Integrated Healthcare Association White Paper: Accountable Care Organizations in California – Lessons for the National Debate on Delivery System Reform

The Integrated Healthcare Association has released a timely and insightful White Paper titled ‘Accountable Care Organizations in California: Lessons for the National Debate on Delivery System Reform‘.

California has 285 physician organizations with many of the characteristics described in the national debate, and its experiences with these organizations over the past thirty years, both positive and negative, offer insight into the challenges that Federal policymakers will face with ACO implementation. This paper outlines five overarching aspects of California physician organizations – their organizational structures, payment methods, relationship with health plans, how they promote consumer choice, and the public policy and regulatory constraints they face – and offers ten key lessons for the national ACO debate.

The ten lessons derived from the five key features and described in detail in the report are:

1. A variety of organizational structures are effective at delivering high quality coordinated care; at least as important to success as structure are an organization’s capabilities, culture, and infrastructure, as well as the alignment of goals between the organization and its individual physicians.

2. In California, a range of relationships exist between physician organizations and hospitals. Alignment of incentives between physician organizations and hospitals offer important opportunities for performance improvements across the entire continuum of care.

3. As a method of payment, capitation can be effective at encouraging coordinated care, but payment methods should vary across ACOs depending on an organization’s ability to assume risk. Fee-for-service payment with shared savings has not proven a successful incentive for the efficient delivery of care.

4. Health plans acting in concert on payment methods and performance measurement helped facilitate the growth of California’s provider organizations, and should also play an integral part in fostering ACO development nationally.

5. ACOs are not a panacea for health care spending control. Some large provider organizations have gained bargaining power and raised prices. Capitation payment and consumer cost sharing partially offset tendencies toward raising prices.

6. ACOs must be agnostic to insurance type; most provider organizations in California have focused on commercial, Medicare, and Medicaid HMO plans for their patients, but for ACOs to be viable across the country, mechanisms must be found to encourage PPO and traditional Medicare and Medicaid patients to use their services.

7. Balancing patient choice with the desire to decrease costs and effectively coordinate care is difficult. California’s experience underscores the challenge of promoting care coordination in an environment of unrestricted provider choice.

8. Regulation of the financial solvency of provider organizations is important to ensure market stability.

9. Consumer protections from capitated provider organizations need to be balanced, not overburdening.

10. Special attention must be given to establishing ACOs in geographic areas with identifiable social and economic challenges. Some California ACOs have been very successful at managing care for Medicaid patients, despite low payment rates from the state.

The report was funded by IHA and co-authored by James C. Robinson and Emma L. Dolan, a graduate student in public health and public Policy at UC Berkeley. The complete report is available at

Doctors: The Sky Is Not Falling

Jeffrey L. Cohen

In the 90s, physicians were told “The sky is falling. You have to find a tree to stand under or you will be crushed.” The “trees” were things like IPAs and PHOs. The future outlook was bleak. All patients were going to be part of some system with which the physician would have no input or control. Decisions would be made on purely business grounds. And the end of fee for service medicine was at hand. NOT.

Here we are today in the face of a national healthcare reform drive. Again, any claim the sky is falling and civilization as we know is will be undone. It is the end days for private practice of medicine. NOT.

The truth is clear: this is a time of serious change in terms of how the United States intends to view and approach the delivery and payment of healthcare. The creation of Accountable Care Organizations (“ACOs”) and the dominant role of insurance companies and Pharma sound
terrifying. terrifying. Clearly, the stated intent is to reduce cost and improve outcomes.

Things like clinical pathways are coming back into focus. Discussions about Physician Hospital Organizations (PHOs), Independent Practice Associations (“IPAs”) and Super LLCs are being renewed and reconsidered against the changing landscape. The market that once existed for sellers of medical practices has withered. Certain specialties, like cardiology, are being hit extremely hard with cuts not only on physician services, but also on diagnostic imaging services that drive a lot of revenue to them. And once again the gong of the death of solo and small practices is being banged once again. Physicians are understandably frightened.

Change is change. It upsets people. And this is not the first time in the past 20 or so years that physicians have been at the butt end of it. That said, they should be wary of the “end of days” salesmen, those which sell products and strategies based on the assumption that life as they know it will end. Physicians should take a hard and long look at the things they are being asked to buy in order to survive the coming tsunami. Does the vendor have an economic stake in the decision? Buyer beware.

So, what are the most popular myths floating around now?

1. You have to spend a lot of money very quickly to comply with the HITECH Act and to get the incentive money for using EMR. Wrong. In fact, physicians that jump quick are likely to get sold stuff that is expensive and doesnt work. Instead, take your time to have an IT expert with no products to sell evaluate your IT needs and see what the most workable options are. Spend more time on the “shoe fitting” and take your time making a decision to buy.

2. Physicians that are in small and solo practices will die off quickly. The simple truth is has always been that small practices are, generally speaking, economically inefficient and limited. Thats not new! What is new is that there are more economic and regulatory pressures and any healthcare reform will be paid, in part, by payment reductions to physicians. Mega groups are an option,
but just one. Look at all forms of alignment and integration, including IPAs, PHOs and others.

