Healthcare Business News

Reform Update: Preferred referrals gain favor with ACOs

By Melanie Evans
Posted: July 9, 2014 - 4:30 pm ET

Each month, doctors at one Arizona accountable care organization get a rundown of referral patterns, including the percentage of patients who followed referrals to specialists the ACO deems preferred.

Doctors get on that list thanks to strong quality scores, efficient operations and laudable customer service. But when performance falters or patients leave dissatisfied, they're dropped.

“If the patient is disappointed, we may lose them,” said Nathan Anspach, chief executive officer of the Phoenix-based John C. Lincoln accountable care organization in explaining why patient satisfaction figures into who stays and who goes on the preferred list.

The tactic of using a preferred referral list is one being tested by accountable care organizations eager to better manage patients who frequently shuttle from doctor to hospital to clinic to nursing home to specialist and back. That movement has long been recognized as a source of avoidable cost.

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Accountable care organizations stand to profit if they can successfully control the cost and quality of medical care, something greatly influenced by where and how often patients receive treatment.

So, ACOs are seeking to control—or at least influence—that traffic. While some seek to nudge patients with lower co-pays and deductibles to hospitals and doctors inside the ACO, others work with commercial insurers that limit the network to ACO doctors and hospitals.

That is the case with Dignity Health, San Francisco, which has touted $95 million in savings over four years for the California Public Employees Retirement System in a narrow network ACO with Hill Physicians Medical Group.

But Medicare ACOs, of which there are more than 350, are not allowed to restrict patients' choice of providers. So, the John C. Lincoln ACO sought to influence physicians instead.

Early evidence from the John C. Lincoln network suggests some benefits for the ACO and preferred doctors. Subspecialists on the preferred list are less likely to repeat expensive screening or diagnostics, for example.

Meanwhile, directing patient referrals has boosted preferred specialists' share of referrals out of the ACO, which includes 12,000 Medicare patients. That's notable considering that patients are not required to follow a referral.

But significant challenges remain. One referral may lead to another, as specialists further refer patients to additional physicians, something over which the ACO has no control, Anspach said. The Arizona system also sees an annual exodus of elderly patients each summer, as they flee 100-plus degree temperatures for more moderate climes. As a result, 20 percent of the ACOs' specialty costs occur outside its region where it has no control over costs or referrals.

ACOs may not fully recognize the potential role referrals play in healthcare quality and spending, Harvard University researchers argued in JAMA this month.

“In general, people recognize that they are important for the quality of care we provide, the quantity of care we provide and that they're also important for prices,” said Dr. Zirui Song, the paper's lead author. But referrals are poorly understood and understudied, he said.

Research has highlighted wide variation in referral rates. One 2003 study found higher volumes of referrals correlated with spending variation across the U.S. Patients saw inpatient specialists 2.4 times as often where spending was highest. Referrals to high-priced providers also drive up spending, he said. Poorly managed referrals can create lapses in care.

“We don't have an accurate understanding of how frequently referrals occur, we know even less about who refers to whom and for what conditions, and we know even less than that about the value of care that a referral leads to,” Song said.

He called for greater study by providers of referral patterns.

Even within narrow network ACOs, organizations can identify potential variation among specialists. That was the case for Dignity Health, which examined the length of stay as a measure of efficiency and quality among four hospitals in its ACO and found wide variation, said Stephen Foerster, the system's vice president of managed care.

Finalists picked for innovation awards

HHS announced it has selected finalists for federal healthcare innovation awards. Awards vary in size, but could be as large as $24 million. Recipients will examine new models for emergency care, pediatrics, heart disease prevention and management, rural health, telehealth, the elderly and those living with HIV/AIDS. Finalists will learn their fate in coming months.

Big data gets little use

Big data may be big news for accountable care organizations, but its use is so far limited, write authors in the latest edition of Health Affairs. David Bates of Brigham and Women's Hospital and co-authors suggest six potential targets for application of data aggregation and analytics. Big data's potential predictive power would be useful to identify high-cost patients; patients with multiple-organ disease and those at risk for readmission, complication, deteriorating conditions or adverse risks.

Follow Melanie Evans on Twitter: @MHmevans

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