David May: Good morning. Thank you for joining Modern Healthcare's editorial webcast. Today we'll listen to a discussion on the challenges and opportunities involving accountable care organizations for hospitals, physicians and payers as well as what this model could mean for patients. Joining us are physician-executives from two healthcare systems and an expert from the Brookings Institution in Washington. Before we begin, we have a few housekeeping items to address: Your phones will stay in listen-only mode during the entire webcast. However, listeners can send questions throughout the event. Our moderator will try to ask as many of those as possible before the hour is up. You can find the questions window on the right-hand side of your screen connected to the webcast dashboard that appeared when you first joined the call. A recording of today's discussion will be available on our website, modernhealthcare.com/webinars. Within a few days, all attendees will receive a follow-up e-mail, including a link to that recording. And now, I'd like to turn the webcast over to Rebecca Vesely, a Modern Healthcare reporter and the moderator for today's webcast, and she will introduce our panelists. Rebecca.
Full Transcript of Webcast: The Next Steps for Accountable Care Organizations. Promises and pitfalls for providers, payers in operating an ACO
Rebecca Vesely: Good morning, everyone. We have a terrific panel here today to talk about promises and pitfalls of accountable care organizations. Our first speaker is Steven Lieberman, visiting scholar at the Engelberg Center for Health Care Reform at the Brookings Institution. As I'm sure many of you know, the center has been at the forefront of care coordination and payment reform strategies. Steve will give an overview of ACOs for us. Our second panelist is Dr. Steve Hester, senior vice president and chief medical officer of Norton Healthcare in Louisville, Ky. Steve will talk about the ACO pilot project Norton is doing with Dartmouth-Brookings and Humana. And our final panelist is Dr. Mark Shields, senior medical director at Advocate Physician Partners in Oak Brook, Ill. Advocate has launched a very interesting ACO pilot for its physicians, and I'm sure we can learn a lot from it. So, Mr. Lieberman, obviously we've all been waiting for the CMS to release proposed regulations on ACOs. Last time I checked this morning, they aren't out yet, so I'll let you tell the audience what we know so far about ACOs.
Steven Lieberman:Let me start—I'm delighted to have the opportunity to kick this off and set up Mark and Steve, who are actually running ACOs. Let me start by a quick review of some of the key goals of ACOs. So, if we could have the first slide? First, ACOs are about promoting and developing new systems of care with the important caveat of not having an adverse effect on existing systems that are already providing accountable care. And the key goal of ACOs in creating systems of care is to change provider culture in the incentives so that we're no longer operating under the environment of fragmented fee-for-service. The goals of ACOs are to lower cost while improving population health. The critical tools that ACOs bring are the ability to measure both clinical and financial performance, and, ultimately, to hold provider systems accountable for both cost and quality for assigned patient populations. Next slide, please.
So, if the key foundation of ACOs is creating a system of care, the logical question is: Why create provider-space systems of care? And the answers are: First, there is some empirical evidence in the peer-reviewed literature that systems of care provide better care at lower costs than fragmented fee-for-service. Independent of how strong that evidence is, the critical reason for having systems of care is that only systems of care have enough patience to allow for meaningful measurements of financial and clinical performance. Clearly, small and solo physician practices don't have that. In addition, the reason to have systems of care is you need a comprehensive set of services. Work done by my colleague John Bertko suggests that the minimum risk-pool size system just from a financial perspective requires 5,000 Medicare patients and more is better and 15,000 commercial patients. Without that, there's just too much volatility in projecting budget targets and measurement. And, as I'm sure we'll hear from my clinical colleagues, those risk pools are actually probably too small to prevent and to support the kind of detailed measurement of clinical outcomes that we need to have comprehensive measurement. Finally, I believe strongly that the performance goals have to be patient-centered, that is, the quality, efficiency and appropriateness of the care that a patient receives has to reflect all the care that that patient receives and should have received, and not just what an individual physician does—that it becomes enormously complicated to try to do a measurement on it, especially or procedural basis. If I could have the next slide.
Some of the other key ACO innovations—and, perhaps, this starts to address the question of how ACOs will differ from HMOs and more conventional managed care—is that ACOs are designed to minimize barriers to entry for both patients and providers. That's the reason why ACOs have adopted a patient-attribution methodology rather than acquiring patient enrollment. In the Medicare statute, it's very clear that there are no benefit or network restrictions, there's no lock-in, there's no prior authorization. None of the kinds of structural features that HMOs have to gain beneficiary compliance.
