Physician-led ACOs now outnumber Hospital-based ACOs: Why this makes sense, and where our terminology breaks down.

At a recent meeting of the American College of Physicians covered in MedPage Today, Neil Kirschner, PhD reported on the growth of ACOs. Dr. Kirschner is the ACP’s senior associate of regulatory and insurer affairs. He reported that in March, 2012, there were only 136 ACOs  that had ACO-style gain-sharing contracts with Medicare, a commercial payer or both. Those ACOs included 91 “hospital-based ACOs” and 45 that were described as “physician-led ACOs.” In the last year, the number of ACOs has almost tripled from 136 to 391.  And, significantly, the 202 physician-led ACOs now outnumbers the 189 hospital-based ACOs.

ACOs by doctor vs hospital sponsorship 2012-2013

Why are physician-led ACOs growing faster?

The rapid growth of physician-led ACOs makes sense because ACO-style gain-sharing reimbursement arrangements are more favorable to physician organizations than hospitals. When a hospital-based health system enters into an ACO contract, it basically says “if you succeed in reducing the total cost of care (primarily by reducing your own hospital revenue), we’ll give you back a portion of your lost revenue.” That’s reminiscent of the old business joke “we lose money on each unit sold, but we’ll make up for it in volume.” But, from the point of view of a physician organization, particularly a physician organization that emphasizes primary care, the ACO contract basically says “if you do more primary care work to avoid the need for hospitalizations and emergency department visits, we’ll pay you for that extra work and we’ll give you a portion of the money we no longer have to pay to the hospitals.”

So, why would hospital-based organizations ever enter into an ACO-style gain-sharing agreement?  Two main reasons.

  • First, as a defensive measure. By forming an ACO in which they are involved, they can avoid or delay the formation of a physician-led ACO. It is better to be “doing” than to have it done to you.
  • Second, as a way to prepare for a potential future state where providers are bearing far more risk, such as in capitated reimbursement arrangements. It takes a very long time to develop effective population management capabilities, including establishing effective governance, building trust, deploying the right health information technologies and analytic systems, and, most importantly, recruiting and developing human resources that can effectively use data and improve care processes.

Ambiguous ACO Terminology

Finally, a note about the use of the term “ACO” and ACO growth statistics.

Many people get confused about the definition of ACO.   Some argue that an ACO is, by definition a specific type of Medicare reimbursement arrangement, the Medicare Shared Savings Program (MSSP), created by the Affordable Care Act (ACA).  But, I don’t agree that the term “ACO” defines a type of contract, and that the term ACO only refers to Medicare.  The “O” is for organization. On its face, the term refers to a type of organization, not to a type of contract.  When people generate statistics about ACOs, they should be counting organizations, not gain-sharing contracts.

I consider a provider organization to be an ACO if:

  1. It includes primary care physicians, and
  2. It has or plans to enter into at least one contractual arrangement where the provider organization takes responsibility for an attributed population of patients, and bears at least some risk for quality and economic performance

In common use, people are most likely to refer to a provider organization as an ACO if at least one such contractual arrangement includes a fee for service component with some risk sharing that includes at least some up-side opportunity to share in savings. The Medicare MSSP and Pioneer ACO contractual arrangements are just prominent examples of such contracts, not limiting to the definition of ACO. Because of that fee-for-service connotation, people don’t tend to describe a staff-model HMO as an ACO, even though they meet the definition I proposed above.

Furthermore, when categorizing ACOs, it is important that the categories are mutually exclusive.  The term “physician-led” seems to refer to an attribute of the governance of the ACO, such as whether the person serving as the CEO is a physician or whether the majority of the shares or votes on the board of directors are controlled by physicians or by people that are employed by physician organizations.  The term “hospital-based” seems to refer to whether the provider organizations that own the ACO include at least one hospital or hospital-based health system.  An ACO can include a hospital as a co-owner and still be “physician-led.”  Therefore, there is inherent ambiguity in the statistics comparing the number of physician-led to hospital-based ACOs.

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Of 27 new ACOs named by CMS: 93% avoid downside risk, 82% avoid CMS loans, 33% use payer-based infrastructure, and average beneficiaries per physician is 106

Yesterday, CMS announced the first batch of 27 “normal” ACOs under its Medicare Shared Savings Program (MSSP).

