American College of Physician Executives (ACPE) Hosts Accountable Care Organization Panel in Tuscon with Elliott Fisher

ACPE members met in Tuscon on November 14th – 18th, 2010. Dr. Elliot Fisher, who oversees the Dartmouth-Brookings Pilot (ACO) Project, and who is often credited for ‘coining’ the term ‘Accountable Care Organization’ chairs the panel, featuring:

Mark Werner, MD, CPE, FACPE — Chief Medical Officer of the Carilion Clinic in Roanoke, Virgina, and an ACPE board member.

Palmer Evans, MD, FACOG — Chief Medical Officer of Tucson Medical Center in Tucson, Arizona.

Steven Hester, MD, FAAP — Chief Medical Officer of Norton Healthcare in Louisville, Kentucky.

The panelists addressed the challenges and opportunities experienced setting up ACOs in their respective organizations.

To view the entire session including an informative Q & A, click here.

Hat tip to Mark Browne, MD aka @consultdoc.


J. Peter Rich, McDermott, Will & Emery to Kick Off ‘ACO Watch: A Mid-week Review’

On Tuesday, November 3oth, 2010 at 10:00, Pacific, ACO Watch: A Mid-week Review of the Market will launch with J. Peter Rich as special commentator.

Not a day goes by without some reference to Accountable Care Organizations or ‘ACO’s’ in print or online media whether of the main or ‘lame stream’ variety. Throw in the ‘digital river’, or new age after market whether via Twitter or other digital interactive media including an exploding blogosphere, and the conversations are considerable and will only grow in both volume and intensity.

Since we are time bound, and given the scale of the challenge and level of stakeholder interest, a mid-week review of the market seems a prudent way to track, vet, review and analyze the contenders including key industry issues.

To join us for the inaugural live (or archived replay) broadcast, click here.

Accountable Care Organization Vision: Is it about ‘Principles’ or ‘Principals’?

We’ve witnessed several industry stakeholders step up and issue statements of principles pertinent to the ‘OG & E’ (i.e., the organization, governance & equity) domain for Accountable Care Organizations recently. The American Medical Association (AMA), California Medical Association (CMA), and an alliance of primary care physician organizations, including the American Academy of Pediatrics (AAFP), the America College of Physicians (ACP), and the American Osteopathic Association (AOA) have all chimed in here, here, and here, respectively.

While no doubt central to leading, and navigating the inevitable ‘white water’ of health reform implementation, what is likely to have far greater contribution to a net strategy gain for both patients and sponsoring providers, are the ‘principals’ in that conversation. Many of the leaders in key strategy slots, whether institutional or professional, are ill equipped to sort through the many issues before them; and one more time are groping for ‘check the box’ answers with deliverables’ solutions and implementation timelines. All well intended, but perhaps a case of putting the cart before the horse?

Unfortunately, since the success of the big ‘risk push-back’ in the 1990s, i.e., hospital systems, medical practice management companies and captive or independent MSOs (i.e., utility type management companies) all returning to their ‘core businesses’, there is precious little institutional memory, insight or competence in these circles at the moment.

Lets not forget to mine the ‘wisdom of the elders’ forged in the 1980’s though mid 1990’s run up to adopt the prior iteration of Berwick’s ‘triple aim holy grail’. In this blog, we will start recounting some of the more strategic mis-adventures associated with rather large, and smart, entities virtually all of them counseled by many of the same usual suspects (or there derivatives) still in that conversation today, and positioning themselves as ‘strategy experts’.

More will be revealed….

Vertically integrated delivery system can be a boon or bust depending on the principles driving the process

L. Gordon Moore, MD

With permission from the author I post below a long anecdote about a high functioning solo primary care practice looking to link up with a local group.  This is supposed to be the way to a future state in which primary care practices operate as the front lines of vertically integrated Accountable Care Organizations.

The notion makes some sense on paper but the real world is a bit messy.  I post this example as a caution that even good intentions can go awry and leave both sides feeling burned.

