Accountable Care Organization (ACO) Tutorial

ACOs: Core Features and Implications for Care Delivery

Charles DeShazer, MD

Overview

What is an Accountable Care Organization (ACO)?

Why is ACO formation being supported by the government?

How are ACOs different in design and operation?

What are the critical success factors for ACOs? How should providers evolve to or participate

in ACOs?

What is an Accountable Care Organization (ACO)?

Genesis of the ACO Concept Concept began to take shape in 2001 based on work of AMGA

to define principles of Accountable Physician Groups Council of Accountable Physician Practices (CAPP) formed in

2002 by AMGA Vision: to foster the development and recognition of accountable

physician practices as a model for transforming the American health care system

Elliot Fisher “Creating Accountable Care Organizations: The Extended Medical

Staff”, Health Affairs, 2007,26:w44-w57 “Fostering Accountable Health Care; Moving Forward in Medicare,

Health Affairs, 2009, 28:w219-w231 Formally proposed and defined in MedPac report to congress in

June 2009 ACO funding supported in the Affordable Care Act beginning in

2012

What is an Accountable Care Organization (ACO)? An Accountable Care Organization (ACO) is a provider-led organization

whose mission is to manage the full continuum of care and to be accountable for the overall costs and quality of care for a defined population. An ACO is a combination of a hospital, primary care physicians and possibly specialists.

Potential ACOs include: Integrated delivery systems Physician hospital organizations (PHO) Hospital plus multispecialty groups Hospital and independent practices

Three essential characteristics:1. Ability to manage costs and quality for patients across the continuum of care and

across different institutional settings2. Capability to prospectively plan budgets and resource needs and distribute

payments3. Sufficient size to support comprehensive, valid and reliable performance

measurement (estimated to be at least 5,000 Medicare or 15,000 commercial patients)

Why is ACO formation being supported by the government?

US Healthcare System is in disarray

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Highest cost and lowest quality system in the world among developed nations

Complex, fragmented, & confusing system Misalignment of incentives Lack of transparency of pricing and costs Inadequate data to assess value (i.e. interaction

of quality, cost and satisfaction) Variations in care with no apparent benefits Costs on an unsustainable trend

Note: * Estimate. Expenditures shown in $US PPP (purchasing power parity).Source: Calculated by The Commonwealth Fund based on 2007 International Health Policy Survey; 2008 International Health Policy Survey of Sicker Adults; 2009 International Health Policy Survey of Primary Care Physicians; Commonwealth Fund Commission on a High Performance Health System National Scorecard; and Organization for Economic Cooperation and Development, OECD Health Data, 2009 (Paris: OECD, Nov. 2009).

    AUS CAN GER NETH NZ UK US

OVERALL RANKING (2010) 3 6 4 1 5 2 7

Quality Care 4 7 5 2 1 3 6

Effective Care 2 7 6 3 5 1 4

Safe Care 6 5 3 1 4 2 7

Coordinated Care 4 5 7 2 1 3 6

Patient-Centered Care 2 5 3 6 1 7 4

Access 6.5 5 3 1 4 2 6.5

Cost-Related Problem 6 3.5 3.5 2 5 1 7

Timeliness of Care 6 7 2 1 3 4 5

Efficiency 2 6 5 3 4 1 7

Equity 4 5 3 1 6 2 7

Long, Healthy, Productive Lives 1 2 3 4 5 6 7

Health Expenditures/Capita, 2007 $3,357 $3,895 $3,588 $3,837* $2,454 $2,992 $7,290

Country Rankings

1.00–2.33

2.34–4.66

4.67–7.00

Exhibit ES-1. Overall Ranking

Exhibit 1. International Comparison of Spending on Health, 1980–2007

Note: $US PPP = purchasing power parity.Source: Organization for Economic Cooperation and Development, OECD Health Data, 2009 (Paris: OECD, Nov. 2009).

Average spending on healthper capita ($US PPP)

Total expenditures on healthas percent of GDP

$7,290

$2,454

16%

8%

Threefold variation in per capita spending

10 Source: Peter Orszag, N Engl J Med, 2007

The lack of a relationship between quality and Medicare spending, by state, 2004

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73

78

83

88

4,000 5,000 6,000 7,000 8,000

Spending (Dollars)

C

ompo

site

Mea

sure

of

Qua

lity

of

Car

e

Source: Data from AHRQ and CMS.