3. Mega Practices Rule. Nah. It really depends on the “glue” of the practice. are they together simply to get new revenues from ancillary services? Many are, and that does not create great strategic advantages. The bottom line in terms of market position is (and always has been): a financially efficient business model (low expenses and high income) which accomplishes and demonstrates value.

4. Accountable Care Organizations Will be Physician Led. Though the opportunity certainly exists and think-tankers favor physician led ACOs, the simple truth is that creating ACOs requires huge time availability, business expertise and capital, the very things that physicians are most challenged by. That said, physicians are at the center of any ACO model and their participation and leadership in ACO development and operation is critical.

5. This is the End of Fee-For-Service Medicine. Probably not. Though the legislation clearly identifies FFS compensation as the villain for our country’s healthcare spending, and though risk based compensation will likely play a larger role, some of the Stage 1 cost savings models pay on a fee for service basis. Moreover, it is important not to become entranced entirely with the insured market. There is a First Tier market of proprietary products and models, like VIP and Concierge practices which will likely grow for high patient contact practices (e.g. cardiology, internal medicine, diabetes).

I personally do not see the end of the medical world, though I do see big changes over many years. I do not see the end of the solo or small practice, though I do see more economic stresses. And I do not see a “one size fits all” solution at all. The options require careful and calm analysis. And the old hard-won strategies that have always won will always win:

2. Increase profitability by any legitimate means that is sustainable. For instance, practicing medicine with a bunch of other physicians you do not want to be around or speak with may be profitable but not sustainable;

3. Make your lifestyle more digestible, a particularly challenging request in sunny South Florida; and

4. Ensure that any strategy you enact include (a) increasing reliance on workable EMR, and (b) tracking, improving and communicating clinical outcomes.

Change is here. More change will come. It is not an end, but rather always something new, surprising and never quite as awful as anticipated. Healthcare reform is less a thing than a conversation at this point. That said, we should all be proactive in plotting our futures. Be adaptable. Be smart. And be patient.

Jeffrey L. Cohen, a board certified healthcare attorney with over 25 years of healthcare law experience, we bring experience, knowledge and practical advice to a wide-range of healthcare related entities such as physicians, medical staffs, home health agencies, surgery and imaging centers and many others.

Audio Recording: Workshop Regarding Accountable Care Organizations, and Implications Regarding Antitrust, Physician Self-Referral, Anti-Kickback, and Civil Monetary Penalty (CMP) Laws

On October 5th, 2010 the Federal Trade Commission, the Centers for Medicare & Medicaid Services (CMS) and the Department of Health and Human Services’ Office of Inspector General co-hosted a workshop on several issues associated with Accountable Care Organizations (ACOs), organizations authorized by the new Affordable Care Act that seek to deliver high-quality and efficient health care services to consumers.  The workshop addressed and solicited public comments on the legal issues raised by various ACO models being considered by health care providers.


October 5, 2010 :: 9:00 a.m. EST

Audio Recording of Morning / Opening Comments and FTC Panels

Morning Transcript

October 5, 2010 :: 1:30 p.m. EST

Audio Recording of Afternoon / HHS Panel and Listening Session

Afternoon Transcript

…..And Now for Something Completely Different?

Mark Browne

Mark Browne is an experienced physician executive working as a healthcare consultant with PYA. He can be found as @consultdoc on twitter.

Last week the healthcare world was all abuzz. The federal government was set to begin the journey that every player in the marketplace has been waiting for, the road to the accountable care organization. Over 300 industry leaders gathered in Baltimore to hear just how this was going to occur, to hear the “new normal.”  Well… that’s not exactly what was heard. Although there were some mentions of changes to safe harbors and inclusion of all players, not a lot of new and different ideas were shared. While following those who were live tweeting the event, comments like “ an ACO a PHO without the H?” and “Without antitrust legislation, we’ll have only large hospital networks remaining..”  and even “..capitation is on the horizon” were the norm of the conversation.

The closer we get to implementation of this “new” model, the more similar it appears to ideas that have been tried (and failed) before. It seems we have not yet developed the appetite for a model that is new and truly different.

Apple’s iPad has been out for less than a year.   It is anticipated that within the year it will have its own category of electronics, and will outsell netbooks by a large margin within the next two years. The iPad was expected to do well, but not this well. The iPad, like healthcare reform, was promoted as something new and truly different. But the iPad was not only new and different, it was also better for the customer…at least at some things. It made doing things that customers truly wanted to do (get information fast) better and easier, even at the cost of not being as good at others (word processing, gaming, etc.).

In an article in Kaiser Health News this morning, the author outlines how many industry players are lining up to make ACO’s work – not for the patient, our customers, but for them, the providers of services. These industry insiders all seem to be afraid of what they might have to give up under this new model of care, and are looking to make sure they maximize their own gains. There may be a lesson for us to learn from our friends at Apple. If we truly want to improve our model of care, we are going to need to give some things up. Everything cannot stay the same with different titles. Different for the sake of different is not going to cut it either. If healthcare is truly going to be reformed, we need to come up with both “different” and “better” – for the providers AND for the patients. So the question remains, does the highly publicized and government-endorsed accountable care organization meet these standards? Based on those attending the listening sessions this past week, I’m afraid the jury is still out.