Lastly, ACOs are designed to be a very flexible model that will allow for different configurations of providers to come together in different organizational and legal context to form different kinds of ACOs that will very much reflect the local markets in which they practice.
The second key innovation of ACOs is that it's a very flexible payment model. The shared-savings model can be a bonus only, no downside risk. For more sophisticated groups, it can have a symmetric level. It could have symmetric risk where the providers are taking marginal reductions—at risk for marginal reductions in their payments or get shared savings if they do better than budget targets. And it will also support a hybrid system of shared savings and partial capitation. Importantly, it's possible to set up a shared-savings methodology to incorporate other innovations such as medical homes or episode-based bundling of payments.
Lastly, and this is a really critically important point: Regardless of how well an ACO does on financial terms, it will not qualify for the first dollar of shared savings if it doesn't meet its quality thresholds. If I could have the next slide.
So, quickly now, what are some of the challenges for ACOs? And the first challenge is whether ACOs can succeed in saving money and improving quality. That's a particularly interesting question given the fact that ACOs don't have the ability to enroll patients, don't have lock-in or the other benefit changes, leaving the question of: By relying on systems of care and the provider-patient relation, is it possible to change patient behavior. One of the questions that is an environmental question that is not directly related to ACOs but is related to what's going on in our current healthcare marketplace is: What happens to provider concentration and power? And, finally, the age-old question is whether ACOs will empower physicians or hospitals. If I could have the next slide, please.
So just to go to that first question of whether ACOs will be financially viable, let's take a very simple, stylized example that takes the bonus-only model, assumes that an ACO is what I would consider to be highly successful and manages to come in 5% below its budget target. So it saves 5%. Under most formulations, we would expect the first 2% to go to the payer. I'd be happy to explain and answer a question of why that's necessary. And the remaining 3% would get split 50-50, although I think Steve Hester would say that in his case he's actually getting less than 50% of savings. So, in a 50-50 model, the ACO receives 1.5 percentage points in shared savings. And there's an important question here of: It's not free typically to produce these rather dramatic results and changes. Where does the cost of financing those necessary clinical process improvement and infrastructure changes come from? And for the purpose of simplicity, I'm going to say that let's assume that there's a net 1.5% savings—that'd be shared savings bonus that the ACO gets. That's a significant portion of typical spending for primary-care physicians, but it becomes a relatively small share of the overall physician compensation, and it's almost rounding thus on the total number of physician and hospital spending. If I could have the next slide, please.
So, it pains me to say this but: ACOs are not a magic bullet. There's no simple way here to both lower PMPM spending and improve quality and at the same time increase speed. If there isn't an increase in the number of patients that a system sees, lower per-member, per-month spending necessarily translates into lower top-line revenue going to providers. So the question becomes: Which providers lose revenue, particularly in a Medicare context where prescription drugs—so called Part D or outside of the ACO support the ACO calculus, most of the low-hanging fruit would appear to be taking actions that reduce hospital revenues, limiting emergency room use and avoiding unnecessary inpatient admissions and readmissions, shifting care to less costly sites of care for imaging and free-standing surgery. All those are things that have the effect of hurting the hospital's top-line revenue. So if reductions in top-line revenues are not going to automatically translate into an adversely effected bottom line that requires cutting costs by more than the loss of revenues for institutions that have high fixed costs, that would be quite challenging. And certainly in a bonus-only model, from a narrow financial perspective, hospitals may wind up winning simply by continuing to exceed budget and never even qualify for shared savings.
So let me wind up quickly by talking about the last slide. Next slide, please. The final slide. By talking about some of the key issues for the Medicare ACO regulation, which the latest rumors have coming out tomorrow—although it's been rumored to be coming out now for several months. We'll see if it actually comes out. I would argue probably the most important thing to issue is whether patient attribution is prospective on—I expect my colleagues will have something to say about that. The second issue is whether the Medicare rule allows for flexibility for different payment and organizational models or whether they try to shoehorn everybody into a pretty standardized, plain vanilla approach. We will all be enormously interested in the precise rules for how budget projections are done and what the rules are for shared savings. My understanding is there is to be accompanying statements from FTC and Justice on antitrust and market power issues, the whole question of what the OIG says about Stark and other issues and the secretary's use of her waiver authority will be obviously of great interest. The last two points are: It is almost impossible under the normal order for ACOs to be able to have—if they can be started on Jan. 1, 2012, if we have to go through a full notice of comments and then the application process. We will also be interested in whether CMS is open to all comers or whether it tries to restrict the number initially of ACOs. And lastly the question will be what's the relationship between a regular ACO and there's a what's called innovative or pioneer ACOs through the Center for Medicare & Medicaid Innovations. With that, let me turn in back to you, Rebecca.
