Health system reformers hope the ACO is a
game-changer. Are you ready to play?

By Kate Alfano

Facing ballooning costs in the current fee-for-service-based health care system, payers are actively seeking different ways to pay for care. One model—the accountable care organization—is designed to bend the cost curve by encouraging physicians to coordinate their services within the continuum, and paying them based on their ability to improve the quality of care their patients receive.

This isn’t a new concept; ACOs have been gaining traction for years in academic and policy institutions. They recently received a boost through the Patient Protection and Affordable Care Act, which aims to test the model first in Medicare, and if it works, expand it into other patient populations using additional payment models. Moving away from medicine as we know it raises a lot of questions, but one expert says it’s far from political.

“The health reform we’re going through right now is not a Democratic or Republican ideology,” says James Martin, M.D., chief medical officer of the Christus Santa Rosa Health System in San Antonio. “It is based on economic realities that the country will go bankrupt if we continue to address health care and pay for health care the way we do right now. The sooner physicians can quit trying to frame it in terms of conservative or liberal viewpoints and really address the economy, the better we’ll be moving forward.”

As described in the health reform law, ACOs are groups of affiliated health care professionals that agree to be accountable for the quality, cost, and overall care of patients for whom their physicians provide the bulk of primary care services. Several organizations could potentially form ACOs, including physicians in group practice, physicians in networks of practices, hospitals and physicians in partnerships, and hospitals employing physicians.

The only ACO program created in the law is the Medicare shared savings program, scheduled to launch Jan. 1, 2012. The law also provides for a Medicaid pilot and other payment and delivery models devised through the new Center for Medicare and Medicaid Innovation. Insurers and others in the private market are expected to follow with their own ACO programs.

As for Medicare, qualified ACOs must coordinate care, define processes to promote evidence-based medicine and patient engagement, report on quality and cost measures, and encourage investment in infrastructure and redesigned care processes. In return for meeting quality and cost targets, physicians within the group are eligible to receive “shared savings” bonuses on top of their typical fee-for-service payments.

Even though the Centers for Medicare and Medicaid Services won’t release the full guidelines until late winter, and the Federal Trade Commission and U.S. Justice Department are working to clarify antitrust issues, a lack of details hasn’t stopped physician groups, hospitals, and others from positioning their organizations for what’s to come. This includes some hospitals in large urban areas of Texas that have begun aggressively campaigning to purchase medical practices, particularly in primary care.

“It appears that the ACO structure requires that there be primary care involved, which is why there has been a sudden resurgence of interest in primary care,” says John K. Frederick, M.D., a family physician at South Austin Family Practice Clinic. “It’s because hospitals and other groups have interpreted [the law] as meaning they have to have a strong and vibrant primary care presence. These big entities are trying to find primary care wherever they can, and in Austin, they’re trying to buy practices or absorb practices very rapidly.”

Facing pressure to consolidate, reorganize, and rethink the way they practice, this time of change can be unsettling for physicians—especially those in small-group, solo, or rural practice settings—but Frederick says reform will ultimately be good for family doctors and their patients. He points to data showing that communities with a large presence of primary care have cheaper and better health care, which have also piqued the interest of lawmakers.

“I interpret what [health care reform] has tried to do with family practice is to be supportive of the model of having an aggressive and very active family practice base,” Frederick says. “In a sense, it’s given us an opportunity to become integral to these new organizations, but only if doctors step up to show leadership and some ability to incorporate with each other to form entities.”

Some physicians are wary of ACOs and liken them to the health maintenance organizations of the 1990s, the last time physicians faced this type of integration. In some cases, Frederick says, they were very good for primary care, and for others, disastrous.

“If you think of it in its largest sense, it really is reminiscent of historical managed care in the ’80s and ’90s where a group of physicians or a delivery system takes responsibility of the care of a population,” says Norman Chenven, M.D., founder and CEO of Austin Regional Clinic, a multispecialty group with a heavy concentration of primary care. “That’s my definition of an ACO; it’s taking responsibility for both the quality of the care delivered and the cost of care delivered to a defined population of people.”

