Berwick touts ACOs in an exclusive online commentary

We can have it all

By CMS Administrator Dr. Donald Berwick
Posted: May 17, 2011 - 1:00 pm ET

American healthcare is at a crossroads. Thanks to the Affordable Care Act, we are now well on route to assuring that all Americans have the peace of mind that comes with access to healthcare insurance. Thanks to the new law, insurance companies won't be able to deny coverage based on pre-existing conditions, seniors will have access to important preventive care, and health insurance will become affordable through “exchanges” to people who otherwise couldn't afford it.

But better coverage isn't enough. We also need better care. The reason is simple: In its current form, American healthcare is not sustainable, either for many of the people who already have insurance or for the tens of millions who now will be newly covered. It is too often fragmented, uneven in its quality and unsafe for patients, all of which raises costs and degrades care at the same time.

I am absolutely certain that we can have what we want and need—better care, better health and lower costs—all at the same time. But we can have that only if we are willing to improve the healthcare system, itself—only if we are willing to change the way we deliver care. If we are willing, then the Affordable Care Act can help. Because it doesn't just extend coverage and provide new routes to health insurance; it also gives our nation new tools for improving the care system.

One of those important new tools is the so-called accountable care organization. The idea of the ACO is to encourage and support physicians, hospitals and other providers to lower costs by providing better quality care, and to reward them for success by allowing them to share in the resulting savings. ACOs are part of an important agenda of change: to shift American healthcare from a system based on the volume of care (the more you do, the more you get paid) to one based on the results of care (the better you do for patients, the more you get paid).

ACOs won't just be a new way to pay for care; they will be a new and better way to deliver care.

In late March, the CMS published its initial, proposed rule on how to implement ACOs, and we are now in the midst of a public comment period. We've heard from hospitals and physician groups about their concerns related to the need for capital, shared savings and reduced complexity. We also know consumers want choice and quality. We are listening to these comments, taking them seriously and working to improve the proposal into an even better final rule.

That's a challenging job, because the ground rules for ACOs have to strike several careful balances. We want to give providers incentives to achieve savings and tools to help coordinate and improve care, but we also want to make sure that they don't stint on care or withhold care when it's needed. We want to make sure that patients get far better coordinated care, but we don't want to burden ACOs with rafts of cumbersome regulations. We want ACOs to form close relationships between primary-care providers and specialists, but the Affordable Care Act requires that patients in ACOs retain the right to see any Medicare provider they want. ACOs need data, but patients need their privacy protected. The CMS and our partner agencies have been holding feedback sessions and soliciting input from all stakeholders—physicians, hospitals, patient advocates and many more—on the proposed rule, so that we can get these balances right.

Meanwhile, we're moving ahead quickly. Even as we continue to seek input on the ACO proposal, we are launching several initiatives to allow us to hit the ground running. Providers who are already ahead of the pack in coordinated care will have an accelerated pathway to becoming ACOs even before the new regulations go into effect, thanks to a Pioneer ACO program just announced by the CMS's new Innovation Center. We are seeking comments on a proposal to provide some up-front payments to providers who want to form ACOs but lack access to capital to invest in new infrastructures and staff to coordinate care. And the Innovation Center will soon launch a program of instruction and technical support to help newcomers who want to form ACOs learn how to do so.

As we navigate toward a final version of the ACO design, we are impressed by the level of engagement on this topic; people sense that we are at the threshold of an important and productive change. And, as difficult as it is, coming up with a workable, promising framework for ACOs based on stakeholder feedback will be well worth the effort, because, if implemented correctly, ACOs will be a driving force in improving health and lowering costs. They will be one key to sustainable, high-quality care for all of us.

Dr. Donald Berwick is the administrator of the CMS.

In an ACO, Who's Accountable?

 Philip Betbeze, for HealthLeaders Media, April 14, 2011

If the accountable care organization becomes the dominant way healthcare is organized in the future, providers will likely face the wrath of both the public and the pundits under ACOs. That will come later, but it is inevitable because one of the chief priorities of ACOs concerns limiting utilization—the same role HMOs once filled.

Under the current payment system, hospitals are the hub of the healthcare experience. They do the most expensive procedures, but generally, their responsibility to the patient ends at discharge. Beyond broad regulations focusing on readmission rates and quality scores, the new healthcare reform law includes demonstration projects that provide incentives and, notably, penalties for providers if they do a poor job of coordinating care. That means if ACOs become the dominant reimbursement structure, communication and handoffs between the hospital and ancillaries, including ambulatory care, surgery centers, primary care providers, the pharmacy, even hospice, will become especially important.

Central to the ACO concept is the idea that patients deserve to have their care coordinated such that one entity giving a service to the patient has all the information about what has been done for that patient elsewhere in the continuum, and then takes that information into account when treating that patient. Such a model helps remove some of the waste in healthcare due to duplicative care, and also makes some entity responsible—through shared payment—for not only distributing that payment equitably among entities involved in the episode of care, but taking responsibility that the patient will not have to seek care to rectify a health problem that should have been addressed during the episode. But who, or what, should that entity be?