Ref. link here.

Free Webinar! ‘The Key Enablers to Building a Sustainable ACO’


Tuesday, November 9th, 2010

1:00 PM to 2:00PM Eastern (10:00AM – 11:00AM Pacific)

  • Five Key Accountable Care Organization Enablers
  • How to put these enablers in place in a range of health care settings
  • Acquire an understanding of new ACO legislation
  • Gain new insight in how to move to an integrated care model
  • Considerations for ongoing performance measurement
  • Understand the value of clinical information across the health ecosystem


Anne McCune
Senior Vice President Strategy and Governance
Ingenix Consulting

FTC to Develop Safe Harbors and Expedited Review Process for ACOs

Ashley McKinney Fischer, Partner, McDermott Emery Will

The FTC, CMS and OIG hosted a public workshop on October 5, 2010, featuring panel discussions on antitrust issues and an announcement from the FTC that it will develop antitrust safe harbors for accountable care organizations (ACOs), as well as an expedited review process for ACOs that do not qualify for those safe harbors.


During a workshop held by the U.S. Federal Trade Commission (FTC), the Centers for Medicare & Medicaid Services (CMS) and the Office of the Inspector General (OIG) on October 5, 2010, FTC Chairman Jon Leibowitz announced the FTC will develop antitrust safe harbors for accountable care organizations (ACOs) and an expedited review process for ACOs that do not qualify for those safe harbors.

For many providers with ACOs in development who have been looking for more definitive antitrust guidance, the announcement may be a welcome relief.   That being said, providers should know that fundamental antitrust principles will continue to apply to the formation and operation of ACOs—namely, that ACOs formed and operated to improve quality and reduce health care costs that do not create undue market concentration are pro-competitive and ACOs formed by independent, competing providers solely to raise prices are not.

This newsletter summarizes the morning sessions of the workshop concerning antitrust issues.   A future newsletter will address other regulatory issues discussed during the afternoon sessions of the workshop.


Section 3022 of the Patient Protection and Affordable Care Act (PPACA), Public Law No. 111-148, directs the secretary of the U.S. Department of Health and Human Services (HHS) to establish, no later than January 1, 2012, a shared savings program that promotes accountability for a patient population, coordinates services under Parts A and B of Medicare, and encourages investment in infrastructure and redesigned care processes for high quality and efficient service delivery.   Under the shared savings program, ACOs that meet quality performance standards established by the HHS secretary are eligible to receive shared savings payments.  Among other requirements, an ACO must be accountable for the quality, cost and overall care of the Medicare fee-for-service beneficiaries assigned to it.

Although popularized by PPACA, the concept of independent providers coming together and being jointly accountable for the cost and quality of care they provide is not new.  In 1996 the U.S. Department of Justice (DOJ) and FTC in the Statements of Antitrust Enforcement Policy in Health Care(Policy Statements) first recognized the concept of clinical integration as a collaborative activity among competing health care providers that may provide a sufficient basis for analyzing joint-pricing negotiations under the rule of reason and not the per se standard of illegality.  Since the passage of PPACA, many providers have wondered how the DOJ and FTC would apply the standards they developed for clinically integrated managed care contracting networks—through the Policy Statements, advisory opinions and other, subsequent guidance—to the formation and operation of ACOs.

Government Officials’ Remarks

CMS Administrator Don Berwick, MD, stated the government wants to help integrated care thrive.   He also noted the government needs to be a proper steward of the antitrust laws.  Said differently, the government wants providers to cooperate and achieve synergies without colluding. 

Leibowitz stated the promise of ACOs—improved quality and reduced costs—offers a real opportunity for health reform and explained that the government’s job is to ensure that regulations encourage ACO development while also protecting consumers.   He then announced the FTC wants to explore the development of safe harbors so providers can know when they can collaborate.  Further, the FTC will explore an expedited review process for ACOs that fall outside the safe harbors.  Leibowitz acknowledged the difficulty of establishing safe harbors—that is, categories of conduct that, absent extraordinary circumstances, the DOJ and FTC will not challenge—that displace traditional facts and circumstances analysis under the antitrust laws.  He then appealed to the provider community, stating that in order to develop effective safe harbors, the FTC needs input from providers.  Specifically, the FTC is interested in the types of activities providers may engage in through ACOs and how providers envision ACOs operating in the marketplace.

FTC Panel Discussions

The FTC conducted two moderated panel discussions.   Provider and payor representatives, as well as policy experts, participated in the sessions.