Rebecca Vesely: Thank you very much. I want to follow up on one thing that you mentioned earlier, which is the 2% savings going to payers first. Why is that?
Steven Lieberman:In the bonus-only model, where if an ACO does better than budget, it will get savings. But if it does worse than budget, it has no financial consequences—what cost estimators refer to as a one-sided bet. Because projecting cost is statistically very noisy, there will be a lot of groups that do absolutely nothing hypothetically and will be able to just by random chance do better than budget targets. And in that case, the payer will be paying out for people who are doing better simply by random chance and normally if you had symmetric risks so that, if there's a group that did worse by simply random chance than budget, it would have to pay it back because we are only paying on the favorable side and there's no consequences for people who have unfavorable variance, that's why we need something like the 2% corridor.
Rebecca Vesely: I see. OK. Thank you. Alright, our next speaker is Dr. Steve Hester from Norton Healthcare. Dr. Hester.
Steve Hester:I appreciate the opportunity to share some of the things we're doing at Norton today, and certainly we continue to be in the learning phase of this as many others are. But one of the things I really want to focus on today is some of the things about obviously health reform sort of changed how we look at our business on a daily basis. But specifically, I think it's easy to get focused into an accountable care organization and call it sort of the organization. I really think it's about how as healthcare providers we look at how we provide greater accountability for what we—in the healthcare we deliver and, ultimately, provide more value to those who are receiving the care as well as those who are paying for the care. And I think that really comes to a lot of clinical re-engineering and that's obviously not an easy task to achieve, and one that requires a lot of change management as well as patients on both the providers and administrative side. I think one of the things that in the early phase looking at the health reform package, it really did not have—seem to have a lot of focus on healthcare delivery, but it focused mostly on healthcare payment structures. And I think one of the values there's really an opportunity for physicians and hospitals to come together to say, ‘How do we actually take our delivery system and change the way we provide care specifically around things that are continuum of care, post-discharge follow-up, those type of things?' I think it's a real opportunity as well as a challenge. Next slide, please.
One of the things just for a little bit of an overview of Norton Healthcare. We're a not-for-profit health system in Louisville, Ky., five hospitals, a significant number of outpatient centers. There's roughly 60,000 discharges a year with about a 2,000-member medical staff. We employ about 500 providers, certainly not unlike any other healthcare system starting to see physicians seeking more employment. And, as we've done that, I think one of the things the highlight about our system is we don't have our own insurance product. We don't own our own post-acute-care facilities or our own home health, so those are things I'll talk about in a moment about important areas I think that require a different level of partnership than we may have had in the past. Next slide, please.
One of the things I think in this that easily gets—we get caught up into the rules, regulations, how we're going to make things move through. But really when I look at this, the key is how do we put the patient at the top of this and make sure we're working towards greater patient accountability? Certainly I think it's going to be incumbent upon health systems to do that better from an educational perspective and making sure that we're pulling folks in and giving patients the tools they need to improve their health. So often, we get into situations where patients want the quick fix, the easy fix, and that's not always the answer. I think we really need to make sure we're spending the amount of time to help develop patient accountability but clearly they need to be at the top of this if we're going to see improvement in outcomes and ultimately in value. Now I think clearly there's a place where the payer or employer plays into this, and you're certainly seeing a large number of health companies develop health wellness programs. I think that's great in terms of how they're getting engaged to help their employees from a health perspective, but not only that but ultimately trying to decrease their health spend. And then ultimately the provider. I think it's really going to take all three of these areas to come together to really get success around accountable care. Next slide, please.
Now, I'll be anxious to see what the regs say when they come out, but I think some areas that I found that are real operational challenges and things that we feel we've spent a lot of time working through and still have a lot to learn, but attribution can be a challenge to get that right. You obviously want to make sure you get the appropriate number of patients involved, and attributing those to the folks that can make impacts—not just from measurement standpoints—but I think that's the key on attribution for me is: If I want to attribute a patient to a provider, I'm going to make sure that provider can make an impact on both outcome and quality. Now I think on the measurement reporting side, one of the values here in which we found in our partnership with, we're working with Humana in the early phase here, we've found that the health plan provides information that we don't yet have available. Some of the claims information can be very valuable as it relates to tying that into our electronic medical record to get more of a 360-view of patient movement and spending, and how we can actually improve utilization and quality metrics. Now in financial modeling and budgeting, I think it's going to be an area that as organizations try to take on accountable care, it's going to be a new challenge because I think the reality is most healthcare organizations that don't have a health plan have not spent a lot on actuarial analysis population. And I think that's going to be a new area that from a healthcare delivery system to spend some time and understand that is going to be very important—making sure that budget targets can be set and that really everyone understands because just as Steven mentioned earlier, some of the 2% corridor, I think as you get into the details of this, you start to understand why that 2% corridor is there because it's not an exact science. It takes a great deal of relationship-building and comfort to get to a place where you feel like both sides of the organization when something happens there's been a real reason that there's that outcome or impact. And then again, the re-engineering focus, the oversight in structure and then partnerships are going to be really key going forward. Next slide, please.