It doesn’t necessarily have to be the hospital. In many cases, it will be, but other organizations, most commonly health plans and large multispecialty physician practices and medical service organizations can also serve as the “accountable” party in the ACO.

What is an ACO?

It’s a legitimate question. Several organizations, including CMS, have demonstration projects or independent trials going on right now, with dozens of organizations spending real money to try to figure out how to compete in a new reimbursement paradigm. But they clearly haven’t figured out how transform an idea that makes common sense into one that makes business sense.

On its face, the ACO is a simple structure. It has two functions. Most important, says Michael Sachs, chairman and CEO of Sg2 Inc., a Chicago healthcare information company, it manages utilization. A distant second priority, when utilization of a service is to take place, is to find where it can be done most efficiently.

“Whatever the unit of service is, you want to reduce it,” says Sachs. “Whether I buy the procedure at $4,000 or $5,000 isn’t terribly significant. It’s whether the procedure is done at all.” He offers, as an example, visiting two different auto body shops and having them compete on the service. You may save by shopping around, but the big point is: Did you get in the accident?

“People always want to go straight to the second element, but that’s not where the savings are going to be and where the real innovation is,” he says. Instead, savings will revolve largely around new models of care, which is where the bigger payoff lurks. He mentioned that over the past 30 years, “whenever there’s been a preauthorization put in front of the utilization of the service, utilization has decreased.”


Ah, but that’s what managed care has done and has continued to do, much to the chagrin of many, if not most, patients and physicians. For example, over the past four years or so, managed care organizations have required preauthorization of imaging, although they have backed off of preauthorization in many other areas.
“The cost is really not in seeing the doc,” he says. “You can’t get the imaging anymore unless it’s preauthorized, so that’s how you manage utilization.”

The Access to Medical Imaging Coalition says in a report that imaging utilization has decreased since the Deficit Reduction Act of 2005, which included the provisions to do so. For instance, the use of CT, MRI, PET, and nuclear services grew by only 1.1%, much slower than before. Meanwhile, screening mammography and the use of dual energy x-ray absorptiometry to detect osteoporosis continue to decline in volume.

Much of the discussion about ACOs has hovered over what entity will have control. Will it be a business entity? Will it be a bunch of joint ventures? Those issues will be worked out, say those who have already embarked on accountable care. The main issue that needs to be solved is clinical integration among a wide variety of players in patients’ healthcare.

“Why does it have to be a hospital-based initiative?” asks Simon Prince, MD, president and CEO of Beacon IPA in Manhasset, NY. Prince and his colleagues believe an independent practice association can do the trick. He’s already got 200 physicians in his IPA, and he believes they are nearly ready for ACO-style healthcare.

“There are still a bunch of us private practitioners, but there’s also a lot of consolidation in our marketplace. Docs are running to the hospital for safety and security in fear of healthcare reform. Staying put in a private practice silo and not doing something may not be the right solution,” he says. “But it seemed there are other alternatives.”


Much of the discussion about ACOs has hovered over what entity will have control. Will it be a business entity? Will it be a bunch of joint ventures? Those issues will be worked out, say those who have already embarked on accountable care. The main issue that needs to be solved is clinical integration among a wide variety of players in patients’ healthcare.

“There are still a bunch of us private practitioners, but there’s also a lot of consolidation in our marketplace. Docs are running to the hospital for safety and security in fear of healthcare reform. Staying put in a private practice silo and not doing something may not be the right solution,” he says. “But it seemed there are other alternatives.”

It’s also easy to get rid of physicians who aren’t meeting the mandates of the IPA, which include some of the goals in ACOs, such as clinical integration and other infrastructure, such as a common electronic medical record system. That said, Prince is not yet completely committed to forming an ACO with Beacon, which is only a few months old. Much of that depends on the cooperation with private payers and CMS, after all.

But early signs are encouraging, he says. He’s courting third parties to help with billing software, determine what corporate functions of the IPA they can farm out. Also, he wanted to use an EMR that wasn’t necessarily linked to any one hospital or health system, so that the IPA can have a dialogue with payers allowing the IPA to remain free agents.
In general, as he’s spoken with all the commercial payers in his region, they are more supportive of his group than he anticipated, he says.

“There’s an appetite for this type of physician-led initiative. Competition is probably one reason because having a competitive playing field is important to the payers and our patients. If every practitioner runs en masse to a hospital or health system, it doesn’t help with that competitive balance.”

Payers, he says, want quality, value, and the understanding that the physicians in the IPA will police themselves. “They want assurances that we will work with them on cost savings,” he says.

One of the main initiatives of the IPA is to set up evidence-based guidelines for physician behavior to help limit overutilization.“We’ll have data and see who the outliers are, and there are teeth in the agreement,” he says. Quality initiatives will be put in place, and rates will be based on how well the group’s physicians meet those targets. Outliers will be asked to leave.

“If we do go down the road of the ACO, everyone needs to be rowing in the same direction. It won’t make sense to be a high utilizer and gaming the system. We value private practitioners because we are them. We will help you get there and give you a platform to have a voice.”

