Virginia Mason’s Clinical Transformation: Hard Work, Big Payoff

By Jeff Goldsmith

In the ten months since the passage of health reform, health care managers, particularly those in hospitals and health systems, have struggled to make sense of an onslaught of change in Medicare policy.  The response has been depressing:  an accelerating wave of merger and acquisition activity, both horizontal hospital mergers and an accelerating concentration of ownership of physician practices in hospital hands.  While this activity anticipates an era of “accountable care”, the care and feeding of these complex new enterprises will deprive managements and physician leaders of the time and bandwidth to actually transform health care delivery itself.

The best antidote to the magical thinking that achieving a certain asset structure is the key to transformation is reading Charles Kenney’s new book about the Virginia Mason Health System’s ten year experience with adapting the Toyota Production system to health services (Transforming Health Care: Virginia Mason Medical Center’s Pursuit of the Perfect Patient Experience, CRC Press, 2010 with an introduction by Don Berwick).  By the year 2000, Virginia Mason had achieved the end state of “integrated care” that the current wave of hospital M+A activity seeks to emulate: a sophisticated 300-person multi-specialty medical group with its own hospital and a regional network of satellite clinics spread across metropolitan Seattle.

Yet Virginia Mason (VM) was losing money and, in the view of its leadership, delivering a suboptimal patient care experience.  Under the leadership of CEO Dr. Gary Kaplan, Virginia Mason management and clinical leaders undertook to apply Toyota’s Lean Production system to Virginia Mason’s operations.  The result was a cultural revolution in an organization that already had a national reputation, replacing a system of “physician-centered” care with a self-improving patient-centered care system.   At the heart of this system was a “factory-floor” process of “rapid process improvement” initiated by workers in direct patient contact — an adaptation of Toyota’s kaizen process to health services.

This rapid improvement process involved empirical analysis of the problem and collaborative redesign by the work force itself (physicians, nurses and support personnel) to eliminate waste and improve the patient care experience.  Different chapters of the book show how this was adapted to design a new cancer center, reorganize VM’s money-losing primary care operations, reorganize care for lower back pain to respond to health insurers’ and business’ cost-containment pressure, recreate its ambulatory surgery program, and, eventually, design a long-delayed replacement hospital.

What strikes you as you work your way through Kenney’s case examples is how hard clinical transformation is at the sharp point of direct patient contact.  It required VM and its workforce to fundamentally rethink and renovate long established workflows, habits and routines.  But most significantly, it involved redistributing power away from VM’s “owners”, the physicians, and enabling even the most junior nurse or aide on a patient unit to “stop the production line” by calling a Patient Safety Alert, triggering an immediate collaborative analysis and correction of defects.

In a visit to VM in 2008 (my fifth in thirty years), I… (Read complete blog post at Health Affairs, here).

Jeff Goldsmith (tcoyote@msn.com) is president of Health Futures Inc. He is also the author of a book released this year titled “The Long Baby Boom: An Optimistic Vision for a Graying Generation.”

6 Reasons Your ACO Will Fail (A Series) – Any One Will Do!

By Gregg A. Masters, MPH

No. 1 – The ‘O, G & E’ Card

At UC Berkeley in the 70s, the secretary in the Department of Psychology pasted a bumper sticker on her desk positing the humility laced question: ‘…you may be correct [in your storied judgment], but are you asking the right questions?’

For some reason, this subtle invitation to examine one’s assumptions [story] remains with me today, echoing amidst the ACO fervor of ‘…better care at lower costs’.

‘…the good news is we’re making great time, the bad news is we don’t know where we are going.’ | Eastern Airlines Pilot

As is often the case, and perhaps so today, when you need to ‘do something’ (since movement in the absence of same, seems like progress), but are not quite clear what that ‘something’ looks like, there’s a tendency to default to the familiar, i.e., this is how we roll. The more conservative among us will hedge that risk by choosing ‘advisors’ with conventional standing when considering what that something is.

In healthcare that more often than not, begins the lawyers and accountants, and generally starts with legal vehicle and organizational structure matters. While ‘mission, vision and values’ are a part of that conversation, they generally do not lead the process by which the engagement unfolds.

Invariably, one or more savvy (entrepreneurial) physicians step forward to claim the ‘organization, governance and equity’ card (OG&E), and off we go on structure of the entity vs. the more open ended, and perhaps, even chaotic but culture enabling, process of engaging physicians in the emotional, philosophical and ‘sweat equity’ journey of infusing a ‘patient’s first’ culture into the new, or re-purposed, entity’s mission.

