11 October 2010

ACOs -- the Gathering Storm?

Those of you who have read this blog for any length of time know that I have been a pretty strong advocate for health care reform.  This has been primarily motivated by my passion for universal coverage, but also with my frustration with the cost of the current health care system, the generally crummy outcomes and the overall level of fragmentation in the whole affair.  Even today, I had to repeat blood tests on a cancer patient who came to the ER. He had had blood tests at the cancer center ACROSS THE STREET before presenting, but, so sorry, our computers don't talk to theirs and it's after 5pm now, so forget about getting those results. 

So it's with a mixture of enthusiasm and dread that I consider the coming onslaught of ACOs.

What are ACOs?  They're the buzzword of the day, that's for sure.  Everybody knows they are the Next Big Thing.  They're coming.  We'll all be in an ACO by next Tuesday for sure.  It'll be nirvana.  Right? 

Sorry, I'm still not clear what they are, and why are they coming again?

Definitions vary a bit, but in general ACOs are an effort to reduce the cost and increase the quality of care by:
  1. Eliminating the traditional fee-for-service payment model
  2. Integrating the delivery of health care
  3. Shifting financial risk onto health care providers
The idea being that if health care providers (meaning hospitals, clinics and physicians) are all, as one, responsible for decreasing the cost of health care delivery, they are more likely to band together in a way that will improve care and thereby decrease excess costs. Something similar was tried in the '90s - capitation - in which the risk was simply offloaded to doctors.  This failed because there was no effort to include other health care stakeholders, and because physicians rebelled against this model.  Similarly, the hospitals have long been incentivized to reduce the cost of care through the Inpatient Prospective Payment System, but that does not involve physicians and still is linked only to a single inpatient admission.  The envisioned reforms differ because they will provide only a single payment, bundled among all involved providers, and the payment will extend beyond a single site of service, but be for an entire "episode of care."

A necessary prerequisite for such bundled payments is that there needs to be an entity designated to receive and distribute these payments.  That's an ACO -- Accountable Care Organization.  The PPACA authorizes Medicare to begin pilot programs in ACOs and bundling starting in 2012, with a clear eye towards making this a national model.  My view had been that this would necessitate that physicians all become hospital employees, but this is not necessarily the case.  it does require closer relationships and partnerships between physicians and hospitals, however. An article in Health Affairs by Elliot Fisher (considered the originator of the ACO concept) outlined possible models:
1. Integrated Delivery Systems
Integrated delivery systems involve a common ownership of hospitals, physician practices, and—in some cases—an insurance plan. Some examples are Kaiser Permanente, Group Health Cooperative of Puget Sound, and Geisinger Health System. These systems typically have aligned financial incentives, electronic health records, team-based care, and resources to support cost-effective care.
2. Multispecialty Group Practices
Multispecialty group practices usually own or have a strong affiliation with a hospital. Examples of this type of arrangement include Mayo Clinic and Cleveland Clinic. They usually do not own a health plan but, rather, have contracts with multiple health plans in their areas. Most have a long history of physician leadership and highly developed mechanisms for providing coordinated clinical care.
3. Physician-Hospital Organizations
These organizations are a subset of the hospital’s medical staff. One example is Advocate Health in Chicago. Most were formed in the 1990s in response to managed care pressures to negotiate with health plans. Some function like multispecialty group practices, focusing on reorganizing the delivery of care to achieve more cost-effective coordination. Although they may be less well suited than integrated delivery systems or multispecialty practices to qualify as ACOs, many could structure themselves to meet the criteria for that type of organization.
4. Independent Practice Associations
Independent practice associations consist of individual physician practices that came together largely for purposes of contracting with health plans. Over time, however, many of these have evolved into more-organized networks of practices that are actively engaged in practice redesign, quality improvement initiatives, and implementation of electronic health records. One example is Hill Physicians Group, in Northern California. Such organizations could qualify as ACOs, and that might encourage other independent practice associations to evolve similarly, given sufficiently strong financial incentives and technical assistance.
5. Virtual Physician Organizations
Finally, a number of small, independent physician practices, many located in rural areas, can organize to become “virtual” physician organizations, such as Community Care of North Carolina. This process can be led by individual physicians in rural areas or by a local medical foundation, state Medicaid agency, or similar organization that can provide the leadership, infrastructure, and resources to help small practices develop disease registries; implement electronic health records; share information; and provide better-coordinated, cost-effective care. These virtual networks could qualify as ACOs and serve as models for other groups of small practices.
In our locality, we have both #1 and #2, and they do contribute greatly to high-quality, low cost health care in our community. I've seen the way the stakeholders and physician leaders work together, and it has led to some great results.   It's not clear to me whether this is scaleable -- whether it can be translated into other communities where there is no tradition of collaboration between docs and hospitals, where caregivers at different sites view one another as rivals and enemies rather than partners in care.  I don't say this, by the way, as an indictment of other communities.  Our locale is unusual in that there is one big hospital and one big multispecialty group and one big HMO.  They partner by necessity, and there is little to no local competition.  In other places, where there may be multiple hospitals competing with one another for business, multiple physician groups trying to play one off over another, surgicenters and free-standing ERs skimming off the cream, the economic environment may make it very difficult indeed to bring these players to the table together in an ACO.