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Philip Betbeze is a senior leadership editor with HealthLeaders Media. He can be reached at pbetbeze@healthleadersmedia.com.

50 Things to Know About the Proposed ACO Regulations

By By Scott Becker, JD, CPA, R. Brent Rawlings, JD, Barton Walker, JD, and Lindsey Dunn | April 04, 2011

This article briefly outlines 50 things to know about the Medicare Shared Savings Program proposed rule — which established Medicare accountable care organizations — released by the U.S. Department of Health and Human Services on March 31. The article begins with a summary of key 45 provisions included in the proposed regulations and then provides five general observations regarding the ACO program, as established by the regulations.

45 key provisions in the proposed ACO regulations

1. ACO Participants cannot participate in other Medicare shared savings programs. A Medicare provider cannot participate in the Shared Saving Program as an ACO participant if it also participates in the independence at home medical practice pilot program or other Medicare programs that include shared savings.

2. An ACO may include the following types of groups of providers:
• ACO professionals (i.e., physicians and hospitals meeting the statutory definition in a group practice arrangement);
• Networks of individuals practices of ACO professionals;
• Partnership or joint venture arrangements between hospitals and ACO professionals; 
• Hospital employing ACO professionals; and
• Other Medicare providers and suppliers as determined by the HHS Secretary.

3. The regulations provide for a once-a-year start date of Jan. 1. Under the proposed rule, ACOs would apply for the three-year program and, if accepted, would be part of a cohort of ACOs joining the Shared Savings Program every Jan. 1.

4. ACO agreements will be for three years with one-year performance measurement periods. 

5. Medicare fee-for-service beneficiaries will be retroactively assigned to ACOs based on primary care utilization during a performance year. "We are proposing to assign beneficiaries for purposes of the Shared Savings Program to an ACO if they receive a plurality of their primary care services from primary care physicians within that ACO."

6. Beneficiaries will not be assigned to more than one ACO.

7. Beneficiaries will not receive advance notice of their ACO assignment. However, providers participating in ACOs will be required to post signs in their facilities indicating their participation in the program and to make available standardized written information to Medicare fee-for-service beneficiaries whom they serve. Additionally, all Medicare patients treated by participating providers must receive a standardized written notice of the provider's participation in the program and a data use opt-out form.

8. CMS expects 5 million Medicare beneficiaries to receive care from providers participating in a shared savings program.
9. An ACO must have at least 5,000 beneficiaries. If an ACO accepted into the program falls short of the 5,000 requirement, it will be placed on a corrective action plan. 

10. The board of an ACO must include some Medicare beneficiaries. "Another of the proposed patient-centered criteria discussed previously is the requirement that ACOs provide for patient involvement in their governing processes. We are proposing that, in order to satisfy this criterion, ACOs will be required to demonstrate a partnership with Medicare FFS beneficiaries by having representation by a Medicare beneficiary serviced by the ACO, in the ACO governing body."

11. The ACO board must include representation from all ACO participants. CMS requires this in order ensure all ACO participants are provided "an appropriate proportionate control over the ACO's decision-making process."

12. No more than 25 percent of board seats can be held by non-ACO participants such as entrepreneurial companies. "In order to be eligible for participation in the Shared Savings Program, the ACO participants must have at least 75 percent control of the ACO's governing body."

13. The proposed regulations do not require an ACO to become a separate legal entity with a separate Tax Identification Number. However, CMS recognized not requiring this could make it more difficult for CMS to audit ACO performance. Thus, it is seeking comment on whether all ACOs should be required to be formed as separate legal entities. 

14. The ACO can enter into a one-sided or two-sided shared savings agreement. Under the first, "one-sided" risk model, an ACO that creates a savings of at least 2 percent would get 50 percent of the money above that threshold, but it would have no penalty if it spent more in the first and second year. Under the "two-sided" model, an ACO could receive 60 percent of the money above the threshold but also would be penalized if it led to higher costs. By the third year of the program, all ACOs would become responsible for losses. 

15. Cost targets, from which savings will be calculated, will be based on retrospective review of aggregate beneficiary-level data for the assigned population. Spending targets will be compared to actual spending and any savings above the ACO's minimum savings rate (generally 2 percent), will be shared between CMS and the ACO.

16. CMS will set spending benchmarks based on three years of data. These will be set with a higher weighting on the most recent year and the lowest weighting on the year three years ago (i.e., a 60, 30, and 10 rating). There are several adjustments to the benchmarking.

17. Generally there is no savings shared or costs to be borne unless savings are at least 2 percent above or below the benchmark. The higher the number of beneficiaries, the lower the minimum savings rate. For smaller populations (e.g., 5,000 beneficiaries), the minimum savings rate can be higher (i.e., up to 3.9 percent). However, there are exceptions to the rule for rural ACOs. 

18. The ACO entity is responsible for distributing savings to participating entities. Medicare will pay the savings to the ACO, which will distribute it to participants in the ACO.