The temptation to put form ahead of function is a real, and a distinct warning sign. Any ‘check the box’ deliverable schedule that does not have the ‘buy-in’ of those (primarily independent physicians) who will determine whether proforma assumptions materialize, is fantasy.

‘It is not necessary to change. Survival is not mandatory’. | W. Edwards Deming

The behavioral sciences tell us that if you are not part of the decision process, the odds are that you are less likely to honor any decisions made on your behalf. So, ‘trust the force Luke’. Go the extra mile and engage in the discomfort of process, and avoid the top down tendency of command and control execution, against an unreasonable timeline.

Next up:  ‘building the physician bridges’.

ACOs Forging the Links

By Ken Terry for HHN Magazine

What hospitals need to know about accountable care; No. 1: Build strong relationships with physicians

Building an accountable care organization is viewed by many hospital executives as the holy grail as they try to figure out how to better manage patient care across the continuum and as they brace for the growth in bundled payments.

Yet, relatively few hospitals and health care systems are ready to form ACOs today. One reason is that their physicians are not ready. Unless a hospital employs most of its staff, ACO success depends on having physician organizations with which to work, and those are still few and far between.

“Hospitals that should be considering an ACO … either have to employ a sufficient number of physicians to make an impact, or they have to have a very well-structured physician hospital organization or independent practice association with a track record of success,” says Thomas Enders III, managing director of the health care group at consulting firm CSC. “If you don’t have that, you can’t deliver on the requirements of an ACO.”

A hospital also needs market clout to draw physicians into an ACO and hold patients there, notes Lisa Bielamowicz, M.D., national physician practice leader of the Advisory Board Co., another consulting company. “If you’re a 200-bed hospital on the edge of a major metropolitan area, it will be difficult to become an ACO, aggregate providers, and manage patient care across the continuum. Because with accountable care, you have to keep patients within the family if you’re going to effectively manage their care,” she says. “Take that same 200-bed organization and plunk it in a small- to medium-sized market, and it could be positioned strongly to aggregate providers and become a successful ACO.”

If your hospital’s competitive situation allows you to consider an ACO strategy, look at your physician alignment and identify the gaps, suggests Wes Champion, senior vice president of Premier Inc., a group purchasing organization that has formed collaboratives to help hospitals start ACOs. You may be able to revive an independent-practice association or a physician-hospital organization that has become ineffective, or work with a multispecialty group that can be the core of an ACO’s physician organization.

Smaller community hospitals might consider joining forces with larger health care systems to form ACOs, Enders says. This may be necessary partly because of the large investment in health information technology that will be required … (Read complete article, here).

Ken Terry is a freelance writer in Sheffield, Mass.

Achieving Better Care at Lower Costs through ACOs

A Brookings Event at The Engelberg Center for Health Care Reform

The Patient Protection and Affordable Care Act created the Medicare Shared Savings program to implement Accountable Care Organizations (ACOs), coordinated networks of providers with shared responsibility for providing better care at lower costs. Officials at the Centers for Medicare & Medicaid Services (CMS) are currently working on regulations for implementing ACOs in 2012 under Medicare provisions that will help transform the payment and delivery of health care.

On February 1, the Engelberg Center for Health Care Reform and the Dartmouth Institute for Health Policy & Clinical Practice hosted a public forum to discuss the most effective and thoughtful path forward for ACOs to achieve such transformation. Donald Berwick, CMS Administrator, gave a keynote address.

Participants (partial):

  • Donald Berwick, Administrator, Centers for Medicare & Medicaid Services
  • Mark B. McClellan, Director, Engelberg Center for Health Care Reform
  • Debra Ness, President, National Partnership for Women and Families
  • Elliott Fisher, Director, Center for Population Health, The Dartmouth Institute for Health Policy & Clinical Practice
  • Francis J. Crosson, Associate Executive Director, The Permanente Group, Inc.
  • Ed Cymerys, Chief Actuary, Blue Shield of California
  • John Goodman, President and CEO, National Center for Policy Analysis
  • Gene Lindsey, President and CEO, Atrius Health

For complete faculty, video and audio downloads, click here.