Sufficient Integration and the Rule of Reason

The first panel addressed the issue of when ACO participants should be deemed sufficiently integrated through the ACO such that their collective price negotiations should be analyzed under the rule of reason and not the per se standard of illegality.  The panel considered whether the FTC should establish a safe harbor for ACOs that satisfy CMS’ criteria for ACO participation in the Medicare program.  Under the proposal, the FTC would view any ACO qualified by CMS to be sufficiently clinically integrated for rule of reason treatment.  The panel also considered how CMS should elaborate on PPACA requirements for ACOs—namely, that an ACO be accountable for the quality, cost and overall care of the Medicare fee-for-service beneficiaries assigned to it—to ensure that ACO participants are sufficiently integrated within the meaning of the antitrust laws.

Panelists discussed possible criteria.   Many provider representatives emphasized the importance of providers’ ability to share data and the ability of the organization to capture and analyze data.  A representative from a clinically integrated independent practice association emphasized the importance of electronic tools to improve cost and care coordination.  These tools allow providers to evaluate their performance against their peers. Another representative from a clinically integrated physician-hospital organization expressed the view that the importance of the adoption and implementation of electronic health records systems (EHRS) has been overemphasized, and that his organization has been clinically integrated despite its participants not having universally adopted EHRS.  Among other initiatives, his organization created disease registries to manage patient populations.  Later, it required participants to adopt high-speed internet technology, then e-prescribing.  As a result of federal stimulus money, the provider participants in his organization are now adopting EHRS.

A trade association representative encouraged the FTC to set the criteria at a high level in recognition that there are various care integration models.  Another panelist added that the FTC criteria cannot be too specific, otherwise competition could be stifled.  These comments recognize that one of the purposes of the antitrust laws is to foster innovation such as new care delivery models.   One of the challenges for the FTC as they consider a possible safe harbor will be how to answer the industry’s call for clear standards while also allowing for flexibility in model design.

Market Power, Over-Inclusiveness and Exclusivity

The second panel discussion addressed issues of market power, over-inclusiveness and exclusivity.  The participants considered whether the FTC should adopt an antitrust safety zone pertaining to market share for ACOs.  Statement 8 of the Policy Statements contains an antitrust safety zone that applies solely to physician networks.  Under the safety zone, the DOJ and FTC will not challenge, absent extraordinary circumstances, an exclusive physician network joint venture whose physician participants share substantial financial risk and constitute 20 percent or less of the physicians in each physician specialty who practice in the relevant geographic market, or a non-exclusive physician network whose physician participants share substantial financial risk and constitute 30 percent or less of the physicians in each physician specialty who practice in the relevant geographic market.  The DOJ and FTC did not extend the antitrust safety zone for physician networks to multiprovider networks, which the DOJ and FTC analyze under Statement 9 of the Policy Statements.

The panel first addressed the issue of how large an ACO needs to be in order to deliver care effectively.   Many panelists believed that ACOs need sufficient scale in order to achieve program objectives and properly measure performance.  ACOs also need scale in order to spread out the cost of infrastructure investments, staff and other resources.   Scale also enables an ACO to spread risk effectively.  The payors on the panel addressed the extent to which they are experiencing market power issues with providers and, not surprisingly, stated that they have experienced price increases in markets where certain providers are dominant.  One of the challenges for the FTC as they consider a possible safe harbor will be how to balance the need for scale to achieve program objectives against market power concerns.

Panel participants also discussed the issue of exclusivity.   Under an exclusive ACO, provider participants negotiate with payors only through the ACO and they may not join other ACOs.  A professor expressed the concern that the advisory opinions on clinically-integrated networks the FTC has issued to date unfairly emphasize non-exclusivity.  He doubted whether a high-functioning ACO can have provider participants whose loyalty is split among competing organizations.  Several representatives stated that exclusivity is necessary to achieve the benefits of clinical integration, at least with respect to primary care physicians.  As with other concerns the FTC must balance, it will be challenged to develop ACO guidance that recognizes both the benefits and foreclosure implications of exclusivity.


Workshop Examines Effects of Waiver Authority on Development of ACOs

J. Peter Rich

J. Peter Rich is a partner in the law firm of McDermott Will & Emery LLP and is based in the Firm’s Los Angeles office.   He co-chairs the Firm’s Insurance / Payors Affinity Group.

The FTC, CMS and OIG hosted a public workshop on October 5, 2010, featuring panel and listening discussions on regulatory issues surrounding how the development and operation of accountable care organizations would be affected by the use of waivers, safe harbors and other exceptions to various fraud and abuse laws.

The U.S. Federal Trade Commission, the Centers for Medicare & Medicaid Services (CMS) and the Office of the Inspector General (OIG) hosted a public workshop October 5, 2010.  A previous newsletter summarized the morning sessions of the workshop, which concerned antitrust issues. This newsletter focuses on the afternoon sessions of the workshop, which featured a panel discussion and listening session regarding how the secretary of the U.S. Department of Health and Human Services (HHS) may encourage the creation and development of accountable care organizations (ACOs) by using the position’s waiver authority or creating new exceptions and safe harbors related to the Anti-Kickback Law, the Stark Law and the Civil Monetary Penalty Law.


