Additional ACO Insights: Won't Make Money, Physician Leverage, Year-to-Year Patient Attrition & It's Not the PCPs, It's the Hospitals and Specialists

"What about concurrent versus prospective
risk adjustment?"

The Disease Management Care Blog listened in on the Opal Events' "CMS ACO Regulations Debriefing" webinar that was held as a follow-up to its Austin Texas conference.  The speaker confirmed much of the DMCB's darkly suspicious bloggery, but there were lots of additional and noteworthy insights:

It's the providers that are "participating" in ACOs, not patients. Patients aren't really "assigned" to any ACO, but their data are.

There's a reasonable chance that the January 1, 2012 start date will have to be delayed.

Why would a provider organization even want to be an ACO? It could be because it wants to be better positioned for the eventual demise of fee-for-service payment systems so it can take on risk. Or, this could be a way to achieve greater clinical and economical integration. Or maybe it just believes this is the right thing to do. While all of these fit with CMS' proposed ACO regulations, wanting to "make a lot of money" is a lousy rationale. That's because the ultimate point of the program is to have millions in efficiency and quality bonuses make up for the loss of millions in billing revenue combined with the investment of millions in care and data management systems.

Speaking of provider participation, it doesn't appear there is anything in the proposed regulations to keep them from abandoning the project midway through the contract period.  The DMCB foresees this leverage being used not only if there is impatience over the return on any financial rewards, but if there is dissatisfaction with the ACO's leadership. 

It's not uncommon for up to 25% of Medicare beneficiaries to switch providers (and health systems) from year to year.  That's why CMS' proposed "retrospective attribution" is both good and bad news.  The good news is that the participating organizations will only be held retrospectively accountable for the patients that were actually cared for in the system.  The bad news is that risk adjustment will be calculated off a baseline year using a population is likely to change considerably by the time the attribution is performed and the results are tabulated. 

While a strong primary care network is important, the economics will really depend on how well hospitals deal with "never events," hospital acquired conditions, readmissions, preventable admissions and cheaper alternate levels of care (like 23 hour stays, avoiding the intensive care settings and transferring patients to skilled nursing facilities instead of rehab centers). In addition, it will be up to the specialists to opt for more conservative (and less remunerative) treatment options.

Any communication from providers to patients about the "ACO" will need to be approved in advance by CMS.  So, if in the name of efficiency and quality, a physician wants to encourage his or her patients to contact the clinic in lieu of going to an emergency room, that letter may have to be submitted to CMS for their review.

Okay, But What Do The Actuaries Have To Say About Accountable Care Organizations?

Braininess

The elites, politicians, economists, physicians and bloggers may have much to say about Accountable Care Organizations (ACOs), but let's face it: we ignore what the actuaries have to say at enormous peril.  That's why it's worth checking out this important report from the brainiacs over at Milliman.  The report helpfully focuses on the many insurance and business risks of ACO's.   Its insights will help you help your bosses, co-workers and teammates as your company grapples with getting that ACO proposal ready for the looming January 1 kick-off date.

For example, think "revenue cycle management" or "fee negotiations" will be enough?  Think again, because CMS is not talking any prisoners on the risk of downside loss. You'll need far more discipline and capital, because Milliman points out that the Feds not only intend to withhold 25% of any savings, but will also require ACOs demonstrate an ability to pay back any losses. 

Milliman predicts that ACOs will need ongoing "service line" performance reports. That's vital, because they'll need to be prepared to redirect their care resources at numerous potential threats, like high readmission rates, high usage of skilled nursing facilities, increased numbers of one-day hospital stays or elevated specialist referrals.  In addition to following those data, it's also important for ACOs to know what level of reduction in any given metric - such as "ambulatory sensitive," "preference sensitive,"  short stay and repeat admissions - is achievable and what that means to the ACO's and CMS' bottom lines.  For example, is a "10%" reduction in ambulatory senstive conditions vs. an adjusted benchmark within reach, and does it get you over the "minimum savings ratio"?  If so, by how much?

Speaking of which, the Milliman report also has some useful benchmark information on ambulatory care sensitive condition (ASC) admission rates.  The report has some great information that compares the ASC performance numbers of "well-managed" to "loosely managed" insurance plans.

Which indirectly inspired the DMCB to once again to rekindling it's telepathic spiritual bonding with the Great and All Powerful and All Knowing Carnac the Magnificent - someone who was so wise, he was able to divinate answers to questions before he knew the question! 

While the DMCB was writing this post, it mysteriously entered into a trance-like state in which Carnac psychokinetically blessed the DMBC with three insightful and all-powerful answers:

1. Answer:  The Great Plains, Milliman and Wardrobe Malfunction!

2. Answer: A hero and a zero!

3. Answer:  Medicare Advantage and The Republican Deficit Reduction Plan!

It was only AFTER these answers were bestowed that the questions were transmitted to the DMCB from the spiritual realm of the all-knowing Carnac:

1. Question: Name a prairie, an actuary and a mammary.

2. Question: Who is Acting CMS Administrator Don Berwick and what are his chances of Senate confirmation?

3. Question: Give an example of capitation and decapitation.

The Patient Centered Medical Home and Diabetes: A Timely Review of the Evidence

Where's that evidence?

After last week's Disease Management Care ACO-Blog-Fest (which catapulted the DMCB onto a highly coveted 'first page' Google "search" status for "Accountable Care Organization"), the DMCB turns its attention back to the Patient Centered Medical Home (PCMH), thanks to this timely hot-off-the-presses review by Trajko Bojadzievski and Robert Gabbay of the Penn State College of Medicine. 

Anyone pondering the many promises of the PCMH is likely to eventually focus on diabetes mellitus.  The condition is not only highly prevalent and costly, but its quite measurable.  Patients with diabetes are readily identified in most healthcare databases and it's relatively easy to measure the frequency of recommended tests and treatments over time.  It could also be argued that diabetes is a "bell weather" for overall quality for providers and insurers.  Solve diabetes and you solve the health care conundrum.

With that as background, Drs. Bojadzievski and Gabbay asked a simple question: what is the evidence that the PCMH reduces costs or increases quality for patients with diabetes?

The authors assembled peer-reviewed published papers as well as all the web-based reports on the PCMH and its impact on diabetes. They identified 41 programs and pilots; three were excluded because of their small size and focus on converting from usual care to a medical home practice, leaving 38. 

Unsurprisingly, the authors found that common ingredients for the PCMH include payment reform (with additional money to pay for new infrastructure, patient coordination and quality bonuses), care management, patient registries, electronic records and expert consultation support. They provide succinct summaries (including a well organized table) of the what the DMCB is coming to refer to as the "Top Eight" PCMH pilots: Community Care of North Carolina, Geisinger Health System, the Pennsylvania Chronic Care Initiative, Group Health, the Rhode Island Initiative, Health Partners, the Colorado PCMH pilot, and the PCMH National Demonstration Pilot.

