Becker's Hospital Review

ACOs Some skeptics have said ACOs involve more work than reward. For example, in November 2011, former Federal Trade Commission Commissioner J. Thomas Rosch said that in even the most optimistic scenario, "the savings to Medicare from the ACO program are no more than a rounding error." Unfortunately for ACOs' defense, it's still too soon for CMS to point to how much money ACOs will save Medicare — if any. Richard Gilfillan, MD, director of the Center for Medicare and Medicaid Innovation, said more "telling evidence" about CMMI models, including accountable care organizations, would be available this summer. But commercial models have reported some promising results, like Oak Brook, Ill.-based Advocate Health Care's ACO. Advocate launched its ACO, called AdvocateCare, in late 2010 with Blue Cross Blue Shield of Illinois. The ACO includes 10 hospitals and covers roughly 380,000 patients. Based on data from the ACO's first six months, hospital admissions per member decreased by about 10 percent and emergency department visits fell by 5 percent. Year-one data from the ACO showed a 26 percent decrease in readmission rates for AdvocateCare patients with chronic illnesses, due in part to patients' access to transition coaches. And the 13.6 percent readmission rate for AdvocateCare patients who were sent to nursing facilities was still lower than the national average, 20 percent.  2. ACOs were designed on a premise that overestimated the level of integration in healthcare. CMS offered the Pioneer ACO program in recognition that a handful of integrated health systems were further along in their clinical integration, coordinated care and shared savings arrangements than others. Healthcare experts often point to those health systems and other highly integrated organizations, like Oakland, Calif.-based Kaiser Permanente or Danville, Pa.-based Geisinger Health System, as what ACOs should ultimately resemble down the line, but these comparisons may be overstated. Dr. Bard of Tufts says ACOs were founded under the idea that there is a high degree of cohesion between physicians and their community hospitals, something he refers to as "systemness." The only problem is this assumed level of systemness or integration is not found in many communities in America. "At the end of the day, if the only successful ACOs are those from [Partners HealthCare], Vanguard Health Systems and Kaiser Permanente, what has society gained?" says Dr. Bard. "These organizations were already operating at the highest levels of confidence in respect to the triple aim." The triple aim was the concept coined by former CMS Acting Administrator Donald M. Berwick, MD: to improve the health of populations, improve the patient experience and reduce per capita healthcare costs. Instead of integrated systems operating successful ACOs, Dr. Bard says ACOs' worth will be proven if they can transform care delivery in organizations and regions that are not prolific healthcare hubs, such as Syracuse, N.Y., or Wichita, Kan. Gary Thomas, COO of Accountable Care Solutions at Aetna, says he's seen nuances in how organizations pursue accountable care programs, driven by the level of integration they've attained. "Interest in a specific approach seems to be heavily dependent on how prepared an organization is to make this transition — both structurally and culturally. Those [health systems] that are far along in clinically integrating their networks are looking at a range of accountable care models to leverage public and private payor programs." He says those health systems that are less advanced are looking for consulting, capabilities and other gain-share programs to push clinical integration and build a foundation for value-based care. 13 3. ACOs won't work when healthcare still operates in a fee-for-service system. Even though ACOs are built on a pay-for-performance reimbursement model, Medicare continues to reimburse hospitals on a fee-for-service model. Medicare also reimburses individual providers and suppliers for specific services just as it did under fee-for-service payment system. Many hospitals continue to use fee-for-service as a way to keep score or determine which physicians have earned what portion of payments and savings. This is still the go-to method for "score-keeping" in some ACOs, according to a 2012 report from the New England Journal of Medicine. Mr. Lockman of the Michigan Pioneer ACO says he's observed this inherent tension at DMC, and among ACOs in general. When hospitals and physicians are reimbursed on a fee-for-service model, it can be difficult to incentivize them to reduce utilization rates and spend more time with patients. "Part of the issue is that we are trying to have a pay-for-qualitydriven system when we're still in a pay-for-volume system," says Mr. Lockman. "It's very difficult to live in both worlds." A 2012 Commonwealth Fund report recommended that ACOs' compensation models should be locally determined, based on the unique makeup of the physician population, the relationship that exists between providers and payors, and other factors respective to the ACO. Potential payment models for ACOs include straight salaries, a model Cleveland Clinic has used for years; equal shares, in which income is based on revenue after expenses with expenses divided equally among providers; productivity-based compensation, in which income is based on the percentage of either billings, collections or resource-based relative value scale units; incentive-based compensation, with a portion tied to providers' performance around core ACO goals; and capitation, in which income is based on distribution of money from payors either equally or based on a predetermined formula. For ACOs to be successful on a nationwide scale, various approaches to payment need to be tested for effectiveness. Hospitals and health systems will also have to use fee-for-service payments in a more limited fashion. "Bringing Medicare and private-sector payment models into sync, to the extent possible, will facilitate this," the Commonwealth Fund reported. 4. ACOs will move patients out of hospitals and hurt hospitals' revenue. Do ACOs represent hits to hospitals' revenue? It's certainly a possibility, but as healthcare strives to incorporate the tenets of the triple aim, declining inpatient admissions may be an unavoidable reality for hospitals. The potential change to hospitals' bottom lines comes on top of ACOs' inherent financial burden, as well. Hospitals have the organizational structure, facilities and capital necessary for ACOs, whereas physicians drive the intellectual capital behind the model, making the most decisions about where healthcare dollars go. So while hospitals and health systems may provide the capital investments and infrastructure necessary for ACO success, it will also be their business model that takes the largest hit from the model as ACOs shift healthcare away from "heads in beds." "To achieve the triple aim, care is going to continue its migration out of hospitals and into the ambulatory environment," says Dr. Bard. "The capital partners that need to make investments in the ACO are precisely those organizations that are likely to experience the greatest negative impact from the ACO — mainly a reduction in hospital volumes." Mr. Lockman says the hospital industry faces a challenge today — to build accountable care mechanisms while ensuring hospitals can survive and thrive. "What we want to evolve to is a situation in which we reserve hospitalization for those who really need it," he says. "That may mean over a period of time, hospitals might get smaller or become more specialized — not any hospital in and of itself but the system as whole."

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