Workshop participants shared a range of viewpoints concerning how the formation and operation of ACOs would be affected by the use of waivers, safe harbors and other exceptions to various fraud and abuse laws.   The OIG and HHS did not provide any details as to precisely what forms such waivers, safe harbors and exceptions might take, instead, they merely received input from participant-stakeholders regarding the range of views and possible approaches that should be considered when structuring the ACO model.

The afternoon workshop session revealed there are many competing concerns among stakeholders.  Providers should note the OIG and CMS still appear to be in the early states of determining what factors and considerations may shape how its waiver authority is implemented, therefore it is imperative that stakeholders stay engaged in the process as the OIG and CMS consider alternatives. Based on comments by workshop participants, the decisions by the OIG and CMS are likely to create relative “winners” and “losers.”


Section 3022 of the Patient Protection and Affordable Care Act directs the secretary of HHS to establish a shared savings program that promotes accountability for a patient population, coordinates services under Parts A and B of Medicare and encourages investment in infrastructure and redesigned care processes for high quality and efficient service delivery.   Section 3022 specifically provides for the creation of ACOs to carry out the shared savings program.  ACOs that meet quality performance standards established by the HHS are eligible to receive shared savings payments. Each ACO must be accountable for the quality, cost and overall care of the Medicare fee-for-service beneficiaries assigned to the ACO.

The Stark Law, the Anti-Kickback Law and the Civil Monetary Penalty Law (collectively, “fraud and abuse laws”) each present potentially significant obstacles to the formation and operation of ACOs.  However, Section 3022 gives the secretary broad authority to create waivers with respect to fraud and abuse laws in order to carry out the shared savings program.  In addition to such waiver authority, the secretary may consider creating new safe harbors or exceptions to the fraud and abuse laws that are applicable to appropriately structured and operated ACOs.

Panel Discussion

The topic of whether and how CMS should use its waiver authority and perhaps promulgate new exceptions and safe harbors was divided into three segments: waivers, safeguards and future actions to encourage innovation.


The initial discussion centered on whether any consensus exists regarding fraud and abuse safe harbors or other waivers.   CMS asked panelists to recommend the necessary elements of such waivers, but the discussion among panelists revealed there are competing core concerns, depending on the point of the view of the stakeholder.

One point of view expressed was that CMS should primarily be concerned with encouraging experimentation and competition among ACOs.   From that perspective, any waivers should be broad, simple and expansive to encourage innovation.  One panelist observed that large, integrated systems already have a head start on ACO development, and that the use of broad waivers would open ACO participation opportunities for new and perhaps smaller groups.  Another panelist noted that waivers should serve to level the playing field and therefore should be applied uniformly to all similarly situated ACOs.

Another core concern was that the “process” itself be emphasized, apart from the outcome, so that the development by CMS of new waivers, exceptions and safe harbors be perceived as methodical, transparent and fair.   One panelist, who expressed the minority view that the fraud and abuse laws as they exist are not an insurmountable impediment to ACO development, stressed that the notice and comment period was of particular importance so that all stakeholders would have a chance to have their concerns vetted.

The panelists also discussed whether waiver protection should be extended to the initial formation of and investment in an ACO.   One panelist emphasized that a waiver only for ACO operations, after the ACO is up and running, would be inadequate to address any fraud and abuse law issues that may arise in connection with the formation and investment stages of ACOs.  For example, a waiver only with regard to ACO gainsharing arrangements would be insufficient to protect the development of the ACO.


Under the Patient Protection and Affordable Care Act, the assignment of a patient to an ACO is to be based on whether the patient’s primary care physician was part of an ACO.   The panelists offered that the patients would want to know the benefits of being within a particular ACO from a quality perspective.  If patients were provided this information, they could respond by staying in or leaving the ACO, making it more truly accountable.  However, another panelist noted, as a practical matter, this is not possible because the ACO itself may not even know which patients are assigned to it until 12 months after a performance year.

(Note:   Section 3022 contemplates that Medicare beneficiaries will never know whether they have been assigned to an ACO or not.  This requirement would appear to entail significant legal liability and political risks.  Moreover, Medicare beneficiaries who are assigned to an ACO may seek care outside the ACO with no financial or other disincentives.  These appear to be fundamental flaws in Section 3022 that will almost certainly need to be addressed by amendment if ACOs are to be successfully implemented.)

Several panelists emphasized that measurements of ACO success centered on quality and not cost savings will constitute important safeguards if the fraud and abuse laws are waived in whole or in part.   They expressed concern that outcome-based quality measurements were not universally appropriate as safeguards because, in a shared-savings context such as an ACO, use of these measures may deter participation by safety net providers or reduce access to care by underserved patients.

Additionally, panelists recommended CMS establish parameters for any mandated compliance plan for ACOs.   It was noted that private accreditation organizations may well play a key role.  In this regard, one panelist advocated that CMS should build in a feedback loop to provide information on whether any compliance plan is promoting quality care or possibly having unintended negative consequences, such as stimulating undesirable levels of over- or under-utilization of health care services by ACO providers.