While their review showed the PCMH was associated with impressive quality gains, the authors' answer to the question poised above was telling:

"Although randomized trials have yet to be performed, the eight Medical Home initiatives reported provide encouraging “before and after” results to support the PCMH as a viable mechanism to improve the quality and costs of diabetes." 

"Before and after?" Once again, the DMCB is left wondering if the enthusiasm for the PCMH will ever be matched by its evidence base.  Recall the following quote from a past 2007 article from the American Journal of Managed Care that critically examined "disease management":

"However, the vendor-run assessments typically do not meet the requirements of peer-reviewed research in terms of the comparison strategy, and adequate control for selection bias and regression to the mean."

Fortunately for the DM industry, they responded by adopting approaches that meet many of the rigor and plausibility requirements of peer reviewed research. The good news for the PCMH is that they can do that also as better data from the pilots are released the coming months.  That being said, the DMCB is also coming to believe that the uptake of the medical home may ultimately hinge less on the pilots than on how well it supports the success of ACOs.  Unfortunately for advocates of the PCMH, that ACO evidence base - and it prospects for profitability - remains an even bigger question mark.

One last important point from the authors was that expert "practice transformation coaches" and "learning collaboratives (meetings to explore and exchange ideas) are a common feature of the PCMH.  If that is one of the factors leading to "before and after" success described above, ACOs that are building medical homes in their networks may be well advised to tap into that kind of expertise.

Three Reasons Why Small Accountable Care Organizations Can Succeed Under CMS' Proposed Rule

Going for that ACO Risk!

In yesterday's convoluted post (individual versus aggregate HCCs?), the Disease Management Care Blog questioned whether statistical uncertainty as high as 40% for the comparison benchmarks will be enough to make organizations think twice about throwing their hat in the ACO ring.  After all, more than a million dollars in investments will probably be necessary to deal with a huge two-sided insurance risk proposition involving thousands of Medicare beneficiaries.  Toss in a) CMS' track record of bureaucratic inertia, b) its clunky quality demands, c) a short start-up time (6 months after the close of the 60 day comment period?) and   d) having to build the skill sets and resources necessary to care for an attributed population, and maybe Vince Kuraitis over at e-CareManagement has a point: "small" ACOs need not apply.

Readers may think that unhappy conclusion is perfectly in line with the cynical, meanspirited, twattling and eternally skeptical DMCB.  Yet, despite what the spouse says, the DMCB is really a naive softie and its hope springs eternal. It bets plenty of small ACOs will go for this brass ring because they have a good - if not better - chance of succeeding.  The DMCB thinks that's because of they may have advantages in 1) geography, 2) their physicians and 3) access and willingness to use external care management resources.  If two out of these three key success factors are present, the DMCB says the provider organization should think about going for ACO status.

What is it about these three characteristics that translate to ACO success?

1) Geography: Maps like this and graphs like this point to areas in the United States where ACOs can make a significant dent in overutilization.  Yes, the Dartmouth Atlas may have its methodologic problems, but even the DMCB (and many of its physician colleagues) believes there is something to the notion of overuse, especially when it comes to "preference sensitive" care.  Accordingly, even small ACOs that "inhabit" the dark colors of the maps or the high ends of those graphs know that they have a great chance of beating a high baseline, even if there is a 40% chance of a misprojection of utilization and even if CMS neutralizes that further in the course of its risk adjustment!

2) Physicians: Managing unfettered patient expectations is well within the reach of primary care providers and team members of the patient centered medical home if they chose to focus on it.  Docs readily intuit that not all heart patients need a CABG, not all rotator cuffs need surgery and not all symptoms need an expensive MRI. Say what you like about HMOs and capitation, one lesson from the 1990s is that when docs tackle utilization, it works.  ACOs that can harness that intellectual capital will beat the benchmark baseline. In fact, small ACOs with "tight" management structures and physician cultures that understand their local markets will probably do best!

3) Outsourcing:  The fact is that there is plenty of help out there.  The joke is that ACO really stands for "another consulting opportunity," but there are myriad expert organizations that understand risk transfer, dealing with CMS, applying the lessons of managed care and marshaling population-based care management services including identifying patients at greatest risk, applying modern versions of disease and case management and using data to nimbly adjust to changes in clinical and economic trends on a quarterly basis.  Unburdened by the hubris of believing that they can build it all, small ACOs will recognize that they can readily buy high performance consulting and turn-key care management services on an outsourced and cheaper basis.

Hierarchical Condition Categories (HCC) and Accountable Care Organization Risk Adjustment: Is Prediction Accuracy of 11-12% of Expected Utilization Enough?

Take a spin on HCCs?

Addendum - DavidN below points out there is an important difference between individual (the topic below) and aggregate HCC-determined risk.  The explanatory power can  go as high as 60%, which is on par with many commercial predictive models. The DMCB appreciates the reader input and placed the new insights into the text below in bold font.

It also wonders if even a "low" 40% unexplained variation may still be too much for ACO wannabes...... 

                                   ++++++++++++

In a prior post, the Disease Management Care Blog introduced budding Accountable Care Organizations to "ambulatory sensitive conditions" and its curious mash of of "applied" health services research and reimbursement. 

In this post, the DMCB introduces the ACO wannabes to managed care's notorious "hierarchical condition categories" (HCC).
This is important because in the ACO Proposed Rule (**NEW** link over on the right of this page), CMS is proposing that HCC be used to risk-adjust the ACO's attributed population's claims expense "benchmark" baseline.  Comparison of that baseline (plus an actuarial trend) versus the ACO's expenses will determine whether the ACO is a hero.... or, literally, a zero.

HCC use age, gender, Medicaid eligibility, Medicare status (age, disabled or end stage renal disease) and the ICD-9 claims record of prior "encounters" to assign patients to 70 different "categories."  Those categories are designed to  "bucket" patients that are not only clinically similar (based on organ systems) but follow similar cost patterns. 

The reason the system is "hierarchical" is because it reconciles the presence of multiple concurrent conditions by identifying a dominant one.  As additional conditions are added to the model - since patients often have multiple diseases simultaneously - their predicted impact is incrementally adjusted upward. The "rate" of that upward adjustment decreases as more conditions are included.  In other words, it's not additive.

HCC have been CMS' answer to the perennial complaint of hospitals and physicians that their patients are "sicker."  Confront any provider with higher than normal claims expenses, unexpectedly long lengths of stay, higher than average rates of surgery, lower satisfaction scores or substandard quality measures, the first explanation will always point to the patients, not the care.  HCC case mix risk adjustment is designed to use the Medicare patients' characteristics to mathematically reconcile the observed rate versus what would be expected so that the quality of the care can be isolated and understood.