The other concern I have is what this may do to emergency medicine as a specialty.  About half of ER docs are already hospital employees or effectively hospital employees (faculty foundations and the like), and the remainder work for independent physician practices.  As Myles Riner put it, " EPs are going to have to find ways to share risk in ACOs as independent practitioners or as hospital employees without sacrificing significant income or undermining practice quality and autonomy."  This represents a significant challenge.  ER docs tend not to belong to the big multi-specialty groups that will bring significant clout to the table in the management of an ACO.  We also are highly subject to leverage from our hospitals in contract negotiations.  We are in a vulnerable position and risk getting squeezed between the big players in the formation of ACOs and the distribution of revenues.

What's the old saying? "Democracy is three wolves and a sheep voting on what to have for lunch."  The ER is small enough that we're little more than a snack for the big guys, but we will be hard pressed to keep them from eating our lunch out of sheer opportunism.  We are going to have to make a strong case for the value of our services in the episodes of care that pass through the ER.  It's also going to be difficult to resist the pressure to simply become hospital employees.  Hospitals may suddenly rediscover an interest in directly employing (and controlling) their ER docs when the financial risk is so greatly magnified as it will be under bundling payments for episodes of care.  While there's nothing wrong, per se, with being an employee, it tends to depress income.  Physicians who are entrepreneurial, who are working for themselves tend to be more effective at running a lean practice and at effectively billing for their services. When this becomes outsourced to the hospital, practice bloat sets in and under-coding for ER physician services becomes the rule.  For physicians who want to maximize their value and the return on the care they provide for their patients, it is best to be independent.

The best advice I can give to ER docs (and frankly, any hospital-based physicians) who are considering how this is going to impact their practices is this:
  • Don't Panic. The history of US health policy is littered with the smoking carcasses of fads like these that never quite caught on. ACOs may become the national model in the future. But we're still eighteen months away from pilot programs.  There's a lot of time before we know what will happen, and this may very well come to nothing.
  • Develop a close partnership with your host institution. (Always good advice.) Demonstrate that you are aware of these macro-trends, and that you are prepared to work with them to maximize quality and efficiency.
  • Demonstrate that your practice adds value to the patient's care.  Embrace protocol-driven care as a mechanism to improve consistency and quality and seek for ways to align the incentives of your physicians and the institution.
  • Encourage collaboration with community providers. If ACOs do become the default model in the future, practices which have already built relationships with their community partners will be better positioned to withstand the changes and perhaps even prosper.
Here are a couple of excellent (more detailed) primers on ACOs, from the blogs Health Reform Watch and The Health Care Blog:

A Guide to Accountable Care Organizations, and Their Role in the Senate’s Health Reform Bill

Pitfalls of PPACA – Accountable Care Organizations


  1. So how exactly does an "ACO" differ from an HMO?

    I keep wondering about one thing: Is the biggest driver of healthcare costs perhaps that we actually have medicine that works? A hundred years ago, even fifty years ago, I would have spent the rest of my life with foot drop and pain.

