ACOs are to begin by January, 2012. It is expected that health plans and other private sector payers will adopt the federal definition and rules for ACOs almost immediately, leading to private sector contracts with ACOs as early as late 2011. It’s therefore understandable that ACO-preparation has already started in earnest around the country.
What will an ACO in my community mean to me, my practice, and my patients?
The first place to look for ACO activity in your neighborhood will be within hospitals and hospital systems. These providers are beginning to get ready for ACO qualification, spurred on by the prospect of significant shared savings and incentive bonuses, as well as the desire to escape financial penalties that might attach to remaining stuck in a solely fee-for-service health care business model after 2012.
Although the impact on small and independent medical practices may at first be limited -- hospitals will initially focus ACO attention on their owned or very closely affiliated practices -- you can expect that hospitals will eventually reach out to almost all the primary care practices in their market area and offer them a role in their developing ACO.
The reason ACOs will be “primary care hungry”? First, ACOs need a large volume of patients, at least 5,000 Medicare beneficiaries, to be economically viable and meet minimal federal requirements. Many ACOs will aim at managing populations of 50,000 or more. Some large hospital systems may own sufficient practices with the right primary care and specialty mix to care for this size population, but most smaller community hospital systems will not. This means they’ll be seeking to form contracts with, and buy up, primary care practices to fill the gaps.
Secondly, ACOs will need primary care resources in abundance to reduce overall costs of care. The “big idea” of ACOs is accountability for quality and cost, which means at least some of both clinical and financial risk gets shifted to provider organizations. If ACOs over-spend their targets, or under-perform on quality, they’ll actually lose money.
This creates an imperative for ACOs to move care from expensive venues, particularly the ER and hospital, to primary care and ambulatory care settings, whenever possible. Regardless of whether the new payment model is shared cost savings (utilization risk) or full capitation (financial risk), it is widely appreciated that ACOs will not be successful unless they have adequate primary care physicians and nurse practitioners in medical home practices who are capable of managing care across the continuum, able to avoid unnecessary high-cost interventions, and have the health IT systems in place to do both.
Not all ACOs, however, will be centered around a hospital or hospital system. Doug Arnold is the executive director of Middlesex Physician Services, MPS, a 400+ physician Independent Practice Association in Connecticut that is in the process of becoming an ACO. According to Doug, it’s a great opportunity.
“We see moving from IPA to ACO status as perhaps the most important opportunity ever for physicians to retain their independence and ownership, and to benefit financially from providing high quality, efficient care.” Our IPA is primary care-based, and we’re committed to the idea of the patient-centered medical home. But we’re extending the PCMH concept to include outpatient specialty care for most chronic illnesses, and we think we can save patients and payers like Medicare a lot of money through close coordination of care. You could say we’re creating an ACO that is a “PCMH neighborhood.”
Should my practice consider being part of an ACO?
This will depend greatly on local circumstances that include strength of leadership, status of health IT infrastructure, availability of risk profiling systems, quality performance capabilities, and adequacy of capital for investment and reserves. Physicians should remember that the acceptance of financial risk is a two-way street: there is always the possibility of loss as well as that of gain.
Based on recent observations, my sense is that many ACO-wannabes have not fully considered the complexity of the IT systems and the sophistication of management that will be needed to shift their organizations from a fee-for-service, volume-based business model to one that can tightly control cost and quality so as to benefit from providing value.
However, assuming that the ACO with which your practice is considering a partnership is well-managed and financially sound, there are many aspects of “accountable care” that could re-invigorate primary care and increase the value of your practice over time. Aggregation of primary care practices within a single organizational structure that values what we can do to manage patients -- rather than using PCPs merely as a source of referrals -- could produce expense and cost sharing, which may relieve some of the practice overhead burdens that most small practices now find such a headache. It might also provide a means for practices to share the costs of acquiring EHR technology, and for the IT support costs needed to get up and running with the EHR incentive programs under “meaningful use.”
The bottom line
ACOs are organizations that integrate a group of health care providers with other facilities and members of the healthcare system, to provide care in a collaborative fashion for a defined population of patients. There is no way to do this and reduce costs except by the devotion of resources to primary care and the delegation to primary care providers of the tasks associated with care management and coordination of care across institutional boundaries; during transitions; and in the homes and workplaces of patients at risk. ACOs are a prescription for the re-invigoration of primary care in the US health care system. Without that primary care re-invigoration, they could turn out to be a prescription for disaster.
David C. Kibbe, MD MBA
Senior Advisor, American Academy of Family Physicians
Chair, ASTM International E31Technical Committee on Healthcare Informatics Principal, The Kibbe Group LLC
* CMS is the administrative body overseeing Medicare, the program that provides health care benefits for seniors over 65 years old. Medicare set fees for providers of many kinds, both physician and non-physician, e.g. physical therapists. For family physicians, GPs, and general internists, Medicare fees account on average for 30% of practice revenues in any given year. Medicare rates are crucial as they set the benchmark rates which private sector health insurance plans and state Medicaid programs follow for their own payment schedules. Any change in Medicare rates, up or down, will likely lead to similar adjustments from other payers.