ACOs Can Work with Physicians in Charge | Study Looks at Effectiveness of a Primary Care-Led Accountable Care Organization

By Victoria Stagg Elliott, Amednews

A hospital partner may not be necessary for an accountable care organization to be effective, according to a report analyzing a primary care-led ACO.

Physicians increasingly are selling their practices to hospitals, which are buying in preparation for the development of ACOs and other aspects of health system reform. People who work in this area are holding up the subject of the journal’s case report — WellMed Medical Management in San Antonio — as an example of how an ACO can work without a hospital partner, serve more than the minimum 5,000 Medicare patients mandated by the Patient Protection and Affordable Care Act for ACO designation, and achieve positive results.

The impact of a primary care-led ACOLinksSee related content”WellMed is the only example I know of a primary care-based ACO. Most people are trying to tie ACOs to hospitals, and WellMed is a great example of how it can be done otherwise,” said Robert Phillips Jr., MD, MSPH, lead author and director of the American Academy of Family Physicians’ Robert Graham Center. The report was published in the January/March issue of The Journal of Ambulatory Care Management.

WellMed, which is organized around the medical home model, has 21 primary care clinics that serve thousands of people age 65 and older. The WellMed Medical Group has rheumatologists, dermatologists, cardiologists, hospitalists and podiatrists on staff, but all other specialty and hospital services are contracted out.

“It’s not a foregone conclusion that the successful ACO of the future is going to come out of a hospital or hospital system,” said F. Douglas Carr, MD, medical director of education and system initiatives at the Billings Clinic in Montana, a multispecialty practice that has its own hospital. It was not part of the WellMed study. Dr. Carr directed the 280-physician practice’s participation in the Medicare Physician Group Practice Demonstration. Information gleaned from the program formed the basis for ACOs’ inclusion in health system reform legislation.

Costs, hospital stays also cut

The case study documented that WellMed’s patients had a lower death rate than those in the same age group in Texas. Subsequent papers are expected to show notable reductions in the length of hospital stays and the cost of care.

“We feel that physicians can create organizations to manage care and control costs without a hospital,” said Gary Piefer, MD, chief medical officer at WellMed Medical Management.

The research, which was funded by…. (Read complete article at amednews).

Will Accountable Care Organizations Become ‘HMOs In Drag”?

By Patricia Salber, M.D. via ‘The Doctor Weighs In’

Accountable Care Organizations (ACOs) are supposed to be provider-led (physician groups +/- hospitals) and, they are supposed to inject a new accountability, at the provider level, for the value of services delivered.  You know the old equation.  VALUE=QUALITY/COST.  Those of us inside the health policy “beltway” know this mantra well.  We have been talking about it for years (decades, really).

I spent almost 6 years working as a consultant to General Motors Corporation starting in the late 90’s.  My job was to systematically evaluate health plans’ quality programs so that GM could determine the value the plans were bringing to their employees.  My team and I helped develop an elaborate Request for Information process that is now known as eValue8.

Frustrated by the slow pace of change, Bruce Bradley, my boss at GM, and other large employer health benefit leaders, such as Chuck Buck and Bob Galvin from GE and Vince Kerr from Ford, formed the Leapfrog Group in an attempt to drive quality improvements more quickly.  The idea was to focus initially on Patient Safety.  This was a compelling choice as the IOM report, “To Err is Human,” had just been published and everyone was now aware of the alarming number of deaths being reported as due to medical errors.  But despite years of focus on the problem, patients still aren’t safe and we are still trying to figure out how to improve value.

Somewhere along the way, some bright people, like Elliott Fisher, MD, Steve Shortell,  Larry Casalino, MD and Mark McClellan, started talking about how we need to focus our improvement efforts directly on the delivery system – the doctors and hospitals – as opposed to trying pressure health plans to do the work.  And, they said, we ought to realign the payment system so that providers are paid for producing good outcomes – not just providing a bunch of services.  Put these two concepts together and…voila!  a new idea is born (or as some think, an old idea is repackaged and, I guess we would more accurately say, reborn).  The concept was christened “Accountable Care Organizations,” and, as I mentioned above, it has become the hottest thing in health care.  A whole industry has grown up around the dream of ACOs:  conferences, newsletters, webinars, journal publications, and, of course, consultancies, like my company, ZOLO Healthcare Solutions.