    Cost of treatment in 2008 dollars: $200 for two doctor's appointments, and $10/month for painkillers.

    These days, I had two spine surgeries, (hiking is back on the menu, yay!), and the total price tag including imaging studies is about $37k (that's what Premera actually paid, the bills came to ~$100k).

    Or compare cancer treatment then (bedside manner, and a death hopefully made bearable by opiates; $200) with some cancer treatments today -- tens of thousands of dollars per month make my two surgeries look like a visit to a doc-in-the-box, costwise.

    So make treatment hurt financially. Maybe then people will start making responsible decisions about the level of care they want. Heck, even my employer just figured that out -- and I am all for it, despite the fact that my IDDM will be costing me the full $5k out-of-pocket max every single year.


  2. Felix,

    My understanding is that an HMO (like Group Health or Kaiser) absolutely could be an ACO. But they serve dual functions of being insurance companies in addition to health care delivery networks. The insurance function is separable from the delivery, and so the Mayo Clinic's intergrated network (for example) could also be an ACO.

    I've heard some rumbling that if ACOs are accepting payment in advance then there needs to be regulation of them similar to insurers, to ensure reserves, etc, but that's all pretty preliminary.

    On the topic of costs -- yes, we can do more, and it works, and people live longer with more chronic disease. Cost of diabetes type 1 in 1900 was cheap -- they all died of DKA when they first developed the disease! Now it's the most expensive of all diseases.

    Having said that, based on the previous post, there do appear to be excess costs we incur, compared to other countries with similar levels of effectiveness in their medicine. So there's fat to trim -- of course one man's fraud and waste is another man's livelihood!



  3. Back in the day, HMOs weren't the completely evil no-treat, no-docs, no-pay organizations they became in the 90s after the big insurance companies got their grubby mitts all over them. Most HMOs were run on the model Kaiser-Permanente or Group Health still use, although I don't believe Group Health owns its own hospitals like Kaiser-Permanente (and I don't believe Kaiser-Permanente owns hospitals in all of its markets).

    I'm not sure how ACOs could work given the zillions of negotiated rate schedules that currently exist. If there were a way to narrow the rate tables down to (picking a number out of thin air here) 50, including actual cost plus 10% (or whatever the Illinois Uninsured Patient Billing Act percentage is), and the current Medicare rate, it might be doable, because there would be increased cost transparency to the consumer. I believe that a consumer should be able to walk into any medical facility and get a reasonable idea of what any given procedure, test, office visit, etc. might cost them (before insurance).

    WRT end of life/catastrophic care: if I'm driving my Prius and get annihilated by a semi, don't call the ambo, just pick up the pieces, put them in a body bag, and take it to the local funeral home. If I've got a terminal disease, palliative care only. No vent, no heroic measures, no surgery, etc, unless there is a very, very good chance that whatever measure is taken will yield significant positive quality of life for a significant period of time.

    The cost of treatment hurts me financially as it is. I avoid going to the doctor as much as possible. I have to go a couple times a year (pap test, spirometry for asthma). I've skipped labs because the preferred lab is not a major player around here. I've got multiple chronic conditions and the cost of meds is stiff. I've got scripts at 3 or 4 different pharmacies because my employer's PBM 90 day generic fill copays are higher than prices for the same drugs elsewhere. I'm for affordable care, what I've got is better than nothing but could be better still.


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