So, from a Norton Healthcare perspective, we have a patient population in the Louisville community of about 1.2 million. We currently started this to include our Norton healthcare employees, our Humana employees, and as we've gone through our attribution model, that went from probably about 24,000 folks down to about 10,000). We're working with some other groups to pull into the process. The early phase included about 300 of our physicians of primary care and specialists. I think one of the things I would say as an organization that does about 1.5 million patient visits a year, one of the challenges is getting to a scope to have to be able to make effective change because obviously taking a significant number of too large employers and putting them into a population to develop to get to 10,000 patients. It gets hard to make sure those all get monitored as those things go through the system, and so if you're really making impact, I would say our greatest level of clinical impacts we're trying to make now focus more broadly on healthcare delivery, but certainly targeted at things we've learned. Their ACO population that we believe we can work through and see improvement. Next slide, please.
Now as part of the Brookings-Dartmouth pilot and Brookings and Dartmouth has have both been very helpful as we've worked through this over a period probably of about 18 months to try to get to a model where we feel like we can have exchange of data and some clear definition around progress. And I think one of the things—certainly there are other organizations listed that are included—but one of the things we all felt like were important from the beginning were really a standard set of quality measures which can be reproduced. The patient-attribution model, which, you know, one of the things I would say on the attribution model is: Don't let perfect be the enemy of good because certainly there are a number of challenges in that model, but one is just to get something going. Because, as you move through a model, regardless of what it is, there will be a significant amount of learning that can help you continue to improve on. I think, and certainly we have looked initially at self-funded populations primarily because we felt like, too, from an employer standpoint, there's a significant amount of engagement on seeing their employees healthcare improve and as well as understanding he direct spend on their healthcare dollar. And then obviously completed a proposed shared-savings model, which Steven had alluded to earlier. Now, next slide, please.
Some of the things from a performance metrics standpoint: You know, these are an early phase. I would really want us to get to where a lot of these—one of the things I think we've done much better in the past 10 years in healthcare is we are measuring a lot more of what we do. But we still haven't gotten to really good outcome metrics and for comparable purposes. And I think that's the real challenge for us in the next five to 10 years: As healthcare delivery, how do we get better at measuring real outcomes? And so, but we started with really clearly looking at triple aim focus from population health safety and patient experience. But then, looking at just we're measuring a number of other things, but as a start, because these are claims-based it doesn't require a significant amount of infrastructure for organizations to get started in something like this. We really focused on looking at overuse around low-back pain, use of imaging studies, how we look at population health from cancer screenings and then safety for annual monitoring of patients on chronic, persistent meds. Now the care coordination is a big part of this, and Steven got into value-based purchasing, but the 30-day all-cause readmissions, this has been a real focus for us as an organization. And then continuing to push our patient experience at work. We have a team that's really dedicated to that, and I think it is something we can measure and have comparable ideas for improvement. Next slide, please.
On the clinical re-engineering side, we really have taken a focus to say, ‘How do we change care coordination and communication from providers?' Really looking at prevention as being a part of this, and then really trying to say, ‘How do we get the folks who are in the emergency department who might need—who could go into an immediate care center-type setting—really to make sure we're getting those folks placed into the right level of care for delivery. Now I think also a big focus has been on the increase in generic medication utilization. As we looked at our own numbers, we found we had opportunity there in really taking some focused efforts to decrease that. But then looking at total different systems of care around management of some complex patients. Next slide, please.
Now one of the things that I hit on earlier, but I think is incredibly important is partnerships in the community, really a strong focus on how you find a home health partner, long-term-care rehab services and look at those folks and start to have discussions about their outcomes and metrics. And I think really as you look at this, you really want to find folks who are giving you the best outcomes, because obviously if you're in a payment situation, you want folks who are invested in both helping you give the best level of care and increasing the value of the patients. Then just as a quick note, community health departments can be a real value and one that have not been looked at in terms of the continuum of care but how do we pull those folks in in a different way, and certainly those are resources in our community that can be maximized. Next slide, please.
