MAY 31, 2011 10:43am ET

10 ‘Facts’ on Accountable Care Organizations

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I spent two days last week at the World Congress Leadership Summit on Accountable Care Organizations and my mind is just now recovering. As far as speaker quality goes, this conference (which offered concurrent tracks on ICD-10 and Meaningful Use) was top-notch, with dozens of speakers from hospitals, medical groups, payers, and consulting firms. There was a lot to absorb, but a few recurring themes came through. Here are my Top 10 takeaways from the conference:

1. The End of Fee-for-Service Medicine is Near
Although it has not commanded the media attention of the previously reported end of the world, the demise of productivity-based reimbursement models is imminent, with profound implications for physicians and anyone else working in the industry. Just how imminent? Well, no one offered a specific doomsday date and time, but consider this: According to Paul Markovich, executive vice president of Blue Shield California, the annual premium for one of its HMO policies will rise to $39,000 annually by 2020 if medical inflation continues at the current pace. “The status quo is going to kill us,” he said. And that message was repeated by multiple other participants, providers among them.
 
2. Current Economics are Unsustainable
You may not like the current iteration of the ACO model (a highly criticized set of proposed rules to be sure), but in one form or another, the industry needs to move to so-called “value-based” purchasing, and do it quickly. “We spend more than we need to and we don’t get good results,” noted Scott Sarren, chief medical officer of Blue Cross Blue Shield of Illinois. “If we fail to reduce costs, our only option left is price controls.”

3. Narrow Timeframe Threatens Federal Program
The health reform law mandates that an ACO program must be in place by January 1. HHS is now digesting comments from a disgruntled industry. The consensus at the conference was that the current ACO proposal is so unwieldy—and risky—that there will be few takers, unless the rules of the game are eased considerably. No one said it, but the federal ACO party may prove to be a giant dud, simply because not very many show up. And make no mistake, this is a program that will need widespread participation to make a dent in the expanding Medicare outlays. Gene Lindsey, CEO of Atrius Health, a Boston consortium of five independent group practices, said his organization is taking a wait and see attitude before jumping in. There will be some takers for the federal plan, however. James Satterfield, a trustee of the Queens County Medical Society, described the organization’s early efforts to participate—primarily due to a sense of urgency among primary care physicians facing growing expenses and dwindling reimbursements.  “The illusion of being autonomous is gone,” he noted.

4. The Private Sector Will Move on its Own Accord
Faced with the prospects of coping with a tangled federal ACO plan, many in the industry are forging ahead on their own, creating ACO-like arrangements—at the not so tiny risk of running afoul of anti-trust laws. In that sense, Obama’s health reform law—which put teeth (and money) into the federal ACO effort—may already be working. Blue Shield of California has launched three risk-sharing ventures with providers. “This is the private sector’s last chance to demonstrate affordability,” Markovich said. And the Illinois Blues plan has launched an ACO in Chicago with Advocate Health Care, a large hospital system.
 
5. The EHR is a Foregone Conclusion
Participating in an ACO of any stripe is all but impossible without an EHR. That message underscored multiple presentations. And while the idea is not shocking, the fact that so many speakers now take for granted the technology that has been resisted for so long is telling. Furthermore, the EHR can work, and work well, even in the complex environment of a large, multi-specialty group practice. With 800 physicians, Atrius is fully implemented on its Epic EHR across some 30 sites. “The EHR allows us to function as one large contracting entity,” noted Lindsey, adding that half of its 700,000 patients are being treated under global payment arrangements.

6. Without the Docs, ACOs Go Nowhere
In the ACO world, all eyes will still be focused on physicians. They may grumble about the loss of fee-for-service and challenge the wisdom of metrics-based reimbursement models, but in the long run, they still retain their dominance. That’s because, without physician participation, leadership and buy-in, the very foundation of accountable care is cracked. HHS recognized the importance of physician leadership when it declared that group practices could form an ACO by themselves. That might be unfeasible for all but the largest groups—the Queens County Medical Society has 700 physicians. Yet the underlying message from the feds is clear: we need your help.  And hospitals need partnerships with physicians--as opposed to mere ownership of physicians--before they can enter the waters. “Market realities and legislation are pushing hospitals and physicians to join forces,” noted Jeffrey Ruggiero, general counsel at the Queens Medical Society.