We are in the midst of another wave of mergers and consolidations on the delivery side of health care.  With thought and care this can be done well.  Let the principles of high performing health systems guide this work. High performing health systems stand on a foundation of effective primary care.  Doing this well means working with the front lines, not just swallowing up practices with boiler-plate contracts and top-down management.

High performing primary care and vertical organizations are not mutually exclusive, but we need to consider the effect of organizational policy has on the ability of a practice to deliver on the promise of effective primary care.

This email is long and I know that some of you will yell “WHAT WERE YOU THINKING?!?!”  Please refrain from that, as we’ve already kicked ourselves in the head over and over about this.  If you don’t want to read it, I won’t be offended if you hit your “delete” button.

Background:  We were sharing our space & staff with another MD up until July, 2009.  At that point in time, we compensated for the lost overhead from the gentleman who does research in our office by charging him rent (previously we took only a % of what he earned, now we are supposed to be paid rent + a %).  Things were going OK, but Rob’s practice was not as busy as our current spending habits dictate, so he started working for a company called X which does concurrent chart review for hospitals to determine inpatient vs. outpatient status, mainly for Medicare patients.  He started there in February this year, and while it is a lucrative job, it is not personally fulfilling in the same manner that a clinical practice is.  Rob shared with our former practice management advisor about this position, in case the PMA knew of any other physicians who were looking to add income after hours.  The PMA shared with us that he was now working for a large hospital organization, and that they were looking to expand into our area.  Thus begins the saga….

Rob started talking to the Medical Group in April or May.  They were definitely interested in folding our practice into their group.  It required multiple interviews with multiple physicians, and at the outset, we thought this would be good.  The group would provide a stable income for the next couple of years, would promote the practice (thus increasing patients to the level needed to make the sort of income that they were offering while not being on a hamster wheel), and would give Rob what he thought he wanted back – a collegial group of physicians with which to practice, a say in how the office would be run, while at the same time allowing him some time “off” (not being on call while on vacation).  The group’s non-profit Foundation would provide everything that the practice needed – paying all of the bills, including rent, an EMR system, payroll, etc.  And the group’s Research Division would contract with the research guy in our office so that research could continue.  Talks with the Medical Group went well in May and the first part of June and then stalled out when the president of the group went away for a month.  At the end of July, agreements were made and a formal employment contract was sent to us the week before we left on vacation in August.  Mid-August, we came back from vacation and Steve signed the employment contract.  Things started to progress.

The next step involved the purchase of our assets by the Foundation.  Within 2 weeks of signing the employment contract, an appraiser was sent to our office.  We were told it would be about 2-3 weeks and then we would get the purchase offer for our assets.  3 weeks went by, and we then started calling on a weekly basis to inquire about the appraisal.  Foundation’s Legal department would NOT release the appraisal to us.  They were working on the purchase agreement.

Meanwhile, the Foundation computer and phone people started hounding us.  Multiple visits to our office were made so that they could look at where they would need to install “their” equipment.  There was to be a computer in every single exam room.  “What a waste!” I thought…..Rob currently uses a tablet and carries it from room to room and it works great.  They also wanted to put phones in every exam room…..ditto the wastefulness.  Our office is so small that one simple yell for help will bring the staff running from the farthest corner.  The phone lady was like a Border Collie; she really “needed” to have AT&T come out and do work in our suite.  We kept telling her that until we had a signed Purchase Agreement, that was not going to happen.  The other thing that was supposed to be happening during this time was the Foundation was to hire our LVN.  Even after coming and talking to her personally, no one bothered to mention to us OR HER that she was supposed to apply for her job online through their website.  It was only after we pushed and told the President of the Medical Group that it was unacceptable for her to start working for an employer without knowing what her salary and benefits were going to be that they even bothered to tell us that she would need to apply online “for any job – just tell us which one.”  She complied, did the online application and had many phone calls with confused HR people wanting to know why an LVN would be applying for an MA position.  Our first clue that the left hand of this organization does not know what the right hand is doing…

