ACOs May Lead to Health Insurer Partnerships with Physicians, Hospitals

I was thinking the other day about President Obama's recent healthcare summit meeting with Democrats and Republicans.

After talking with top lawmakers, maybe he should have a follow-up with a specific healthcare focus: bring hospitals, payers, and providers–and no politicians–to the table, and talk innovative approaches to healthcare.

During that discussion, Obama and healthcare stakeholders should consider Accountable Care Organizations (ACO), which some believe may jumpstart healthcare plans into a new cosmos of care, and would be truly emblematic of bringing everyone together as partners. We'll know over time.

The debate is truly in the embryonic stage, with the basic premise of ACOs removing fee-for-service and replacing it with a payment for a fixed amount per person, with quality and partnership the key elements for Medicare beneficiaries and others. Doctors and hospitals would receive bonuses for exceeding quality-of-care measures. In turn, they would also get penalties for providing lower quality or higher cost per patient.

One governmental agency, the Medicare Payment Advisory Commission, (MedPAC)  has been at the forefront of the ACO debate. In a report to Congress released this week, "Medicare Payment Policy," the commission noted that it has been an "early proponent of payment reforms" that would include ACOs.

The current report noted how ACOs could deal with the "fundamental problem of the current Medicare system,"–namely–that "providers are paid more when they deliver more service without regard to quality or value of those additional services."

In contrast, ACOs represent an example of a "policy that may benefit from coordination with private payers,"according to the commission report.

Marc Bard, MD and Mike Nugent, in a paper for Navigant Consulting, "Accountable Care Organizations and Payment Reform: Setting the Course for Success," wrote that they believe healthcare leaders should immediately begin to embrace ACOs. As a team examining ACOs, Bard says he focuses on delivery system design and leadership, and Nugent focuses on payer innovation and strategies.

"Using the ACO compass, new payment reform guardrails and a commitment to greater engagement, early adopters can begin redesigning their current systems to better position themselves for inevitable change," Bard and Nugent state in their paper. "For those sitting on the sidelines, there is no time to waste."

"Payers and providers must jointly commit to embarking on a journey that leads to both ACO driven clinical transformation and payment reform," Bard and Nugent wrote.

Specifically, Nugent noted the role of payers, which sometimes stand on the sidelines in ACOs. Under the current system, "It's been payer vs. provider. And everyone loses. That is what is driving payers and providers increasingly to the table," Nugent says. "It is time to imagine a fee schedule that payers, providers and patients could agree to that would pay for productivity, and quality."

So there will be plenty of debate ahead. "Obviously this is not going to change overnight, nobody can just change the culture," says Bard. "This is fundamentally designing a different model."

Congress is also looking at ACOs in healthcare pilot projects.

Under the House bill approved in November (HR 3962), provisions are included that call for incentive payment for pilots encouraging ACOs in both Medicare and Medicaid beginning in 2012. The Senate health reform bill allows for providers organized as ACOs that voluntarily meet quality thresholds to share in the cost savings they achieve for the Medicare program. These shared savings programs also must have "adequate" participation of primary care physicians, and would also start in 2012.

While the health reform package may not survive intact–ACOs pilot programs are likely to withstand political changes.

Bard and Nugent acknowledge there will be resistance to ACOs, especially among those who believed ACOs would be a reincarnation of the Independent Practice Associations (IPAs) of the early 1990s or the Physician Hospital Organization of the late 1990s, which focused on consolidation and increased market share at the expense of care quality and added value, according to Bard and Nugent.

But they insist that ACOs "offer the greatest potential yet to deliver better quality care more efficiently."

There are cautionary flags out there, however.

One caveat is put forth by one of government's biggest boosters–the Medicare officials. "If there is no financial pressure on providers that choose to stay in the current fee-for-service payment systems, their incentive to take a risk on a new system will be limited–and only providers who expect that they will fare better financially under the new payment method will volunteer," according to MedPAC's report that was released this week stated. "As a result, all other things being equal, voluntary payment reform would increase, not decrease. Steady pressure on unit prices under Medicare's current payment systems, coupled with appropriate redistribution of payments will help address both of these challenges."

So, this leads us all back to the table. Maybe providers, payers, and patients should meet at the next Blair House summit. Mr. President, are you listening?

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