7. Shared Savings Models Quickly Become Complex
Jay Sultan, an associate vice president at payer software vendor TriZetto Group, laid out the opportunities for risk sharing between providers and payers on a neatly packaged continuum. At the least risky end is fee-for-service with a pay-for-performance twist. At the other end, global capitation (I had flashbacks to the early days of managed care).  In between, various degrees of shared savings, pay bundling around service lines, and shared global risk. Sorting all these out, Sultan said, would not be easy. He advised providers to consider the question of how much risk do they want to assume, rather than asking how they will be paid. Those are related questions, but it’s a germane distinction. Other panelists echoed that theme, and more than one noted that doing the actuarial work needed before signing onto any kind of shared risk model would require service and expertise not found in a smaller group practice. Physicians may be the key players, but their management team will of necessity include those not sporting an M.D.

8. When Players Align, Gains Are Real
The industry is so fragmented, and cost containment so little practiced, that sometimes even small efforts can yield some impressive gains. The Tucson Medical Center implemented a co-managed service line with its affiliated physician group for orthopedic services, and promptly reduced expenses by some $13 million in under two years, while simultaneously implementing quality metrics. “We had been paying top dollar for implants,” recalled Palmer Evans, M.D., senior administration adviser at the center, which has an affiliated 700-physician practice. It was chosen by the Dartmouth Institute as one of five national pilot sites to test the ACO concept.

9. The Target Will Be Narrow
A rather chilling portrait of Medicare’s own financial woes was offered by Ronald Klar, M.D., the former chief of health systems innovation at the George Washington University Medical Faculty Associates. The physician-turned-consultant, who was a key adviser to CMS as it worked up its ACO proposal now under the federal comment period, unleashed a torrent of statistics that detailed how a relatively small number of Medicare beneficiaries account for two-thirds of spending. Furthermore, Medicare spending has doubled in the last decade due to increased demand. So an industry facing a burgeoning expansion of Medicare rolls, a corresponding increase in expensive disease states, and a shrinking number of taxpayers working to support the system’s reserves, has little choice but to try something else. “If the ACO doesn’t work in some fashion, the alternative will be worse,” Klar said. “Cuts, cuts, and more cuts.”

10. The Questions Will Be More Difficult
Of course, there is another alternative, one that nobody likes to talk about. Only Sultan of TriZetto dared utter the “R” word, rationing. “Nobody likes to talk about it,” he said. In other words, at some point, the health industry will have to make difficult decisions about what kinds of care to cover for seniors, and when, in essence, to declare that enough is enough. Last summer, CBS reported the following: “Last year, Medicare paid $55 billion just for doctor and hospital bills during the last two months of patients' lives. That's more than the budget for the Department of Homeland Security, or the Department of Education. And it has been estimated that 20 to 30 percent of these medical expenses may have had no meaningful impact. Most of the bills are paid for by the federal government with few or no questions asked.”

At some point, we will have to begin asking.

 

Comments (7)
Excellent synopsis. Could not agree more.
Posted by mpatel2323 | Tuesday, May 31 2011 at 3:12PM ET
I concur-excellent synopysis of the conventional thinking that consumes us in healthcare today. However, in healthcare we rarely get to conventional thinking goals and there will be many turns in the journey. Payment reform for example is a sharade in that 1. we cannot define Value no less measure it or use it for rewards and 2. new systems of payment are based on FFS (fee for service) equivalents that need reforming. The mythology that we do not already ration is irrational in this finite world with infinite perceived medical needs. Hold on--it is going to be a bumpy journey. Rob MD
Posted by Robert F | Tuesday, May 31 2011 at 3:28PM ET
Terrific summary. Only add would be that, in your Number 5, you did not mention health information exchange (HIE) and really HIE is what a true accountable care organization will be required to have in order to meet regs. HIE may not be "a foregone conclusion" yet, but I predict it will be.
Posted by Donna S | Tuesday, May 31 2011 at 4:31PM ET
It is truly elating to see the quality, intelligence and pragmatism of the medical industry emerging in this conference and in this discussion.

Yes, the industry - and particularly its practitioners - must change both heir processes and their belief systems. Yes, it will beneficial - and necessary - to our Nation, population and economy. And yes, it will be difficult and financially costly to themselves. If it seems overdone, it's largely because it's so overdue.

Like all forms of change, it will happen. The choices are whether to adapt to change in the most farsighted and well-managed ways... or to suffer the massive structural and financial damage when "willful negligence" catches up to you.

Congratulations on now choosing the former alternative.
Posted by BruceSF | Wednesday, August 10 2011 at 2:49PM ET
Its like you read my mind! You seem to understand so much approximately this, like you wrote the e-book in it or something. I think that you could do with some % to force the message house a bit, however other than that, this is wonderful blog. A great read. I'll definitely be back.
Posted by Lavonna K | Friday, December 13 2013 at 11:35PM ET
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