Move forward to the last week in October.  Three days before the end of the month, with Rob supposed to be starting to work for the medical group on Nov. 1, we finally get the purchase agreement.  Not only is the amount bottom-dollar for the Fair Market Value of our assets, but in it they state that he cannot continue to work for X.  We told them that this is a deal-breaker.  Back in August when we signed the Employment Contract, we specifically asked if his work at X would be a conflict.  We have IN WRITING that it would not.  (They made a HUGE assumption that it was an Independent Contractor type of employment and not and Employment Agreement when they answered that question.  That has now come back to bite them because it wasn’t until October that they even bothered to ask for a copy of his employment.)  Foundation’s Legal department is stating that anything that uses his medical license is a conflict of interest and all income must flow through them and be passed on to Rob.  We knew that X wouldn’t do an independent contractor agreement because we asked about that in January upon the advice of our CPA.  But their Legal Beagles wanted to try anyways.  So the start date was pushed back to Dec 1.

On 10/29, AT&T called to state that they were on their way out to do work in the suite.  I said NO WAY.  I had a password protection put on our account because the Border Collie was ordering things to our account without telling us and without authorization.  (She was told – in no uncertain terms –  that there was to be NO WORK done in our suite until we had a signed Purchase Agreement.  And I have Building Management on my side for this one.)

We gave them until Nov. 5 to work something out with X.  Nothing was worked out.  On Nov. 8, Rob send a “Dear John” email to the Medical Group and told them that he appreciated all of their hard work, but without him being able to continue his work at X, we could not progress with the deal.  Never mind the fact that a deal had not been worked out with our research guy and our LVN still did not have an offer of employment.  That got the Medical Group freaked out.  They called and asked Rob if he would consider an “administrative” position with the medical group to offset the income that we currently get from X.  He said yes.  They told him by the middle of this week that they would have something.  He told them that they had until yesterday to come up with an agreement for research and a written employment offer for our LVN.

Needless to say, no administrative position has been offered.  No offer of employment for our LVN.  No contract for research.  No Deal.  Rob called the Medical Group yesterday, said “Enough is enough, thank you for the offer.”  Oh, and I forgot to mention that meanwhile, we have learned that their EMR is 1990’s technology (way behind our current EMR system, which just got certified this week for Meaningful Use), that many physicians are unhappy with the Foundation due to the top-heavy management and inability to get things done (like repair holes in walls and fix non-working computers), and we have decided that it’s just not going to be a good fit for an entrepreneurial physician to work in this monster of a system.

The past 6 months have been an exercise in patience, but have also been a learning experience for us.  Although large organizations may be the only way to make it work going forward with Healthcare Reform in areas such as ours, we are going to make sure that we participate in an organization that is not top-heavy and where the physicians have a say in the running of the business.

What will we do now?  The future is uncertain.  We’re not sure that we can sustain a practice and live in the area that we do.  Our house payment alone is 65% of our income because we moved here right before the market peaked and then tanked.  We don’t really want to move – our kids are doing really well in top-rated schools.  They have lots of friends (which is hard for our son to do).  We love our community. We like our house (even if it is overpriced).  My mom lives close by.  We are looking at sharing our office space again with another provider.  Rob will continue with X and research, and we will try to get creative about marketing our practice. Our story will continue, but without a top-heavy, unorganized group.  We are looking at migrating our EMR system to an ASP, Rob is drooling over the fact that he might be able to use an iPad, we don’t relish him continuing to work 20+ hours per week plus holidays for X, but we see it as temporary, although it is a long-term “temporary.”

Lesson learned:  Solo is the best option for us at this time. Just say NO to the big groups when they come knocking on your door.  And really do your research if you think you want to not be solo any more.

Happy Saturday and thanks for listening to me vent!