As my team and I have dug deep into what it will take to transform the cottage industry of health care – small to mid-sized group practices and hospital systems – we have begun to worry that folks more influential than ourselves are developing long lists of things these organizations will have to have in place in order to be successful as an ACO.  Here are some examples:

  • A new or enhanced organizational infrastructure that includes physician and hospital leaders working together to deliver better outcomes at the best price possible (no small feat, this one!)
  • The capability to generate data about the ACO’s population, including lists of people with chronic illnesses, so that you can proactively reach out to them to provide assistance with managing their care
  • Sophistication in financial management so that the ACO can handle a single payment for all of the services provided in certain types of hospitalizations (aka bundled payments) – and divvy the dollars up fairly amongst the people and institutions that provided the services
  • A care management infrastructure that includes medical teams, case managers, and non-clinical support people
  • Utilization management capabilities that ensure patients get what they need (right thing, right place, right time), but also ensures they do not get stuff they don’t need or that could even be harmful (e.g., things that bring no “value” like duplicate tests, advanced imaging for self-limited conditions, antibiotics for colds, hospitalizations that could be prevented with more intensive upfront care.
  • Electronic health records (a good thing) and ways for doctors to communicate electronically with pharmacies, other doctors, and patients
  • Ability to oversee, in a consistent way, any services the ACO chooses to delegate to another organization

I could go on and on – and indeed some of the ACO readiness checklists that I have seen (our own included) have identified a hundred or more complex capabilities the organization will need to have or buy.  I have worked with a lot of health plans over the years and I can say that many of them would have trouble demonstrating that they could do everything that appears on these lists.

Now, I am not saying that these things don’t bring value.  Indeed they do – or at least they can – if they are done right.   But what I am saying is that all of this stuff must be designed and implemented, in a way that keeps the patient’s experience and outcomes – meaningful to patients and their families – front and center.

ACOs should not be denying payment for a service just to save a buck.  Rather, they should be redirecting care to a service likely to bring the most value to the patient.  This will be easy in some areas of care, for example high tech imaging, because professional organizations, like the American College of Radiology, have developed detailed evidence-based guidelines, to help doctors order the right test the first time.   So, an ACO, instead of telling a doctor they won’t get paid for a CT scan, would instead  have processes in place to redirect the doctor to a (more expensive) MRI as will yield the best answer to the clinical question.  This type of approach will be harder – but not impossible – in some other areas of care, particularly, end-of-life care, as the value of the last few months of life are clearly different depending on whether you are the dying patient, the loved one, or the organization paying the bill.

All of this leads me to the point of this post, as captured by its title:  Will ACOs (and the organizations that help them develop and grow) just move a laundry list of  health plan functions out of the plan and into a new organization?  Or will they instead develop into a more effective way to deliver better value?

A friend sent me a recent blog post by Pauline Chen, MD, from the New York Times, titled “The Missing Ingredient in Accountable Care.” In the post, Dr. Chen describes going on and on about ACOS to a group of her friends, saying things like this:

When she got done describing the benefits of ACOs, she “took a deep breath then looked around. One friend had stood up and was excusing herself to go to the bathroom. The other was looking into her bag, rummaging around for her cell phone.”  “Thanks for the explanation, Pauline” one of her friends said, as she pulled her phone out and quickly glanced at its screen. ““I hate to break it to you,”” she continued, ““but whatever that care plan is called, it still sounds like an H.M.O. to me.””

In our wonky-inside-the health policy beltway,” I worry that we will once again forget that patients, people who use the health care system, want to feel cared for…they want to feel valued. As Jay Crosson, MD, former Executive Director of the Permanente Federation and former Vice Chair of MedPac, noted in a talk to a gathering of his colleagues at Kaiser Permanente:

“It’s really pretty simple from the members’ perspective. It amounts to this: ‘Answer the phone; meet my needs; and treat me with dignity and empathy.’ If we do those things, we will succeed. If we don’t do those things, then no matter what else we do, we will not succeed.”

Patricia Salber, MD, MBA is the founder and host of The Doctor Weighs In.  She is a board certified internist and emergency physician who loves to write about fat, fitness, diabetes, and weight loss (and other stuff).  She has worked as a physician executive for a variety of health care organizations (health insurance companies, medical groups, large employers).  Dr. Salber is currently Founding Principal at ZOLO Healthcare Solutions, a consultancy focused on helping organizations get ready for the post-health care reform world.

Are ACO’s Good or Bad for Competition?

