In the HealthLeaders Media 2012 Industry Survey cross-sector report, just 13% of healthcare leaders say their organization plans to join a commercial ACO. However, 51% plan to be part of a Medicare Shared Savings Program—the so-called Medicare ACO.
It seems that many healthcare leaders may not recognize they already have the foundation in place for a commercial ACO that could prove more lucrative than the MSSP.
It's illogical to me that providers are so eager to join the ballyhooed Medicare ACO or even the Medicare Pioneer ACO program without first creating a commercial ACO. Why focus attention on secondary payers (Medicare and Medicaid) when primary payers (commercial insurers) are interested in establishing programs that should garner greater shared savings than anything being offered by the government?
This incentive certainly should inspire earlier adoption of a commercial ACO before the MSSP, and I think we'll see more announcements of these pursuits in the coming year.
Just last week Blue Shield of California, Greater Newport Physicians (an IPA of more than 500 doctors), and Hoag Memorial Hospital Presbyterian in Newport Beach, CA, announced a three-year accountable care initiative to provide integrated, cost-efficient care to approximately 11,000 Blue Shield HMO members in Orange County.
The providers and payer involved with this ACO, which starts July 1, 2012, will share clinical and case management information and coordinate healthcare services. The provider organizations' will align their incentive structures to improve healthcare quality and patient service while reducing costs.
"We coordinate the care of our patients as they navigate throughout the entire healthcare system, because we know that patient care includes prevention, chronic care management, acute episodes of care, and post-hospitalization recovery," Cassidy Tsay, MD, MBA, medical director of Greater Newport Physicians, said in a statement.
This partnership, subject to the approval of the California Department of Managed Health Care, is the sixth commercial ACO for Blue Shield of California, which is considered an early adopter of the commercial ACO model.
But is the commercial ACO really new? More than a few healthcare leaders have remarked that the ACO is a rebranded and refined model of pay-for-performance and capitation. That's somewhat true. The biggest difference between P4P/capitation and the ACO model is the joining of all stakeholders at the table (the physicians, the hospitals, and the payers) to all share data to guide better outcomes.
By comparison, in the 1990s the lack of alignment from these stakeholders contributed to the near demise of the capitated model.
Although the model has changed, for years payers have encouraged providers to achieve better patient outcomes, and much of that has occurred through P4P-type initiatives. Many of the payer-provider contracts have monetary incentives associated with them along with participant rankings.
The commercial ACO contains elements of capitation and P4P, and most hospitals and health systems nationwide are already working on quality and safety initiatives. All of this is the foundation for a commercial ACO—yet there still a great deal of hesitation to participate. Why?
"Think of P4P as the bachelor's degree; [a commercial] ACO is your master's degree. But moving forward depends [on an organization's] strategic plan," explains Mark Shields MD, MBA, vice president of medical management for Advocate Health Care in Mt. Prospect, IL, and senior medical director for Advocate Physician Partners. (On March 22, Shields will join leaders from Sharp Healthcare and Blue Cross and Blue Shield of Illinois for a 90-minute HealthLeaders Media webcast titled Successful Commercial ACOs: Early Adopters Answer Your Questions.)
In fall 2010, Advocate Health Care signed a three-year agreement with BCBS of Illinois to hold doctors and hospitals accountable for performance and quality service. Advocate, which operates 10 hospitals around Chicago, agreed to limit the rate increases it negotiates from the insurance company.
Additionally, physicians and hospitals must meet performance targets in quality, safety, and efficiencies of the medical care provided to patients covered by BCBS of Illinois's HMO and PPOs. Advocate makes money by getting a share of dollars saved under the arrangement (financial terms and rate increases were not disclosed).
This commercial ACO model puts a greater share of the risk onto Advocate, however, as it must improve patient outcomes and reduce patient care costs in order to reap greater financial rewards in shared savings.
Shields says that, although the commercial ACO agreement raises the bar even higher for Advocate's performance, it's a natural next step for the system. In fact, they were able to get the program off the ground in just three months.
Could your organization move as fast? Shields says it's essential that providers looking to establish a commercial ACO build off of existing payer relationships, as his organization did. Advocate Physician Partners is a joint venture between Advocate Health care and the 3,900-plus physicians on the medical staffs of the Advocate hospitals. It has spent the last nine years working with its payer and unifying practitioners through a clinical integration program—an important precursor to an ACO model.
Advocate Physician Partners' integration program was actually funded by health insurance plans as well as the Advocate system. The goal was to unify both employed and independent physicians into a single comprehensive care management program.
The integration model established a common set of goals and measures across all insurance carriers while giving the physicians an infrastructure and support. In addition, the payers established a pay-for-performance incentive system. It was this clinical integration program that gave Advocate a solid foundation to launch a commercial ACO with BCBS of Illinois, says Shields.
The commercial ACO "is a natural progression for us. We view it as a key to the reengineering of the care delivery system," he says. "We are making the shift from limited to full capitation, so this gives us additional dollars. … So we'll continue our clinical integration, which is a major source for our incentive pools, and now we have the opportunity for shared savings based on our performance."
Advocate Health Care is compiling its data and metrics on the patient outcomes from its first full year using this model and will release the information in the spring. In the meantime, Shields says the organization plans to pursue an MSSP ACO in the coming months. By doing so, the organization will change its reimbursement model—getting nearly 60% of its revenue from ACOs.
"We happen to think that expecting fee-for-service to last or hoping for continued rate increases will fail. We think both Medicare and commercial payers will decrease unit prices, so we'll just be running faster on the hamster wheel and getting paid less for it," says Shields. "However, we also don't think if a hospital or health system has not worked with their payers or physicians in a collegial way that an ACO is the first place to start—but this is [ultimately] the direction to move toward."
Shields is right that launching into an ACO with no foundation is ill-advised. However, healthcare leaders should assess their readiness, as much of the foundation may already be laid.
Working with the primary payer on a commercial ACO, instead of concentrating on one with your secondary payer, will put your healthcare organization in a stronger financial position and soften the inevitable reimbursement transition.
Karen Minich-Pourshadi is a Senior Editor with HealthLeaders Media.