Doug Ardoin, M.D., M.B.A., says this type of delivery system can be very beneficial for patients if executed correctly. He is physician-in-chief for the Memorial Hermann Healthcare System in Houston. “The ACO is about a continuum of care; it’s not about an isolated episode of care in time. It is about taking care of populations of patients and knowing who in your panel has chronic disease that needs to be better managed in an outpatient setting.”

It’s about engaging your patients and walking them through all of the different care settings, he says, “so you reduce waste, reduce duplication, and you better coordinate care through the continuum.”

HMOs failed because they didn’t value this type of continuity or the primary care physician’s role in addressing the health care of the individual, says Christus’ Martin. What makes this time different is the federal government’s commitment to value primary care. According to Martin, officials are committed to paying primary care physicians more than what they’ve been paid, offering them a care management fee to help them continue doing the routine preventive care, and implementing pay for performance measures.

“Those are the big differences in what the HMO was and what I see the ACO becoming,” he says. “Everybody I’ve talked to nationally about ACOs says that if we do not have a strong primary care infrastructure based on the patient-centered medical home, the ACO will fail. It’s a complete turnaround from what it was when the primary care physician was simply a gatekeeper and a necessary evil; now that person will become the leader of the process.”

Encouraging family physicians to step up as leaders of ACOs is the key message of the Joint Principles for Accountable Care Organizations, published by AAFP in November in collaboration with the American Academy of Pediatrics, the American College of Physicians, and the American Osteopathic Association. They assert that ACOs must have a strong foundation of primary care using the patient-centered medical home model and must have strong physician leadership at all levels of the organization, with “significant and equitable representation from primary care and specialty physicians.”

Gary Piefer, M.D., agrees. “Family physicians have to be keenly involved in the leadership and development of governance, and of the business model.” Piefer is the chief medical officer of WellMed, a group of affiliated companies founded in San Antonio that includes an employed physician group, a health plan, a transportation company, and a disease management company. He describes WellMed as a functional medical home operating as an accountable care organization that is led and governed by primary care physicians delivering high-quality, cost-effective health care.

“What we’d really like to see family physicians do is to get themselves in the position that they’re organized appropriately and can help significantly impact the leadership and governance of whatever happens in an accountable care organization,” Piefer says. “They’re not very well positioned to do it because the debate tends to be on trying to improve reimbursement when the discussion should be how to improve quality. Because once you improve quality, you’ll now have money left in the pool. Then the question becomes how you distribute it.”

AAFP can’t give the same advice to every physician; each market is different. However, Academy leaders say they can tell physicians the issues and options to consider, and the questions they should be asking hospitals and others involved in forming an ACO. Until CMS releases the final guidelines, AAFP advises physicians to prepare for clinical and financial integration, and to consider investing in health information technology if they haven’t already done so. Continue working to implement aspects of the patient-centered medical home, communicate with other physicians in their community about organizing a virtual or actual group practice to enhance their market leverage, collect data on their practice’s quality and cost effectiveness to establish their value in the market, continue talking with and listening to commercial payers about ACOs, and follow updates on regulatory implementation and network with other members of their health care community.

AAFP also asks members who have gone through this process to become an expert to assist others. Based on his past experience with population-based care, ARC’s Chenven says aligning necessary resources and developing infrastructure for ACOs is daunting, even to someone who has done this sort of thing before. “You don’t just grab a few doctors and decide you’re going to be an ACO,” he says. “It’s much more complicated than that.”

According to Chenven, physicians must first have a very well thought-out business plan. Second, they need to have a source of capital that can be invested in the venture, or “adventure” as he says may be more appropriate. Third, they must have a real commitment to finding experienced managers, both physicians and laypersons, who have experience with this type of model.