By Naveen aka @naveen101

Earlier this week, I sat in on a roundtable discussion of health insurance plan CEO’s from around the country. The topic jumped from Medicare Advantage bonus payments to general quality improvement, to the insurance industry’s perception by Joe Q. Public, and of course, what role health plans will end up playing in Accountable Care Organizations (ACO).

As any insurance executive would rightly observe, the conversation to date has largely revolved around the providers of care. Because ACOs were designed as much to control health care spending as they were to improve quality, discussions often oversimplify them into a network of doctors and hospitals reimbursed with global capitation or bundled payments (fancy terms for a one time fee as opposed to a ‘fee for service’ itemized bill). The other details – advanced IT infrastructure, rigorous care management programs, skilled nurses and primary care providers, billing and claims competency, and marketing and communications activity, to name a few, are usually forgotten.  But eventually, this stuff will come up, and whoever is ready to roll will find themselves in high demand.

Hospitals and doctors seem to be more focused on getting the money. The early rumblings from the trenches indicate that the ACO craze is causing a shift towards market consolidation – providers of care are merging together, buying each other out and gaining share in their local markets. At my meeting, CEOs from Minneapolis to Seattle and Buffalo to Pittsburgh all reported the same trend in their markets. This is likely being done for a few reasons. The bigger a provider group, the better prices they can demand from insurance companies, as shown last year in a sophisticated study released by the office of Martha Coakley, the Massachusetts State Attorney General:

A. Price variations are not correlated to (1) quality of care, (2) the sickness or complexity of the population being served, (3) the extent to which a provider is responsible for caring for a large portion of patients on Medicare or Medicaid, or (4) whether a provider is an academic teaching or research facility.  Moreover, (5) price variations are not adequately explained by differences in hospital costs of delivering similar services at similar facilities.

B. Price variations are correlated to market leverage as measured by the relative market position of the hospital or provider group compared with other hospitals or provider groups within a geographic region or within a group of academic medical centers.

This means a few things. First, that if ACO’s are simply big groups with lots of clout in their market, they will likely screw over insurance companies on the commercial side to get better rates (I somehow doubt anybody will lose much sleep over this) – especially if Medicare ACO money incentivizes them to cost shift so they don’t exceed those spending targets. (Cost shifting in a nutshell: If a new knee costs $22,000 and Medicare says it will only pay $20,000, a hospital can bump up the price for private insurers like United or Aetna to $24,000 to make up for the difference.) So, any money ‘saved’ by the Medicare program would just be taken out of somebody else’s purse or wallet.

Second – and more importantly, Coakley found … (Read complete blog post, here).

Naveen Rao lives in Washington D.C., and consults in health care. The majority of his work is clinical quality improvement analytics for community-based health insurers, with broader involvements in clinical redesign efforts such as the medical home and increasingly, the accountable care organization.

The Future of Accountable Care Organizations (ACOs): An Interview with Bill DeMarco

By Richard L. Reece, MD

What follows is an interview with Bill DeMarco, a health care consultant for more than 30 years and an advisor on Accountable Care Organizations (ACOs). The subject of Accountable Care Organizations (ACOs) accounted for only 10 pages of the 2500 page health reform bill. Yet ACOs are now the buzz, the rage, the hottest 3-letter acronym since sliced bread, and the most talked about subject in hospital board rooms, medical staff lounges, and the medical talk circuit, and consultant enclaves. I am cautiously pessimistic about the future of ACOs. My views on ACOs are available in an e-book , Pros and Cons of Accountable Care Organizations (www.practicesupport.com).

How long have Pendulum Healthcare and DeMarco and Associates Consulting been in existence?

Pendulum since 2001 and DeMarco and Associates since 1980.

As you know, you and I go back a long way, starting with the formation of the SHARE corporation in Minneapolis.

Yes, I was one of the 10 people who started SHARE, a small primary care group that contracted with specialty physicians as a staff model HMO, which we might call today a medical home.

Today let’s talk about Accountable Care Organizations (ACOs). ACOs are the hottest subject going, as hospitals and physicians contemplate implications of the health reform law and their future.

Yes, ACOs are a hot subject. I prefer to call them Medicare Shared Savings programs. They are connected to the prepaid demonstration projects CMS conducted with several of the big multi-specialty groups five or six years ago. Also they tie into the discussions about cooperative organizations. CMS had a meeting last week encouraging hospitals and doctors to become cooperative health plans.