Future action to encourage innovation

Generally, panel members recognized that a paradigm shift in health care services delivery is reshaping the “old model.”   The current network of fraud and abuse laws may need to be reinvented from the ground up if it proves too stifling to innovation that can successfully bring about both cost savings and increased quality with improved outcomes.  One panelist suggested that fraud and abuse compliance enforcement is simply not working well and needs to be overhauled in light in of the Patient Protection and Affordable Care Act.  Another panelist opined that the current system only works for large, highly integrated systems with employed physicians and no physician ownership.  As a result, the OIG and CMS need to bring exceptions and safe harbors in line with the current thinking on state-of-the-art integrated delivery.

Listening Session

A wide-variety of comments were made during the listening session by various provider, industry and patient advocacy stakeholders.   Although the OIG and CMS provided no significant responses to the issues raised, the range of speakers’ comments demonstrated the challenges ahead in crafting an ACO model that will meet the needs of all interested parties.  In addition to topics covered during the panel discussion, listening-session speakers brought to light several other salient issues including incentive payments or services offered to patients and providers to help foster ACO goals (which currently do not appear to be permitted under Section 3022); tracking of metrics to detect under-utilization; restriction by ACOs of provider opportunities to participate in ACOs; interaction between Medicare ACOs and ACOs receiving payment from other public and private payors; the development of ACOs in rural areas; and the implications of state-managed care laws for ACO development (e.g., though not mentioned specifically, laws such as California’s may require ACOs to obtain prohibitively costly and time-consuming HMO-type licensure).


Accountable Care Organizations Versus Medical Homes: What’s the Difference?

Kevin Fickenscher, M.D.

A brief overview of one of the most discussed questions in healthcare today.

In the great healthcare alphabet soup, it’s easy to lose sight of the differences between proposed solutions for making healthcare more efficient and effective.  Rather than tackling payment reform in isolation of care delivery, Accountable Care Organizations (ACOs) and Medical Homes offer a consolidated approach to both issues. While the models are still developing, various pilot programs are being implemented around the country.

Accountable care organizations are vertically integrated organizations of care, which are at minimum composed of primary care physicians, a hospital, and specialists. The various members of the healthcare team work together to improve the health of a designated population.  The intent is to coordinate care under the auspices of one organization. In theory, if the patient of an ACO is seen outside of the organization, the ACO maintains responsibility for the health of that individual.

But where does the “accountable” part of the name come from?  Well, in an ACO, providers are held directly responsible for the health of their patients and are evaluated based on their effectiveness, efficiency and quality of care in treating patients. The “responsibility” piece is the key differentiator of ACOs compared to more traditional health maintenance organizations (HMOs). While both approaches provide patients care that starts and ends with a primary care physician, provider members of ACOs work together across all of the specialties to develop care delivery programs which focus on outcomes and coordinating care.

To qualify as a Medicare ACO under the new healthcare reform package, organizations must agree to be accountable for the overall care of their Medicare beneficiaries, have adequate participation of primary care physicians and specialists, define processes to promote evidence-based medicine, report on quality and costs measure, and coordinate care.  ACOs encourage physicians and hospitals to integrate care by holding them responsible for quality and cost.

The incentives of the ACO are clearly different from the current fee-for-service reimbursement system.  The focus of the ACO is to streamline its processes and care while exceeding the norm on quality and outcomes.  If the organization spends less than projected, all members of the ACO share in the bonus payments thereby incentivizing effectiveness and efficiency.  If, on the other hand, an ACO underestimates the cost of operation, the providers will earn less, thereby institutionalizing “accountability.” Patients’ rights advocates have expressed that the model incentivizes providers to save money by cutting corners in treatment. Advocates argue that ACOs are not only responsible for setting and meeting goals on effectiveness and efficiency, but also on quality of care as measured by patient population health.  The approach is designed to assure best efforts on the part of every member of the organization and to streamline care while ensuring its effectiveness.

Medical homes are similar to Accountable Organizations in that they consolidate multiple levels of care for patients. However, medical homes take the approach of having the primary physician lead the care delivery “team.” Simplistically, an ACO consists of many coordinated practices while a medical home is a single practice.  A medical home has several key characteristics, including:

  • Designation of a personal physician– each patient has an ongoing relationship with a personal physician trained to provide first contact, continuous and comprehensive care.  Also, the personal physician leads a team of individuals at the practice level who collectively take responsibility for the ongoing care of patients.
  • Whole person orientation– care is organized around providing services for all of the individual’s health care needs.  The medical home takes responsibility for appropriately arranging care with other qualified professionals on an as needed basis.
  • Care coordination and integration – care across the spectrum of specialists, hospitals, home health agencies, and nursing homes is coordinated with the personal physician leading the effort.
  • Evidence and outcomes focus – the quality and safetyof care are assured by a care planning process using evidence-based medicine, clinical decision-support tools, performance measurement and active participation of patients in decision-making.
  • Enhanced accessto care – practices are “open” in the sense that scheduling is available to individuals, hours of practice are expanded hours and new communications options are deployed for the convenience of individuals seeking care.
  • Comprehensive payment model – payments for services for individuals enrolled in the patient-centered medical home reflect a comprehensive payment for services that extends beyond the face-to-face visit with the personal physician.

