ACOs: A Guide for Physicians

April 8, 2012

Should you join an accountable care organization? It's important for physicians in community-based practices. Here's what you need to know about this emerging care-delivery model.

"Accountable care organizations have been described as unicorns, because none have been seen but everyone knows how to describe one." So says MGMA independent consultant Owen Dahl. Because we haven't yet seen any ACOs in action, many practices have put off thinking about them. But ACOs are emerging, in more than just theoretical form, and understanding market changes just makes good business sense.

Should you get involved with an ACO? The answer depends on your practice's strategy, culture, and tolerance for risk.

An ACO is an organization of healthcare providers that can receive additional funds from Medicare (and an increasing number of private payers) if it can demonstrate that it provides higher-quality care at reduced costs to a defined group of patients. An ACO must measure quality, outcomes, patient satisfaction, and cost, for which it will need a sophisticated IT infrastructure, and it must form a legal organization to receive and distribute shared savings among its providers.

The regulations governing Medicare's new Shared Savings Program have formed the framework around which ACOs will organize. To participate in that program, an ACO must:

• Define processes to promote care quality, report on costs, and coordinate care.

• Develop a management and leadership structure for decision making.

• Develop a formal legal structure that allows the organization to receive/distribute bonuses to participating providers.

• Include the primary-care physicians (PCPs) of at least 5,000 Medicare beneficiaries.

• Provide CMS with a list of participating PCPs and specialists.

• Have contracts in place with a core group of specialist physicians.

• Participate for a minimum of three years.

ACOs will be led, for the most part, by hospitals and regional health-delivery systems, since only such large organizations have the scale necessary to meet the government's regulations, which are centered on managing the healthcare outcomes of large populations. But ACOs are going to need affiliated community clinics to deliver many actual services to patients, so practices will have an opportunity to join ACOs.

Hospitals that are forming ACOs might offer to purchase your practice outright, or may propose (or be open to) some lesser form of formal affiliation. Such offers might be attractive, as declining reimbursement and increasing practice expenses have driven many physicians in recent years to consider paths that include hospital employment, hospital integration, and various other professional service arrangements.

When affiliating with a hospital, you want to reduce the headaches of practice management, increase your access to capital, mitigate the risks of an uncertain future, and improve your income potential. But the flip side to all that is a loss of control. Entrepreneurial private-practice physicians tend to underestimate what it will mean to have the hospital as their "boss." Before making any decisions about affiliating with a hospital, consider the nature of your current relationship with its administration. Bear in mind that a new kind of affiliation might bring with it additional bureaucracy and make it harder to do what you want to do. But it might bring benefits, too, like income stability and resources for new technologies.

How'd we get here?

The trends shaping healthcare today are consumerism and patient-centered care; transparency in healthcare cost-effectiveness; value, as represented by quality and safety in relation to cost; metrics; and information technology that delivers real-time data on the patient, processes, and systems.

As the population statistics change and baby boomers age, healthcare costs are rising. The growing rate of obesity adds to the number of Americans with other chronic conditions such as diabetes, CHF (congestive heart failure), and CAD (coronary artery disease). Employers understand the impact of health and wellness on the productivity of their work force, as well as the ever-increasing cost of insuring their employees. Consequently, employers continue to experiment with wellness programs such as smoking cessation, weight loss, and health coaching.

Change in the payment and delivery system is inevitable. Health reform will shortly deliver many newly insured patients to your office. Evidence-based medicine focused on outcomes and quality will be a central organizing principle for care delivery and payment. Cost management is a practical imperative for a sustainable delivery system. And information technology is essential plumbing to this increasingly sophisticated system.

Shift to the ACO

ACOs represent less a paradigm shift in healthcare delivery than the coalescence of many tactics that have been tried at different times over the years to make providers accountable for their patients' health status. For example, membership in HMOs increased in the 1990s as health plans, hospitals, and physicians sought to deliver more cost-effective healthcare. More recently, medical homes have offered upfront payments to physicians to provide additional services, such as coordinating care with other providers.

But these initiatives usually lack mechanisms to tie providers' pay to their patients' ongoing clinical outcomes - one of the hallmarks of the ACO model. Unlike previous iterations, moreover, ACOs will rely on providers to review their own work and set standards. Their success will depend on how well providers, payers, and patients navigate the challenges that limited the effectiveness of previous efforts.

The core principle of accountable care is the alignment of payments, benefits, and other healthcare policies with measurable, meaningful progress in improving healthcare while lowering costs. Under Medicare's Shared Savings program, an ACO that succeeds in both delivering high-quality care and reducing the cost of that care to a level below what would otherwise have been expected will share in the Medicare savings it achieves.

Access to high-quality information systems, medical management protocols for monitoring patient adherence, and compliance with regulatory requirements are all essential to ACO development and management. Clearly, the costs and effort associated with these activities are substantial.

Having an enterprise-wide EHR is not enough. The capability to develop information from the data within the EHR to facilitate changes in the practice, and then demonstrate the results of those changes to payers, is essential to population health management, which is at the heart of the ACO model. Patient engagement requires secure messaging, patient portals, patient-maintained health records, and tools for patient self-care such as telemonitoring, mobile health applications and telemedicine. Having knowledgeable managers with relevant experience will be important to effectively implementing and managing ACOs.