Lastly, I think things that are going to help us get to a place of success really are perception of the ACO development in the communities, and those are very much going to be community-based. Obviously, we're still, the definitions—those coming out—will help give clarity there, but I think that's going to take some marketing to our patients to make sure we continue to have their best interests at heart. I think patient engagement is a must and then making sure that we understand provider culture change is not something that's easy. And this is really the hard part of this work. I think really having some strong folks to help that structure will be real important. And then I think innovation and data exchange and reporting of—as I stressed earlier—outcomes metrics are going to be really important. And I certainly hope, and Steven hit on a little bit of this earlier, that we see as regulations come out we get some flexibility there around some of the restrictions we might have now around Stark and the antitrust-type things to really look and say, ‘How do we improve care without finding ourselves crossways with governmental regulations?' So with that, I'll turn it back over to Rebecca. Thank you.
Rebecca Vesely: Great. Thanks so much for sharing that. Can you tell me when you expect to get results of this pilot?
Steve Hester:Yeah. We have some early numbers now, but I would say probably in this type of a population you would want at least probably six more months to nine months for us to really start looking at some—you know we're obviously trending and watching a lot of things, but where I'd feel comfortable is probably six to nine months.
Rebecca Vesely: And then how long do you expect this to run?
Steve Hester: You know, we really view this as more of an ongoing process in terms of how we're changing our healthcare delivery system, and so, you know, I look at this being a small subset of the pilot, of looking at how we're increasing value for healthcare delivery in general. So I see that as the real value in this pilot is, how do we look at change across the system? So I'd say obviously we plan to do this for three years. It's kind of where we started our initial phase. But, some of the change we're making I think will continue for some time.
Rebecca Vesely: OK, great. Well now we'll hear from Dr. Mark Shields and what's happening at Advocate Health Care in Oak Brook, Ill.
Mark Shields: Thank you very much. It's nice to be part of this panel. This is an exciting time in healthcare. I really agree with the two Steves that an ACO creates significant challenges and opportunities for the delivery system. Now in my comments, I'm going to primarily move what I would call upstream from an ACO and talk about building the chassis for a successful ACO and give our program over the last seven years as a template or an example of the kinds of things that we feel need to be done for a accountable care organization to be successful. I'm not sure it takes seven years. I think it can be telescoped, but there is a lot of change that needs to occur. This slide gives our formal definition of clinical integration. And, essentially, this describes what we do across our joint venture, which is a joint venture between 3,800 doctors and Advocate Health and Hospital Corp., which is 10 hospitals in Northern Illinois. And, as I said, we've done this for the last seven years. It's essentially doctors working across specialties, working together with the hospital to drive quality, patient safety and cost effectiveness. And I think it's very important to point out that 75% of these physicians are in small practice. Average size is 2.7 physicians. Because clearly that is the target audience that we're going to have to include if ACOs are going to have significant legs across the country. We know large multispecialty groups are able to drive quality, patient safety, cost effectiveness, but infrastructure is needed to help these smaller practices reform.
So our program has not only come from this challenge of having small physician practices, which is a dominant practice across the country, but we also have, I think, addressed some of the shortcomings of the classical hospital medical staff structure. Of our 3,800 doctors, we represent about 65% of physicians who are on staff of the Advocate hospitals. So this is an elite group. I'll talk about some of the membership issues in a minute, but it's not for everybody. They really have to be engaged in the program and we've had commercial contracts for this program now for seven years. So it's a model that works both in the commercial market as well as the potential governmental market. The clinical integration program as the slide shows has evolved now to have 146 individual measures basically grouped into five categories: clinical outcomes, efficiency, medical and technological infrastructure, patient safety and patient satisfaction. Next slide.
This is a schematic that just gives you a sense of how we've evolved over time. When we first started, we had only 36 measures, but we've added measures for specialists as the industry has really developed more and more measures for specialists and then, more recently, we have added measures that tightly align physicians and hospital management. That's same measures, the same thresholds for them to succeed, and then it's really helped drive things like CPOE, use of electronic ICU and other measures. Next slide, please.
This slide gives a sense of how the program has developed over time. It takes time. We develop individual report cards that go out every quarter to physicians on their own metrics as well as for the local physicians in the hospital organization—make sure we've got all of the metrics. Next slide.