I found five things interesting about the list:

  1. 93% were unwilling to accept downside risk.  In the original proposed rule for the MSSP, ACOs would have been forced to accept downside risk.  Presumably, CMS thought that “skin in the game” would be an important motivator for real transformative change, and they wanted to increase the chances that the federal government would be able to achieve a net cost reduction.  But, in response to fierce backlash from providers saying they did not want to accept downside risk, CMS relented and introduced an option allowing providers to avoid taking downside risk in exchange for a smaller upside reward.   When it came time to lay chips on the table, 93% took the safe bet.
  2. Only 18% requested up-front payment.  One of the complaints from the provider community during the design phase of the MSSP was that providers lacked access to the capital needed to create the infrastructure to successfully improve care processes and manage risk — things like healthcare information technology, analytics and care management.  In response, CMS offered an option where ACO applicants could receive some up-front payments that would be repaid out of subsequent rewards.  CMS was offering to finance the investment, but it would be a loan, not a grant.  Only 18% of the first batch of ACOs selected this option.  I suspect this was due to the same risk aversion that led them to accept smaller rewards to avoid downside risk.
  3. 33% used payer-based infrastructure.  If physician organizations are to remain locally-focused, it makes more sense to share infrastructure with others to achieve economies of scale, rather than taking on the cost of creating their own infrastructure.   As I described in a prior post, this can be accomplished through a franchise arrangement.  It can also be accomplished through a management services organization (MSO), as is commonly done by PPOs and medical groups in mature managed care markets.  Or, it can be done by partnering with payers who already have such infrastructure.  Any of these approaches could potentially work, but I’m least enthusiastic about using payers’ infrastructure.  Nevertheless, nine of the 27 new MSSP ACOs are organized as partnerships between local health care providers and Collaborative Health Systems (CHS), a division of Universal American, a publicly-traded for-profit health insurance company that offers a variety of plans including Medicare Advantage plans.  For these 9 ACOs, Collaborative Health Systems will provide a range of care coordination, analytics and reporting, technology and other administrative services.  This is a popular option not only because of the economies of scale, but also because it allows the providers to avoid having to take out a loan, either from CMS or from traditional sources of capital such as banks or the equity markets.
  4. 44% did not note the number of physicians in their press-release blurb.  I hate to read too much into such a factoid.  But, for ACOs to work, the physicians must really be involved.  What does it tell you if the organizers of an ACO, when drafting their little blurb for the CMS press release announcing their selection as one of the first batch of MSSP ACOs, did not think to state the number of physicians involved?
  5. Average beneficiaries per physician is 107.  Of the 13 ACOs that did think to include the number of physicians in their press release blurb, 4 of them had between 100 and 400 beneficiaries per physician, 7 of them had between 31 and 60 beneficiaries per physician, and 2 of them had less then 10 beneficiaries per physician.  If ACOs are to really work, they don’t just need infrastructure, they need “mind share.”  If 5% of your patients are involved in some new program, and if you have not agreed to any downside risk in terms of taking on debts or being on the hook for possible negative rewards, and if the rewards are relatively small even for that 5% of your patients, are you really going to be motivated to radically transform your care processes and change your habitual clinical decision-making practices?

Here’s this list, including the beneficiaries per physician calculations.

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What can we learn from the managed care backlash of the 1990s? Can we avoid an ACO backlash?

Advocates of “accountable care organizations” (ACOs) are careful to avoid the terminology of “managed care,” which is widely viewed as a failed model from the 1980s and 1990s.  But, there are obvious similarities between ACOs and managed care.  Both involve an organization taking responsibility for the quality and cost of care for a defined population.  Both emphasize the importance of primary care as the foundation of a coordinated and efficient health care delivery system.  Both involve economic incentives to physicians to improve quality and slow the upward trend in total cost of care.

But, we all remember the strong backlash against managed care during the late 1990s.   Although almost 10% of the U.S. population are still served by HMOs, the managed care vision has been largely in exile for more than a decade now.   PPOs are now the dominant model, with relatively small financial incentives to patients to seek their care from providers within relatively large provider networks.  Many PPOs have dabbled in “pay for performance,” but the physician incentives involved have been relatively small and the performance bar set relatively low.  The use of more heavy-handed managed care approaches has declined significantly.  For example, plans usually don’t require a referral authorization by a “gatekeeper” primary care physician before granting access to specialists.  And the use of pre-authorization by health plan staff for many expensive procedures has declined significantly.   Health plans did not drop these heavy-handed approached because they became convinced they were ineffective.  They dropped them because they feared they would face a consumer backlash and lose membership.

So, what can we learn from the managed care backlash?  And what can we do differently to avoid an “ACO backlash?”

I went back to some research done during the height of the managed care backlash to refresh my memory of how bad it was, and why it happened.  Most helpful was a paper from 1997 in Health Affairs by Robert Blenden and other researchers at Harvard and the Kaiser Family Foundation. Blenden reported survey results showing that Americans hated managed care companies even more than they hated banks and oil companies.