Hospitals Need To Focus On Culture In Order to Be Able to Survive in an Era of Accountable Care Organizations and Medicaid Reimbursement Rates

Kent Bottles, MD

When a health system asked me to facilitate a Board discussion on physician alignment and integration on November 12, 2010, I was already committed to giving a keynote on the future of health care for the American Institute of CPAs in Las Vegas on November 11.Although I usually fly Delta or USAir where I have priority frequent flyer status, the only way I could get to the Board meeting was by flying from Las Vegas on Southwest Airlines.

My experience on Southwest reminded me of the importance of culture in navigating change in a rapidly evolving environment like we have in health care in the United States today. It is all too easy to focus on all the technical issues hospitals face in setting up Accountable Care Organizations to handle the inevitable global payments that will replace the current fee for service system. This blog is a plea for hospitals and doctors and consultants to pay attention to both the technical and the cultural or adaptive challenges we face in transforming a $2.5 trillion American industry.

Recent articles on companies outside of health care have highlighted how important culture has been to the success or failure of Southwest Airlines, QVC and Zagat to respond to changing business conditions. Southwest’s COO states “our culture is our biggest competitive strength,” and the flight attendant and pilots’ union worry about how the recent purchase of AirTran will affect their unique culture. I have seen Southwest pilots help clean up the cabin, and the flight attendant on my recent trip told me she was giving up her day off because the company needed her help. QVC is trying to use the same methods and culture that made selling on TV popular with Internet customers. And Zagat, which had cultural troubles moving from book format to online, is now hoping that smart phone applications will reinvigorate their business model.

Harvard’s Ron Heifetz differentiates between technical and adaptive work, and I have found this concept useful in working with health systems responding to payment reform. Everyone involved in hospital physician integration efforts will need to undergo a cultural (adaptive) shift because the healthcare reform law and the transition from fee for service to global payments mean the old ways of doing things are not sustainable. Even if all the technical tasks are superbly done, difficulties will arise if the leadership, management, care teams, and physicians still have the old mindset and culture.

In attending conferences and working with hospital CEOs, I have found that there is more emphasis on the technical tasks that need to be accomplished in order to form an Accountable Care Organization than on the culture such a change will require. I have heard a lot of keynotes filled with power point slides on defining the role and reporting structures for newly formed physician leadership teams; creating system-wide operational councils; and specific legal structures of ACOs so they can accept and distribute global payments. These are all important technical tasks, but they will fail if the culture does not change too.

Two concrete examples may help make this point. Sony engineers came up with the equivalent of the iPod long before Apple. However, Sony ran into internal obstacles because of its culture, Sony’s leadership and organization was designed to come up with improvements to the next generation of CD players, but the new iPod technology threatened how Sony’s leaders and engineers thought about their product line. They could not overcome the cultural barriers to marketing such a revolutionary product. Sony’s failure was not one of technical expertise; it was and adaptive failure of cultural mindset.

My travels found me in Savannah, Georgia recently having lunch with Joe Scodari who sits on three Boards of Directors in the health care space. Scodari related a similar story of cultural failure to adapt when Kodak engineers invented the digital camera; the film culture at Kodak did not approve marketing such a transformational product that would cut into Kodachrome film sales. Kodak missed out on digital cameras, and film sales plummeted anyway.

So how do hospital system CEOs avoid the fate of Sony and Kodak as they respond to the sweeping changes in the new federal health care reform law? They must focus on both technical and cultural issues. Jane Kornacki and Jack Silversin who pioneered the physician/hospital compact model and Bob Kegan and Lisa Laskow Lahey who developed the immunity to change model for transformation have much to teach all of us. Physician leadership academies are another essential ingredient in transforming culture among newly employed physicians who are not used to being employees.

Southwest Airlines made money when other airlines floundered; they attribute this success to culture. Hospitals that focus on culture and technical tasks will have a better chance of survival in an environment that is increasingly saying you better get ready to survive on Medicaid rates, not private insurance rates.

Kent Bottles, MD is a seasoned thought leader in strategy and implementation issues for hospitals, health systems, medical groups and physician organizations. Dr Bottles has held a number of leadership positions in academia, biotechnology, and community health systems.