19. ACOs will be subject to a withhold of shared savings to offset possible future losses. "The ACO will be subject to a 25 percent withhold of shared savings in order to offset any future losses under the two-sided model." If an ACO completes its three-year agreement, it can recoup the 25-percent withhold. If an ACO terminates its agreement before the three-year requirement, CMS will retain any portion of shared savings withheld. 

20. To be eligible to receive shared savings, the ACO must also meet certain quality standards. There are five standard measures for quality or areas. These include patient care giver experience, care coordination, patient safety, preventive health and at risk population/ frail elderly health. CMS will designate scoring and measurement concepts. "Each of the [five] domains is equally weighted in determining an ACO's overall quality performance score, regardless of whether the ACO is in Track 1 or Track 2."

21. An ACO must develop a process to promote evidence-based medicine, patient engagement and coordination of care.

22. ACOs must have a patient survey tool in place.
23. ACOs must have a process for evaluation the health needs of the population it serves.
24. ACOs must have systems to identify high risk beneficiaries and develop individual care plans for target populations. 

25. An ACO must report and maintain a database of all ACO participants and their National Provider Identifiers.
26. ACOs must have a compliance plan and conflicts of interest policies and means to screen ACO participants.
27. ACOs must get approval for any changes in ACO participants (i.e., providers) during the three-year contract period.

28. Where an ACO's structure or participants changes during a term, CMS has five different ways it may respond. In some cases, the ACO will be allowed to move forward in the program. In others, it would be required to start over with a new three-year agreement. In some cases, the ACO would no longer be eligible for the Shared Savings Program. (See page 137 of the proposed regulations for the full list of CMS responses.)

29. Primary care providers may only participate in one ACO. However, a hospital can participate in more than one ACO, as can non-primary care medical and surgical providers.

30. Physicians eligible for primary care provider status include internal medicine, general practice, family practice and geriatric medicine specialists.
31. At least 50 percent of an ACO's primary care physicians must be meaningful EHR users as defined by the HITECH Act and subsequent Medicare regulations.

32. Each ACO will have significant public reporting requirements in a standardized format. Name; location; contact; participating providers; identification of participants in joint-ventures between ACO professionals and hospitals; identification of representatives on the governing body; associated committees and leadership; quality performance standard scores; shared savings information, total proportion of savings distributed to participants; and total used to support quality performance will be reported publicly.

33. ACOs must have a data-use agreement with CMS. However, Medicare beneficiaries assigned to ACOs can opt-out of data sharing. The ACO must supply beneficiaries with a form that allows them to opt-out. 

34. CMS will share aggregate population data regarding the ACO's population several times per year. Data from CMS will include financial performance; quality performance scores; aggregate metrics on the assigned beneficiary population; utilization data at the start of the agreement period based on historical beneficiaries; and identification of historically assigned beneficiaries used to calculate the benchmark.

35. CMS may monitor to ensure they are not avoiding at-risk beneficiaries or distributing unapproved marketing materials in addition to a whole range of other issues. In regards to marketing materials, CMS must approve any marketing materials or other communications promoting the ACO. 

36. ACOs must agree to be open wholly to audits. "We further propose that, if such data are generated by ACO participants or another individual or entity, or a contractor, or subcontractor of the ACO or the ACO participants, such ACO participant, individual, entity, contractor, or subcontractor must similarly certify the accuracy, completeness, and truthfulness of the data and provide the government with access to such data for audit, evaluation, and inspection."

37. The regulations set forth 16 grounds for termination of an ACO's shared savings agreement with CMS.Examples of these grounds include failure to report quality standards or failure to meet quality thresholds and avoidance of at-risk beneficiaries. (A full list of the 16 grounds can be found on pg. 409 of the proposed regulations.)

38. There are several concepts which are not subject to appeal by an ACO if it is terminated from the program by CMS. (A list of these can be found on pg. 412 of the proposed regulations). ACOs may appeal an initial determination if it is not prohibited for administrative or judicial review. 

39. CMS can change the program during a contract term, but can't change the rules regarding the eligibility requirements of an ACO, calculation of the shared savings rate and beneficiary assignment.

40. CMS and the OIG have proposed waivers with regard to Civil Monetary Penalty, Antikickback and Stark laws solely as to relationships wholly related to an ACO. For Stark and Antikickback, the waiver applies only to distributions of shared savings (not any other financial relationships). To view the CMS and OIG guidance, clickhere. 

41. Preliminary guidance from IRS available. The IRS has issued preliminary guidance to provide tax-exempt entities information on participating in ACOs. To view the IRS guidance, click here. 

42. Preliminary guidance from antitrust agencies available. The FTC and DOJ have also issued a proposed statement of antitrust enforcement policy as to ACOs. According to the guidance, ACO participants will not be challenged if they have a combined share of less than 30 percent of the common service in each area. If outside the safe zone it can still proceed if less than 50 percent. If more than 50 percent it must receive an approval to participate. If less than 50 percent, it doesn't need a review, but can request one. To view the antitrust guidance clickhere. 

43. The core concepts of the ACO program are to achieve better care for individuals, better health for populations and lower growth for Medicare expenditures. 

44. Comments on the proposed rule will be accepted for 60 days after the proposed rule is published in the Federal Register (expected April 7, 2011, so until June 6, 2011).

