Accountable Care Organizations: What Do They Mean for You?

ACOs may only make up seven pages of the healthcare reform, but they have recently become a significant issue among physicians and facilities. Here’s a rundown of what you need to know about them and how they will affect your practice.

by John Andrew Estialbo, Staff Writer; Tim Herb, Staff Editor

What is an Accountable Care Organization?
According to the recently enacted reform, an accountable care organization (ACO) is a system of physicians and healthcare facilities which shares accountability in providing and managing the healthcare needs of a minimum of 5,000 Medicare recipients for at least three years. An ACO will acquire the employment of physicians from different specialties—from primary care, hospitalists and specialists to sub-specialized doctors—and will act as different yet synchronized parts of healthcare for the patient, to which they will ensure that all of these components will work well for the patient, physicians and the healthcare facility.

As a business model, ACOs are a type of payment arrangement which ties reimbursements to quality benchmarks and cost reduction for a particular patient demographic. Built on the models of Medicare Physician Group Practice and Medicare Healthcare Quality Demonstrations, one of its main principles is that all compensation related to enhancing healthcare quality also reduces overall expenditures.

According to Kelly Devers and Robert Berenson of the Urban Institute, “The goal of the ACO is to deliver coordinated and efficient care. In order to meet the requirements of this type of incentive system, an ACO needs to be able to; care for patients across the continuum of care, in different institutional settings; plan, prospectively, for its budgets and resource needs; and support comprehensive, valid and reliable measurement of its performance.”

Who are eligible to be an ACO?
The healthcare reform states that an ACO can include physicians and hospitals in group practices (ACO professional), networks of individual practices, partnerships between hospitals and ACO professionals, or hospitals which employ ACOs or other Medicare providers and suppliers. The Affordable Care Act also mandates each ACO to set up a governing body on behalf of ACO professionals, suppliers and Medicare recipients, which makes every ACO accountable for its own regular assessment and benchmark monitoring.

How do reimbursements work for ACOs, and how does it differ from other payment models?
Compared to other models, ACOs’ core focus is overall cost reduction. Although fee-for-service plans, referrals and performing more procedures are still options for patients, an ACO is incentivized by bonuses when these doctors are able to produce savings and keep overall costs down while meeting specific healthcare quality benchmarks, with emphasis on prevention and conscientious management for chronically ill patients. In this system, physicians will get more by keeping their patients out of the hospital.

On the other hand, some say ACOs bear more risks than other payment systems. In the event that an ACO fails to accomplish its core principles and objectives, it would be trapped with the costs made to invest on improving its healthcare service and a flat or standard fee from its patients.

How different are ACOs with HMOs (health maintenance organizations)? While HMOs’ standards were set by payers like insurance companies, ACOs are self-monitored and expected to conduct routine assessments. Moreover, HMOs forced cooperation between physicians and hospitals, while an ACO’s cooperation depends on the doctors and hospitals working together within their ACO network.

Vice President of Training and Recruiting for Pinnacle Health Group Craig Fowler adds, “HMOs were focused on capitated payments and depended on a single point of contact, usually the PCP, while ACOs emphasize the quality of care and fiscal responsibility of those who manage the patient’s care. This is best demonstrated by healthcare systems like Mayo Clinic in Minnesota and Geisinger Health System in Pennsylvania, who are more or less already operating as an ACO with how they pull more services together. Since ACOs will be largely dependent on EMRs (electronic medical records), shared information among physicians is expected to create better patient management.”

What does an ACO mean for the patient and physicians caring for them?
An ACO is still just an alternative for patients. Although doctors may be expected to refer patients to healthcare facilities and other physicians within their ACO network, patients still have the freedom to get treatment from their preferred doctors and it similarly applies to Medicare beneficiaries as well. On the other hand, physicians run the risk of not getting their share of generated savings and could even lose their jobs if they do not meet quality benchmarks.

Who will lead an ACO?
According to Devers, the provisions for it in the reform are not as clear-cut when it pertains to ACO leadership, and asserts that its vagueness was deliberate in order to maximize its ACO’s flexibility, thus making physicians, healthcare facilities and insurance companies all viable candidates. In lieu of this, Devers and Berenson added, “Physician decisions drive most health care services (and costs), so certainly physicians must actively engage with the ACO, but independent and small group practices may not be large enough to be held accountable for the quality and cost of care across the continuum of care.”

