Tom Norton gets to grips with what an Accountable Care Organization is … and what it is not.
Sixteen months into the new Healthcare Reform law, many continue to wonder about the status one of the most confused aspects of the new HCR — the elusive Accountable Care Organization, or ACO. And why are ACOs viewed this way? Simply stated, the heated debate over exactly what an ACO is … and what it is not … has not been resolved as of this writing.
And really, if you think about it, this unsettled state of affairs is somewhat odd. The ACO concept is fairly well defined in the HCR Act, and since it is based on years of theoretical research conducted by the Dartmouth Health Care Atlas, you have to wonder, “What can be so misunderstood about the idea?” The answer is, apparently a lot. Today, it is clear that even those experts tasked with setting up the new ACO’s (hospitals, doctors groups, healthcare provider organizations, etc.) are struggling mightily to get a handle on this concept.
Questions like, “Aren’t ACOs really just modified PPOs?”; or, “Really, they must be just good old, off the shelf HMOs, right?”; or how about, “They have to be something new. Maybe a potent combo of HMO/PPO?”…are being debated daily in healthcare journals, newspapers, policy websites, and, importantly, in the healthcare board rooms of America. As of today, the “answer” to all of this is a thoroughly jumbled mix that is comprised of differences in geography, service area populations, and local medical cultures.
As a result of all this quibbling, there is now a growing portfolio entitled, “This is what an ACO really is.” And given the variety of answers in that file, probably the more daunting challenge for ACOs is, once you think you actually understand what an ACO actually is, how the heck do you execute one these things in the real world?
A Review of Actual ACO Execution
Probably the most useful way to approach this ACO execution question is to consider those ACOs that are planned or actually up and running; those entities that are “thinking about” an ACO launch; and still others that are not acting at all. Let’s quickly review a few of each, remembering that the official CMS ACO Medicare launch date is January 1st, 2012, less than six months from today.
Planned & Working ACOs…
As of this writing, we have found a limited number of actual ACOs that are up and running. However, many groups do seem near an activation stage for later this year. For example, in a recent membership survey, the publication CIMO (Chief Medical Information Officer) found that 17% of members surveyed reported they were planning to launch their ACO by January 1, 2012. While not an overwhelming response, this is not an insignificant group indicating planned forward action on ACOs, soon.
Beyond this, certainly the most prominent functioning ACO to date is the successful pilot being run by the California Public Employee Retirement System (CalPERS). Launched in January of 2010, this program is currently delivering care to about 40,000 patients. According to information released by CalPERS in April, (and heavily endorsed by CMS) this ACO approach includes a diverse partnership with the Hill Physicians Medical Group, Catholic Healthcare West, and the Blue Shield of California Health Maintenance Organization (HMO) (An HMO? We’ll come back to this point, in a moment). The CalPERS’s ACO goal, similar to that stated in the HCR law, is creating “an integrated health care approach that improves health care quality and reduces costs.”
Early examples of cost savings in this CalPERS ACO pilot include a 17 percent reduction in patient re-admissions; a half-day reduction in the average patient length of stay; a nearly 14 percent drop in the total days patients spend in a facility; and a 50 percent reduction in the number of patients who stay in a hospital 20 or more days. Overall, CalPERS is saying this ACO is likely to result in $15.5 million in total savings when the pilot ends in December of this year.
So, on the face of it, this all sounds pretty good, even impressive!… Indeed, CalPERS is so enthusiastic about the pilot that it is talking about rapidly expanding the model for its entire public employee population in CA.
So all is happiness and light with this California ACO experience. Except for one thing. Let’s go back to the primary service point in the CalPERS program. Yup. It’s an HMO (Blue Shield of California Health Maintenance Organization). So when others are thrashing about trying to determine what an ACO really is, and how to execute it … is what’s old (HMOs), now brand new (ACOs)?? That is, is an ACO really just an HMO? Indeed, is this significant CalPERS success just another point of disagreement?
Those “Thinking About” ACOs…
It’s pretty clear that those currently “thinking about” establishing ACOs — currently make up the vast majority of the potential ACOs groups. They know a lot about ACOs; continue to research and ruminate about them carefully; but right now, they aren’t committed to the ACO concept.
Clearly the most notable in this group would be several entities that participated in the CMS Physician Group Practice (PGP) Demonstration project that ran from April 2005 to March 2010. Ten, large regional organizations including groups like the Marshfield Clinic of Wisconsin; Everett Clinic of Washington State; Park Nicolette Group of Minnesota; The University of Michigan Hospitals of Ann Arbor; etc … joined CMS with the high hopes of proving that the ACO concept was workable and, in fact, the “next big thing” in healthcare delivery.
However, when the results of the five year project were announced this past winter, it was clear that nine out ten of those participating entities were unhappy with the ACO concept. Indeed, the only member of the pilot group that seemed to be marginally pleased with the outcome was the Marshfield Clinic.
