ACOs: Multi-year transition requires an overhaul to healthcare delivery

To join or not to join? It’s a question many physicians ask themselves about accountable care organizations (ACOs). Even after coming on board, they may harbor doubts about their decision.

ACOs are a relatively new phenomenon, and data for a complete evaluation of their effectiveness are not yet available. In July 2013, nearly one-third of ACOs in the Pioneer Program-created by the Centers for Medicare and Medicaid Services (CMS)-announced that they were dropping out or recalibrating because providers had accepted too much financial risk.

Several of them transitioned to an ACO under the Medicare Shared Savings Program. Others revamped to focus on commercial ACO products, while some completely re-evaluated their readiness for shared risk models. Medical Economics decided to explore why the ACO model has failed in some cases and succeeded in others.

Purpose and evaluation

Designed with the Affordable Care Act (ACA) in mind, the ACO model stresses quality and a continuum of services leading to a healthier population while curbing costs. ACOs create incentives for physicians’ offices, hospitals and long-term care facilities to collaborate in treating a patient across the entire spectrum of settings.

“The Medicare Shared Savings Program will reward ACOs that lower their growth in healthcare costs while meeting performance standards on quality of care and putting patients first,” says Alper Ozinal, a spokesman for CMS.

At the end of each calendar year, CMS assesses the ACO’s quality and financial performance based on a population’s use of services. The results determine whether an ACO should be rewarded for improving care and reducing growth in expenditures compared to a benchmark population.

“This gives the ACO an incentive to improve the quality of care for all patients seen by its participating providers and suppliers,” Ozinal says.

“Studies have shown that better care often costs less, because coordinated care helps to ensure that the patient receives the right care at the right time, with the goal of avoiding unnecessary duplication of services and preventing medical errors.”

Medicare beneficiaries don’t have to select an ACO for their care; they maintain the right to select any physician, hospital or other provider participating in Medicare. ACO beneficiaries also retain the same right as regular Medicare beneficiaries. However, Medicare Advantage patients relinquish that right and are managed similarly to HMO plan members, who must stay in the network to avoid high fees, prior authorizations or both.

Provider participation in an ACO is voluntary. Some ACOs are led by physicians, others are directed by hospitals, and many more ACOs are hybrids.

“Our physicians were very interested in us developing ACOs,” says Anthony D. Slonim, MD, DrPH, executive vice president and chief medical officer of Barnabas Health in West Orange, New Jersey.

“We took the lead of our physicians and responded to their interest. Several were concerned about new payment models and what healthcare reform meant after the ACA was passed,” he adds. “Getting into the game early and learning how to do this work was very important to them. They wanted to make sure that we were advancing those kinds of conversations and relationships.”

Next: Acclimating to the ACO model

In response to this demand, the system launched two ACOs-Barnabas Health ACO-North in July 2012 and Central Jersey ACO in January 2013. Barnabas Health ACO-North, which operates in northern New Jersey, consists of 341 physicians and three hospitals. Central Jersey ACO includes 278 physicians and three of the system’s hospitals in Southern New Jersey, as well as an external hospital partner.

Preliminary results are positive, with Barnabas Health ACO-North demonstrating improvement in 21 out of 23 quality measures set by CMS. Whether or not these changes will lead to cost savings remains to be seen. “We don’t have any concrete financial savings data yet,” says Slonim, who is also chairman of the board of directors at CMR Institute, a Roanoke, Virginia-based provider of non-branded education for pharmaceutical, biotech and medical device industries.

“The ACO movement has created new opportunities for providers and industry” to collaborate in managing patient populations, he says. “Industry brings some really important skills to the conversation. Pharma, for example, knows how to run drug trials over large populations. Device manufacturers are starting to look at their outcomes from both a clinical and econometric perspective.”

ACO challenges

Acclimating to an ACO model poses major challenges. Provider groups that already were operating efficiently won’t see as much financial benefit as their less-efficient counterparts, says Margaret O’Kane, president of the National Committee for Quality Assurance (NCQA), a Washington-based not-for-profit organization.

“The ability to save money seems to be somewhat related to how much money was being wasted in the first place,” she says. “Ironically, some of the dropouts from the ACO programs are some of the organizations that have the longest track records of success in delivering high-quality care, so it’s kind of disappointing.”

While hesitating to over-generalize, O’Kane describes the care model shift as “a harder journey for a hospital-based ACO than it is for a provider group-based ACO.” Learning to function “180 degrees differently” will require a lot of innovation in a leaner environment, she says.

“The business incentive for a hospital usually is to have heads in beds, and if you’re an ACO, you’re trying to keep people out of the hospital and healthy,” she says. “It could take down the whole organization if your hospital beds are empty, so it’s a complicated transition for a hospital.”

