Loads of potential

"Accountable care organizations” is the latest catchphrase in the quest to reduce costs and improve quality.

And ACOs could be one avenue to both of those goals—but only after the payment system is overhauled to reward providers and patients for embracing a new model of care. So say respondents to the latest Commonwealth Fund/Modern Healthcare Opinion Leaders survey, which focuses on delivery system innovation and improvement.

“Nine out of 10 leaders in the field believe the way we pay for care—the current financial interest to provide more care, and the lack of incentives for care coordination—is the biggest barrier to innovation,” says Karen Davis, president of the Commonwealth Fund.

Regardless of their field—academic research, healthcare delivery, insurance or government—between 91% and 95% of respondents say the current financial interests and incentives built into the system are either an “extremely significant” or “very significant” barrier to ACOs. The second biggest barrier, cited by 86% of respondents, is closely related: a lack of financial incentives for providers to integrate with each other. Those who work in healthcare delivery rank that lack of incentives in itself as a bigger problem than the current payment system overall, with 95% calling it an extremely significant or very significant barrier.

In comparison, respondents gave less weight to cultural issues, such as patient preferences, physicians' desire for autonomy or the way providers are currently trained. For example, only 71% of respondents say that physician autonomy would be an extremely or very significant barrier, and that number dropped to 67% for respondents directly involved in healthcare delivery.

A total of 225 opinion leaders from healthcare delivery, policy and finance participated in the survey, which is the 22nd in a series designed to gather opinions from healthcare leaders on timely policy issues.

ACO needs definition

The term ACO—which was coined by healthcare quality researcher Elliott Fisher of the Dartmouth Institute for Health Policy and Clinical Practice and several of his colleagues—was cited by name in the recently passed Patient Protection and Affordable Care Act, in one of the few provisions directed at healthcare cost control. The basic idea is that physicians and hospitals work together to coordinate care and have some joint responsibility for improving and maintaining the health of their patients in an efficient and cost-effective way. Medicare would offer financial incentives to providers who were part of an ACO.

But providers will have to wait until the rulemaking process is done before they know exactly how the government defines ACOs.

“My constituents are waiting for the other shoe to drop on a definition,” says William Jessee, president and CEO of the Medical Group Management Association. “There are some vague outlines, but there are a lot of questions. Would ACOs bear financial risk? If I were a health plan, I wouldn't want them to bear risk, because then they could contract directly with employers and cut out the middle man. There's going to be all kinds of wrangling about that.”

Barry Lachman agrees that the lack of a definition makes it difficult to render an opinion on the potential effectiveness of ACOs. As medical director for Parkland Community Health Plan, he oversees managed care for Medicaid and Children's Health Insurance Program patients in the greater Dallas area, and he predicts that his covered population will balloon by 25% to 30% under the payment reform provisions that expand Medicaid coverage. Lachman has done pioneering work in disease management for chronic diseases such as asthma, and says he believes deeply in the virtues of coordinated care.

“When you look at what's wrong with the system and what leads to bad outcomes and excess cost, it's anywhere there's a handoff,” Lachman says. “ACOs have the potential to break down those silos and make communication and cooperation better, but not until we can get a definition we can hang our hat on, like the patient-centered medical home has.”

Medical homes, another strategy to improve quality and reduce costs, have well-defined characteristics and criteria resulting from the medical-home recognition program run by the National Committee for Quality Assurance. Lachman wants to see something equally detailed for ACOs.

The Commonwealth Fund's Davis says ACOs would encompass medical homes, which are primary-care practices that offer coordinated care to patients, especially those with chronic illnesses, and usually receive a per-patient management fee for phone calls, e-mails and other kinds of patient contact not normally covered under standard fee-for-service arrangements.

“Some people call an ACO ‘the medical neighborhood' that's responsible for the full continuum of care and managing transitions,” Davis says.

HMO by another name?

David Abernethy, senior vice president of government relations for New York-based insurer EmblemHealth, calls ACOs “an old idea dressed up in new fancy clothes.” He says they won't save any money to the system as a whole unless there's a limit on total healthcare spending—a tough sell to the public. “Politically, limits are untenable because people believe their health is better served by throwing everything at the wall and seeing what sticks,” he says. “Americans have huge expectations of complete freedom in the medical marketplace, and they want the best doctor in town even if he's not in their network.”

Abernethy points to the rise of HMOs in the 1980s, which worked well in some areas but failed to rein in overall costs. “The way you get people's attention is if they can make money,” Abernethy says. “Lots of doctor groups put together group network health plans in the 1980s and 1990s. The basic notion of high-quality, limited networks that operate under capitation is still a very powerful concept that has been proven to save money.”

The MGMA's Jessee agrees that ACOs sound suspiciously like HMOs under a different acronym, but believes that several significant changes in the market make the basic concept more likely to succeed this time.

First is a better understanding of what's wrong with the system. “Today, we recognize that the fragmentation of care is one of the biggest barriers to quality and efficiency improvement,” Jessee says. Second, an increasing number of physicians don't want the economic pressure of running a practice and would rather be employed. And third, more sophisticated information technology makes it easier to pass along crucial data whenever a patient moves between providers, and also to analyze the quality and effectiveness of the care given.

Respondents thought money would be the most important component of gaining acceptance for whatever method of care coordination and accountability is eventually adopted. Only a third of respondents thought it would be “extremely effective” or “very effective” for providers to be required to join an ACO (and that percentage drooped to 27% for those in healthcare delivery), and an almost equal number backed similar requirements for patients. But 65% of respondents endorsed financial incentives for providers (up to 78% for those in healthcare delivery), and about half favored them for patients as well.

Jessee agrees that changing payment incentives is key. “I went to see my internist the other day and he complained about the amount of time he spends responding to patient requests by phone and e-mail—none of which is paid for,” he says. “Sometimes he wants patients to come in just so he'll get paid for his time. That's the perversity of the system.”

But the total amount of money available will have to stay the same. “At some point on bending the cost curve, we'll have to be more effective with the same amount of dollars,” says Ed Millermaier, chief medical officer and chief operating officer for Borgess Ambulatory Care, the outpatient arm of Borgess Health, Kalamazoo, Mich. “There is no new money, so we'll have to figure out how to make do with what we've got.”

Borgess is moving toward an integrated delivery system model, as is its major competitor, Bronson Healthcare Group, also in Kalamazoo, and they share certain services such as a cancer center and a helicopter service. Millermaier says both are responding to trends toward increased accountability. Payers in their area, including Priority Health in Grand Rapids and Blue Cross and Blue Shield of Michigan, are testing incentive programs based on coordinated systems of care. But Millermaier expects such fundamental changes to take more than an increase in reimbursement.

“If we really create a system based around ACOs and payment reform, we will have to unravel more than 50 years of a payment strategy, and realize that many large organizations have designed their whole systems around the infrastructure that we're thinking about changing,” Millermaier says. “The ability of humans to make changes is biological, not digital, and it's slower than we think.”

Elizabeth Gardner, a former Modern Healthcare reporter, is a freelance writer living in Riverside, Ill. She can be reached at [email protected].