Blenden’s survey results showed that a significant proportion of Americans experienced hassles and other problems with managed care plans.  These common, minor problems were hypothesized to serve as the seeds of stronger dissatisfaction and distrust.  The survey also showed that the public overestimated the frequency of rare events that are dramatic and threatening.  For example 66% thought that HMOs sometimes or often hold back on a child’s cancer treatment.  73% thought that HMOs send newborn babies home after just one day, in spite of mothers’ concerns about their children’s health.  As shown in the following graph, there was a dose-response relationship with the “heaviness” of the health plan and the degree of mistrust that the health plan would do the right thing if they got sick.

Blenden concluded that the backlash against managed care was primarily driven by mistrust and fear, leading to calls for government regulation and reducing the market demand for managed care.  I created the following “cause-effect” diagram to illustrate this theory.

So, what can we do differently this time around?  We must do a far better job of building trust. That will require actually being trustworthy.  And, it will require being more proactive about communicating trustworthiness.

This topic is so central to the success of ACOs that it deserves a lot more attention by people who have expertise in public opinion, market communication, and brand development.  But, here is my proposed starting point for developing a strategy to build trust in ACOs and other innovative models of health care finance and delivery.

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Mayo and Cleveland Clinic are becoming franchisers. Maybe they should focus on primary care.

As described in a recent article in American Medical News, the Mayo Clinic and the Cleveland Clinic are both independently offering medium to large groups of specialist physicians an opportunity to use their esteemed brand names and a variety of other resources formerly only available to employed physicians.  In return, the group has to pay a fee and agree to meet clinical criteria.

That’s a franchise model, although Mayo and Cleveland don’t use that terminology. Perhaps they are worried that the term “franchise” may conjure up unflattering comparisons to fast food chains.  But, as I’ve described in a previous blog post, the franchise model is not frivolous.  It is a serious, time-tested business structure appropriate for a business that his a mix of large scale and small scale requirements. Large scale requirements are things like infrastructure for research and development, volume purchasing, specialized management disciplines, and branding.  Small scale requirements include top local talent that is highly motivated to develop relationships and attend to the details that determine the quality of local operations.  A large, conventionally-structured company can certainly have “field” employees spread out in many local areas.  But, they may not be able to attract and retain the best local talent.  And those field employees won’t be as motivated as franchisees that are, by definition, entrepreneurial business owners.

It has to be real to avoid being cheap

Mayo Clinic and Cleveland Clinic are well aware that they have strong, valuable international brands.  They take their brands very seriously, both in local markets for care delivery and on a national and international scale when they have ventured into publishing and internet-based businesses.  So, I know they must be keenly focused on picking franchisees that won’t sully their names. The worst thing for them would be for their franchisees to deliver poor care under their logos, creating confusion in the market about what their brand stands for.  Franchisers know they need to assure that their standards are maintained consistently.  This consistent adherence to standards is one of the most essential sources of value to consumers.

But why not focus on primary care?

The fact that both Mayo and Cleveland are focused on “single specialty groups” implies to me that they are directing this franchise model on specialists rather than primary care-based organizations. But, perhaps it is the primary care providers that could benefit the most from getting access to resources that are too costly for them to develop themselves.  Things like advanced analytics, health care information technology, lean coaches, care management training, call centers, contracting professionals, and sophisticated advertising.  These are the capabilities that serve as the foundation for successful primary care-based accountable care organizations (ACOs) or to achieve favorable performance in episode-based, bundled payment for chronic diseases.  To a primary care franchisee, the brand name recognition may actually be less important than the opportunity to have world class infrastructure and management support, while still allowing the participating primary care physicians to maintain a degree of independence.

The following tongue-in-cheek video illustrates the idea.

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Health Care Heroes: Wilmer Rutt, MD – Adapting the R&D Concept to Health Care Provider Organizations

Wilmer Rutt, MD - Director of Henry Ford Health System Center for Clinical Effectiveness, in his office at New Center Pavillion, 1993

This morning, I read the results from a clinical trial of ovarian cancer screening in JAMA.  The trial showed that ovarian cancer screening was not effective in saving lives.  I was interested in the article because I was one of the investigators in that trial, which began in the early 1990s.  Henry Ford Health System was the largest of many recruitment sites for the Prostate, Lung, Colorectal and Ovarian (PLCO) trial, one of the largest clinical trials ever done.  I’m not surprised by the ovarian cancer results, since our models long ago suggested it was unlikely to work.  But, it is amazing to me how long it takes to figure out whether something works in health care, particularly for interventions that are preventive services or that attempt to change the delivery system.  It is unfortunate that the “learning loop” — from innovation to implementation to evaluation and back to innovation — is often far longer than our collective attention span.

