Quality Over Quantity: Accountable care organizations link physician payments to hospital outcomes

The Mayo Clinic is technically one. So are Pennsylvania’s Geisinger Health System, California-based Kaiser Permanente, and the Cleveland Clinic. Beyond the handful of long-established and well-integrated sites being labeled as de facto accountable care organizations (ACOs), advocates are seizing the moment and pushing for a bold vision of what role ACOs will play in the movement to reform the health care payment system across the country. In at least two major pilot projects in the works, hospitalists are expected to be front and center in leading the transition.

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February 2010

An ACO is an agreed-upon group of providers who band together to assume joint responsibility for both the quality and cost of health care for a specific population of beneficiaries. “What an ACO is trying to do is defragment health care,” says Mark Werner, MD, chief medical officer for southwest Virginia’s Carilion Clinic. As long as the group meets defined quality benchmarks, its providers can share in any financial rewards that spring from cost savings. But the providers also share in the collective risk of penalties for poor performance. Using the buzzwords of the moment, an “alignment of incentives” could help “bend the curve” of the sharp upturn in health care delivery costs.

ACO advocates argue that by pushing quantity over quality, the current fee-for-service payment system actually punishes providers that coordinate care or promote greater efficiencies; policy analysts are nearly unanimous in decreeing that the current model is fundamentally broken and must be replaced. “Well, actually, it’s not broken,” says Alfred Tallia, MD, MPH, professor and chair of the department of family medicine at the Robert Wood Johnson Medical School in New Brunswick, N.J. “It’s working very well for delivering what we’ve got now, which is not what we need, unfortunately.”

What an ACO is trying to do is defragment health care.
— Mark Werner, MD

Perfect Timing

The current push for health care reform offers the opportunity to make the case for a more equitable, outcome-oriented payment system as a necessary component of any structure that emerges. Many reform advocates in Massachusetts already have moved from asking how to provide more health care coverage to asking how the government can afford it, and ACOs have become a favored mechanism for controlling costs.

The general ACO concept has been backed by the nonpartisan Medicare Payment Advisory Commission, and received another boost when the Accountable Care Promotion Act, initially co-sponsored by Rep. Peter Welch (D-Vt.) and Rep. Earl Pomeroy (D-N.D.) in May, was incorporated in its entirety into the health care reform bill introduced in the House of Representatives. The bill would launch a pilot program for ACOs for Medicare beneficiaries, while similar provisions within the Senate health care reform bill would set up pilot projects for both Medicare beneficiaries and pediatric beneficiaries of Medicaid or the Children’s Health Insurance Program.

Among the pilot projects already planned, health care officials at Robert Wood Johnson are hoping to create an academic health center-related ACO to link the disparate elements of health care delivery across a large swath. “Our vision is really to build the finest 21st-century integrated delivery system for New Jersey,” Dr. Tallia says. “And that would include everything from advanced, personalized in-home and outpatient primary care to high-tech, leading-edge inpatient quaternary care—and everything in between.”

Virginia’s Carilion Clinic was the first to announce its participation in a separate pilot involving the Engelberg Center for Health Care Reform at the Brookings Institution in Washington, D.C., and the Dartmouth Institute for Health Policy and Clinical Practice in Lebanon, N.H. Both institutions have been heavyweights in championing the ACO cause. Dr. Werner says Carilion actually began transforming itself into a more coordinated and integrated organization about three years ago, well before the current ACO buzz began. “We always said from the beginning that we were creating an accountable physicians group, where the physician group had accountability for all of the outcomes important in health care,” he says.

The Nitty-Gritty

So how would such organizations actually work? Dr. Tallia sees three absolutes: local accountability, shared savings and performance measurements. Beyond those necessities, the details begin to blur. The bad taste left by the widely despised capitation payment systems of the 1980s and ’90s has made experts wary of dwelling on the similarities between ACOs and fixed, prepaid capitation plans. Any mention of the C-word, in fact, is followed almost immediately by a caveat: This is a flexible, big-tent strategy that avoids any one-size-fits-all payment prescriptions. And most advocates are emphasizing that ACOs should be voluntary.

Analyses have suggested that in order to succeed, an ACO should enroll 5,000 or more Medicare beneficiaries, or at least 15,000 privately insured patients. Which combination of patients and providers should be included has been left vague to allow emerging networks to tailor the model to their own needs. Some experts differ as to whether hospitals are a necessary component, though almost all agree on the need to include primary care providers.

Dr. Tallia envisions his medical school-based linkup as a marriage between New Jersey’s largest multispecialty medical network, the Robert Wood Johnson Medical Group, and the 30 percent to 40 percent of primary care practices in the state that already have relationships with the school. “If you marry the primary care relationships to the subspecialty care in the Robert Wood Johnson Medical Group and then tie in the area hospitals, by golly, you’ve got an ACO,” he says.

Robert Wood Johnson University Hospital is building an inpatient hospitalist service that will become an integral part of that mission, he says, with its focus on increasing efficiency, reducing the length of hospital stays, appropriate testing and handoffs, and proper communication with other care providers prior to hospital discharges.

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ACO Outreach

But any system in which success leads to fewer hospitalizations also needs buy-in from those who stand to lose business. In short, otolaryngologists and other specialists will need financial incentives, too. That reward system, in turn, requires the right formula for setting and regularly measuring quality standards.

Based on initial savings estimates, however, Dr. Tallia isn’t worried about anyone missing out on a slice of the pie. “We’re looking at somewhere between 15 percent and 25 percent cost reductions,” he says, adding that participants should gain sizable rewards. Initially, he says, he hopes to start with 5,000 to 10,000 enrollees and launch demonstration projects targeting patient subsets like Medicare beneficiaries and those insured by large employer groups. Ultimately, he’d love to have half of the state’s insured population.

From its own database models, Virginia’s Carilion Clinic estimates that its doctor group takes care of as many as 60,000 Medicare patients per year, with a strong tilt toward primary care providers. For the past six months, the clinic has been working to identify the geographical scope and specific subset of beneficiaries that would work best for the pilot.

Once it settles on the best combination, Dr. Werner says, the clinic can look at that group’s historical spend rate over the past few years, then agree on a reduction in the rate of growth by, say, 1.5 percent. “If we’re able to have reductions that exceed 1.5 percent, we would have an opportunity to share in those reductions,” he says.

EMRs

Dr. Whatley has difficulty imagining how an organization could pull off a successful ACO without electronic health records, as Carilion now has. Unsurprisingly, many payment reform advocates are pushing for the technology needed for ACO-style startups to flourish.

As Dr. Werner says, “You need to give the group of physicians that are going to be part of an accountable group the necessary infrastructure and tools to be able to provide care together.” ENTtoday

Bryn Nelson is a freelance writer based in Seattle.

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