I’ve been reading your articles on ACOs. One thing that comes through is that you believe ACOs are a “new path” for physicians and hospitals.

Yes, they are indeed a new path. They are truly an opportunity, for physicians specifically, to generate a bonus in exchange for increased consistency, efficiency, and effectiveness. ACOs put dollars on the table for quality.

Previous variations of the ACO model, PHOs and IPAs, have failed or faltered for various reasons, one reason being physicians fearing hospital control and the other being lack of any revenue advantage for physicians. Do ACOs change the control and revenue landscape?

I think they do. They create an opportunity for Medicare, the biggest payer by far, to generate savings in conjunction with aligned physicians. There will now be physician dollars available to reward efficiencies and to offset startup costs. ACOs are moving away from a production mentality of PHOs to a value-based mentality. They are crossing the quality chasm by focusing on medical management to bring costs down by removing waste from the system. ACOs are about population management, and physicians who participate and lead this change are going to get paid for quality.

What are the start-up costs for an ACO?

It depends on where the physician organization is on the integration scale. If they are fully integrated, like Geisinger and the Greater Marshfield Plan, they could go ahead quickly and be part of the ACO class of 2012. If the physicians don’t have anything in place, you are easily talking about $3 to $5 million to organize for the first year and then ongoing administrative costs to have a licensed driver in the driver seat. There are management companies out there to provide the needed management services, and there are some shrewd investors interested in providing the start-up capital for ACOs in exchange for a part of the bonus.

The electronic infrastructure by itself required to track data to calculate rewards would be a huge expense, with EMRs on both the hospital and physician sides.

In an ideal world, having that EMR will be important. However, when we started HMOs in the 70s, we needed the same kind of utilization data, and we survived. In addition, many physicians are already using some sort of data clearinghouses because they get an extra 3% to 4% using electronic billing. Many of these ACOs will be administrated through a fiscal intermediary. You could start an ACO without an EHR.

But you are right, it would be expensive to put in an internal EHR from scratch. That’s why you need to earmark some of your savings for that purpose integrating HIT and EHR.

Who are your clients? Are they mostly hospitals or physician groups?

It’s been a combination of physicians, physician organizations and IPAs who want to set up a data warehouse, and who want to be certified as an ACO. We’re working with a couple of hospitals, who want to do a joint venture with physicians. I am also talking to two companies, with another in the wings, who want to form an ACO for their employees. Employers are taking it upon themselves to go out to hospitals and physicians and create their own custom networks versus the insurance company discount networks of the past.

This is something most hospitals were not aware of, and many of their existing physicians could wind up joining a competing ACO. Also Phycor-like organizations are roaming the countryside to form ACOs by buying practices right out from underneath the hospitals’ nose. So we’re telling hospitals, don’t be shy about forming your own ACOs. Sit down with medical staff and tell them you are interested in cooperating with them to form their own physician driven ACO.

In preparing for this interview, I ran across this statement “Hospitals are the raw meat physician-ACOs will feed upon.” Is that an over-statement?

I think it is. Removing waste from the delivery system is not all about physician ACOs chopping out hospital days. Many existing physicians and hospitals are leaving dollars on the table because they are not coding and documenting correctly. ACOs will help correct these problems, and help both parties’ reimbursements but there are so many things that can be done before chopping out days per thousand.

Hospitals need doctors to help them correct problems like re-admissions, which come at hospital expense. And you’re going to be looking at better coordination between primary care doctors, specialists, and the hospital. Under bundling of hospital and doctor fees, pay will be more predictable and controlled than under fee-for-service because there will be agreement in advance as to what the “package “ of services are and what the Medicare payment rate may be for that package.

You mentioned bundling, which comes under the guise of global payments, and reducing fee-for-service. Is that one of the main thrust of this reform law?

Should we have “bundles” only, or should we have modified fee-for-service? That’s one thing holding up discussions of ACO legislation. Many years back we had cost HMOs and risk HMO contracts with the government. The choice was up to the HMO but risk arrangements usually offered better opportunity for additional revenue from savings. If we extend this down a bit we could have risk and cost ACOs. I think it will eventually go mostly into bundling, but not necessarily capitation. Capitation is paid on a per member per month. Bundles work differently because you’re paying for episodes and your success is tied to patient population management.

ACOs are targeted at the Medicare population. It is my understanding that a physician in private practice can belong to an ACO and continue to conduct fee-for-service in private practice independently for seniors not in the ACO and for his non-Medicare patients. Is that correct?