But, the back story of how Henry Ford got involved in the PLCO trial is the most interesting aspect of the PLCO story for me.  It is the story that best illustrates why Wil Rutt, MD is one of my health care heroes.  When I was fresh out of University of Chicago medical school in 1990, I moved to Detroit to work with Dr. Rutt, who had recently founded the Center for Clinical Effectiveness (CCE) at the Henry Ford Health System.

In other industries — particularly product manufacturing industries — it is typical for companies to invest in internal capacity for research and development (R&D).  Universities and governments do basic research, figuring out how nature works.  But, it is companies that do R&D to apply basic knowledge to the development of successful products.  They generate ideas for product innovations.  Then they use rigorous methods of scientific research and engineering to figure out whether those innovations are successful and to develop ways of manufacturing the product.  Separate from such R&D efforts, manufacturers also have engineers in the product manufacturing area that try to improve manufacturing processes.  To do so, these engineers use methods variously described as statistical process control, continuous quality improvement, total quality management, six sigma, and lean.  Drug and biomedical device companies are product manufacturers, and share this tradition of investing in both R&D and manufacturing process improvement.

In the field of health care delivery, there has been great progress over that last few decades in adapting the process improvement methods from manufacturing for use in health care.   Drs. Don Berwick, Paul Batalden, Brent James, and Jack Billi come to mind as zealous advocates for this advancement. And, certainly there have also been plenty of health services researchers, mostly in universities and government-sponsored think tanks, who have done research on health care delivery organizations, studying such organizations as anthropologists might study gorillas in the mist.

Mark Muller, Wei Chang, Kim Sadlocha and Rick Ward in the the offices of the Center for Clinical Effectiveness, 1993

But, as of 1990, there was little or no precedent for non-academic health care provider organizations to do R&D, the kind of practical work applying rigorous scientific and engineering methodologies to improving the design of a company’s own product or service.  Wil Rutt’s CCE was one of the first attempts to apply R&D to health care delivery. He assembled a team of doctors, PhDs, IT professionals and others to design better ways for Henry Ford Health System to deliver health care.  The CCE did extra-murally funded research intended to be generalizable to the world.  But the focus was on R&D for Henry Ford, and the grants and papers were merely a means to that end.

One of Dr. Rutt’s many innovation concepts during the early 1990s was the idea to design a care process that resembled the Jiffy Lube oil-change process to deliver clinical preventive services.  At that time, there were upwards of 50 different preventive services recommended in the U.S. Preventive Services Task Force guidelines.  Dr. Rutt’s CCE developed pocket-size guideline manuals, age and gender-specific flow sheets, and preventive services quality feedback in an effort to promote adherence to preventive services guidelines by primary care physicians.  But, he concluded that it would be better to cross train non-physician staff to efficiently deliver a whole set of preventive services to patients during a single ambulatory encounter.  He wanted these services to be delivered in a convenient setting such as a shopping mall rather than on a clinical campus. He called these “Health Assessment Labs” or “HALs.”  However, Dr. Rutt needed funding to implement and rigorously evaluate the HAL concept.  Along came the National Institutes of Health (NIH), who was sponsoring the PLCO trail.  Dr. Rutt saw the opportunity for Henry Ford to be a clinical site for the PLCO.  We won a grant to do so, and became the largest of the many PLCO clinical sites.  That grant was one of the largest research grants ever received by Henry Ford Health System, which is no slouch in clinical and basic science research.  But, Dr. Rutt’s thrill was not the research fame.  It was the opportunity to do R&D on the HAL concept.

Two decades later, we are still, as a field, at the infancy of our journey to adapt the R&D concept to health care delivery.  Certain delivery systems, such as Kaiser Permanente, Mayo Clinic, Cleveland Clinic, and Novant have discussed an R&D-like concept of developing proprietary science, technology and methods for care delivery.  But, the R&D concept has not really taken hold.  Health care provider organizations do not yet consider R&D to be a core competency.  Hardly any provider organizations have an internal department dedicated to R&D.  They don’t yet see R&D as a necessary investment required to maintain organizational competitiveness.  I feel strongly that we need to finish making that advancement.  And when we do, we’ll owe a debt of gratitude to Dr. Rutt for being the pioneer.

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Dr. Ward’s Slides from AMGA ACO Learning Collaborative, Chicago, July 14, 2011

Presentation entitled “Developing the Economic Model for Success” from day 2 of the American Medical Group Association’s Accountable Care Organization Learning Collaborative, at the Swissotel in Chicago.  Attended by approximately 60 leaders of AMGA member physician organizations and other interested parties.