I mentioned that we have within this joint venture about 65% of the hospital medical staff. It's a significant hurdle to be a member of this joint venture. As you can see here, we've progressively increased the number of membership requirements, so you really have to jump through a good number of hoops to continue to be a member of APP, and that's really gone along with the development of the physician led culture of this organization. Next slide.
This is a very busy slide, but essentially the point is that it is a yearlong process that we go through to develop new measures that we will use in the program. We don't view our expertise in measure development but really look to national organizations like the National Quality Forum, the NCQA, the AMA consortium and others. But we've spent a lot of time vetting which measures we use, making sure they're relevant to the marketplace, insurance companies, to employers, to patients, to physicians. Now then we assess the data-gathering challenges. We approve the list and develop quality improvement, process improvement measures and support them and then roll them out in the fall of the following year. Next slide.
But having measures and having incentive funds, and we have significant that we'll distribute for this pay-for-performance program based on metrics. We'll distribute about $50 million starting in a couple weeks based on the 2010 performance. And it's a key part of the program. It awards physicians for work that they know is good for patients but is not compensated for in our fee-for-service system. But you have to go beyond having measures and incentives to really providing infrastructure and support to help doctors succeed. And this will be very important as we move into ACOs. And for example, having Web-based disease registries, having pharmacists who do academic detailing to help drive generic use, having formal educational programs—both for doctors and for their office staff, following the Institute for Healthcare Improvement models of advice for chronic admissions and how we're moving into access. So having education and infrastructure support is critical to achieve success, particularly if you're dealing with small group practices. Next slide.
I think the most important thing in getting success in an ACO will be culture, culture, culture. And it does take time, and it takes discipline. But an ACO has clinical integration, has—fits into the long-term goal of the Advocate Health and Hospitals Corp. culture as well as the culture of this joint venture. The schematic here is the Advocate 2020 strategic plan. As I said, this is composed of 10 hospitals in Northern Illinois, and what is relevant to this slide is that the word ‘hospital' does not appear on it. That is very unsettling when this first came out, and this was long before there was discussion on the national scene of ACOs done about four years ago. So it made a lot of hospital CEOs uncomfortable, but we're interested in a lifelong relationship with our patients regardless of where they are and to re-engineer the care and programs to accomplish this. Next slide.
We have rolled out starting Jan. 1 of this year a program that we call AdvocateCare. Essentially what we feel will be our accountable care model. And we have our first contract, commercial contract, to support the Blue Cross, which is the largest payer in our marketplace. It's a shared savings model, and essentially we have a global cost management on top of the existing fee-for-service structure. We have responsibility for managing the comparative trend—how we do compared to the rest of the market. We have a method for sharing the savings both with the insurance company as well as amongst the physicians and hospitals. We've had to step up our partnering with Blue Cross that's been a good partner with us in terms of data-sharing and how we manage care at different levels of the organization. And we really feel this model will be applicable not only on commercial contracts but applicable to Medicare. Next slide.
This slide shows some of the key strategies that we have undertaken to prepare for AdvocateCare—whether commercial or for governmental. Accelerating, improving our primary-care access, this helps avoid emergency-room use; our outpatient management, the most obvious step is our hiring of dedicated care managers to assist physicians with high-risk, high-cost patients; reorganizing our inpatient management that will assist physicians in both optimum length of stay as well as avoiding readmissions; Perfect Transitions also addresses this with improving the handoffs, having some transition coaches for high-risk patients, integrating our home-care services with those. We're developing a formal post-acute network. This will be particularly important for Medicare ACO and then supporting services, such as our data analytics where there's some additional systems for this. A key strategy that Steve Lieberman talked about is this No. 7, which is backfill/market share growth. This is key since for a given 1,000 patients, if you're successful in an ACO model, we need fewer people in hospital beds, avoiding readmissions, avoiding admissions by managing chronic disease better. So our plan is attract physicians who are splitters to do more of their care at Advocate hospitals and to attract additional physicians in our market to join Advocate Physician Partners. And then finally culture. I really think this is where this begins and ends. If you're not focused on changing the culture, both for doctors as well as the hospital managers. So that concludes my comments.
Rebecca Vesely: Great. Very interesting. Thanks. Well, we've got a lot of really great questions, and I'm going to start with you Dr. Shields. One of the questions that we got from one of our audience members is: The number of metrics you are tracking is quite impressive. What does the infrastructure look like in terms of human capital necessary to support those initiatives, and what level of interaction does the system have to support all these small practices? Can you answer that?