This multi-year transition to an ACO model requires significant overhauls to healthcare delivery, technology systems, operations and governance. Forging alliances with new partners and payers is also critical. Participants in the Medicare Shared Savings Program also are accepting greater responsibility and risk in the effectiveness and quality of care, according to the Brookings Institution, a Washington-based public policy organization.

First-year interim results, released by CMS in late January, were “mixed.” Of the 114 ACOs in the program, 54 saved money but only 29 saved enough to collect bonus payments, according to the Brookings Institution. The savings generated by the 54 ACOs amounted to $126 million, with Medicare reaping $128 million in total trust fund savings.

Although most ACOs manage Medicare patients, MissionPoint Health Partners in Nashville launched an ACO for its own employees of Saint Thomas Health. While insuring 12,000 people, the ACO decreased overall costs of care by more than 12% from 2012 to 2013. 

“All parts of the system are incentivized to help a patient get better,” says Jason Dinger, PhD, chief executive officer of MissionPoint. “It takes the whole system to do that.”

MissionPoint also reduced its avoidable admissions rate for Saint Thomas Health’s employee population from 4.5% to 2.23% and its emergency department revisits at Saint Thomas Health facilities

Jason Dinger, Ph.Dwithin three days from 1.85% to 0%.

At the heart of this ACO’s success is a clinically integrated network of more than 1,600 physicians, seven hospitals and 100 outpatient facilities-from imaging centers to physical therapy offices and nursing homes in central Tennessee.

Addressing unique nonclinical factors also makes a big difference. For example, schedulers inquire about patients’ access to transportation for office appointments, while nurses conducting home visits monitor chronic diseases and oversee care transitions after hospital discharge, such as confirming the installation of grab bars in the shower as a safety measure.

“Our initial experience has shown that a lot of our savings come from working on real-life needs that patients have,” Dinger says. Results for the Medicare population will be released later this summer. “Successful ACOs are engaging patients in new and innovative ways well beyond physician visits,” he adds. “If you just focus on one dimension as an ACO, it’s very hard to succeed.”

Next: "It takes a lot of change leadership."

Building a successful ACO

Prospering as an ACO often hinges on being physician-driven and focused on care transformation. “It takes a lot of change management and change leadership,” says Aric Sharp, vice president of accountable care at UnityPoint Health Partners in West Des Moines, Iowa. “This change has to happen in the clinical space.”

UnityPoint-an ACO since January 2012 and now providing services in Iowa, Illinois and Wisconsin-relies extensively on physician engagement through committees and boards that conceive various initiatives.

“Among the protocols in development is the management of low back pain,” says David M. Williams, MD, CPE, medical director of the ACO. Costly imaging doesn’t necessarily improve care. “There’s a lot of medical evidence that we have vast overutilization of imaging like MRIs for patients with uncomplicated low-back pain.”

The transformation of care and payment models is a delicate balancing act that needs to occur at a sustainable pace, says Rob Lazerow, practice manager at The Advisory Board Company, a Washington-based research, technology and consulting firm specializing in healthcare and higher education.

Accountability shouldn’t take precedence over devising a care model that works. If that happens, it’s time to recalibrate. “We’ve seen some organizations that have gone too far too fast with care redesign; others that have gotten in over their heads with financial accountability,” he says.

Incentives are more clear-cut for physicians than hospitals. Rewards are structured as shared savings, capitation or a combination of the two. Providers may be rewarded for reducing avoidable care-for example, preventing hospital admission or readmission for patients with diabetes or heart failure, Lazerow says. But they could also receive incentives for treating patients who need unavoidable care-such as hip and knee replacements-with effective coordination, high quality and efficiency.

Another successful ACO strategy entails classifying patients into risk-based segments and employing different clinical interventions for each group, he says. For high-risk patients, a complex care manager would coordinate services. And for rising-risk patients with chronic conditions, the ACO would engage them through a medical home model to prevent deterioration. In the low-risk category, an online portal would facilitate communication with providers in a less costly and less intrusive way.

Timothy Peterson, MDIn a fee-for-service system that is often “focused on volume over value,” change is welcome, says Timothy Peterson, MD, MBA, executive medical director of the east division at Physician Organization of Michigan ACO and medical director of the Population Health Office at the University of Michigan Health System.

“The ACO model is a nice transition away from that,” he says. “But if we do our job well, it will eventually become impossible to cut costs out of the healthcare delivery system without risking compromising the quality of care provided. I do not think shared savings models are the final step in the evolution of payment reform in the U.S.”

However, having access to Medicare data and analytics on healthcare utilization is helpful for physicians wondering how they stack up against their counterparts. “It’s hard if you only have your own medical records to look at,” Peterson says. “Medicare sharing that complete patient experience of data with us has really been eye-opening.”