45. The ACO program is scheduled to go into effect on Jan. 1, 2012.

General observations on the ACO program

46. Will require massive bureaucracy. Given the scope of the regulations and the number of actions and approvals to qualify and participate and be accountable as an ACO, the ACO regulations likely will require the establishment a massive bureaucracy. In some ways, it's a different form with much more integration than providers that manage a Medicare advantage plan system but with arguably even more complexity.

47. Regulations are idealistic. The regulations in many ways speak of what is viewed by CMS as ideal concepts in healthcare, concepts used as platitudes such as "patient-centered care," "patient engagement" and many other terms. It will be fascinating to see how the actual practical hard-nosed implementation meshes with such ideals.

Further, the regulations speak of the kind of leadership expected in ACOs as though government can choose leaders or dictate what they look like in what we know is an imperfect world and where the reality of capitalism and a free market. In reality, who leads such organizations is never going to be as clean and clear as the regulations seem to believe and the leaders won't fit a certain stereotype.

48. Regulations limit business involvement. The program set forth the kind of negative attitude that one might expect from CMS towards business and further tends to reflect CMS' demonization of business and insurance. For example, while some might think business involvement is needed to drive this, the regulations specifically require that business interests cannot make-up more than 25 percent of the board in ACOs.

49. Regulations require beneficiary representation in ACO governance. The program requires a means for equal and shared governance in ACOs and requires beneficiaries to have a say in the ACO governance. Specifically, the proposed regulations require the ACO governing body to include including "a Medicare beneficiary serviced by the ACO." 

50. Regulations favor PCPs. The ACO regulations — much like intended reform in the 90s — view the primary care physician as the leader of patients' healthcare and really relegates many other parties to being cost centers. Language regarding PCP roles is somewhat glowing, further suggesting this perspective.

A Watershed Day for Accountable Care Organizations

By David A. Manko, Esq. and George Choriatis, Esq.


Yesterday was a watershed day for accountable care organizations (ACOs) - a new type of healthcare organization being promoted under ongoing health reform initiatives, particularly the recently enacted federal health reform legislation (the "Patient Protection and Affordable Care Act" or "PPACA"). Such reform initiatives seek to encourage physicians, hospitals, and other healthcare providers to form ACOs assume accountability and coordinate their services for a defined patient population and to be rewarded for improving the effectiveness and efficiency of their care with respect to the defined patient population. Yesterday, the following took place:The Centers for Medicare and Medicaid Services (CMS) issued proposed regulations implementing the ACO program to be established under Medicare, which is known as the Medicare "Shared Savings Program." To access the regulations, click here:

• CMS and the HHS Office of Inspector General (OIG) issued a proposal to waive the application of the Stark law, the Anti-Kickback law, and the Civil Monetary Penalties Law with respect to specified financial arrangements involving ACOs. To access the proposal, click here:
• The Federal Trade Commission (FTC) issued new guidance regarding the application of the federal anti-trust laws to ACOs. To access the guidance, click here:
• The Internal Revenue Service (IRS) issued a notice soliciting comments regarding the application of the federal tax laws governing tax exempt organizations to hospitals and other healthcare organizations that are recognized as tax exempt under Section 501(c)(3) of the Internal Revenue Code and participate in ACOs. To access the notice, click here:
• The New York State legislature enacted a law establishing an ACO demonstration project in New York State. The legislation requires the New York State Department of Health (DOH) to establish an ACO demonstration project, pursuant to which the DOH would certify up to 7 qualifying organizations as ACOs through December 2015. The December 2015 sunset date does not mean that an organization qualified as an ACO prior to that date would be required to cease operating on that date, but that DOH may not approve any new ACOs after that date unless such date is extended. Organizations certified as ACOs by DOH would be protected from certain types of liability under anti-trust, corporate practice of medicine, self-referral, and state insurance laws. The enactment of this legislation is intended to facilitate the development of ACOs beyond the Medicare context.

We intend to publish further analyses of the above items. Stay tuned.

WSJ: What is an ACO?

By AVERY JOHNSON

The 2010 health-care law encourages the development of accountable-care organizations as a way to improve care and reduce costs.

So what exactly are accountable-care organizations, anyway?

In broad outline, these entities propose to unite doctors and clinics or hospitals in groups that pool their resources with the goal of trimming spending while boosting the quality of care. When the group can show that it is improving care and delivers it for less than the cost projected—arrived at by crunching historical patient data for that market—a share of the savings goes to the ACO's bottom line.

ACOs exist more on paper than in reality, for now. But a few organizations up and running for decades do closely resemble how the concept can work. One of the most prominent is Atrius Health of Newton, Mass., an alliance of five medical groups comprising more than 800 physicians, about 700,000 patients and 30-plus care centers in eastern Massachusetts.

"An ACO is like a unicorn; everyone thinks they know what one is, but no one has ever seen one," says Gene Lindsey, president and chief executive of Atrius Health. "A few months ago, I announced to our organization, 'We are an ACO.' "

The term was invented only in 2006 and was just recently worked into the 2010 health-care reform law. Regulations for ACOs from the Department of Health and Human Services are pending, and the National Committee for Quality Assurance, a nonprofit that accredits health-care organizations, is in the process of developing ways to accredit the groups.