Things got even more interesting this March when CMS announced its “real world” ACO rules would be based on the increasingly controversial results of the five year PGP pilot. When this information was released, the nine pilot groups that did not like the PGP pilot were direct in expressing their displeasure with CMS’s “real world” vision for ACOs. In fact, the nominal winner in the PGP pilot, the Marshfield Clinic, joined the other nine groups in stating there were major problems with the proposed CMS ACO rules.
Jointly, the ten PGP participants sent a letter to CMS expressing concern over many of CMS’s ACO decisions. Highlights included:
· In the CMS demonstration, all 10 sites received up to 80 percent of verified savings to Medicare. In the real world, CMS proposed that only 50 percent or 60 percent savings in the ACO program would go to the ACO. The 10 found this unacceptable.
· Additionally, under the CMS “real world” rules, ACOs are to be subject to penalties if they don’t hit savings and quality targets, called a two-sided risk model. In the demonstration pilots, CMS did not penalize the ACOs for not meeting these goals. The 10 were not pleased with this rule.
· Finally, to participate in the “real world” ACO program, sites will have to subject themselves to additional government scrutiny and regulatory burden. For example, they will have to let CMS review their marketing materials and invite additional reviews of business arrangements by the HHS Office of Inspector General and the Federal Trade Commission. The response? As one pilot ACO participant drolly observed, “Everybody invites the OIG over to dinner, right?”
In sum, not an overwhelming endorsement from the PGP participants of the proposed CMS ACO rules…
So, as we back away from those “thinking about” establishing an ACO, you gotta say, there is just a lot of uncertainty out there. And, really, I’d say, that’s probably a bit of an understatement.
Those who are “Just Saying No”…
In contrast to all the uncertainly of the last group, there is one growing collection of key healthcare entities out there who believe have the ACO conundrum all figured out. Their approach to this boggy territory? Well, they are just saying “No” to establishing Medicare ACOs.
Certainly the most important voice among these naysayers is the prestigious Mayo Clinic of Rochester, Minnesota. Remarkably, shortly after the issuance of the CMS ACO rules in the spring of this year, Mayo responded bluntly, and curtly to the news: “Mayo Clinic is not going to participate in a Medicare accountable care organization under the circumstances proposed.” Dr. Douglas Wood, Mayo’s chairman of health care policy and research, went on to say, “Mayo does not want to significantly change what it believes is its current efficient, patient-friendly program, and so, will not be participating in the new CMS ACO venture, at least as currently structured.”
Shadowing the stunning Mayo rejection came word from the American Medical Group Association, the trade association representing most potential ACO organizers, that 93% of their membership would not be participating in the CMS Medicare ACO concept.
So, in a sense, that was that. The combination of one of the most legendary health centers in the US, along with a major association representing most of the future, potential ACOs, collectively turned their backs on one of the key centerpieces of the new HCR law. We can only imagine the reaction at CMS when these Mayo/AMGA statements were received in Washington, DC. No doubt, it must have fallen somewhere between a debilitating anxiety attack … and simply running up a crisp white flag.
So, to begin to wrap this up, I think it’s fair to say that even a very strong CMS ACO advocate would have to agree that ACOs are “just beginning to get traction” in the HCR schematic. Beyond the continuing debates over the ACO theory, right now, it’s pretty apparent there just isn’t much ACO infrastructure in place. With the exception of the successful CalPERs ACO, which as we have pointed out is actually premised on a long functioning California HMO, and the prospective 17% of those in the CMIO survey who say they are “planning to implement in 2012,” there is little public evidence that a broad ACO activation is underway.
Further, the reported difficulties of the participants in the CMS PGP Demonstration project, along with the follow-on negative response to the March 2010 “real world” CMS ACO rules, have caused most organizations that are supposed to be moving towards establishment of ACOs to be either cautiously designing unique ACO approaches that will benefit their organizing group…or finds them “standing down” until the smoke clears around the ACO issue.
Certainly, the happiest folks in the entire ACO swirl right now are the Mayo Clinic and the members of AMGA who have made the call to simply say “no” to whatever it is that an ACO may turn out to be, come what may from CMS. Obviously, they believe there are significant downsides to establishing ACOs and they are not afraid to walk away from the concept. All of that said, it really is an amazing stand if you think about its significance to HCR program.
So, where are we with healthcare reform’s ACO’s? At the least, all of this suggests substantial problems for the formal CMS launch of Medicare ACOs next January, 2012. In fact, taking a broad look at the facts in hand, I think you would be safe in saying that with less than six months to go before the official CMS ACO start-up date, the ACO concept is actually in fairly deep trouble…And if that’s true, that important fact and what it portends for the overall implementation of the 2010 HCR law must be viewed as a key, critical development for HCR.
Those are my thoughts on the state of affairs with HCR’s ACO concept. I would welcome your thinking on this ongoing, important aspect of the new law…