The new healthcare reform package includes support for pilot programs for both the ACO and medical home initiatives under the Medicare program.  While these two approaches to care delivery and payment reform remain under development, they offer a glimmer of hope on how we can stretch the healthcare dollar further, focus on care delivery efficiency and drive quality results.  It’s clear that the final approach is very much on the drawing board and providers across the spectrum clearly have an opportunity to develop models which meet the needs of their respective communities.  We will continue to follow this exciting development in the coming months.

Kevin Fickenscher, MD

The views and opinions expressed herein are my own and do not necessarily represent the views and opinions of Dell Services or its affiliates.

Follow Dr. Fickenscher on Twitter @MDKev

Inaugural National Accountable Care Organization Congress

The inaugural meeting of the National Accountable Care Congress ‘ACO Congress‘ to meet in Century City, California, October 25 – 27th, 2010.

The ACO Congress represents itself as ‘the leading forum on Accountable Care Organizations (ACOs) and related delivery system and payment reform’, and will feature over 50 sessions, and a faculty of over 100 national experts.

For more information:

  • Toll-Free: 800-503-5640 (Continental U.S., Alaska, Hawaii and Canada only)
  • Phone: 206-629-2352

Healthblawg on ACO’s: The Regulators & Lawyers Listen at HHS

Don Berwick kicked off the day-long Accountable Care Organization (ACO) Workshop and Listening Session, co-hosted by the FTC, CMS and the OIG, with a short, stirring speech that touched on his Triple Aim for health care: better care for individuals, better health for populations and reduced per-capita costs.  He committed the government to interpreting applicable statutes “wisely, so as not to impede the development of ACOs.”  That sums up the reason this workshop was so eagerly anticipated.  Health care providers are extremely eager to become ACOs – though the term has yet to be fully defined – yet are extremely concerned about the potential to have specific ACO arrangements identified as illegal by the FTC, the OIG or CMS because the arrangements violate antitrust law, Stark, anti-kickback or anti-fraud and abuse laws, or may be subject to civil monetary penalties.  The health reform legislation authorized these agencies to develop waiver programs and safe harbors in order to implement the ACO concept, and proposed rules doing so will have to be issued this fall in order to have these systems up and running next year, as called for by the law.  Berwick’s commitment to make this as pain-free as possible was echoed by FTC Chairman Jon Leibowitz and HHS Inspector General Dan Levinson.  Check out the live-tweeting transcriptof the day’s events. (Audio of the day’s proceedings should be posted in the near future.)

So, this leaves just a few questions:

  • What is an ACO and why are they given special status under the law?
  • Why are waivers or safe harbors needed if ACOs are authorized by the Federal health reform law?
  • What waivers or safe harbors are likely to be proposed in the next month or so?
  • Will these waivers and safe harbors protect ACO activity where the payor is a commercial payor, rather than a federal health care
  • program payor?

What is an ACO and why are they given special status under the law?

The health reform law, now known by its acronym PPACA or ACA (Patient Protection and Affordable Care Act, or simply Affordable Care Act), authorizes (among many other demo and pilot programs) the establishment of a shared savings program known as the ACO program, in Section 3022 (codified as Title XVIII, Section 1899). See CMS Shared Savings (ACO) FAQ for details.  At its core, the law requires that an ACO must:

1) Have a formal legal structure to receive and distribute shared savings
2) Have a sufficient number of primary care professionals for the number of assigned beneficiaries (to be 5,000 at a minimum)
3) Agree to participate in the program for not less than a 3-year period
4) Have sufficient information regarding participating ACO health care professionals as the Secretary determines necessary to support beneficiary assignment and for the determination of payments for shared savings.
5) Have a leadership and management structure that includes clinical and administrative systems
6) Have defined processes to (a) promote evidenced-based medicine, (b) report the necessary data to evaluate quality and cost measures (this could incorporate requirements of other programs, such as the Physician Quality Reporting Initiative (PQRI), Electronic Prescribing (eRx), and Electronic Health Records (EHR), and (c) coordinate care
7) Demonstrate it meets patient-centeredness criteria, as determined by the Secretary.

The ACO provision in the ACA has garnered a disproportionate amount of attention, likely because of the opportunity for shared savings and the opportunity for hospitals to more closely ally their affiliated physicians.  However, the point was made time and again at the workshop that the goal of the program is to improve patient care and the patient experience — without that guidepost at the core, the exercise won’t work.

Aside from large IDS’s seeking to use the ACO program as a means to protect and potentially grow market share and margin (after all, “no margin, no mission”), why would hospitals want to get involved?  Hospital reimbursement is on the line here: about 70% of costs — and potential savings — are on the hospital side of the equation, and much of the control over those costs lies with physicians.  If they are not already employed physicians, the sharing of savings means the hospital will be sharing with the physicians, and not vice versa.  Despite this apparent disincentive, past experience has shown that strong physician-led initiatives can bring hospitals into the fold.  Two examples: the Medicare Physician Group Practice Demonstration Project (an ACO precursor) and the Grand Junction, Colorado experience: a physician-led arrangement initially targeted by the FTC as a price-fixing scheme, eventually resolved through a settlement agreement, and now seen as a national model of collaboration, aligned incentives, cost-effectiveness, and quality improvement.