Tweaking will not help…

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Market has changed since the current system was designed Shift from infectious diseases to chronic conditions Population life expectancy extended from late 40’s to late 70’s

US reimbursement model has created “perverse incentives” to increase spending Fee-For-Service (FFS) incentivizes volume over quality Third party payer system shields the consumer from the true costs of

care 2001 IOM Report the “Quality Chasm”

Working harder will not be able to correct the fundamental deficiencies Restructuring is needed to create a system that produces safety,

effectiveness, patient-centeredness, timeliness, efficiency, and equity as a reliable property of the system

Rationale for promoting the ACO model Payment reform

FFS payment structure seen as a one root cause of fragmented, poor quality and low value care delivery

Capitation and global payment schemes require a certain level of sophistication and integration

P4P mixed results ACO structure considered mechanism to enable transformation of the

delivery system Strong interest in improving quality and decreasing costs to maximize the value

equation Many best practice models in terms of value are IDSs (e.g. Geisinger, Kaiser

Permanente, Intermountain, Mayo, Cleveland Clinic) Need to separate performance risk from insurance risk and place accountability for

performance risk where those decisions are made – at the point of care Bundled and global payments are a key enabler

Reduces the need to micromanage the delivery process Encourages redesign and innovation to maximize efficiency and performance Supports collaboration and integration

How are ACOs different in design and operation?

How is this Different from IDS Strategy of Late 1990’s? Performance vs. Insurance Risk IDS strategies of late 1990’s

These were mainly defensive strategies to create leverage with health plans IPAs formed primarily to create a contracting structure for greater leverage and control Groups formed to be able to take on and manage capitation payments Hospitals bought physician practices to create leverage, generate referrals and increase FFS revenue

There was not much focus on creating a truly integrated system of care capable of taking on performance risk Quality measurement was in a nascent stage and there was not much focus on cost efficiency, quality,

transparency nor overall performance Lack of good risk adjustment methodologies and performance assessment lead to some organizations

taking on inappropriate levels of insurance risk Very little attention to physician management and productivity dropped in owned practices Information Technology in general and EMR technology in particular was expensive and immature

ACOs are designed to take on and manage performance risk Goal is to create a structure capable of balancing cost, quality, access and service to optimize

care for a defined population across the entire system Performance measurement to evaluate the quality of care and to prevent potential overuse (in

fee for- service organizations) and underuse (in capitated ones) is a cornerstone of the Accountable Care Organization (ACO) model

Mature IT today creates the opportunity to wire organizations and create new levels of integration, transparency and performance management

Changing Hospital Incentives

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Current focus: revenue growth Often driven by large capital investments with high fixed costs Incentives for more use

Extra MRI means more revenue Foregoing MRI means NO revenue Only way to make margins is to use more or charge more

Always leads to greater health care spendingBetter focus: spending targets & shared savings

Preserves margins Provides incentive to avoid increases in capacity (and to reduce

capacity where feasible); and to improve care in domains previously ignored: care coordination, end-of-life

Reimbursement Models and Delivery Structure

Source: ACO Toolkit. Brookings-Dartmouth Collaborative 2011

Key Functions an ACO Must Perform Patient Attribution

Ensure that providers believe they are fairly accountable for a particular patient

Budget Development and Management Establish benchmarks Case Mix Adjustment Track and manage the budget Determine level of risk with payers

Manage Payment Models and Incentives Determine how to distribute shared savings to best incentivize

providers Performance Measurement

Measure and track quality performance

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Patient Attribution Virtual assignment currently exists b/c most patient see one or

two PCPs and most PCPs admit to one or two hospitals ACO must agree to attribution method although can use

different attribution methods for different payment models Accountability for assigned patients lies with the ACO, not the

individual provider Important to understand that once patient is attributed, the

ACO is responsible for ALL costs of that patient, inside and outside of the ACO

Methods Patient selection of PCP Utilization patterns

Ensure that high-cost patients with an established provider are not referred out or discontinued after formation of ACO

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Shared savings: Overview

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The principal features of a “shared savings” model include: Payers and ACOs establish budget targets for the total health

spending of ACO’s members. Payers may continue to make payments on a fee-for-service

basis. At the end of the year, the actual and target spending are

reconciled. If the actual spending is less than the target, and if the ACO has

performed adequately on access and quality metrics, the ACO, payers, employers, and consumers share the difference (“shared savings”).

Developing a Budget Analysis of 2+ years of historical data Benchmarks established

Cohort approach Claims lag an issue Ensuring similar populations Incentive for better coding may distinguish populations Decreasing ability to identify control population

Budget Projection approach Avoids issue of loss of control population Build historical trends into projected benchmarks which may reward high cost providers Difficult to account for system-wide changes Accurate exposure data (monthly membership) extremely important for calculation of

PMPM costs Various trend project methods

Need to analyze care management investments relative to potential shared savings benefit