Roots in the '60s
Doctors, nurses and technicians at Atrius Health, part of Harvard Community Health Plan back in the 1960s, constantly strive to shave costs and improve quality. The group saved $62 million in 2010 from improvements that lowered costs.

A committee of doctors and other employees reviews operations looking for specific ways to make them more efficient. A few months ago, for example, the panel noted it was taking MRI technicians and nurses 10 minutes to turn over exam rooms between patients. After making some adjustments, such as removing cabinet doors so technicians could get at supplies more easily, it now takes five minutes. The result: an increase of two MRI patients a day, or 700 scans a year. Atrius Health recorded roughly $3.5 million in savings last year from this change alone.

Other innovations adopted include an electronic medical records system that helps measure quality and identify problems in patient care. Atrius Health also uses case managers, who help patients with chronic conditions coordinate care using multiple doctors and medicines; and pharmacists who review patient records to identify problematic drug interactions or cheaper alternatives for persons on multiple medications.

Two years ago, the group's doctors started a monthly process of sharing and discussing patient records. Physicians performing near the bottom of the pack thus can learn from peers who are seeing better results. Atrius Health executives say the practice has improved quality of care across the organization.

Quality measures are showing improvements, too. Atrius Health reports it has been able to boost the number of patients receiving cholesterol screenings to 88% from 80% and the number of diabetics getting a certain blood test to 79% from 68%.

An Adoptable Model?
Still, some critics argue that the ACO concept is not widely adoptable.

The health-care law calls for paying providers for the services they use and for rewarding them for any savings, initially in the Medicare program.

Atrius Health is paid by health plans with traditional fee-for-service deals for about 50% of patients. For the rest, when cost of a patient's care exceeds the limit set by the payor, Atrius Health has to cover the difference. The group has enough scale that it is able to improve quality, wring out waste and absorb losses on certain cases.

But smaller ACOs might not be able to get to that scale.

"It's so much like the old managed care that people really didn't want," says Jeff Goldsmith, a professor at the University of Virginia. That model, tried extensively in the 1990s, led to outcry over care rationing and caused some providers to lose money. Mr. Goldsmith worries that patients could find themselves in ACOs without being given a choice.

Organizations can try to limit their risk, as Atrius Health does, by accepting pay from some insurers for total care, and pay for services as performed from others. But critics say it also could be confusing for doctors in an ACO if they're paid different ways by different insurers.

Payor Problems
Atrius Health admits having multiple payor sources can be a problem, as it can create conflicting agendas for care. For instance, the group's global payments cover care coordinators for patients, while its fee-for-service payments do not. It has resolved this problem, it says, by allowing the global payments to subsidize the fee-for-service patients. But Chief Physician Executive Rick Lopez acknowledges that not every group would be able to do that.

Another concern: "Hospitals and doctors don't work together well," says Mr. Goldsmith. Hospitals' incentive is to maximize revenue through admissions, Mr. Goldsmith says, while doctors aim to keep their patients at home or in outpatient facilities.

Dr. Lopez agrees: "It absolutely is a tension that underlies the concept." Atrius Health has ended preferred relationships with hospitals when they didn't share its collaborative approach, he says. But the group has saved roughly $5 million in 2010 from its hospital partnerships.

Atrius Health is unique in some ways. It's a large and sophisticated group that is able to pull off care coordination because it can afford to invest in information technology and other costly improvements.

By contrast, so many mom-and-pop medical groups and small hospitals lack these kinds of resources, Mr. Goldsmith says, "the idea that this could scale to the rest of the health system is seriously flawed."

Elliott Fisher, the Dartmouth Medical School professor who helped coin the term ACO, and who worked with members of Congress to draft the ACO concept into the health-care law, concedes that "there are some really important questions about whether this will work."

But, Dr. Fisher adds: "I think it's the best hope we have."

Ms. Johnson is a reporter for
The Wall Street Journal in New York. She can be reached at
avery.johnson@wsj.com.

In Search of an Accountable Care Organization (ACO)

ACO's Beginning to Take Form

Below is a recent article featuring Beacon IPA in Renal Business Today...


By Keith Chartier

Like many physicians, Long Island, N.Y.-nephrologist Simon Prince sees a volatile situation in which more and more physician practices are becoming hospital owned amid a turbulent healthcare landscape.

In fact, a recent survey of 58,000 physicians by the Medical Group Management Association found that 55 percent of physician practices were hospital owned in 2009. In 2008, 50 percent were hospital owned, and approximately 30 percent were five years before.

“There are a lot of reasons in which docs are doing that— decreasing reimbursement, fear of the unknown of what’s coming in healthcare reform and just people throwing the towel and not wanting to deal with it, rising administrative burdens, oversight, tech requirements, etc.,” Prince said.