Full page PDF format.

Hand-out PDF format.

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Explaining alternative types of ACO structures: How do Co-Management arrangements and Hospitalists fit in?

All across the country, physicians and hospitals are talking to each other about creating new organizational structures to enable them to work together more effectively.  Some are trying to create Accountable Care Organizations (ACOs) or Organized Systems of Care (OSCs) to participate in the Medicare Shared Savings Program or similar programs being launched by commercial health plans.  Others are motivated by a desire to accomplish specific goals, such as improving transitions of care or trying to get surgical procedures to start on time.

Any organizational structure represents a trade-off between different “dimensions” that are competing for attention.   For example, in a car company, it may be helpful to have one part of the company focus on the European market, while others focuses on North America, Asia, etc.  Alternatively, it would be good for one part to focus on products that are sporty, while other parts focus on luxury, economy and utility.  Or, one part can focus on marketing and communications, while other parts focus on research & development, manufacturing, and finance.  Whenever one dimension is selected to be the basis for organizational structure, the other dimensions are not selected.  The lack of consistency and focus in the non-selected dimensions often becomes a problem for the company.  Those problems become the justification for the next reorganization of the company.

In health care, there are a number of relevant dimensions crying out to the selected as the basis for organizational structure:

  • Geography:  Regions of the country, or regions within one metropolitan area, or urban vs. rural, or international
  • Professionals (doctors) vs. Facility (hospitals, ASCs, nursing homes, LTACs, etc.) vs. Ancillaries (lab, home health, DME, optical) vs. Insurers
  • Primary Care vs. Specialty Care
  • Academic. vs. Community (“town vs. gown”)
  • Ambulatory Care vs. Inpatient Care
  • Professional Credentials: Doctors vs. Nurses vs. Administrators vs. Lawyers
  • Clinical Department: Surgery vs. Medicine vs. Pediatrics vs. Psychiatry vs. Dermatology vs. etc.
  • Service Lines: Heart & Vascular  vs. Bone & Joint vs. Fetal & Maternal vs. Cancer vs. Pediatrics vs. End Stage Renal vs. Hospice vs. etc.
  • Payer type: Fee For Service vs. Capitated/Managed Care, or Commercial vs. Government
  • etc.

The structure of a local health system cannot be based on all of these dimensions at the same time.  Different local markets have different structures.  Over the last two decades, the typical structures of local health systems have shifted.  Continued shifting is anticipated.

During the 1980s and 1990s, various “health system” and “staff model HMO” structures were established, and many physician practices were acquired by hospitals and other large entities.  But, after the managed care back-lash of the late 1990s, the degree of integration decreased.  In the conventional  organizational alignment in the 2000′s, the payer function was separated from providers, and physician providers were separated from hospitals.  Health plans hired their own care managers or contracted with care management vendors in an attempt to improve health outcomes and reduce cost (or at least to appear to do so).  Primary care physicians and specialists formed various types of physician organizations such as multi-specialty group practices and independent physician associations (IPAs).  Hospitals hired their own hospitalists to coordinate hospital services and reduce length of stay under prospective payment.

In anticipation of health care reform, and in particular the Medicare Shared Savings Program, hospitals are initiating the formation of Accountable Care Organizations (ACOs).  Such organizations integrate physicians and hospitals.  They also intend to include care managers as part of the ACO, rather than relying on health plan-based care managers.  I call this the “integrated delivery system ACO Model.”  It resembles the health systems of the 1980s and 1990s, with the exclusion of the payer function.  They desire to avoid “insurance risk” while retaining “performance risk” — although I am deeply skeptical that these two components of variance can be meaningfully separated.

This integrated delivery system ACO model offers the theoretical advantages of alignment of incentives of primary care physicians, specialists and hospitals — all focused on managing the care of a defined population of patients to improve quality and reduce overall population cost.  However, there are a number of important barriers to this model.  First, in many medium and large communities, there are more than one hospital organization and more than one physician organization, and there is a many-to-many relationship between them.  If a hospital organization convenes an ACO, they must either accept the divided loyalty of the associated physicians or they must disrupt the referral relationships to cleanly separate “their” physicians from those of competing ACOs.  If many primary care physicians continue their association with multiple hospital-based ACOs, then it becomes difficult for any one ACO to make significant investments in primary care practice-based care management staff, clinical information technology, and practice transformation coaching.  Each ACO  fears that their competitors will have a “free ride” on their investments.  If hospital leaders in a community attempt to solve this problem by creating a single large ACO for the community, they threaten the competitiveness of the local health care market and risk attracting the ire of the Federal Trade Commission and other anti-trust regulators.