Inaugural Program Scheduled: ACO Watch – A Mid Week Review of the Market

On November 30th, 2010 at 10:00 AM Pacific and 1:00 PM Eastern, ‘ACO Watch’ will launch a weekly round-up of action in the emerging Accountable Care Organization (ACO) ‘tsunami’.

As the volume of activity builds in anticipation of the January 2012 ‘go live’ date, we will summarize, vet, and comment on the activities of the major and perhaps below the radar screen, if not stealth, players.

Our first guest commentator is to be announced shortly.

To join us, click here.

4 Accountable Care Challenges for CMS

Tony Miller, for HealthLeaders Media

The Accountable Care Organization model presents extraordinary opportunities.  It promises to move Medicare and potentially other payers from traditional, volume-driven, inherently inefficient, and counter-productive fee-for-service financing to a value-driven, patient-centric approach to payment and care delivery.  And unlike a multitude of other reform initiatives affecting care delivery and payment, the Medicare ACO program will be a nationwide option, not a mere demo or pilot.

Working together under the umbrella of an ACO, health systems, physicians groups, and other health care providers will be able to redesign care and realign economic incentives.  As evidenced by private sector projects led by Carol Corp and other innovators across the country, the benefits of accountable care are impressive:  higher quality of care, increased patient safety, improved patient satisfaction, strong care management and coordination, and lower costs.  In other words, a genuinely win-win scenario for patients, providers, and taxpayers.  The entry of Medicare and the prospect of significant shared savings will serve to make accountable care a viable reform across the marketplace—provided the Centers for Medicare and Medicaid Services (CMS) adopts sound policies.

CMS plans to release proposed rules on…

Full text of article, here.

Tony Miller is the Chief Executive Officer of Carol Corp.

Medicare Program; Request for Information Regarding Accountable Care Organizations and the Medicare Shared Saving Program

Donald M. Berwick

Centers for Medicare & Medicaid Services

This document is a request for comments regarding certain aspects of the policies and standards that will apply to accountable care organizations (ACOs) participating in the Medicare program under section 3021 or 3022 of the Affordable Care Act.

Comment Date: To be assured consideration, comments must be received at one of the addresses provided below, no later than 5 p.m. on December 3, 2010


The Affordable Care Act seeks to improve the quality of health care services and to lower health care costs by encouraging providers to create integrated health care delivery systems. These integrated systems will test new reimbursement methods intended to create incentives for health care providers to enhance health care quality and lower costs. One important delivery system reform is the Medicare Shared Savings Program under section 3022 of the Affordable Care Act, which promotes the formation and operation of accountable care organizations (ACOs). Under this provision, “groups of providers * * * meeting the criteria specified by the Secretary may work together to manage and coordinate care for Medicare * * * beneficiaries through an [ACO].” An ACO may receive payments for shared savings if the ACO meets certain quality performance standards and cost savings requirements established by the Secretary. We are developing rulemaking for the establishment of the Shared Savings Program under section 3022 of the Affordable Care Act. In addition, section 3021 of the Affordable Care Act establishes a Center for Medicare and Medicaid Innovation (CMMI) within CMS, which is authorized to test innovative payment and service delivery models to reduce program expenditures while preserving or enhancing the quality of care. We are considering testing innovative payment and delivery system models that complement the Shared Savings Program in the CMMI. In both of these efforts, we are seeking to advance ACO structures that are organized in ways that are patient-centered and foster participation of physicians and other clinicians who are in solo or small practices.Show citation box

We have already conducted substantial outreach and…

Read full text, here.

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Hearing on Strengthening Medicare and Medicaid: Taking Steps to Modernize America’s Health Care System

Donald Berwick submitted testimony:

To watch the hearing click here.