However, he believes there is still a critical mass of independent, private-practice doctors who like being autonomous. “We still need to come together, because it’s just too hard to remain in your silo,” Prince added. “Those days are over, but private practice still isn’t dead. The sky isn’t falling. There is still some opportunity if we can come together.”

This past summer, Prince spearheaded the development of Beacon IPA, which includes a network of more than 200 local physicians who can share costs, risks and accountability for quality of clinical care. It’s a model that may sound familiar to the healthcare hot topic of the day: accountable care organizations (ACOs).

Prince is well aware of the possibility of ACOs, and has already started laying the groundwork of moving Beacon IPA into an ACO when and if that day comes. In the meantime, the organization is striving to help physicians maintain some semblance of autonomy in a merger-happy world.

“We are striving to evolve into an accountable care organization (ACO) and make a difference in healthcare,” added Prince. “ACOs have rapidly gained importance under the healthcare reform legislation introduced by President Obama. Although many questions remain about the viability of ACOs, we at Beacon embrace its philosophy. Beacon IPA is owned and operated by physicians, and we will make every doctor in our network accountable for their performance. The success of our venture will be of great benefit to all parties involved, including our patients, physicians and insurers.”

ACO Basics

When healthcare reform passed in early 2010, ACOs were tucked deep within the law's pages and weren't on the forefront of the national consciousness. That should change this year as Medicare works to set the rules and regulations that will govern ACOs, which are set to start no later than Jan. 1, 2012.

Under the law, qualifying provider groups are to work together to manage and coordinate care for Medicare fee-for service beneficiaries. In addition, the law stipulates that ACOs that meet quality performance standards are eligible to receive payments for shared savings.

According to the law, the following groups are eligible to participate in ACOs: physicians and practitioners in group practice arrangements, networks of individual practices, partnerships or joint venture arrangements between hospitals and ACO professionals, hospitals employing physicians and practitioners, and any other group Medicare deems appropriate.

Also, an ACO must have an established, formal legal structure, and it will also be required to participate in the program for no less than three years. Another eligibility criterion is that ACOs must have at least 5,000 patients in order to participate. In addition, ACOs are mandated to have a leadership and management structure that includes clinical and administrative systems. ACOs must also have defined processes to promote evidenced-based medicine, 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 coordinate care

Shared Risk

It has been argued that the current fee-for-service payment system rewards volume and intensity rather than efficiency and effectiveness of care, often penalizing those systems that attempt to improve care. In contrast, the ACO system, in a perfect world, would reduce cost while increasing quality of care. There are, however, risks.

“What all docs are worried is that you share in the risk,” Prince said of ACOs. “That’s the biggest unknown. Who is going to share in the risk? If they’re going to put the risk back on to the ACO and onto the physician, it’s going to be more difficult and we could start self selecting which patients we want to include in our ACO.”

Click here for the rest of the article.

An Accountable Care Organization Administrator and Patient Dialog About Being in an ACO

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ACO's as part of the ACA healthcare refrom law

CMS Expects to Issue ACO Rules by Mid-January 2011

The Centers for Medicare & Medicaid Services could release the proposed regulations for accountable care organizations (ACOs) by mid-January 2011, according to a posting from the law firm McDermott Will & Emery.

The law firm reported that on Dec. 3, Head of CMS, Donald Berwick, and Jonathon Blum, deputy administrator of CMS and director of Medicare, made the announcement while speaking at during the annual policy conference of the National Committee for Quality Assurance.  They also announced that Medicare beneficiaries will be notified when they are assigned to an ACO.

AMA makes recommendations to CMS for physician-led ACOs

The AMA submitted its most detailed comments (PDF) to date to the Centers for Medicare & Medicaid Services (CMS) on how Medicare should structure physician-led and patient-centered accountable care organizations (ACOs). The recommendations were submitted today, Dec. 2, in response to a specific request from CMS for comments on how to ensure that solo and small group practices have the opportunity to actively participate in Medicare's ACO program. 

Top recommendations 

The AMA's recommendations to CMS on structuring physician-led ACOs include:

• Developing new payment models for physicians that move Medicare away from today's dysfunctional physician payment system—the threat of Medicare physician payment cuts will impede physicians' efforts to improve care coordination, such as employing case managers and investing in infrastructure to monitor and improve quality
• A range of specific new payment methods that CMS should consider in addition to shared savings, including an accountable medical home payment system and bundled payments for specific medical conditions, such as congestive heart failure
• Increased access to loans and grants for small physician practices
• Easing of antitrust restrictions that prevent physicians from collaborating
• Timely access to quality data

The AMA also urges CMS to allow patients to voluntarily select a Medicare ACO and to undertake a proactive effort to educate and encourage beneficiaries to take steps that will help make ACOs successful. For example, patients should be able to:

• Choose and consistently use a primary care physician as a medical home
• Select specialty physicians, hospitals and other providers that coordinate effectively with their primary care medical home and each other
• Engage in shared decision-making processes with their physicians about appropriate treatments for their conditions
• Participate in other types of programs developed by their physicians to maintain and improve their health at an affordable cost

This education effort should be developed in cooperation with physicians and launched well in advance of the ACO program's initiation. 