Important to consider whether and how benchmarks should be updated

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ACO and Payment Continuum

Source: ACO Toolkit. Brookings-Dartmouth Collaborative 201123

Manage Payment Models and Incentives ACO will have to manage a complex mix of

reimbursement methods Likely will have a mix of reimbursement schemes for some

time, including FFS Need to determine model for shared savings distribution

that will incentivize the right providers for the right behavior

Must have the ability to distribute payments and shared savings accurately

ACO governance will need to determine how align financial and non-financial incentives such that functional groups are not working at cross-purposes

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Performance Management ACOs will have to demonstrate performance transparency Achieving selected quality targets will be a prerequisite for obtaining

shared savings May include credit for improvement vs. hitting absolute benchmarks

Investments in redesign and infrastructure for care management may need to precede reimbursement through shared savings

Standardized metrics and benchmarks are evolving Overuse

Avoidance of antibiotic use for adults with bronchitis Population health

Breast screening Chronic care

Diabetic A1c control Outcomes

30 day post-MI mortality rate Outcomes measures should be risk-adjusted

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Performance Reporting Highly Dependent on IT Infrastructure Basic IT Infrastructure

Administrative data Claims data

Intermediate IT Infrastructure Clinical data Lab data Registries

Advanced IT Infrastructure EHR ACO-wide Direct patient-generated information about experience Outcome measures

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Health Information Technology Meaningful Use incentives driving broad adoption of

EHRs Health Information Exchanges (HIEs) will help with

comprehensive information needed for care management Data warehousing and analytic resources will be essential Care management

Disease registries are a minimum requirement Clinical decision support – reminders, alerts Referral tracking Care plan documentation Case management system

Patient Health Record (PHR)

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What are the critical success factors for ACOs?

What are the Challenges to ACO Development The historical lack of collegiality and collaboration between the various organizations,

in particular, physicians and hospitals The need for strong leadership and skills to address the cultural, legal, financial and

resource-related challenges to creating new provider organizations Ensuring a strong primary care base with adequate infrastructure and resources to be

accountable for a full scope of responsibilities Governance and creating joint accountability Determining who will and how to distribute revenue and "shared savings“ Cultural and workflow shifts necessary to implement more efficient and high-quality

models of care delivery Holding physicians accountable for productivity, quality AND efficiency at an

individual AND population level Implementation of necessary infrastructure, especially IT, in a capital constrained

environmentSource: McKethan A, McClellan M. Moving from volume-driven medicine toward accountable care. Health Affairs Blog. August 20,

2009. (Accessed October 26, 2009, at http://healthaffairs.org/blog/2009/08/20/movingfrom-volume-driven-medicine-towardaccountable-care/)

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ACO Critical Success Factors Culture

Collaborative Transparent Progressive Performance driven

Clinical leadership Legal and financial expertise Effective governance structure Strong and effective primary care base redesigned to

support care coordination Integrated and effective administrative and clinical IT

infrastructure and operations

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How should providers evolve to or participate in ACOs?

ACO Considerations Local market conditions Assessment of readiness Determine alignment strategy (alone, strengthen current

partnerships, new partnerships) Establish governance and management structure Ensure have right leadership, experience and mix of skill-sets Determine capital requirements Determine IT strategy Establish quality and operational improvement methodology Integrate with other changes (e.g. meaningful use, ICD-10,

PCMH) Define a time-boxed tactical pathway to achievement of an

ACO organization with effective tracking and course correction mechanisms

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Critical Success Factors for Primary Care Effectiveness in an ACO

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Complete & timely information about their patients and the services they are receiving

Technology and skills for population management and coordination of care

Adequate resources for patient education and self management A culture of teamwork Coordinated relationships with specialists and other providers Ability to measure and report on the quality of care Infrastructure skills for the management of financial risk Commitment by leadership to improving value as a top priority

In closing, Berwick comments… Triple Aim

Berwick’s highest priority as head of CMS Better care for individuals, described by the six dimensions of health care performance listed in the

Institute of Medicine’s 2001 report “Crossing the Quality Chasm”: safety, effectiveness, patient-centeredness, timeliness, efficiency, and equity.

Better health for populations, though attacking “the upstream causes of so much of our ill health,” such poor nutrition, physical inactivity, and substance abuse.

Reducing per-capita costs (utilization and unit costs).

Recent Comments re Goals of ACOs Reducing dependence on hospitals. Instead, "patients will be home where they want to be." Using a proactive approach. ACOs will advance ways to help people stay healthy. Using a rich trove of healthcare data. ACOs will use data-driven approaches such as patients registries. Taking an innovative approach. ACOs will draw upon the best advances in models of care. "We want

to help integrated care to thrive in America.” Maintaining and executing plans. "I don’t view the ACO as primarily a financing mechanism, It's a

care delivery system.”

 “Successful redesign of health care is a community by community task. That’s technically correct and it’s also morally correct, because in the end each local community  — and only each local community – actually has the knowledge and the skills to define what is locally right.”

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