Could the next few years be a period of “creative destruction, ” as the fragmented fee-for-service system will be transformed into a more coordinated system of care?
Robert Kocher, M.D.
University of WashingtonACOs, otherwise known as Accountable Care Organizations (ACO) which were established in the Affordable Care Act (Act) to improve the quality of care for Medicare beneficiaries, are shaping up as the key change agent in health care service delivery.
According to an article by Robert Kocher, M.D. and Nikhil R. Sahni, B.S. (Kocher) in the November edition of the New England Journal of Medicine, how ACOs will affect physicians and patients depends on whether or not physicians are able to get themselves organized to influence how ACOs develop.
If physicians fail to organize, their interests will likely be usurped by hospitals, argues Kocher.
Profound Implications for Physicians
Under the Act, Medicare is launching a Shared Savings Program for groups of health care providers that join forces, with or without hospitals or health plans, to form ACOs that agree to take responsibility for the quality, cost, and overall care of a population of patients.
“The actions of physicians and hospitals during this period, ” writes Kocher, “will determine the structure of the delivery system for many years. The implications will be profound for hospitals’ dominant role in the health care system and for physicians’ income, autonomy, and work environments.”
Will physicians control the ACOs by affiliating and contracting with hospitals or will hospitals control them by employing physicians? Kocher says that whoever gains control will capture the largest share of any savings.
AMA Principles
The American Medical Association (AMA) thinks this development is important enough that the Association’s House of Delegates adopted principles regarding the establishment and operation of ACOs at the Association’s 2010 interim meeting of the House of Delegates, November 6-9 in San Diego.
The AMA principles emphasize that ACOs must be physician-led, place patients’ interests first, enable independent physician participation and ensure voluntary physician and patient participation.
Cecil B. Wilson, M.D., the group’s president said:
“The AMA is committed to ensuring physicians in all practice sizes can lead and participate successfully in new models that allow them to provide the best care to their patients. For this to happen, significant barriers must be addressed, including a lack of resources, existing antitrust rules and conflicting federal policies.”
The delegates asked the AMA to develop a toolkit that provides physicians with best practices for starting and operating an ACO, including how to develop governance structures, organizational relationships, and quality reporting and payment distribution mechanisms.
“Creative Destruction”
Kocher wrote that the next few years will be a period of “creative destruction, ” as the fragmented fee-for-service system will be transformed into an efficient and coordinated system of care.
That transformation, continued Kocher, will be driven by incentives for the development of the information systems and infrastructure necessary for better and more efficient management of chronic conditions. “Outpatient changes will be reinforced by hospital readmissions policies that improve handoffs and by initiatives to reduce the occurrence of hospital-acquired infections and ‘never events’. The desired consequence of these changes is enhanced tertiary prevention, leading to substantial reductions in unnecessarily expensive specialty referrals and tests and avoidable complications.”
How specialty procedures such as hip and knee replacements will fare will depend on the data the new information systems gather. Medical device manufacturers and orthopedic providers have often told us that orthopedic procedures are preventative in nature and allow patients to mitigate or postpone long-term chronic conditions caused by musculoskeletal injuries. Bad knees, hips and spines don’t do much to help a diabetic patient do their exercises.
Physician Controlled ACO
Specifically, Kocher describes what an ACO run by physicians might look like.
Such an ACO will “incorporate primary care practices structured as patient-centered medical homes and that can support new investments in information systems and care teams and can maintain service hours resembling those of retailers.” According to Kocher, this will mean “major changes in the structure of physicians’ practices, since even physician-group–based ACOs may include one or more hospitals, though they may instead contract with hospitals for specific services chosen on the basis of their relative value.”
He says larger ACOs are likely to be contracted directly by payers to manage the continuum of care. He says they are also likely to bear greater financial risk by receiving greater payments for the care of chronically ill patients and accepting at least partial responsibility for the costs of specialists’ visits, tests, emergency room visits, and hospitalizations.