“I think it’s much harder for small practices to do, and I think the small practices will have to find ways to link arms and work together with each other to develop at least enough scale to spread the overhead on the kinds of investments you need to do this,” Chenven says. “A lot of investment is in the IT system, but it’s also dedicated staff to manage the program, dedicated case managers, outreach people, that sort of thing, who are contacting patients.”

Piefer says the rise of the ACO doesn’t spell doom for the solo practitioner, “but if you generally want to be successful in the long run, you’ll need to learn how to affiliate and work in teams.”

That’s why Frederick, a private-practice physician for 20 years, is exploring the idea of forming a virtual physician network of other small-group and solo primary care practices in his community rather than joining a multispecialty network or a hospital system. “Those are not bad options, but there are a lot of physicians who want to maintain their autonomy and their own self-determination. They don’t want to be owned by anyone,” he says.

Still in the planning stages, his organization would give private practices a chance to stay as they are while pooling resources in health information technology and administration. “To some degree they’ll have to clinically be a part [of the larger group], but if we can do that virtually and allow them to continue to have a say in what happens to their practices professionally, to me, that’s a very good option for a lot of smaller practices.”

As their ACO takes shape, Frederick and his partners must overcome several of the challenges already mentioned. They are actively seeking funding and equity partners, and seeking answers to legal questions. Of the practices that have already made the switch to electronic medical records, each has a different system that will need to be connected with the others to allow for clinical collaboration. And they must overcome physicians’ attitudes toward organizing. “There’s a big hill of pessimism, fear, and suspicion we’re trying to get over.”

Regardless of how individual physicians choose to collaborate, they can no longer “hunker down” and survive, says Christus’ Martin. He points out that if ACOs don’t work, “something else must step up to the plate right after that also addresses the principles of primary care infrastructure and health outcomes.” There’s no going back to the old system, he says.

To make ACOs work, “it’s going to take a change in how we [physicians] take care of business, moving away from a physician-centric model to a patient-centric model, willingness to use guidelines of best practices, and providing consistency of care. It will require physicians to report their outcomes, their successes, which are all new and different. It will also force physicians to look for partnerships in the community, whether it’s the hospitals, or a larger physician organization, or another health system,” Martin says.

“Hospitals will really have to adjust because they’ve always been focused on revenue-generating into the hospital. The new ACO, as I understand it, is actually going to reward more to keep people out of the hospital. So hospitals will have to change the way they look at their health system.” Instead of asking how much money we made, the question is how well we took care of patients in this community and did our outcomes support what we’re trying to accomplish, he says.

Accountable care ultimately must be about improving and maintain the health of a population of patients and not just about controlling costs, AAFP says. It must be about proactive and preventive care, not reactive care; about outcomes, not volume or processes; about leveraging the value of primary care and the patient-centered medical home.

“At the end of the day, it ain’t rocket science, it’s just work,” says Memorial Hermann’s Ardoin. “It’s not like we’re building a spaceship. All these parts and pieces already exist; the work is just connecting them and making them work as a unit. That’s where I think everyone needs to take a step back and realize that ACOs and the law aren’t about creating a new map. All of these parts already exist, we just need to quit functioning in our silos, open the door to the continuum and connect the dots.”

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Additional resources

AAFP will publish a set of ACO resources this spring, but in the meantime, here are some resources you can find on www.aafp.org.

> Joint Principles for Accountable Care Organizations
http://tinyurl.com/29tr75k
> AAFP Accountable Care Organization Principles
http://tinyurl.com/4en6a4b
> Family Practice Management—Opinion: The PCMH and ACO: Opposed or Mutually Supportive?
www.aafp.org/fpm/2010/1100/p6.html
> AAFP Accountable Care Organization Task Force Report, October 2009
http://tinyurl.com/4ftho96
> Private Sector Advocacy: ACOs
http://tinyurl.com/4rgnr8v