Mark Shields: Yes. We—and you know when we started this seven, eight years ago, we weren't at this level. I think it's very important to point out. I think you can start and have significant success with many, many fewer measurements. Now, I think if you're going to be a full-blown accountable care organization, you have to quickly reach this kind of scope. But to start out with a product that is attractive to the commercial market on a clinical-integration basis, I don't think you have to do that. But the bottom-line question is we currently have about 28 FTE equivalents, and people spend part of their time on that so that's summing it up in terms of FTE—full FTE—equivalents that are committed to the clinical integration program. The hiring of dedicated care-management staff is something that's 70 FTE, I said, we are hiring for this single commercial contract, and we need many more if we're going to move into a Medicare ACO. And those FTEs do not include the staff we have hired to help roll out an electronic health record across our physicians. And I think what's important to note is what the stuff we've done over the last seven, eight years is really been done without a fully deployed electronic health record. [Unclear: 42:55] use registries or other electronic tools, but not had an EHR. I think, quickly, a full-blown ACO is going to need an electronic health record to really capture the full opportunity. But, we have done—what we've accomplished over the last eight years without that EHR.
Rebecca Vesely: So how are you paying for all this? That's another question from our audience.
Mark Shields: Yeah. We negotiate the—we do single-signature contracts for both the joint venture and the hospital contract. We've done—you know, for the last eight years—we've negotiated both base compensation and incentive compensation. And, over time, that incentive amount has increased. It's now about 10% of physician compensation. And those are the dollars that are in our incentive program, and also help support infrastructure for the program.
Rebecca Vesely: I see. And, Dr. Hester, what kind of EMR are you using? Is in it synced up with allowing you to share across the care continuum, like ambulatory, nursing home?
Steve Hester:No. We've had a complete EMR within our hospital system that we're in the process right now of rolling out our ambulatory side. We're actually in the process of making a change—quite a bit of change for us—on the EMR front, but one of the things that we, too, have done a lot around the metrics side but using registries, things like that, to be able to do it. Sort of rather than having the full EMR, I would agree with Mark that the more you can have, that integration certainly you're going to be required, I think, in the future, and, so certainly in the process of building that. But to date we've not had the complete EMR rollout. But there's certainly hope to have that in the next one to two years.
Rebecca Vesely: OK. I want to go back to the issue of attribution. Mr. Lieberman, you talked a little bit about this in your presentation. But can you explain a little bit more what perspective attribution is and why this is so important moving forward in ACOs?
Steven Lieberman:Happy to. And I suspect that Steve and Mark will have real-world experience in this, but the simplest way to think about it is: Do you know in advance could your patients that are members of the ACO are, and do you have explicit budget targets for those patients? Or are you in the opposite circumstance, which is what I'd call retrospective attribution? And, an example of what I'd call ‘retrospective attribution' is what CMS did in the so-called physician group practice demos, which is at the end of the period, one looks backward and says, ‘Where did patients get their care?' And after the close of the year, unfortunately, well after the close of the year, you're then told who are the patients that were assigned to the ACO. When, obviously, if you don't know who the patients are until after the end of the year, you can't—that becomes a score-keeping exercise but it's hardly one you can target your efforts. And, just to use a hypothetical: If a third of a patients at a physician's practice are in an ACO and two-thirds aren't, if the physicians don't know which patients are in the ACO, they either have to make the process changes for everybody without the prospect of getting reimbursement for two-thirds of those patients, which becomes a very questionable, I think, financial and cultural change. Or it's not clear how they should be acting. So that's why, in my mind, it's so important to have clear targets set in advance for an identifiable population.
Rebecca Vesely: So then, Dr. Hester, how are you dealing with this issue?
Steve Hester: Well, so right now, we're looking—we end up doing a look-back on our patients to develop who will be attributed, so in essence a starting point. You have to start somewhere. So we're starting with a patient population. We look back to say, ‘Which of the folks do we want to put into a model will be attributed because they've received care from the providers within our group? And then set targets for the future of what those would look like. Because the key is, as we touched on, the key is the conditions. If they really want to make impact on these patients, they need to know the patients are involved; they need to not be blinded. And, so, I think one of the things—the troubles you run into on a retrospective look are that you end up with patients not knowing they're in the model and then physicians not knowing they're in the model. And the reality is: I don't think that we can expect to have change in healthcare without having patients fully engaged in understanding what the opportunities are. And so I really think that we're going to need a model that has the patients completely aware of being in the model and how the attribution works.
Rebecca Vesely: OK, so then you see the measurement of patient service satisfaction is becoming even more important in the metric moving forward in this model?