To control ACOs, physicians will have to overcome several hurdles, says Kocher.
The first is collaboration. “ACOs will require clinical, administrative, and fiscal cooperation, and physicians have seldom demonstrated the ability to effectively organize themselves into groups, agree on clinical guidelines, and devise ways to equitably distribute money. Nearly three quarters of office-based physicians, representing nearly 95% of all U.S. practices, work in groups of five or fewer physicians. Since much of the savings from coordinating care will come from successfully avoiding tests, procedures, and hospitalizations, the question of how to divide profits among primary care physicians and specialists will be contentious. Proceduralists who would end up losing income are likely to resist key structural changes.”
Primary Care Docs v Surgeons
One needs look no further than the split between primary care physicians and surgeons during last year’s health care debate. Or, the current debate over how the “doc fix” should be addressed.
According to a study conducted by researchers at the Mount Sinai School of Medicine in New York City and the James J. Peters Veterans Administration Medical Center in the Bronx, New York, published in the October 25 Archives of Internal Medicine, most doctors supported a shift in payments toward counseling and management compared with only 17% of surgeons. Support for shifting payments was less likely to be expressed by physicians in office-based settings, practice owners and those with fewer patient care hours.
Another hurdle identified by Kocher involves the sophisticated information technology (IT) systems and skilled managers needed in order to hold clinicians accountable. “Historically, doctors have not shown the willingness to assume more capital risk or to invest in overhead. Finally, memories of the failed capitation models of the 1990s may make some physicians hesitant to participate.”
Hospital Challenges
The hurdles for the hospitals, according to Kocher, will be their need to trade near-term revenue for long-term savings. “Hospitals are typically at the center of current health care markets, and by focusing on procedures and severely ill patients, most have been fairly profitable. Building an ACO will require hospitals to shift to a more outpatient-focused, coordinated care model and forgo some profits from procedures and admissions. Hospitals’ decisions will be further complicated if payers do not change their payment models similarly and simultaneously.”
Another hurdle for hospitals is that they have generally struggled to operate outpatient practices effectively and may have difficulty designing ACOs. “Acquiring practices and hiring physicians as employees typically reduce the physicians’ incentive to work long hours and, therefore, reduce their productivity, ” said Kocher.
Which model wins out will likely be determined by local market conditions. In geographic areas where physician are scarce and well-established hospital-based health systems exist, hospitals are likely to dominate, says Kocher. In areas where well functioning physicians groups with working IT systems and effective management systems exist, physicians are likely to dominate.
Crossroads
Sitting on the sidelines will be a bad long-term strategy for physicians, says Kocher.
“First, health care reform has passed, bringing extensive changes, and it would be very difficult to repeal or modify the [Act] so as to delay reforms. Congress’s pay-as-you-go rules would require lawmakers to find equivalent savings if they discarded ACA provisions that were expected to save health care dollars—especially at a time when there is tremendous pressure to use any available savings to reduce the deficit. Moreover, policies pursued by the new Independent Payment Advisory Board will probably increase the pressure on providers to coordinate care and form ACOs. Finally, private health plans are facing even more pressure from employers and state insurance commissioners to control premiums.”
Kocher says once the new payment system and other changes included in the ACA transform the relationship between hospitals and physicians, the new order will become entrenched and persist until the next period of creative destruction. Therefore the actor who moves first effectively is likely to assume the momentum and dominate the local market.
Health care systems changed dramatically in the early 20th Century with the introduction of antisepsis and the increasing safety and success of surgery. “Hospitals gained power as they became associated with hope and health rather than fear and death. Now, after decades of hospital hegemony, we stand at another crossroads; physicians may be able to gain market leadership if they move first. How the development of ACOs plays out over the next few years is likely to have lasting implications for the practice of medicine, patients’ experience of health care, and health care costs in the United States.” concluded Kocher.
For more information regarding ACO’s on the CMS Web site, click here:
https://www.cms.gov/OfficeofLegislation/Downloads/AccountableCareOrganization.pdf