With one significant exception, HCC, like "ambulatory sensitive conditions," have been used in health services research to compare and contrast patterns of care and inform public healthcare policy.  That exception is that HCC have also been used to risk adjust the payments from CMS to its Medicare Advantage plans.

CMS experience with MA Plans has introduced a HCC "wrinkle" in the Proposed Rule.  Reportedly, when HCCs first arrived, MA Plans responded by hiring consultants and upgrading their claims systems to increase the "accuracy" of the coding.  This also increased the "coding intensity," resulting in an upward trend in their claims profile, which made patients appear sicker.  This cleverly shifted the HCC case mix and led to higher payments in the following year.  CMS, arguing claims expenses for beneficiaries generally remain stable year to year, proposes to avoid a reprise of that trickery by using the same HCC from the baseline year for all three of the ACOs' contract years.

And, in case you're interested, new Medicare enrollees would be risk adjusted on just age, gender, Medicaid eligibility and Medicare status. Indirect medical education (IME) and  disproportional share hospital (DSH) payments would not be backed out of the case mix adjustment.

All well and good, says the DMCB, but what ACOs really need to know is how accurate the HCC system is.  The answer, from the perspective of health services research, is "pretty good."  If, however, you are betting millions of dollars of investment, the answer may be "not very."  According to this definitive paper, the individual "explanatory power" of HCC ranges between 11% and 12%.  In other words, close to 90% of the year-to-year variation in the observed vs. expected claims expense that will determine payment levels from CMS under the Proposed Rule could be unpredictable. 

If aggregated and rolled up, the explanatory power may range between 60-70%.

Managed care organizations - with hundreds of thousands, if not millions, of enrollees - are used to underwriting cycles and understand the mathematics of transferring risk.  They use underwriting, the law of large numbers and surplus to cushion claims expense unpredictability.  They can handle 90% (or 40% in aggregate) swings in unexpected utilization. 

It remains to be seen whether smaller and lower capitalized ACOs will be willing to accept that level of uncertainty.  One possible answer to that will be addressed in tomorrow's DMCB post.

Image from Wikipedia

Ambulatory Care Sensitive (ACS) Hospitalizations and Accountable Care Organizations: A Complicated Measure of ACO Quality

Food fight!

Imagine being a C-suite, VP or lead administrator in a newly formed Accountable Care Organization. At some point, you'll need to have a physician meeting to go over the terms of the CMS contract.  Because such meetings often occur after clinic hours, you may be tempted to provide dinner.  While the docs are working on their chicken breast, white bread rolls and iced tea, you'll remind them there's a Medicare claims-expense threshold to beat.  You'll point out that once savings being to accumulate, the ACO will get a percent as a bonus that could add up to millions of dollars. 

However, you'll also need to point out that certain quality measures also have to be met in order to get the full bonus.  That's when you'll say:

".... and every time we admit a patient with urosepsis, pneumonia, dehydration diabetes (short and long term complications), COPD and heart failure, we lose quality points."

The DMCB suggests, at this point, that is when  hospital administrators will rue the decision to provide dinner. That's because the doctors will be throwing it at them.

The DMCB explains.

As noted in a prior DMCB post, ACOs shared savings will be contingent on attaining sufficient levels of clinical quality in their attributed population. Go to the just-published New England Journal "Perspectives" article by CMS Administrator Don Berwick on ACOs and you'll find this table that summarizes CMS' proposed measures for assessing ACO quality.  That Journal table is taken from a more complicated table in the proposed rule (go to page 174) on how ACO quality will be assessed.  

As the DMCB understands it, CMS is proposing 65 quality measures. Each would be worth "two points," for a maximum of 130 points.  With a few "all or none" exceptions (for example, diabetes), each participating ACO would be compared to a yet-to-be-determined benchmark on each of the quality measures.  The more the ACO "beats" the 30th percentile for each of the 65 benchmarks, the greater the fraction of the available two points that is awarded.  Divide that rolled up point sum by 130 and that will be the fraction of the shared savings that is awarded.

All well and good, but this is where it gets interesting.
 
In the suite of ACO "Care Coordination" quality measures is a subcategory called "management of ambulatory sensitive conditions."  It includes diabetes (short and long term complications), COPD, heart failure, dehydration, urinary tract infection and pneumonia.  That's 14 points.
 
Just what are "ambulatory sensitive conditions" (ASC) you ask?

ASC is all about measuring the rate of "avoidable" hospital admissions in each of those disease categories.  It assumes that a hospitalization for an ASC can be used as a surrogate measure of access to appropriate outpatient primary health care.  If the patient had optimum outpatient access, evidence-based care and close follow-up, the hospitalization could have theoretically been avoided.  An excess number of hospitalizations in those seven disease categories could mean that the outpatient primary care system is failing.

For more information, here's the definitive AHRQ summary on the topic.  It's testimony to how ASC-logic has been used for years by academic researchers and health policy types to assess managed care, health care quality, Medicare and Medicaid.  For example, CMS has looked at ASCs to scrutinize managed care.  States have also relied on them (example) to assess quality of care. Here's an example of ASC methodology being applied to conclude that 7% of hospitalizations among Medicare beneficiaries with diabetes "could be avoided."  Here's a ten year old Medicaid study showing there's a link between ASC hospitalizations and not having at least 3 outpatient visits in the prior year.

To put this in perspective, imagine that you or a loved one has just come down with pneumonia.  Laypersons may expect to be hospitalized for intravenous antibiotics.  The research-based rationale on why you may be wrong is here.

The ultimate question in all these studies is - and for the ACOs will be - whether the observed rate of ASC hospitalizations is "disproportional" to what would be expected.  That's why the AHRQ summary mentioned above prominently points out that some ASC hospitalizations are always expected to happen and why CMS will use benchmarks for ACOs.  As the DMCB understands it, the "specifications" and risk-adjustment methodology that will be used to establish those benchmarks has not been "refined" yet and will be subject to feedback obtained during the 60 day comment period.

The DMCB has been thinking about this and has several worries:

1.  ASC are not a familiar metric to physicians, who will misinterpret them as an attempt to deny hospitalizations for all patients that need them.  Administrators won't do a good job of dissuading the physicians from that point of view.  What should happen is that both administration and physicians need to think about systems of expedited management for patients with those seven conditions upstream in the course of care.  Do that and the hospitalization rate will go down - but not vanish.

2. It may invite coding gamesmanship.  The detailed ACS methodology relies on ICD-9 coding in its calculations.  While this was a subject of research, most hospitals had no reason to code around ACS-based metrics.  Now that there's money attached to it, ACOs could change that.

3. And finally, the DMCB is unaware (readers?) of  a nerdy corner of health services research like ACS hospitalization rates being tied directly to reimbursement in such an astonishing scale.  Assuming they're adopted, if this part of the regulations collapses under the weight of misinterpretation, mismanagement or bad measurements, it could put the ACO concept at risk.