An alternative model for ACO formation is the “primary care-based ACO” model.  Under this model, primary care physician organizations come together to convene the ACO, such that all of the patients of participating primary care practice units constitute the ACO’s defined population.  The draft regulations for the Medicare Shared Savings Plan define the ACO population this way, although it is obviously limited to only the Medicare patients.  In this primary care-based ACO model, the ACO has an easier time achieving critical mass and avoiding free-rider problems with their investments in practice-based care managers, clinical information technology, and practice transformation coaching.  In such as model, specialists and hospitals become cost centers to the primary care-based ACO.  Such specialists and hospitals will continue to provide services to patients from multiple ACOs.  In this sense, hospitals and specialists are on the periphery of the ACO, rather than at the center of it.

Of course, the diagram above is an over-simplification because it lumps all specialists together.  In fact, as shown in the figure below, the optimal alignment of specialists depends on the focus of their practice.  Traditionally, “PARE” providers (pathology, anethesiology, radiology and emergency) are closely affiliated with hospitals.  In addition, specialists with practices that focus on inpatient care and procedures have a stronger natural alignment with hospital organizations.  Such providers include surgeons, interventional cardiologists, and critical care physicians.

On the other hand, internal medical sub-specialists with practices that focus on evaluation and management services for chronic diseases may find themselves more naturally aligned with primary care-based ACOs.  As the “patient-centered medical home” (PCMH) model takes root, and the primary care base of the U.S. health care system is gradually restored, it is recognized that there will not be enough primary care physicians to play that expanded role.  The supply of mid-level practitioners (nurse practitioners and physician assistants) will also be insufficient to fill the gap.  Therefore, I feel that the logical answer is for primary care-based ACOs to engage chronic disease-oriented internal medical sub-specialists to play the role of clinical leaders of some PCMH practices emphasizing the care of patients with those chronic diseases.  Many sub-specialists have been advocating for the right to be considered PCMH providers.  Unfortunately, in the draft rules for the Medicare Shared Savings Programs, such sub-specialists were not included in the criteria for physicians eligible to have “attributed” patients in that program, seemingly coming down on the other side of this debate.

So, how does “Service Line Co-Management” fit in?

As described in a recent article in the AMA online publication, many hospitals are entering into co-management arrangements with specialists associated with their key service lines.  Under co-management, the specialists and the hospital form and co-own a separate limited liability company (LLC) which is assigned the responsibility to accomplish specified goals for the service line and to generally contribute to improved clinical quality or efficiency of services delivered in that service line.  Such an arrangement must be set up and managed carefully, so as not to run afoul of rules against kickbacks for hospital referrals.  Co-management LLCs are not ACOs, since they are not intended to take responsibility for a defined population of patients.  But, they can serve as a first step to building trust between physicians and hospitals in preparation for the formation of an integrated delivery system ACO model.  For hospitals desiring to convene such ACOs without the benefit of a long track record of effective physician collaboration, I highly recommend consideration of the co-management model as a way to “get some points on the board.”  The more focused co-management arrangements are on specific, achievable and measurable goals, the more successful they will be and the better they will serve this trust-building function.

In the context of a primary care-based ACO model, a hospital-specialist service line co-management entity may play a more interesting long term role.  If primary care-based ACOs view such service lines as cost centers, and if such ACOs have multiple hospital partners that are competing against each other, the co-management entity can potentially become the vehicle for value-based contracts with the ACO, delivering a winning combination of clinical quality and population-level efficiency to assure the success of both the hospital and specialist partners.

Therefore, service line co-management can be a great first step, regardless of whether the eventual ACO model in the community ends up as an integrated-delivery system ACO model or a primary care-based ACO model.

What about Hospitalists?

In a primary care-based ACO model, the ACO may be motivated to “reel in” the hospitalist function in order to get the benefits of smoother transitions of care and to encourage stewardship of inpatient and specialist resources as needed to manage overall population health care cost.  Of course, hospitals will not easily give up the control of the hospitalist function that they typically enjoy.  Hospitals need the hospitalists to be focused on their objectives of reducing length of stay and increasing “keepage” (or reducing “leakage”) of specialty and ancillary services referrals to competing hospitals or specialists.  I anticipate a tug-of-war between hospitals and primary care-based ACOs over alignment with hospitalists.  I would consider the degree of alignment with hospitalists to be a measure of the intensity and sincerity of a primary care-based ACOs’ efforts  to manage population cost.  The next few years will be an interesting time to be a hospitalist.

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ACOs must steer clear of anti-trust issues

What’s the problem?