Absolutely. The private physician is not a government employee, and this is not government takeover. What the government is going to do is set the criteria for bundling for an episode of care. The physician can manage within that framework. But I do think ACOs will be a vehicle many employers will look to for managing non-Medicare employees, and we are seeing this with Humana and Norton as well as similar shared savings arrangements between Blue Cross and Advocate hear in Chicago.

Hospitals are hiring primary care doctors as well as specialists in record numbers. The number of physicians in private physician-owned practices has dropped from 75% of physicians to less than 50% in the last five years. Doesn’t having physicians as salaried employees make the creation of ASOs easier for hospitals?

The reform law is directed at physician- owned and physician- driven enterprises. The statute mentions hospitals in only one aspect – when hospitals own primary care physicians. These hospitals are eligible to apply, all the other ACOs are “physician-driven.” In my opinion, ACOs are really an “physician-anointed” program. Hospitals are hiring more doctors to make sure they don’t wander off the reservation. And yes, salaried physicians would help hospitals to form ACOs, if the primary care physician practices hospitals buy are seeing more than 5000 non-Medicare Advantage patients. And yes, having both primary care physicians and specialists under one corporate roof as employees would help in care coordination. Many specialists and primary care doctors see cooperative groups involving specialists, primary care physicians, and hospitals as their future over the next 3 to 5 years.

The federal government is moving very fast on ACOs, and just like another business you need to get ahead of the curve. State governments are moving even faster with Minnesota, Michigan, Colorado, Massachusetts, Pennsylvania already having ACO like organizations operate in conjunction with Medicare.

Florida, Arizona and others are also moving this way as the money for these and similar programs are cut. The states are very interested in partnering with providers to hold the line on unnecessary care costs. Vendors and purchasing organizations, on their part, are taking a serious interest in forming ACOs. As the ground shifts underneath physicians, they are realizing they may be left out of these cooperatives that are being built. As Dr. Jack Lewin likes to put it,

‘Either you have a seat at the table, or you are on the menu.’

Another powerful trend is the consolidation and concentration of health care into larger and larger entities, many of whom may have the power to negotiate higher and more favorable rates. This may be an unintended consequence of health reform and raises anti-trust issues. How do physicians avoid anti-trust in forming ACOs?

You manage anti-trust by making sure physicians who are part of your organization understand the difference between competitive and anti-competitive behavior. How do you do that? The first thing you do is read the document that the Federal Trade Commission prepared in 1966 that offers several pathways to “safe harbors” when physicians develop their own networks. The 50 page document says you have an exemption from antitrust if you are clinically integrated OR financially integrated. If you are taking capitation or at risk financially , you are exempt. Then the government doesn’t see you as a bunch of competitors, but as a cooperative group with a community benefit.

The same occurs when a group becomes clinically integrated, they are exempt because instead of being seen as competitors trying collude to a anti-competitive strategy you are building a cooperative strategy to improve quality. But beware. If you are not truly clinically integrated, you are at risk for an antitrust action. In Chicago, an insurer challenged the Advocate health system as not being clinically integrated, and Advocate spent tons and tons of money defending themselves. But Advocate did take clinical integration very seriously. Now that they have done that, they have re-engineered their system to the benefit of both their hospitals and their physicians. Blue Cross Blue Shield has offered them an exclusive for their ACO bundled payment plan.

This example shows that ACOs offer a new pathway for physicians and the government for their mutual benefit. Physicians need to read the FTC document, not sit in a room talking about price and contracts, and to hire a good antitrust lawyer to advise them.

The Association of Health Care Lawyers has a whole list of qualified lawyers to advise on antitrust issues. Definitely get yourself a good attorney to review what you’re doing. You do not need to apply to the FTC to proceed with an ACO, but you do need to follow the rules in the six pathways advised by the FTC. I think CMS will defer to the FTC to enforce the rules even though, as written CMS has that power today.

So, to conclude, “re-engineering” the health delivery system is underway. To navigate the maze, get yourself a good lawyer to avoid antitrust issues.