Ten Predictions for 2011

The Disease Management Care Blog was interviewed today on blogradio by Gregg Masters of ACOWatch. If you missed it, the podcast is linked below. The audio can be accessed by clicking the "play" arrow button toward the left side of the badge. Think of it as informative background talk complimenting that extra cup of caffeine as you clean out your email inbox.

In the podcast, the DMCB makes a brazen prediction:

1. CMS will delay the targeted January 1, 2012 start date for Accountable Care Organizations. Note that none of the proposed enabling regulations have been released as of this writing. The DMCB calculates that the a) time required by CMS to solicit, digest and respond to the follow-on public commentary to the proposed rules, plus b) the the inability of most ACO wannabes to plan and organize in the time remaining, makes the current ten month window a daunting proposition. Toss in hostile Congressional meddling as well as growing uncertainty over the fate of the ACA and the deadline has now become practically impossible.

While it is at it, the prescient DMCB has some other audacious predictions for 2011:

2. While healthcare-based social media will continue to expand, its full potential as a catalyst of personalized patient behavior change will be hampered not only by the uncertainty imposed by the privacy restrictions of HIPAA, but "no you can't" Homeland Security concerns over Twitter encryption.

3. Donald Berwick will be confirmed by the U.S. Senate as Administrator for CMS. Republicans will use Dr. Berwick as the poster boy for their newfound - if cynically opportunistic - bipartisanship because a) it's just a matter of time until the Administrator's independent streak begins to vex the Obama Administration, b) the shrewdly targeted use of CMS' grants will curry favor with key individual Senators and c) health care reform is enough of a target rich environment without picking on Dr. Berwick.

4. Reality will not only continue to intrude into the naive enthusiasm over the electronic health record but rear its ugly head in the emerging evaluations of the Patient Centered Medical Home. Both will disappoint when stakeholders seek "proof" of increased quality and lower costs.

5. Speaking of health care costs, they will continue to go up a rate that exceeds the general rate of inflation. That's because, despite health reform, the twin inconvenient truths of our advancing age and voracious appetite for technology refuse to go away. That being said, opportunists will continue to blame the health insurance industry.

6. The population health management (PHM) née disease management industry will continue to hold its own thanks to the grudging acceptance of nurse-based care management as part of the suite of services required to manage insurance risk. Vendors will also have the advantage of being able to couple or decouple PHM with other sophisticated wellness, prevention and health promotion programs.

7. The term "disease management", despite the DMCB's vast supportive readership, will not be resurrected in policy parlance. It will, however, also refuse to die.

8. A political stalemate will prevail as socially-minded progressives and market-minded conservatives battle for the hearts and minds of the body politic. Conflicting public opinion surveys, a divided government and the slow march of the ACA through the appeals process will not lead to any winners or losers. Deciding that will have to wait until 2012.

9. Ours is a time of "Black Swans." Despite our scientific modernism, our worldwide interconnectedness has ironically made us ever more vulnerable to unknown unknowns like pandemics (H1N1), economic dislocations (mortgage meltdowns) and political revolutions (Egypt). Compounding our budgetary travails, another **Big Event** is going to further distract the Administration and Congress from taking constructive action on health reform.

10. The Disease Management Care Blog will not achieve the popularity or the revenue potential of the Huffington Post, leading to further DMCB spousal skepticism over the merits of this whole blogging thingy. She will be unimpressed by the hundreds of thousands of hits, the thousands of return readers, the growing number of links to media outlets such as New York Times, The Washington Post and the Wall Street Journal and vast blogging income amounting to the tens of dollars.

Listen to internet radio with ACOwatch on Blog Talk Radio

An Accountable Care Organization Administrator Explains Why This Is A Good Idea to a Skeptical Patient

Oh you silly attributed ACO enrollee.....

Helen Hunt and the Patient Centered Medical Home (PCMH): Making Accountable Care Organizations Want To Be A Better Provider

In the anti-managed care cinematic screed "As Good As It Gets," Jack Nicholson proclaims a famous movie love-line to Helen Hunt: "You make me want to be a better man!" It's an ironic Disease Management Care Blog favorite, and not just because it occasionally shows the DMCB spouse that that statement is not always true. It simply likes the idea that good people can sometimes change dysfunctional behaviors for the better.

Which brings the DMCB to the "Helen Hunt" player in the ACO drama: Patient Centered Medical Homes. Given all the hub-bub over the Republican efforts to appeal the ACA and speculation over the pending ACO regulations, the Disease Management Care Blog began to lose track of the PCMH movement. There are still a lot of state and commercial health plan sponsored pilots out there. What is going on?

Based on the numerous confabs it's attended, the many manuscripts it's read, the many conversations it's had and the many blogs it's scanned, the fate of PCMH appears be increasingly linked to that of ACOs. Not content to wait until there's proof that the PCMH actually "works," policymakers have doubled down by mashing the two concepts together. Unless the majority of stand-alone pilots unexpectedly begin to show some solid results, they'll be completely overshadowed by the ACO feeding frenzy.

Which is why the DMCB suggests that if ACO architects can only read one article about PCMHs that they turn to this past issue of Managed Care Magazine. They will be reminded that the bottom line about the PCMH is that most of the pilots are only two to three years old, which is not enough time to make an informed judgment about whether the PCMH not only merely but sincerely and really reduces health care costs. While there are some success stories (Blue Cross Blue Shield of Michigan, Pennsylvania's Southeast Collaborative and Group Health), there are years to go and lots of hard work ahead before anyone knows for sure.

That being said, the article points out that there are some important features that ACOs will need to keep in mind when they build a healthy primary care medical home capacity, namely:

It's not just the desire to do the right thing as much as paying the primary care docs a lot of money. Repeat: a lot of money.

It's not the electronic health record as much as having a patient data registry to track outcomes. In fact, forcing a full-fledged EHR on primary care clinics can be a distraction.

It's not only a matter of the docs in medical homes working smarter, it's also working harder with extended hours on evenings and weekends.

It's not just the physicians, it's getting the patients involved with written provider-patient agreements.

It's not just the big bang change management in large integrated practices, but finding those practices with six or fewer physicians who can achieve consensus and "just do it."

Why should ACOs go to all this trouble? The DMCB argues that the real reason why ACOs need healthy PCMHs is because of the impact that these primary care practices can have.

There is evidence that greater emphasis on primary care - with or without the wrapper of medical homes - is associated with health care efficiency, quality and effectiveness as well as equitable access and leads to fewer unnecessary ER visits and better coordination. Over and beyond that, however, the DMCB thinks when primary care docs have a credible role, i.e. a "seat at the table." in these emerging mega-organizations, it increases the odds that the ACOs will be better able to reconcile their social mission with profitability.