In an ACO, providers are accountable for achieving better results for all of their patients at a lower cost. However, physician groups may resist policies that put them at risk. ACOs will have to offer incentives that make the risk worthwhile for practices.

An ACO can be made up of a multispecialty group; an organization of individual practices (like an independent practice association, for example); partnerships or joint ventures between hospitals and medical practices, in addition to physician-hospital organizations and integrated delivery networks; or hospitals with their employed physicians.

A functional ACO most likely needs to include primary-care physicians, specialists, and a hospital. It also needs to be able to administer payments, set benchmarks, measure performance, and distribute shared savings (or allocate losses).

Implementation of the Shared Savings program began on January 1, with 32 "pioneer" organizations. Medicare's Pioneer program is designed for healthcare organizations that are already experienced with coordinating care for patients across care settings, so they can move more rapidly from a shared-savings payment model to a population-based payment model as they demonstrate specified levels of savings during the first two years of the program.

Most of the Pioneer ACOs are linked to integrated delivery networks, academic institutions, and independent physicians' associations. The Renaissance Medical Management Co., for example, is an organization led by primary-care physicians in southeastern Pennsylvania that includes a network of approximately 200 family and internal medicine practices and an established relationship with a health plan.

The initiative will test the effectiveness of several payment models and how they can help experienced organizations provide better care for beneficiaries, work in coordination with private payers, and reduce Medicare cost growth, according to HHS. The Pioneer ACOs are required to engage other payers in similar efforts to the Shared Savings program. Pioneer ACO payment models include the risk of financial penalties for providers should healthcare spending accelerate. The risk of financial loss is perhaps greatest for the option that pays providers under a capitated model starting in the third year. Eligible savings range from 50 percent to 75 percent of the amount providers save, depending on the level of risk the ACO accepts.

Should you participate?

All this leaves many providers with a decision to make: Should you jump into ACO participation?

"A lot depends on the market and who the players are," says Kim Harvey Looney, who leads the healthcare regulatory practice at Waller, Lansden, Dortch & Davis in Nashville.

What is your relationship with the hospital - do you trust its management enough to be business partners going forward? "Rather than jumping on board, be a little wary and be thinking about doing something to align with other physicians," suggests Looney.

Pioneer ACOs will prospectively know who their included beneficiaries are, and will be able to contact them. But patients will continue to enjoy freedom when it comes to their healthcare choices - nice for them, but a challenge for the ACO, which is responsible for their health outcomes. Novant Health, owner of 13 hospitals and hundreds of clinics in states from Virginia to Georgia, considered joining the Pioneer ACO program. But Fred Hargett, Novant's executive vice president and CFO, says he didn't see enough in the regulations about the patient's responsibility or accountability. "Their mobility is a question mark for us," Hargett says, referring to patients' ability to seek care outside of the ACO. Novant Health is working to develop ACO-like concepts with commercial payers, but is holding back on the government's version.

Reimbursement methods will continue to incorporate quality and outcome metrics, and affiliation with larger healthcare systems will provide physicians with a voice in the process of developing those metrics - as well as determinations of the incentives for meeting them. As opposed to direct employment, affiliation allows physicians to maintain some control in a time of transition. Affiliation with healthcare systems also provides support for physician participation in other delivery-reform efforts such as expanded use of medical homes, bundled payments, value- based purchasing, adoption of information technology, and payment reforms.

The decision to participate in an ACO is a serious and far-reaching decision. Rather than try to fit into a predetermined definition of accountable care, providers are exploring innovative approaches with commercial payers to reward quality and more closely align the pieces of the healthcare delivery chain as patients experience them. Have you explored your economic, political, and organizational options to maximize your chances of success?

Is an ACO for you? A self-check questionnaire

Trying to decide whether to join an ACO? Consider the following questions:

1. Do you know what the vision of the ACO will mean to your day-to-day operations? Is productivity balanced with an incentive linked to quality?

2. How is the ACO organized? Will you or a representative of your specialty be a decision-maker at the table? How much autonomy are you willing to relinquish?

3. What is the process and timeline? Will you have to adopt new information technology tools?

4. What is the plan for implementation and support?

5. Does the ACO have the capital to acquire needed technology and the management and operational expertise to implement the ACO?

6. What are the other specialties in the ACO? Are these physicians you have shared patients with in the past and is their governance and management style consistent with yours?

7. Are you committed to the ACO's philosophy and delivery model as well as other key aspects of the program - including participation in and adherence to data-driven, evidence-based medicine, use of defined practice management and EHR infrastructure, and participation in care protocol development using measurable care standards?

Rosemarie Nelson is a principal with the MGMA healthcare consulting group. She conducts educational seminars and provides keynote speeches on a variety of healthcare-technology and operational topics. Drawing upon her diverse experience, Nelson provides practical solutions to help medical groups succeed in their practices. She may be reached at www.mgma.com/consulting/nelson.

This article originally appeared in the April 2012 issue of Physicians Practice.