Accountable Care Organizations (ACOs) involve the creation of new entities that are intended to improve quality and efficiency of care.  But, experts in economics and anti-trust law worry that ACOs can have the unintended effect of reducing competition among health care providers, creating local monopolies that can drive up prices.

In a recent commentary in the Journal of the American Medical Association (JAMA), Duke faculty members Barak Richman, JD, PhD and Kevin Schulman, MD argue that providers forming ACOs are emphasizing horizontal integration of formerly-competing entities to increase market power and generate monopoly profits in the privately-insured health care market, rather than focusing on vertical integration of complementary entities to generate performance-driven savings in the publically-insured Medicare market.  They explain that monopolies are even more problematic in the health care market than in other markets because private health insurers insulate consumers from directly facing unreasonable monopoly prices, hiding those high prices behind increasing insurance premiums.  I would argue that such prices are even more obscured from consumers when they take the form of slower salary growth offered by employers shifting compensation dollars to cover increasing health insurance costs.  Health plans face regulations and other barriers that limit their ability to refuse to pay these higher prices, even if the price exceeds the value received by their members.

Who is the enforcer?

The Patient Protection and Affordable Care Act of 2010 (PPACA), the health care reform law that features ACO gain sharing provisions for Medicare, does not exempt health care providers from anti-trust laws or oversight by the government authorities responsible for enforcing those laws.  As explained in a recent article in the New York Times, two government authorities share anti-trust enforcement responsibilities: the Federal Trade Commission (FTC) and the Justice Department.  In recent years, the FTC has taken the lead in reviewing proposed joint ventures of hospitals and physician organizations to examine whether the benefit to consumers from efficiency gains exceed the harms to market competition.  The FTC has expressed concerns about the potential anti-competitive effects of ACOs, and is thought to be less empathetic to ACO’s arguments about the value of ACOs to achieve care process transformation and associated quality and efficiency gains.  The Justice Department, in contrast, is thought to be more enthusiastic about ACOs and more vested in the success of ACOs and the PPACA in general.  The two government entities appear to be engaged in a debate about turf and approach.

What can the government do to avoid health care monopolies without inhibiting health care transformation?

First, the government can clearly communicate standards, processes, and the responsibilities of the government entities involved, including the FTC, the Justice Department, and CMS.  Apparently, the agencies are working to create such a document, but the debates have delayed its completion and release.

Second, the government can make sure that the process is expeditious and not overly burdensome on health care providers.  The FTC’s reviews of joint ventures of hospitals and physician organizations have historically taken a year and required expensive analysis and documentation.  These reviews need to be streamlined.

In addition to federal anti-trust oversight, states have the option of implementing price controls to curb excessive monopoly pricing.  According to Richman and Schulman, some states were successful in using rate caps during the 1970s and 1980s.  But, such anti-market approaches are likely to be politically unpalatable, and should be reserved for the scenario where other oversight approaches fail, or for rural areas where small population density cannot support multiple competing ACOs.

What can ACOs do to steer clear of anti-trust issues?

I’m no lawyer, so the following is clearly not legal advice.  But, in my opinion, ACOs should be centered around primary care physicians and the defined populations of patients with whom they have care relationships.  And, they should have a sincere primary focus on making investments in patient-centered care process transformation that are obviously beneficial to “consumers.”  If ACOs are centered around hospital facilities, and if they lack credibility in the investments they are making in care coordination, disease management, quality improvement and other care process improvement initiatives, anti-trust enforcement officials are going to be less likely to conclude that the efficiency gains exceed the harms to market competition.

Second, be leary of ACO structures that involve 100% of the providers or facilities of any type in a local market, particularly in markets that have a large enough population to support competing providers.

Finally, and most importantly, get quantitative about quality and efficiency benefits.  Be ready in advance of launching an ACO with prospective models, based on explicitly stated, reasonable assumptions, showing that the investments and process changes that are planned can plausibly be expected to achieve substantial improvements in quality and reductions in cost compared to trend.  Then, be ready with the database, epidemiology expertise and analytics to support population-based, risk-adjusted metrics to prove that the planned quality and efficiency gains are actually being achieved in the expected time frame.  Those prospective models and retrospective evaluations should apply not only to the Medicare population, but also to privately insured and uninsured populations.   Nothing is likely to be as convincing to anti-trust enforcers than valid measures of quality and efficiency benefits that accrue to consumers.

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Why many clinical leaders prefer Registries to EHRs: Actively Structured Information

I went to the huge HIMSS’11 convention in Las Vegas a few weeks ago.  When visiting the bewildering number of vendor booths, I focused on a few key questions relevant to the challenges facing physicians and hospitals working to establish successful Accountable Care Organizations (ACOs):

1) What is the current state of clinical data exchange between Electronic Health Record (EHR) systems primarily used for acute hospital care vs. ambulatory care?