In other words, even if there is no evidence yet that the PCMH reduces costs, having a strong primary care presence will make ACOs want to be better providers. While that may not do much for the an ACO's bottom line, building a robust primary care network may lead all those angry Helen Hunts out there to buy into the "love line."

Closing Thoughts on Accountable Care Organizations: A 60% Chance of Making Money and the Concentration of Risk and Power

The Disease Management Care Blog closes its Accountable Care Organization Orgy Week (4 out of 6 of the last posts have to do with ACOs) with two reader alerts.

The first is this very readable New England Journal piece by veteran policy watcher John Iglehart on the latest Medicare Physician Group Practice (PGP) Demonstration results. Ten group practices (two freestanding, two academic faculty, five integrated delivery systems and one hospital sponsored provider network) continued to care for Medicare beneficiaries under fee-for-service, but agreed to invest in organizational change, clinical programs and care management. Doing that meant that they could compete for an upside gainshare based on increased quality and reduced expenditures versus targeted expenditures and "comparison group" measures. Here's the CMS press release, but readers will find the combined clinical and financial results in a neatly summarized table here.

The data are interesting because all of the participants met at least 29 of 32 clinical quality goals but only 6 received any gainshare money over the four years. According to Mr. Iglehart, PGP is a key template being used by CMS to tee up the ACO regulations. It makes the DMCB doubt the nostrum that increased quality means lower cost. More significantly, it wonders about the wisdom of investing millions to participate in a CMS ACO pilot when there is a 60% chance of getting anything back.

The second alert is a repeat of a point made in a prior post: gain sharing is merely a policy stepping stone toward the eventual assumption of insurance risk by these newly formed mega health care organizations. While that experiment in the 1990s was a time of great tribulation, things may be different this time thanks to better information technology and care coordination. Maybe. The prospect of another wave of physician bankruptcies worries the DMCB less than the concentration of power along with the concentration of risk. Not only will these big organizations achieve "too big to fail" status, but they'll be just as tempted as health insurance companies to withhold coverage if it means reducing their losses. If the playing field can be made level, it may not be such a bad idea to have the holders of risk on one side versus the patient advocates on the other. It's like divided government: it's a terrible system until you ponder the alternatives.

More Accountable Care Organization Conference Notes: No Faux ACOs Here!

After a second and equally rewarding day at the Opal Summit, the Disease Management Care Blog has decamped from Austin Hyatt Hotel venue armed with additional Accountable Care Organization insights.

In yesterday’s post, the DMCB mentioned that it discovered there already are a host of ACO-like legal organizations providing patient-centered care to thousands of commercial insurance beneficiaries using evidence-based guidelines and data reporting with feedback under full or almost full capitation. More of them strutted their stuff today. The DMCB was impressed with their physician-friendly culture and repetitive use of the phrase “do the right thing.” While CMS Administrator Berwick has warned the industry that he won’t tolerate applications from faux ACOs, it looks like there are some genuine provider organizations that are primed and ready to go. The only things they’re missing are 1) an upside gainshare contract with Medicare and 2) invites to the conferences, symposia, meetings and forums being held inside the D.C. beltway.

One thing even more striking than the spandex on the Hyatt’s treadmills was that ALL of these organizations had made a huge investment in non-physician coaching programs that, depending on patient need, used both face-to-face and telephonic counseling to change patient behavior.

Additional food for thought:

Organizations that are ready to go for the ACO demos took at least 3-4 years to get where they are today. Unless the building blocks are already present, the DMCB thinks it will be very daunting for a regular hospital or a vanilla physician group to get up to speed by January 2012.

Want to be a truly “accountable” organization? Then you should, in this order, build: 1) an HIT infrastructure that includes an electronic record with an information exchange, 2) a primary care medical home network, 3) nurse-based patent counseling/coaching capability that is either embedded in the medical homes or shared among several medical homes, 4) an ability to assess the needs of your population and your organization’s performance in meeting those needs and then 5) be prepared to negotiate insurance risk-based contracts with the insurers.

Yes, evidence-base patient care protocols are important, but there are exceptions to every rule. Those exceptions are more common that you might think, especially in the elderly. Be prepared to support your providers when they break those rules.

Since it is unlikely that the Federal Trade Commission and the Department of Justice will allow ACOs to zip up an entire local provider market, will ACOs allow those non-participating providers access to their information systems? The DMCB thinks they should because patients “attributed” to ACOs will inevitably wander outside the network and benefit from the information sharing. The economics of upside gainsharing says they shouldn’t allow access, but that wouldn’t be the right thing to do, now would it?

Want to reduce readmissions? Then: 1) have a care management nurse conduct a in hospital visit with the patient, 2) conduct one or more home visits 3) carpet-bomb the patient with phone calls, 4) refer the patient to every community-based organization you can think of 5) over-communicate with the primary care provider 6) expect every discharged patient to be seen by that provider within seven days of discharge and 7) make sure the home health agencies understand you are not out to steal their business.

Heard of “hospitalists?” How about “post-hospitalists,” who are outpatient physicians responsible for seeing a patient within seven days of discharge? Two of the ACO-ready organizations mentioned above are doing this. Really.

While ACOs are taking on gainshares and capitation, they might also want to announce that they have a “center of excellence” that is open for the rapidly accelerating medical tourism business. Since they’re organizing providers to drive better clinical outcomes at lower cost, they could also argue that their hand, plastic or heart surgeons are among "the best" and steal some overseas business from places like the Cleveland Clinic.

That's a picture of the Congress Bridge in Austin, TX. The DMCB walked across it last night to a great barbecue place. The "sampler" plate serving was as big as its head. The DMCB spouse says that's huge.

Accountable Care, Version 2.0 - The Business Line Approach to ACOs

Is the Disease Management Care Blog a picayune naysayer when it comes to Accountable Care Organizations (ACOs)? Is it a petulant personality disorder that accounts for its unwillingness to recycle the progressives' praises, the academics' accolades and the Obama Administration's nostrums?

Fortunately for the DMCB's self-esteem, it found it isn’t the only nattering nabob out there. The latest issue of Health Affairs has an article by another skeptic who reminds us that ACOs are a fragile species. The DMCB also gives author Jeff Goldsmith extra credit for not going completely negative in his article titled Accountable Care Organizations: The Case For Flexible Partnerships Between Health Plans And Providers. After reviewing all the things that could go wrong, he has some ideas on what could be done to make things right.

In other words, while the regulations haven’t even been written yet, but it’s not too early to start thinking about ACO Ver. 2.0.

A lot could go wrong. According to Dr. Goldsmith, early-mover hospitals that already have acquired physician practices are experiencing financial losses. Their initial mistakes were assuming that docs do what their told and guaranteeing their salaries in excess of billings. Once ACOs launch, those blunders could easily compound thanks to allowing the work units to function independently while underinvesting in utilization management, administrative support and clinical discipline. There is a good chance that, once they are confronted with declining revenues and disappointing gainsharing, ACOs will have to turn to the only option they have left: using their market dominance to squeeze higher payments from the commercial insurance sector. At the end of the day, it’ll be managed care that once again cross subsidizes Medicare.

