During my (long) flight back from the Southwest yesterday, an article in the Wall Street Journal caught my eye. It was entitled "Embracing Incentives for Efficient Health Care" and prompted me to think about similarities between the recent HIE movement and the clinical integration movement in the 1990s.
The article states that hospitals and doctors around the country are beginning to create new entities that aim to provide more efficient health care. For instance, Tucson Medical Center in Arizona is forming a company that the hospital will own jointly with local physicians’ practices, which, in turn, will aim to sign contracts with insurers and Medicare to earn financial rewards if it reduces health care spending. This type of entity is referred to as an “accountable care organization” or “ACO” – a concept created by the Patient Protection and Affordable Care Act (PPACA) of 2010 – and they are indeed taking hold everywhere, including in New Jersey.
The WSJ article points out that Medicare’s traditional payment structure inherently incentivizes providers to order more tests and services because reimbursement is tied to volume. By comparison, under the PPACA the government intends to reward ACOs that can demonstrate reductions in Medicare costs across a group of patients, which should be achieved by the ACO-participants coordinating care and utilizing other methods (e.g., technology; patient care coordinators) to manage care for a certain patient group. Through future regulations, the Centers for Medicare & Medicaid Services (CMS) must implement the ACO option no later than the following new year (January 1, 2012).
However, the article also notes concerns are being raised that larger hospital-doctor coalitions could use their market clout to negotiate higher fees from private payors. Karen Ignagni, chief executive of America’s Health Insurance Plans, an insurance trade group, is quoted in the Wall Street Journal article as stating "If ACOs are a recipe for more consolidation and price increases, that will take us in the wrong direction . . ." But, CMS Deputy Administrator, Jonathan Blum's response is that CMS "wants the program to create incentives, both clinical incentives and payment incentives, that encourage providers to provide better and more low-cost care" and that his agency (CMS) is "working to ensure that [its] payment rules don’t produce unintended consequences for private payors.”
To some extent, ACOs invoke a bit of déjà vu . . .
In the 1990s, clinical integration was all the rage, as hospitals worked to acquire physician practices and create multi-entity systems. However, even when clinical integration was successful, financial integration remained a formidable obstacle, and in most cases independent doctors were not able to integrate financially because health insurance plans were not willing to contract with independent doctors in this way. Moreover, “messenger models”, global capitation and percent of premiums did not prove to be particularly effective solutions, as evidenced by the collapse of several health care systems attempting to create such integrated delivery networks.
So, some may ask whether ACOs are destined to a similar eventual demise? While some pilot ACO initiatives have produced mixed results, others, including ones in New Jersey, show promise of cost-savings and improved health care delivery, at least for certain patient populations. In addition, with the feds pressing HIEs to operate with transparency and accountability, as well as engage in quality reporting using standardized measures, and to adopt new certified technologies supporting integration (e.g., the interoperability requirement), there will likely be more trust and "a common interest" among providers and, so ACOs may be better poised for success today than in the past.
Even so, providers looking to form an HIE with future ACO-potential must ask and answer many vital questions with this prospective goal in mind, including, among other things: What corporate form should the HIE take? What will be the governance and oversight structure? How will/can patients' data be used and disclosed through the ACO in compliance with federal and state privacy laws? In addition, once the PPACA rules are released, the HIE must be able to adapt to meet ACO-specific regulatory requirements. Finally, and perhaps most importantly, an HIE or ACO that is looking to negotiate fees with potential payors must proceed with caution. Any network of otherwise competitive providers that are not adequately integrated to pass muster under the FTC's approved approaches may be engaging in collusive bargaining under the FTC's rules. To review the FTC's advisory opinions where health care providers were found adequately integrated for purposes of antitrust analysis, visit the FTC's website for health care advisory opinions.
For a select copy of 3 FTC's advisory opinions regarding integration of providers, click "Read More" below. I also recommend reading an interesting interview with former CMS administrator, Mark McClellan, during which he answers the following questions:
- What are some of the factors critical to successfully implementing an ACO?
- How does the ACO model fit in context with other major reforms, like bundled payment, global and episode-based payment reforms, and the medical home model?
- Long-term, which form of payment will work most effectively with the ACO model— shared fee-for-service savings, partial capitation, or some other form of global payment?
- Are provider organizations "ready" to function as an ACO in areas such as governance, physician relationships, coordination, health information technology (HIT), and performance measurement?
- ACOs have been discussed mostly in terms of hospitals and physicians. Does the ACO model hold promise for other combinations of health care providers?