Why are waivers or safe harbors needed if ACOs are authorized by the Federal health reform law?

The general idea is to get providers across the continuum of care to band together, work on reducing costs and improving quality, continue to be paid on a fee-for-service basis by CMS, and then retrospectively look at system-wide savings (e.g., avoided readmissions) and share those savings around.  Sharing those savings around outside of an integrated delivery system raises a host of potential antitrust, fraud and abuse (anti-kickback), Stark and CMP issues, and the statute authorizes the development of waiver programs and safe harbors in order to make it all work.  It’s really a square peg-round hole problem, because the policy basis for making illegal this sort of sharing is grounded on fee-for-service, retrospective reimbursement systems.  Prospective payment, particularly bundled payments for episodes of care, eliminates the potential for the harm these rules protect against (over-provision of care due to financial incentives), yet they are still on the books.  For example, we want physicians to share in the hospital savings experienced as a result of an avoided readmission which would not be eligible for separate reimbursement; this opportunity will incentivize them to work harder to prevent the readmission.  Under current rules, however, a payment by the hospital, directly or indirectly, to the physician, tied to that savings, is impermissible.

What waivers or safe harbors are likely to be proposed in the next month or so?

Federal officials at listening sessions are notoriously tight-lipped, so not much was said about what to expect, other than proposed regulations are expected to come out this fall.  However, all were keen to emphasize that they want to eliminate the regulatory impediments to ACOs, and welcome further comments from the public.

As a whole, the regulated community is eager to have greater certainty, in the form of new regulated guidance; however, some would prefer to simply be guided by what’s out there already: advisory opinions, guidelines, regulations, etc., that lay out safe harbors.  For example, the joint DOJ-FTC healthcare antitrust guidelines provide that clinical integration — even in the absence of full merger or acquisition, or direct employment of physicians by a hospital — will keep providers out of antitrust hot water even iof they are collaborating in ways otherwise prohibited.  At the other end of the spectrum, some folks would prefer to have the federales get broad authority to issue blanket waivers without establishing super-specific criteria.

Establishing criteria for waivers or safe harbors will be somewhat difficult, because the definition of an ACO is a little slippery. The financial arrangement at its core can be simply a shared savings arrangement, but it might also veer into other territory: underwriting patient expenses such as transportation costs or home monitoring device costs, or the payment of a physician group’s up-front capital expenses by a hospital in order to kick-start the process (all potentially illegal inducements under current law).

Many of the comments were directed at ensuring that a particular type of arrangement or organization does not escape the feds’ notice, so that they can all be written into waiver or safe harbor language.  

Will these waivers and safe harbors protect ACO activity where the payor is a commercial payor, rather than a federal health care program payor?

The rules at issue are all Federal health program rules — except for the FTC antitrust rules, which apply across the board.

A number of forum participants suggested that a rule of reason analysis under the antitrust laws (rather than “per se” analysis) would be needed in order to address market power issues in each unique ACO situation.  It seems to me that such an approach would be throwing away the current opportunity to craft a set of guidelines focused not only on ACOs but on other provider arrangements likely to come down the pike under other ACA demo and pilot authority.  This opportunity should be seized by the other agencies as well — not just the FTC.

Final thoughts

Will providers actually come together to form ACOs?  The jury is still out.  There is certainly a lot of noise being made, but the long-term key from both a policy and business perspective is that the efforts of the provider organizations must be to make themselves more patient-centered.  Berwick’s emphasis on this point was striking, and he illustrated it with an anecdote from his days of practicing as a pediatrician at Harvard Community Health Plan, where systems were in place to support a patient-clinician partnership at a very high level, suggesting that HCHP was an ACO long ago.  In current-day Massachusetts, Blue Cross Blue Shield of MA has rolled out its Alternative Quality Contract to  a quarter of its provider network; half of the docs involved are in small practices.  While it has taken some years for the AQC program — another proto-ACO program — to get off the ground, it is significant because it has allowed for the agglomeration of small practices into a larger whole for purposes of the contract, thus perhaps lighting the way for ACO participation by organizations other than IDS’s.

So is this deja vu all over again? Have we stepped back in time a couple of decades to re-experience managed care failures of an earlier era?  Certainly, some rpoviders see the ACO structure as a way to increase market share, margin and bargaining power — and it’s a no-downside financial deal.  As noted above, it cannot be only that.  There are significant costs and potentially difficult negotiations ahead as providers across the continuum work with the regulators to hash out the final status of the ACO landscape, and then deal with integrating themselves into one or more ACOs with a laser focus on patient-centered care.  That focus should yield benefits up and down the line: for patients, providers and ultimate payors in both the public and private sectors.

David Harlow
The Harlow Group LLC
Health Care Law and Consulting