In the unlikely event that gainsharing that's been grafted onto a still dominant fee-for-service system does change physician behavior, high revenue specialists will need to not only need to forgo some of their practice income but agree to a redistribution of what’s left over. That will be a tall order. Physician lines could end up exiting the ACO relationship, becoming large single specialty regional providers with considerable market clout.

Dr. Goldsmith proposes that the commercial insurers rethink ACOs and consider economically dividing payment for medical services into three physician-based service lines. This “modular approach” preserves the better elements of “ACOness” but avoids many of the dysfunctions mentioned above:

Primary medical care: reimburse primary care providers with risk-adjusted monthly payments for medical home services. Unlike full capitation, primary care physicians would be shielded from the downsides of any overutilization, especially for services that they can’t control. Evidence-based medicine at the point of care will hopefully lead to smarter patients, greater coordination and less downstream health care expenses (The DMCB thinks of this an enlightened form of capitation but thinks some fee-for-service is necessary to incent physicians to also provide timely and convenient care).

Unscheduled care: use traditional fee-for service to pay for episodic care, diagnostic services and unscheduled emergency services with the right degree of patient cost-sharing and the right amount of insurer-based preauthorization (The DMCB agrees that using fee-for-service will likewise incent providers to see these patients. The problem is that there is no one-size-fits-all cost sharing, meaning some patients will inevitably forgo care for the wrong reasons).

Specialty care – reimburse hospitalizations or organized outpatient services that involve multiple specialists by using a global payment that pays for a service from the start (the initial evaluation) through the middle (the operation) to the end (all the aftercare services). Hospitals, health systems or physician groups could develop or sponsor “specialty care marts” that organize the care and disburse the payment for each episode (The DMCB thinks this borrows heavily from Porter and Teisberg's book on Redefining Health Care. It liked it then and it still likes it today)

The DMCB is intrigued by this because

1) Payment seems to better “targeted” to the unique circumstances of the three lines. Primary care physicians get a global payment to reimburse them for the tangled suite of services encompassed in a medical home, episodic care is supported by episodic payment and the specialists share in a payment that spans a coordinated period of time that also rewards them for efficiency.

2) Hospital mischief is minimized and restricted to the third line specialty stuff they’re good at. Having a single payment to pay for a span of care is not unlike familiar inpatient DRGs.

3) Instead of ending up with large ACOs that will probably end up being regulated like electric utilities, small clusters of providers can really compete for patients. On the other hand, there is nothing to keep ACOs from using the three payment models above when it comes to their own internal transfer pricing.

The DMCB hopes the coming ACO regulations permit the varied payment methodologies described above.

How To Keep Patient-Consumers From Getting Screwed by Accountable Care Organizations (ACOs) - Share the Some of the Savings With Them

One lingering issue for the D.C. mandarins who have been assigned to write the Accountable Care Organization (ACO) regulations is whether the participating providers should a) be assigned and b) know the identities of the patients that have been statistically "attributed" to the ACO. This is a critically important issue, because it is the attributed population's costs that will be used to ascertain whether or not there will be any additional payment to the ACO thanks to "shared savings."

A CMS request for information does a good job of outlining the alternatives:

"Some argue it is necessary to attribute beneficiaries before the start of a performance period, so the ACO can target care coordination strategies to those beneficiaries whose cost and quality information will be used to assess the ACO's performance; others argue the attribution should occur at the end of the performance period to ensure the ACO is held accountable for care provided to beneficiaries who are aligned to it based upon services they receive from the ACO during the performance period. How should we balance these two points of view in developing the patient attribution models for the Medicare Shared Savings Program and ACO models tested by CMMI?"

The Disease Management Care Blog agrees with Drs. Feder and Cutler's answer. In the long term, the success of ACOs' will be the direct result of how well they reconcile the twin issues of protecting the rights as well as enabling the responsibilities of health consumers. If the ACO business model is ultimately based on "shared savings," it'll ultimately be the patient consumers who determine whether "bending the curve" was the result of good doctoring or unjust denials. Sooner or later, it'll be the patients - the ones who vote, write to members of Congress, call their State Attorney Generals and get interviewed by news organizations - who will need to buy-in to the merits of "high value" health care services.

How can consumers be assured that they're not being screwed by their ACOs? In addition to being assigning ahead of time, patients should be given the disease management-invented option of being presented with a care plan "contract" that represents an "opt-in" or, better yet, being automatically signed up and then being given the ability to "opt out." In addition, consumers will be more likely to support their ACOs if they know there reasonable rules for consumer protection. Examples of this include having 1) ready access to an ombudsman and 2) provisions for getting second opinons and external appeals if there is disagreement about getting costly health care.

Last but not least, Feder and Cutler also suggest there should be a mechanism that allows the participating consumers to also financially benefit if there are any savings. The naive "why not?" DMCB wholeheartedly agrees. That kind of arrangement has a distant relationship with old fashioned and consumer-friendly "mutual" style insurance arrangements, is in the same spirit of the novel MLR ceiling rebates and would be a refreshing example of how health care savings don't have to go to funding Medicare's spiraling deficits, an insurer's surplus or a hospital's capital campaign. The DMCB thinks this is something that Democrats, Republicans, Progressives and Republicans could agree with.

Image from Wikipedia

Want to Form A Physician-Led Accountable Care Organization (ACO)? Here's How

The Disease Management Care Blog is ashamed to admit that it didn't quite grasp that physicians could independently take the helm in Accountable Care Organizations (ACOs). Sure, physician-led organizations are named as potential entities in the Affordable Care Act (like "ACO professionals in group practice arrangements" as well as "networks of individual practices of ACO professionals"), but it wasn't until the DMCB read this report from the Center for American Progress that it thought it could really work. The title is "Achieving Accountable and Affordable Care" and its authors are Georgetown's Judy Feder and Harvard's David Cutler.

The DMCB thinks of this as a physician road map.

Drs. Feder and Cutler favor the testing of "physician-led accountable care groups" alongside hospital-led ACOs. They point out that hospital dominated systems have a pattern of using their size to fend off attempts at real reform, while simultaneously using their owned/employed physicians to secure referrals, capture specialty revenue and squeeze insurers for higher payment rates. They also note that past large hospital-doc alliances have often not lived up to the promise increased efficiency or provided savings; in fact, employed physicians turn out to be less productive compared to their private practice colleagues. In contrast, they note, independent physicians are more likely to force hospitals to compete for patients instead of just cornering the market.

As evidence of physician success, they point to the Physician Group Practice demo (see page 10 of the report). It found that independently functioning physician groups can develop their own systems that efficiently move patients through the care systems that, in turn, reduce hospital expenses.