First you would want to find out who your best referrals are coming from and defines your virtual group. Talk with this series of doctors about what an ACO is and what could be done in terms of developing a loosely knit group to meet high performance standards

Once you have at least a core group to discuss the vision you need to get advice on operational ACOs and also get a lawyer to make sure you have a pathway through the clinical integration steps. There are a lot of good things in this health reform law for physicians. And there are a lot of good things being published by medical societies to help doctors avoid the pitfalls in forming an ACO. The Massachusetts Medical Society just published a one-page summary of what to avoid in forming an ACO. The Physicians Foundation is also preparing tools and background information to answer physician questions.

Physicians need to do their homework, even before hiring a lawyer, before proceeding with an ACO.

Richard L. Reece, MD, blogs at Medinnovation and has a website under construction. http://www.doctorreece.com. He is the author of three recent books, Obama, Doctors, and Health Reform (Iuniverse, 2009), Innovation Driven Health Care (Jones and Bartlett, 2007), and an E-book, Pros and Cons of Accountable Care Organizations (Practice Support Resources, 2011). He works with The Physicians Foundation, a 501C3 organization representing physicians in state medical societies. Opinions expressed in his blogs are his alone. He can be reached at rreece1500(at)aol(dot)com, 1- 860-395-1501

An ACO Watch: Mid-Week Review ‘Mea Culpa’!

The brodcast today on ACO Watch: A Mid-Week Review was a, well, d/i/s/a/s/t/e/r:

Per Wikipedia:

A disaster is a natural or man-made hazard that has come to fruition, resulting in an event of substantial extent causing significant physical damage or destruction, loss of life, or drastic change to the natural environment. A disaster can be ostensively defined as any tragic event with great loss stemming from events such as earthquakes, floods, catastrophic accidents, fires, or explosions.

Well perhaps not that dramatic, but the subject ‘how to engage independent physicians’ in the ACO conversation from vision to fulfillment, was and is a subject worthy of an intelligent and coherent discourse which yours truly just did not deliver. So, as host and producer of the broadcast, upon reviewing the rather marginal audio, coupled with a meandering and monotone rendering of the narrative, I elected to delete it.

We will have another go at the subject next week perhaps aided by a co-host at that time.

Meanwhile, here are some of the links referenced during the broadcast. The intent was to weave them into a narrative worthy of your time. We’ll do our best to deliver on February 2nd 2011.

The issue of crowd-sourcing or even strategic targeting of key physician (aka ‘champions’) engagement in ACO’s is a BIG issue. Considering the history of the medical staff organization, it’s roots and nature as a voluntary entity, and prevailing organizational designs, is a worthwhile exercise as we continue our march towards clinical/financial/legal or ‘virtual’ integration. Who can properly steward this transformational bridge? The answer to that question is one of the key determinants of success this go round, imj.

ACO Watch: A Mid-Week Review

Tomorrow, January 26th, 2011 we’ll review headlines in the ACO market, and focus specifically on the cultural antecedents and pathways for engaging ‘independent physician’ participation in ACOs.

Other than mature IDN’s such as Mayo, Kaiser and Geisinger, et al, who have risen to the head of the class when discussing ACO potential, there is a second tier of ACO candidates that include Advocate Health Partners, and Monarch Healthcare; for context click here. We’ll consider their cultural standing, organization model, and strategies to appeal to the independent physician market, while also exploring the ability of physician leadership sourced from voluntary medical staff culture to add value to the ACO development conversation.

To  join us live or for an archived replay, click here.

On February 9th, self proclaimed ‘ blogvocateur’ Jaan Sidorov, MD, former medical director with Geisinger Health Plan, and publisher of the witty and insightful ‘Disease Management Blog‘, joins me to discuss his series of very informative blog posts, and key conference take aways,  from ‘ACOs Summit: A Transitional Model to Full Risk Care Management‘. To listen live, or via archived replay, click here.

On February 16th, Kevin Fickerscher, MD, joins me to discuss ‘ACO’s vs. Medical Homes: Is there a difference?’  Dr. Fickenscher serves as a Strategy, Development and Thought Leadership Officer for Dell Healthcare Services on an international basis. Prior to his current position, Dr. Fickenscher served as the Vice President for International Healthcare for Perot Systems which was acquired by Dell in November 2009. Dr. Fickenscher is a physician executive and leader with extensive experience in strategic and operational development in complex healthcare organizations. He has provided leadership for various organizations related to technology and information management, organizational transformation and development, physician management, health policy analysis, leadership development, clinical quality and resource/care management, among other areas. Dr. Fickenscher is considered to be a dynamic, visionary leader in healthcare throughout the world.

To listen live or via archived replay, click here.