2) Do leading EHR systems have useful “registry” capabilities?

Link to image from Nuance of their booth at HIMSS'11

I have been hearing from many clinical leaders that the most popular EHR systems still do not support real clinical integration across settings, and are still weak in terms of the “population management” and clinical process improvement features that are present in existing chronic disease registry applications.  I was hoping to learn that these concerns were really based on a lack on familiarity with how to configure and use EHR systems, rather than any inadequacies of the systems themselves.  After all, clinical message and clinical document standards have been around for years, and population management features were prominently identified in recent Meaningful Use incentives.

The verdict?

Some progress has been made in leading EHR systems, but clinical integration across settings and population management are still major weaknesses.

But why?

It turns out that both problems are related to the same underlying issue: failure to appreciate the importance of “actively structured” information.

Health Information Technology (HIT) leaders have for decades focused primarily on a vision of computerizing health information, going paperless, and improving the access to that information by many members of the clinical team across settings.  To reduce the burden of capturing information that can be displayed on a computer screen, HIT vendors have developed document imaging, optical character recognition, and voice recognition technology.  And, they have created clinical documentation systems that allow the user to enter simple codes to insert blocks of text into their notes quickly.  Over the last 15 years, most HIT leaders have recognized that there is some value in “structured data” — health information in the form of codes that computers can interpret rather than just display.  In response to this recognition, EHR vendors have added “template charting” features that allow users to do exception editing of some coded values in notes.  They have developed sophisticated systems to interpret the meaning of textual information and convert that text into structured data.  And, they have created messaging standards that allow orders, clinical documents (notes) and continuity of care information to be shared across systems and care providers.

But, the problem that remains is that the structured data that is being captured and exchanged is “passively structured.”  Although the current crop of EHR systems may allow some of the health information to be represented with codes, the EHR tools and the care process itself do not assure the capture and transmission of particular pieces of information required to support particular down-stream uses of the data, such as reminders, alerts, quality and performance metrics, and comparative effectiveness studies.  The clinical leaders that are focused on improving care processes, and the health services researchers that are trying to measure performance and comparative effectiveness are well aware that missing data is crippling to the usefulness of passively structured data.  The real care process improvement and performance and effectiveness measurement efforts of Accountable Care Organizations requires “actively structured” health information.   To assure the completeness of the information, they use “registry” applications, questionnaires, and data collection forms.   And, they transmit this information in formats that rigorously enforce the meaning and completeness of the structured information.  The objective is not to capture as much structured data as possible.  The objective is to assure the accuracy and completeness of particular data elements that you are relying on for specific, strategically important purposes.

I believe that HIT professionals may be reluctant to make actively structured information a requirement because (1) they lack expertise and familiarity with the downstream uses of the data for care process improvement and measurement, and (2) they are concerned that the added burden of actively structured data capture on end-user clinicians may further worsen their problems with “clinical adoption” of their technology.   They are attracted to solutions that extract passively structured information from clinical notes, such as voice-recognition and “clinical language understanding” (CLU).  And they don’t realize that the big pile of passively structured data output by such solutions will fail to meet the requirements of Accountable Care Organizations.

To solve the problem, two main things are necessary:

  1. Refocus the design objectives of EHR products on the strategic goals of Accountable Care, rather than on the tactical goals of reducing medical records cost, “going paperless” or reducing security risks.  The biggest implication of this will be the integration of analytic and care process management functionality into EHRs, rather than viewing those as separate solutions to different problems.
  2. Create stronger organizational linkages between HIT professionals, the clinical leaders involved in care process improvement and the epidemiologists and biostatisticians that have the expertise to measure provider performance and treatment effectiveness.  Many hospitals, physician organizations and nascent ACOs are attempting to do this by hiring “chief medical informatics officers” (CMIOs).  But that will only solve this problem if the new CMIOs can bridge between HIT, process improvement and measurement disciplines.  If the CMIO role is viewed more narrowly as a liason between HIT professionals and front line clinician users, the focus will continue to be on unstructured or passively structured data to reduce barriers to HIT adoption.

 

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Harold Miller’s Paper: How to Create Accountable Care Organizations

This is probably the single most useful reference regarding Accountable Care Organizations, outlining alternative ways of conceptualizing them and giving a balanced explanation of the pros and cons of alternative models, including structure and reimbursement.  David Share, MD, from BCBSM was involved, and the document uses BCBSM’s Physician Group Incentive Program as a case study.

The web reference is: http://www.chqpr.org/downloads/HowtoCreateAccountableCareOrganizations.pdf

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