How could CMS promote the formation of physician led ACOs? According to Feder and Cutler, the Agency should:

1) emphasize outcome metrics that rely on high levels of physician engagement such as readmissions or hospitalizations for ambulatory care sensitive conditions;

2) provide technical and expert support to physicians groups that apply to form ACOs;

3) promote Patient Centered Medical Homes in the ACO regulations and get the Center for Medicare and Medicaid Innovation (CMMI) to complement the effort with the promotion of this and other physician-led care initiatives.

4) look for ways to get organizations that consist of multiple small practices involved as ACOs; one way to connect the the clinics would be with "certified care management companies" (see page 13 of the Center for American Progress Report).

5) offer loans to enable investment in practice redesign

The New England Journal has also weighed in on the topic. This article by Robert Kocher and Nikhil Sahni discusses what could get in the physicians' way of ACO leadership:

1) docs will need to closely collaborate on clinical pathways and the allocation of resources, something that they're less likely to do in business settings (though that's changing);

2) docs will need to invest in information technology, administrative managers and overhead and finally

3) docs will need to ignore those bad memories of failed capitation models and get used to taking on some risk.

They also point out that in addition to battling hospital dominance, they may also be needlessly distracted by declining FFS payments and trying to preserve their old referral "paths."

The DMCB would add that other ingredients for successful physician-led ACOs are strong leadership, shared vision, data sharing, provider feedback and accountability, a culture of teaming, being able to "trend" thanks to strong HIT support and investing in intellectual capital.

More on that notion of intellectual capital in a future post.

The Federal Trade Commission and Accountable Care Organizations: Networks, Pricing and Cost Controls

At first glance, it's a good idea that should be able to stand on its own two feet. Promote the "accountable" coordination and integration of providers that link both quality and savings. Reduced numbers of hospitalizations, avoided visits to pricey specialists and less emergency room crowding will free up hundreds of millions of dollars. After the Feds and other insurers take their cut, those savings can be shared with the providers in upside risk arrangements named "Accountable Care Organizations" or ACOs. Set it up, stand back and let the good times roll, right?

This New England Journal Perspective points out that it's not going to be that simple. It wasn't until now that the naive Disease Management Care Blog appreciated that two, not one, Federal agencies will jointly face the "delicate task" of midwifing ACOs. While it will be up to CMS to assure that ACOs meet the statutory requirements in the Accountable Care Act, another set of hands from the Federal Trade Commission (FTC) will guard against anti-competitive price-fixing bad behavior (for example) by ACO wannabe hospital-physician groups.

To accomplish this, the Perspective author and health care and antitrust lawyer Thomas Greaney recommends that the FTC:

1) clip the wings of overly inclusive arrangements that lock up key physician groups or hospitals that lead to local monopolies. The idea is to make sure that other local health care providers can provide a credible and competitive alternative

2) insist on transparent cost and quality information so that it anti-competitive arrangements (like "most favored nation" clauses) can be spotted early and

3) not be afraid to mandate insurer premium caps and, by inference, hobble the providers' ability to raise prices.

Egads! says the DMCB. The already delayed ACO "proposed rule" regulations promise to be four times as complicated thanks to the involvement of two sets of regulators. Having the FTC define local ACO networks, dive into the small print of contracting arrangements and set prices sounds suspiciously like setting power utility rates at best and old style Poliboro central planning at worst.

Is the potential of ACO's so wonderfully stupendous that the U.S. would have to resort to this level of government involvement and detail to make them work?

A Hippocratic Oath For Accountable Care Organizations (ACOs)

During it's post-Thanksgiving meal torpor, it occurred to the Disease Management Care Blog that it recited the Hippocratic Oath upon graduation from medical school. Since modern scientific policymaking has ascertained that goodly medicine should be a team sport, the agreeable DMCB wonders if other members of the health care community would want to demonstrate similar allegiance to the art. It is in that spirit that the DMCB offers up a version of the Oath for the newest member of the health care family: Accountable Care Organizations (ACOs):

I swear by CBO, the scorer, Hopefulius, Prayitworkius, and Panacea, and I take to witness all those who testify, publish and make presentations based on assumptions and made-up stuff, to keep according to my ability and my judgment, the following Oath and agreement:

To consider dear to me, as my parents, CMS who will regulate this art; to live in fear of its Administrator and, if necessary, to share upside risk with him or her; To look upon his or her regulations as my own siblings, to not rock the boat lest I be tossed under the bus or have to respond to a hostile letter from HHS Secretary Sebelius.

I will hustle for bundled payments for the good of my patients according to my ability and my judgment and avoid expensive MRI scans and other non-evidence based priceyness for everyone.

I will not give in to anti-trust allegations, nor will I document if I have made such a plan during meetings; and similarly I will not give an FTC lawyer any testimony to prompt scrutiny. But I will preserve the purity of my cash flow and my not-for-profit operating surplus.

I will not exceed my budget, even for patients in whom disease is manifest; I will meddle in all operations to be performed by practitioners, specialists in this art.

In every house where I come I will enter only for the good of gainsharing, keeping myself far from all appearance of any intentional ill-doing and all seduction and especially from the pleasures of finally controlling doctors, be they salaried or slaves.

All that may come to my knowledge in the exercise of my electronic records or in daily flow of information, which ought not to be shared with other competing providers appearing on area billboards as “Top 100,” I will keep secret and will never reveal.

If I keep this oath faithfully, may I enjoy my life and practice my art, be mentioned in glowing Congressional testimony or a State of the Union address and in all times; but if I swerve from it or violate it, may all my assets be absorbed by a for-profit investor owned health care system.

Once the regulations get published and the ACOs get selected for the national pilot program, the DMCB looks forward to seeing the Oath administered to the suits at an appropriate White House ceremony.

Do Accountable Care Organizations (ACOs) Save Money? Or Better Yet, Will We Ever Know For Sure?

The Disease Management Care Blog doesn't know. And that's just for starters.

Confused? So is the DMCB.

It touched on the topic of cost savings in this prior post when it pointed out that one of three cost scenarios for Accountable Care Organizations (ACOs) was possible: 1) no savings, 2) one time savings and 3) cumulative savings, otherwise known as bending the cost curve. "Paul N" left a reader comment to that ACO posting, asking the DMCB to "please explain."

Well, perceptive reader, the least the flummoxed DMCB can do is visually display the three possible outcomes:

First of all, this display of possible ACO cost outcomes over time assumes that there will a continuing year-over-year increase that will never go to zero. The solid blue toward the left represents the baseline rate of increase. Once the ACO is formed, this baseline trend can 1) continue unabated (the blue dotted line) or 2) slow down (the red dotted line). If the savings are "one time", the rate of cost increases will revert back. It will parallel what would have happened if the ACO hadn't been formed (that's the solid red line). However, if cost inflation continues to stay down, the rate of increase will have a lower slope i.e., the Holy Grail of "curve bending" will have been achieved (that's the green line) when you decide to remeasure at the Follow-Up point in time.