The AMA also makes recommendations on the types of quality measures ACOs should use. At least in the initial years of the program, CMS should avoid making ACOs collect and report quality measures beyond those already required under other CMS programs, such as the Physician Quality Reporting System (PQRS), formerly known as the Physician Quality Reporting Initiative. 

Although additional quality measures may ultimately be warranted, it is impractical to develop a single national set of such measures prior to implementation of the Medicare Shared Savings Program, because the areas where ACOs will focus their cost reductions will likely vary significantly from region to region. Furthermore, measures that may be appropriate for one ACO model may not be appropriate for another. ACOs should be allowed to report on a hybrid of nationally and locally focused quality measures related to their particular patient population. 

Physician-led ACOs will encourage innovation, competition 

When the AMA submitted its comments, AMA President Cecil B. Wilson, MD, said, "The physician-led ACO model injects competition into the market by eliminating the need for consolidation under a hospital system. Competition fosters innovation, which ultimately helps patients receive efficient, high-quality care. Care coordination is vital, and physicians can work together with a health care team to keep patients healthy and out of the hospital while maintaining independent medical practices. CMS should adopt policies that facilitate physician-led ACOs and do not inadvertently bias participation in favor of large health systems and hospitals. Our goal is to ensure that new models of care benefit patients, and for this to happen physicians must be able to successfully participate in and lead ACOs." 

Learn more about the AMA's advocacy efforts on ACOs.

PhysiciansPractice.com- Trendspotter: Featuring Beacon IPA

Trendspotter: Fledgling IPA Charts Its Own Course

By Ken Terry | November 24, 2010

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Accountable care organizations (ACOs) are supposed to improve quality and cut costs by getting hospitals, doctors, and other providers to work together. But increasingly, observers are raising the possibility that ACOs might raise costs faster by consolidating providers and forcing payers to accept big payment increases.


The main reason for this concern is that hospitals are expected to be the driving force behind the ACO trend. As they grow by acquiring other hospitals and employing more physicians, healthcare systems are becoming ever more influential in many markets. The advent of ACOs promises to increase that dominance — assuming the government lowers the antitrust and other regulatory barriers to forming these organizations.

But hospitals need not control ACOs. In fact, under the health reform law, they don’t even have to be ACO members, although their cooperation will be needed. The American Medical Group Association (AMGA) has started an ACO collaborative to help large group practices form ACOs. There are also clinically integrated IPAs and PHOs that could easily become ACOs, and 50 to 75 other physician-led organizations are on the same path, according to one estimate.


Among these entities is the Beacon IPA of Manhasset, NY, on the north shore of Long Island. Formed last summer, the IPA already has about 200 physician members, according to nephrologist Simon Prince, the IPA’s leader. The IPA’s long-term goal, Prince says, is to become clinically integrated and ready for whatever healthcare reform brings, including ACOs.


The IPA is not affiliated with any hospital “by design,” says Simon, the immediate past president of the medical staff at North Shore University Hospital in Manhasset. “We are trying to remain free agents.” Instead of being part of a hospital strategy, he says, the IPA wants to create its own strategy.


The main impetus for formation of the IPA, he explains, is the growing power of the North Shore-LIJ Health System, which is the dominant healthcare player on Long Island. North Shore-LIJ has hired a lot of physicians, creating fears among some private-practice doctors they might not be able to survive on their own.


“A lot of doctors didn’t go into medicine to become employed physicians, but the environment is such that it’s very difficult to maintain your independence,” Prince says. “So I felt an IPA was the best alternative that would allow the individual practices to maintain as much autonomy as they can.”


To become clinically integrated — which would allow the IPA to negotiate with payers, as North Shore-LIJ does — the doctors must have EHRs. So its members have agreed that, within six months, they will either have EHRs or have plans to get them, Prince says. At that point, the IPA will start to build the infrastructure for clinical integration, following the Federal Trade Commission’s guidelines that have allowed other IPAs and PHOs to bargain with payers.


The government incentives for meaningful use of EHRs will be a significant help to the practices in the IPA, Prince says. In addition, the IPA will provide some technical support to help physicians implement their EHRs and show meaningful use.


Where will the money for these activities come from if the IPA isn’t affiliated with a hospital? Prince says the IPA is in discussions with Empire Blue Cross Blue Shield and other payers. He suggests that the plans might be willing to kick in some extra funds to help the IPA become clinically integrated with the prospect of lowering overall costs down the line. Later on, if the IPA’s added value brings in enhanced payments, he says, part of that extra money could finance the IPA’s operations.


So far, Prince has been pleasantly surprised by the local payers’ interest in working with the IPA. He speculates that their interest might be prompted by their inability to limit cost increases from North Shore-LIJ, which has negotiated “very big rates… If they give us something extra and help to avoid that, I think that’s attractive to them.”


Meanwhile, Prince doesn’t rule out a future agreement with a hospital to form an ACO. “Remaining a free agent and seeing what the best fit is for us could be our advantage. If we grow and become a little more attractive, it might put us in a better position to negotiate a deal with a hospital or health system down the road.”