PRACTICAL CONCERNS: The Marin-Sonoma-Napa ACO

Mark Wexman, MD

Insurance companies routinely retain large portions of the premium dollar, even as government programs send medical facilities huge payments for hospitalizations, ancillary services and testing. Physicians often compete over the remaining crumbs. Few opportunities have arisen to change this medical funding paradigm--until now. The Affordable Care Act of 2010 opens a new pathway for partnership and alignment among doctors, hospitals and/or insurance companies for Medicare patients. That pathway is the Accountable Care Organization.

The promise of the ACO is the return of a “share of savings” from healthcare expenditures for Medicare patients to a local organization that can implement better healthcare and illness prevention strategies. The ACO is the legal vehicle that encourages clinically integrated physicians, hospitals and other providers to create and align clinical protocols for successful treatment and transition of patient care through the inpatient and outpatient environment. We can then share in the savings, if any, by demonstrating a reduction in the projected cost of care for a Medicare population.

The Marin-Sonoma IPA is currently applying to be an ACO, and we expect to know before the end of the year if our application has been accepted. With the certainty of continued downward pressure on fee-for-service payments from Medicare (and thereby other insurers), if independent doctors, medical groups and hospitals are not in an ACO, there is no other mechanism for them to recoup the reduced reimbursement within the insurance system and maintain profitability.

The Marin-Sonoma IPA believes that developing an ACO should be central for independent physicians and hospital administrators as the key strategy for non-Kaiser patient care delivery. If we fail to implement an ACO in places like Marin, Sonoma and Napa counties, with all of their favorable health and economic attributes, then we deserve the cookie-cutter medicine likely to be imposed on us by far-away administrators and bureaucrats.

What does the structure of an ACO provide? It aligns the expense of an innovation in healthcare delivery with the economic incentive of better reimbursement for ACO providers who can demonstrate better care outcomes and patient satisfaction and “bend the cost curve.” If we achieve the Three Aims stated in the ACO regulations--better care of individuals, better outcomes for populations, and lower growth in expenditures--then we share in dollars not expended on unnecessary care.

An ACO congestive heart failure care program, for example, would focus on keeping patients well and out of the hospital. CHF is a significant example because it is a high frequency illness, with great monetary cost and quality of life lost. What does it take to create better managed, less expensive CHF patients? The answer includes (1) intensively managed in-hospital treatment with collaboration between cardiologists and hospitalists or internists treating the acute illness, (2) a combined group of mid-level providers, nurses and pharmacy technicians armed with simple technology like weight-monitoring scales and (3) oversight and office follow-up by primary care doctors and cardiac specialists. Rapidly adjusting patient medicines and following best-practice protocols for optimal prognosis will reduce readmissions. Implementing better care processes via a community-wide electronic health record with accessible charting, along with rapid HIPAA-compliant communication tools for providers, can give patients and families quicker and better care in less expensive environments.

So why aren’t these procedures in place today? Because the savings accrue to the insurer or the government payer, leaving hospitals and physicians with only the expenses and “heaven points” earned for doing the right thing. For our hospital partners, the scary thing about the new ACO paradigm is that keeping patients out of the hospital is counterintuitive to their longstanding financial planning. The standard hospital business plan of “filling beds with heads” now becomes “stop readmissions, reduce total admissions and collaborate as an integrated system of care.” Under the ACO, hospital profitability depends on its share of the accumulated savings from bending the cost curve. The current ACO model will be protected from downside risk for three years, as systems are put in place and experience is gained.

How do Medicare patients enroll in an ACO? They are attributed to the primary care physician with whom they have had most of their visits that year. How do primary care physicians, specialists and hospitals begin to participate in this new system? Primary care physicians can belong to only one ACO, but specialists can see patients from multiple ACOs, if they choose. Physicians can enroll in an ACO voluntarily by agreeing to share information and participate in clinical protocols. Patients are not limited in any fashion as to whether they can get healthcare in or out of the ACO.

The Medicare population in Marin, Sonoma and Napa counties is about 136,000 people, 45% of whom are already covered by Kaiser. That leaves about 75,000 Medicare recipients in our practices for a potential network. If we can change the inflation on medical cost from the 8% predicted to 4% actual, then half of the savings (2%) can be used for reinvestment in our community medical care processes and for additional hospital and physician reimbursement. How much money are we talking about for such small changes in the inflation of cost of care? The average Medicare patient uses about $12,000 per year in services, so total spending on the non-Kaiser group in Marin, Sonoma and Napa counties is about $900 million per year. The 8% expected inflation rate for that amount is $72 million per year, so if we reduce the inflation to 4%, we would organizationally share $18 million per year.

How does an ACO allow a change in the relationship of medical groups and hospitals with the large PPO insurers? As a clinically integrated group with an ACO designation, we can negotiate together and offer the programs and processes that were originally designed and demonstrated in our Medicare patients to these commercial insurers. In turn, if we have an effect on the health costs of the population under management, a portion of the savings could return to the ACO to distribute to its members and to invest in making the ACO even more effective. The potential for partnership with large PPO insurance companies that align risk/reward for improved health outcomes without shifting actuarial insurance risks to the doctor and hospital groups will be the key to successful implementation.

Doing nothing and waiting for the inevitable forces of healthcare economics to negatively affect the quality and value of medical practice is healthcare suicide. Although we cannot know the outcome of our investments in this ACO strategy in advance, we can be confident that we are using the best legal structure available to create a better program for healthcare delivery in Marin, Sonoma and Napa counties. This approach will certainly be more flexible and specific to our unique community needs than anyone in Washington or Sacramento is likely to propose. No waiting on the sidelines on this one: we must all step up and be held accountable to the current and next generation of physicians and communities that we serve.

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Dr. Wexman, a Larkspur cardiologist, is managing partner of Cardiovascular Associates of Marin and chairman of the board for the Marin-Sonoma IPA.

Email: mwexman@camsf.com

ACO Resources from CMA

Want more information about accountable care organizations? The CMA website at www.cmanet.org offers of wealth of materials about ACOs and other aspects of the Affordable Care Act. Among the latest offerings:

Legal and Practical Considerations Concerning Accountable Care Organizations (CMA On-Call document #201). Provides a general overview of ACOs and the legal and practical issues that physicians should consider when vetting ACOs. Free download for CMA members; $38 for nonmembers.

Accountable Care Organizations and Medical Foundations (Powerpoint presentation). CMA General Counsel Francisco Silva outlines the requirements of the ACO and 1206(l) medical foundation laws and identifies risks and benefits that physicians should consider. Free download for CMA members and nonmembers.

FAQs About Accountable Care Organizations (Patient handout). Handout for patients that explains their rights in relation to ACOs. Free download for CMA members and nonmembers.