The DMCB thinks it's possible to have a "one time" savings scenario if there are one time improvements: hospital beds are temporarily closed, physician staff is consolidated and surgeries are delayed. The cost curve will swing back up, however, if beds, staff and surgeries expand or if efficiencies allow the system to "do more with less." Given the legendary levels of waste in any health care system (for example, here, here and here), that scenario is quite likely.

However, not only is the DMCB saying it doesn't currently know how this ACO "savings" business will work out, it is also predicting that it won't ever know for sure. That's because ACOs won't be operating in a vacuum: while we're tracking their costs over time, various parts of the Accountable Care Act will be kicking in (including subsidized insurance with exchanges), new "must have" drugs or technologies will continue to come on line or unemployment may drop (yes, it makes a difference). What's more, ACOs may find new business lines or become predatory monopolies and make financial mischief of their own.

All those moving parts will create a lot of background noise, making it difficult - despite any sophisticated statistical modeling - to confidently discern any real ACO "music" through all the static. Overseen by an under-resourced and inflexible CMS and loaded with obscure statistical methodologies, endless caveats and actuarial assumptions, the DMCB is afraid that the future reports on "ACO savings" will be the laced with bias, spin and conflicting endpoints strung out over the course of many years.

The DMCB welcomes comments from readers with better insights into health economics.

California: The Learning Lab Ecosystem for Accountable Care Organizations (ACOs)

Want some pointers on how to assemble your Accountable Care Organizations (ACOs)? Look no further than lessons from the "ACO ecosystem," otherwise known as The State of California. At least that's the message of this Integrated Healthcare Association "white paper," authored by James Robinson and Emma Dolan. For ACO wannabes, the Disease Management Care Blog says this is "must" reading.

It turns out that The Golden State has hundreds of Independent Practice Associations (IPAs) and Integrated Medical Groups (IMGs), many of which already appear to meet or exceed the emerging definition of ACOs. Their experience to date can be very instructive.

Some of the more important points gleaned from the report by the Disease Management Care Blog:

How much integration is really necessary? If California is any guide, financial success and market dominance doesn't appear to correlate with the degree of integration. Instead, clinical quality and profitability are a function of culture, HIT infrastructure, administrative leadership and the alignment of the physicians with the organization's goals. To be successful, nascent ACOs don't need to be highly integrated.

Put physicians on salary and you own them, right? Not exactly. Docs need to feel accountable, have ownership, get performance feedback and agree with the ACO's goals. They also need advanced care coordination capabilities and access to coordinated chronic care teams and care management. The DMCB wonders if ACOs will need to have physicians in prominent leadership positions.

What about the patients? To succeed, ACO's will need to reconcile the twin expectations of coordinated care and unfettered patient choice. If California is any lesson, IPAs and IMGs are better at coordinating care than accommodating patient choice. They've done well in contracting with health maintenance organizations (HMOs) that lock patients into a network. They've done less well in attracting patients who are in preferred provider organizations (PPOs) and have a choice. Could this be a potential Achilles heel for Federally sponsored ACOs?

Bigger is better? Not necessarily. Large IMGs and IPA become unwieldy. What's more, smaller organizations have shown that they can outsource management are care coordination functions successfully. This is another confirmation of what the DMCB has been saying all along: ACOs and disease management vendors could be the beginning of a long friendship.

This important white paper has some other interesting pointers on how ACOs should approach the mix of capitation, fee-for-service and bonuses. That'll be addressed in a future posting.

Primary Care - Hospital Negotiation Over the Formation of An Accountable Care Organization (ACO)

The Disease Management Care Blog recorded this exchange between a hospital administrator and a primary care physician over the terms of participating in an Accountable Care Organization. Chances of success seem high.....



This same physician is expert in the Patient Centered Medical Home.

Three Novel Suggestions for the Regulations That Will Govern Accountable Care Organizations (ACOs)

When Robert Berenson speaks, the Disease Management Care Blog listens. In the past, Dr. Berenson had some important cautions about the Patient Centered Medical Home and now he's tackled Accountable Care Organizations (ACOs). It worth clicking here and reading it at some point, but until you have the time, your helpful DMCB is pleased to offer this quick summary.

Dr. Berenson points out that the Affordable Care Act (ACA) specifically addresses ACOs as a "program" that will promoted nationwide through regulations. This is a big departure from the usual pilot or demo approach that that hinges on "requests for proposals" (RFPs). The ACO was included in the ACA because of its promise to generate savings by incenting physicians to reduce waste and inefficiency in a non-threatening manner. Another reason was its potential to promote better coordination of care for costly and chronic conditions "under one virtual roof."

In order to make this happen, the regulations may ultimately make ACO funding look a lot like the "delegated capitation" that's been used for years in risk-bearing "provider service organization" (PSO) arrangements. Unlike PSOs, however, ACO's will only have "upside" risk. In other words, if claims expense is lower than anticipated, the savings will be shared with the ACO. However, if claims expense is higher than anticipated, the ACO will be held financially harmless. It's a no brainer and ACOs wannabes will flock to this faster than IT consultants glomming onto "meaningful use."

Which, according to Dr. Berenson, is the rub.

If the risk is only upside, the physicians and hospitals pondering forming an ACO will be far more likely to participate, even if they have little interest in true coordination and cost savings. Since there are no penalties for higher than expected spending and they don't have to deal with the unpleasantness of patients being "locked" into their networks HMO-style, they'll figure they have little to lose. Years later, it'll look much like a lottery. Many nascent ACOs will fail while some will randomly succeed. The resulting disappointment may lead to an otherwise promising idea being abandoned.

To combat this, Dr. Berenson has three suggestions:

1. Avoid invisible assignment. While the regulations have yet to be unveiled, it's widely anticipated that ACOs won't really know which patients have been "assigned" to them. Knowing that up front would better enable the physicians to avoid unnecessary costs, patients should know that their physicians may have an economic incentive to withhold care and physicians and patients may ultimately benefit from a mutual social compact. The chance of success will increase.

2. Introduce shared risk. In other words, there should be a downside, albeit "limited and manageable" chance of a loss, using "risk corridors." This will separate the wheat from the chaff. To guard against any significant losses, ACOs that are serious players could purchase "reinsurance."

3. Use a different baseline: Instead of using local costs as the comparison baseline for shared savings, use a) the national projection of Medicare spending growth in dollar terms, or b) adjust the baseline against an national historical risk-adjusted average. That way, baseline wasteful spending patterns would not be rewarded in the reconciliation of the pre vs. post shared savings calculations.

For additional reading on ACOs, there's more DMCB discussion and links to the peer-reviewed literature here.