Pilot tests in ACOs show the seeming relationships between the three. At Carilion Clinic in Roanoke, VA, there are about 900 healthcare providers for 37,000 assigned Medicare patients; Norton Healthcare in Louisville, KY has about 400 providers for 20,000 Medicare patients, while Tucson Medical Center has a ratio of 80 to 7,000. In Irvine, California’s Monarch Healthcare (medical group and IPA), there’s more than 800 PCPs and 2,500 contracted, independent physicians who will cover Orange County, while Healthcare Partners in Torrance, CA will cover the LA County with 1,200 employed and affiliated PCPs, along with 3,000 employed and contracted specialists.

Meanwhile, Anthem Blue Cross and Blue Shield is developing its own ACO in Southern California for their PPO Plan beneficiaries, and they have recently partnered with Monarch HealthCare, HealthCare Partners, Sharp Rees-Stealy Medical Group, Sharp Community Medical Group, and Graybill Medical Group, which mostly cover San Diego and Orange County.  Aetna, Humana and Wellpoint have also come up with ‘diversification plans,’ which include acquisitions and partnerships that will enable them to directly employ physicians and participate in ACOs.

Texas-based WellMed Medical Management takes a different approach. It is a physician ACO set up in medical home model that has 21 primary care facilities, along with hospitalists, podiatrists, cardiologist, rheumatologists and dermatologists, with the rest of healthcare services contracted out. The American Medical Association (AMA) pushes full support for physician-led ACOs, explaining, “ACOs must be physician-led and encourage an environment of collaboration among physicians. ACOs must be physician-led to ensure that a physician’s medical decisions are not based on commercial interests but rather on professional medical judgment that puts patients’ interests first.”

What do ACOs mean for physician recruitment?
Given that ACOs will be mandated in January 1, 2012, they have become a priority among many healthcare systems and facilities—it is not surprising that physician recruiting remains a top priority among administrators and industry leaders, only preceded by service quality and cost reduction.

Fowler comments, “ACOs emphasize new concepts for the physician recruiting process–with all the emphasis on quality metrics and fiscal accountability within an ACO network. Both outside firms and in-house recruiters alike have to tackle them head on. Since ACOs also have new ways of delivering compensation, particularly with bonuses and incentives, there may be new levels of accountability in their delivery.

ACOs can also have a significant impact on physician supply and demand. About 75% of Internal Medicine physicians will branch out to other specialties and sub-specialties, and so it may only exacerbate the current shortage of traditional IM physicians. It similarly impacts other specialties. As more consolidation occurs in the marketplace—hospital systems buying practices and/or merging with other organizations—employment arrangements are a continuing trend. It is fair to note that you can expect to see an increase in demand for physicians, particularly in primary care and hospitalist medicine. There is a great emphasis for these specialties in the healthcare law.”

What should physicians, facilities and patients be skeptical about with ACOs?
The majority of support for ACOs is restrained, with clinical integration being a great concern among physicians, facilities and industry experts. As hospitals transition themselves into integrated systems, more and more independent practices are left with a reduced market share.

Both healthcare facilities and physicians are also guarded on how ACOs can ensure that antitrust and antifraud provisions can be implemented effectively, as they can be a factor in reducing market share among different hospitals or independent practices as well as driving up overall costs.

The American Hospital Association (AHA), meanwhile, has noted that the recently released guidelines for ACOs might not fully tackle the clinical hurdles among healthcare providers. Executive Director for Deloitte Center for Health Solutions Paul Keckley remarks, “The language in the guidance suggests that they have been very thoughtful about waivers and antitrust. And, they have maybe been cautious thinking about what will happen if commercial health plans piggyback the ACOs and use them as their contracting organizations.”

Kirk Mathews, CEO of Missouri’s Inpatient Management, Inc., questions, “Will highly-structured ACOs also result in anti-trust, self-referral, and anti-kickback issues in larger markets? I am eager to see if the published rules will lead to or provide for relaxed Stark rules and regulations. What happens to that group of six hospitalists at the local hospital when it becomes part of an ACO? Will those hospitalists still be able to provide care? Will the primary care and specialty physicians still have privileges at the hospital?”

AMA’s speaker Jeremy A. Lazarus, MD comments, “ACOs offer great promise for improving care coordination and quality while reducing cost, but only if all physicians who wish to are able to lead and participate in them. For this to happen, significant barriers must be addressed, including the large capital requirements to fund an ACO and to make required changes to an individual physician’s practice, existing antitrust rules and conflicting federal policies.”

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