Chairman Baucus, Ranking Member Grassley, and Members of the Committee; thank you for the opportunity to appear before you to discuss ways to strengthen Medicare and Medicaid and modernize America’s health care delivery system. The Affordable Care Act, passed by Congress and signed into law by President Obama in March of this year, is landmark health care legislation that is bringing comprehensive insurance reforms, expanded coverage, and enhanced quality of health care to all Americans. Millions of people across the country are already benefiting from this law, including the more than 100 million people enrolled in Medicare, Medicaid and the Children’s Health Insurance Program (CHIP). Because of the Affordable Care Act, the fiscal future of Medicare is stronger, new tools to fight Medicare and Medicaid fraud are returning money to the Trust Funds and the Treasury, Medicare beneficiaries have new benefits and lower costs, and State Medicaid programs have additional resources and options to expand coverage, which is especially important in these challenging economic times.

As a pediatrician, I have witnessed both the best and the worst of the American health care system. I had the opportunity to practice pediatrics for 20 years in an organization that promoted integrated care, and saw firsthand the enormous difference that a doctor, nurse, and patient working together can make in health care outcomes. I have devoted my career to the belief that all patients deserve access to high quality health care, regardless of who they are or whether they live in a large city or a small rural community. High quality health care does not necessarily mean the most expensive health care. It means safe care, free from medical injuries, errors and infections; it means reliable care, based on the best available science; and it means person-centered care, in which each patient is treated with dignity and respect for his or her own unique preferences.

These core beliefs will continue to shape my work at the Centers for Medicare & Medicaid Services (CMS). As Administrator, protecting and strengthening Medicare, Medicaid, and CHIP is my top priority. And the Affordable Care Act has provided a number of important tools to help achieve this goal. It explicitly protects the guaranteed Medicare benefits on which so many seniors and individuals with disabilities rely. It will not cut these guaranteed benefits, nor will it ration care. The Affordable Care Act does not prescribe a ―one size fits all‖ approach to health care, because health care is first and foremost about caring for unique individuals. The Affordable Care Act incentivizes hospitals to improve the quality of care and prevent unnecessary readmissions, which are often harmful to patients.

CMS can help lead health care improvement in many ways. With new provisions in the Affordable Care Act, you have presented CMS with additional opportunities to work with others both in the public and private sector to make real improvements in the nation’s health care delivery systems.

CMS can and should be…

For complete testimony transcript, click here.

California Medical Association Adopts Organizing Principles for Accountable Care Organizations (ACOs)

Francisco Silva

Guiding principle – The goal of an accountable care organization (ACO) is to increase access to care, improve the quality of care and ensure the efficient delivery of care. Within an ACO, a physician’s primary ethical and professional obligation is the well-being and safety of the patient.

ACO governance – ACOs must be physician-led and encourage an environment of collaboration among physicians. ACOs must also be physician-led in order to ensure that a physician’s medical decisions are not based on commercial interests but rather on professional medical judgment that puts patients’ interests first.

Voluntary participation – Patient participation in an ACO should be voluntary rather than a mandatory assignment by Medicare. Any physician organization (including an organization that bills on behalf of physicians under a single tax identification number) or any other entity that creates an ACO must obtain the written affirmative consent of each physician to participate in the ACO. Physicians should not be required to join an ACO as a condition of contracting with Medicare, Medi-Cal or a private payor or being admitted to a hospital medical staff.

Savings used for patient care – The savings and revenues of an ACO should be retained for patient care services and distributed to the ACO participants. An ACO’s savings and revenues should not go to insurers.

Flexibility in patient referral and antitrust laws – The federal and state anti-kickback and self-referral laws and the federal Civil Monetary Penalties (CMP) statute (which prohibits payments by hospitals to physicians to reduce or limit care) should be sufficiently flexible to allow physicians to collaborate with hospitals in forming ACOs without being employed by the hospitals or ACOs. This is particularly important for physicians in small and medium size practices who may want to remain independent but otherwise integrate and collaborate with other physicians (i.e., so-called virtual integration) for purposes of participating in the ACO.

For more detailed information, or to view the full report from CMA’s Physician-Hospital Alignment Technical Advisory Committee, click here.