BHCG Monitor: Focus on Health Care Benefits - April 2012

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BHCG Monitor: Advance Care Planning – An Imperative Conversation


Accountable Care Organizations — A Primer

Imagine a system of health care that pays health care providers to keep you well, not just treat people when they’re sick. A system where providers would have a financial incentive to limit unnecessary tests and encourage patients to exercise more and eat better. A system where hospitals would actually benefit financially from keeping people out of the hospital. This is the health care system, structured around Accountable Care Organizations (ACOs), that some see as a promising new model for delivering and paying for health care.

What are ACOs?

In simple terms, an ACO is a network of providers that share responsibility for providing care to patients. ACOs can contract with any entity that pays for health care services – employers, insurance companies or governmental programs such as Medicare. Instead of getting paid for each service, ACOs are rewarded if they are able to manage chronic disease and meet certain quality measures, including reducing hospital admissions and emergency room visits for a defined population. If they improve care while restraining costs, the health care systems can share in the savings. At the same time, ACOs may risk losing money if their costs run higher than expected. The idea is to eliminate duplication of services, coordinate patients' care, and to boost preventive efforts that may ultimately reduce the need for high-cost services such as hospital stays.

Think of it as buying a television, says Harold Miller, president and CEO of the Network for Regional Healthcare Improvement and executive director of the Center for Healthcare Quality & Payment Reform in Pittsburgh. A TV manufacturer like Sony may contract with many suppliers to build sets. Like Sony does for TVs, Miller says, an ACO would bring together the different component parts of care for the patient – primary care, specialists, hospitals, home health care, etc. – and ensure that all of the "parts work well together."

The problem today, Miller says, is that patients are getting each part of their health care separately. "People want to buy individual circuit boards, not a whole TV,” he says. “If we can show them that the TV works better, maybe they'll buy it," rather than assembling a patchwork of services themselves. "But ACOs will need to prove that the overall health care product they’re creating does work better and costs less in order to encourage patients and payers to buy it."1

Medicare ACOs

While only seven pages in the Patient Protection and Affordable Care Act (PPACA) signed into law in 2010 were devoted to ACOs, the law’s passage kick-started their development in both the public and the private sector.

In the public sector, Medicare has developed two different ACO pilot projects – a Medicare Shared Savings Program and The Pioneer ACO Model. As of July 9, 2012 the Shared Savings Model has selected 116 ACOs to participate, with more applications in the pipeline. The Shared Savings Program will financially reward ACOs that lower their growth in health care costs while meeting performance standards on quality of care. In southeast Wisconsin, the following organizations have been selected to participate in this program: Accountable Care Coalition of Southeast Wisconsin, LLC, Aurora Accountable Care Organization, LLC and ProHealth Solutions, LLC.

The Pioneer ACO Model is designed for health care organizations that are already experienced in coordinating care for patients across care settings. Pioneer ACOs accept greater financial risk with the potential for greater reward. It will allow these health care organizations to move rapidly from a shared savings payment model to a population-based payment model. There are 32 ACOs participating in the Pioneer ACO Model. The only one in Wisconsin is Bellin Thedacare Healthcare Partners operating in northeast Wisconsin.

Private sector ACOs

A handful of new commercial health insurance products born out of the ACO model are now entering the marketplace. Although ACOs are fundamentally a provider-driven model, insurers often play a significant role in their formation and operation by supplying back-office services, support and capital, and wrapping insurance products around the resulting ACO networks. Examples of this provider-insurer partnership here in southeast Wisconsin, include Aurora Health Care’s ACO offerings with Aetna to create the Aurora Accountable Care Network and with Anthem Blue Cross and Blue Shield to create Priority Blue.

Another ACO in development in southeast Wisconsin – Quality Health Solutions – was formed by seven health systems: Agnesian Healthcare, Fond du Lac; Aspirus, Wausau; Bellin Health, Green Bay; Centegra Health System, McHenry, Ill.; and Columbia St. Mary’s, Froedtert and Wheaton Franciscan, along with the Medical College of Wisconsin.

ACOs – will they improve health care?

In theory, ACOs have the potential to fundamentally improve the value of health care. If health care providers can be effectively rewarded for keeping people healthy rather than only treating them when they are sick, the model holds promise. However, some health policy experts question whether ACOs can be that agent of change. There is agreement from all experts that the present fee-for-service payment system is inefficient, wasteful and must be changed. By and large, providers currently are paid for the number of services they provide, not for the quality of those services or the efficacy. If ACOs are eventually able to pay providers for keeping people healthy, and not for simply providing services, our health care system will truly provide value.

Some questions to consider

How will employees react to being required to receiving all their care from a limited number of health care systems? Additionally, if they are required to switch physicians, what will be their reaction? If an ACO solely revolves around one health care system – and we know that not every system does everything well – what will be the impact on quality of care? If the ACOs involve multiple health care systems, how will they coordinate care with electronic medical record systems that may not be able to “talk” to one another? If an employer commits to an ACO and it fails to deliver on cost and/or quality, how difficult will it be to switch employees again to a different plan or ACO?

ACOs have been heavily promoted as a panacea for control of health care spending while improving health outcomes. How effective they will be is unknown. This uncertainty should compel employers and their advisors to carefully consider all the above questions before determining their strategy.

Works Cited

1 FAQ On ACOs: Accountable Care Organizations, Explained, Kaiser Health News, October 21, 2011

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BHCG Monitor: Focus on Health Care Benefits - April 2012