Steve Hester:Well, I think in terms of achieving outcomes, because primarily, I think, without the patient knowing if you're really just going to put some folks in and you do some score-keeping exercise at the end of the year to say, ‘Well, How did you do?' and no one really understood they were really in the model, then I don't think that you can expect change because what you're really looking to say is, ‘How do we develop new delivery systems that offer patients the opportunity for care coordination, different things than they may have had in the past, and we really need to see what makes the greatest impact. And, so without those patients knowing you're in a model, I'm not sure we can expect to achieve that.
Rebecca Vesely: OK, Dr. Shields, we've had a couple questions as far as small group practices—obviously this is a big issue in the country—and can you tell us a little bit about what you think that small-group provider practices can do to prepare for all these coming changes?
Mark Shields: I think they need to find partners. The critical thing is that they need to be able to work across specialties, and I think physician organizations alone could be a successful ACO or do a clinical integration program, but I think there is enormous value to partner with a hospital. Hospitals have management expertise, they have data management, they have capital. I think that if physicians do this alone, quite honestly I think they're leaving significant resources on the table. And then you also have to look at partnering with organizations like skilled-nursing consortiums. Those will be critical for success in a Medicare ACO. Not quite as critical for a commercial product, but for Medicare it's absolutely essential. So it's looking for partners, and I think this needs some real culture change and I don't think the place to start—small practices aren't doing that now, and ACO is not the place to start. There are other opportunities—whether it's bundled payments, a clinical integration program, other kinds of efforts. But they need to start doing that immediately, and that's what I would say.
Rebecca Vesely: There's a couple people who also want to know—
Steven Lieberman: Rebecca, if I could. This is Steve Lieberman. I just wanted to add one point, which I think flows from what Mark's experience with Advocate and what he said. I think it's important to distinguish being part of a system of care from being from the legal or organizational implications of being part of the system of care so that, Mark, if I'm understanding what you're saying, you're able to successfully integrate small practices that continue to operate as their own entity, whether you're not employing physicians necessarily.
Mark Shields: Yes. The word I used was ‘partner,' and, you know 75% of our docs are in private practice and they're not owned by the system. They're in private practice but they're active members of this joint venture of 3,800 docs.
Rebecca Vesely: A couple people want to know, Dr. Shields, how these physicians are making money? How do you distribute the shared savings, and do they get a cut from the hospital side?
Mark Shields: I'm sorry I missed your last—
Rebecca Vesely: Do they get a cut the hospital side?
Mark Shields: Do they get a cut from the hospital—
Rebecca Vesely: If the hospital achieves savings, do the physicians' share in that?
Mark Shields: Sure. Well this has evolved over a seven-year period and actually before that we have continued to have risk contracts in which we have those discussions, and that's the key part of the culture-building. It makes many hospitals uncomfortable because it really has to be transparent about their costs and revenue flows with physicians. But that's really what it's about. And, yes, as I said, we negotiate for these payments, and then there are savings from the global budget based on use of hospital, use of ER, use of imaging, use of specialty care and so on and so forth. So, yes, those savings come into the overall incentive pool and are then shared between all the members of the joint venture—both the doctors and the hospital.
Rebecca Vesely: So there's an opportunity for everyone to do well in this new environment?
Mark Shields: That is correct. Now I think, I said though, I think it's very important to point out this backfilled component because for a given 1,000 patients, if you're successful in either the clinical integration or ACO model, you need fewer hospital days than what you had in a prior state. We feel being a first-mover in our market is an important component. If you want to attract more physicians and patients to come to our system, then I think this follows up on what Steve Hester had said about how we want to engage patients since I'm very hopeful that the Medicare ACO attribution will be prospective so we know in advance who these patients are. And, in addition, that Medicare really would allow us to reach out to the patients in a formal manner and tell them that we are in this program and that we have these programs that are attracted to that because we really want to increase the stickiness of those patients to our system because it is a PPO model. Patients are not locked in. They can go outside our system but we want them really to stay heavily engaged in our system and we want to reach out to them in a formal manner.
Rebecca Vesely: Great. Well we're just about out of time here. I really appreciate all of you taking the time and to our audience for all the great questions and for listening in. This has been a very thought-provoking discussion, and I'm sure we'll be hearing a lot more about ACOs in the future. Dave, I guess I'll turn it back over to you.
David May: Thank you, Rebecca. And this concludes today's discussion on accountable care organizations and some of the challenges and opportunities that lie ahead. For those who want to view this webcast again, all attendees will receive a follow-up e-mail with a link to this recording of this webcast available on modernhealthcare.com/webinars. All slides presented here in this webcast are also available at that address. We thank you.
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