Accountable Care Organizations and PPACA after November 2nd 2010

Health care reform or the Patient Protection and Affordable Care Act (PPACA) began its journey on February 24, 2009, when President Barack Obama addressed a joint session of Congress and said, “Let there be no doubt: health care reform cannot wait, it must not wait, and it will not wait another year."  What followed after that was a series of compromises and promises that eventually led to the passage of PPACA which was signed into law on March 23, 2010.

Amazingly, the PPACA estimated savings of $143 billion over 10 years as projected by the Congressional Budget Office and Joint Tax Commission fell way short of the cost savings promised by the five major trade groups—American Hospital Association (AHA), America’s Health Insurance Plans (AHIP), American Medical Association (AMA), Advanced Medical Technology Association (AdvaMed), Pharmaceutical Research and Manufacturers of America (PhRMA), who presented the White House commitments to reduce costs by $1.7 trillion, thus bending the cost curve over ten years while protecting the current system^[1].

So why did we change the system if we could truly generate over ten times the savings with our conventional system?  While some say universal coverage, others point out numerous ways to find holes in the math.  Do the November 2nd elections tell us anything about the future of PPACA?  According to the Kaiser Family Foundation, Midterm Election Exit Poll, the economy and anti-incumbent sentiment dominated returns, with 3 out of 5 votes listing the economy as their primary concern, while health reform was the primary issue for 1 in 5 voters.  While many Americans complain about health care reform, it does not seem to be driving them to the polls^[1]. 

As I survey my colleagues about PPACA, there seems to be an equal split between enthusiasts and those that prefer to take a wait and see approach.  There remain a number of undefined regulations.  But while many areas of grey remain, we can count on the main provisions, such as Accountable Care Organizations and the Medicare Shared Savings Program surviving as they are integral to bending the cost curve downward and ensuring the sustainability of the program.  I do think we will see some changes, for example the erroneous W-2 provision and penalizing FSA limitations will most likely be voted out next year.

What are Accountable Care Organizations and why do we need them?  Elliot Fisher, MD and Director of the Dartmouth Center for Health Policy Research is quoted as stating, “An Accountable Care Organization is a local network of providers that can manage the full continuum of care for all patients with in their provider network.”^[3] The Mayo Clinic, the Geisinger Health System, and the Carilion Clinics are often noted as successful examples of ACO’s.  Phillip Ronning, in Becoming Accountable, states that, “the true opportunity lies not in building an accountable care organization – but in becoming accountable for delivering value to the patient.”^[2] This concept represents the paradigm shift that is PPACA and what holds the real value of the law. 

In the new model, the delivering value to the patient through coordination of care, physician efficiency, and physician productivity will become the drivers for financial reward.  ACO’s move the industry away from the traditional fee for service model and instead replaces it with a patient/primary care physician experience and outcomes model.  Volume, growth and cost data are no longer the drivers for compensation.  The following chart provides a quick snapshot of how the traditional model and ACO models compare:

In looking at the chart above, one can see that the primary drivers of our delivery model have changed.  Chris Hottinger, of President of Strategic Business for CFH and Associates and Northern California Board Member of HIMMS, stated in an interview for this article, “we are set up for disruptive change when instead we need incremental change where we bend the cost curve down without negatively impacting customer quality of care.  We need to develop the financial tools and data analytical methodologies that will allow us to actually improve quality of care by aligning financial incentives.  For example, there needs to be an incentive for primary care physicians to take on the added responsibility for coordination of care and increased productivity, while maintaining current levels of quality, or better.  Another example might be the creation of specialized hospitalized rather than all hospitals having redundant departments which drive up the cost curve.  An effective ACO delivery model with aligned financial model would allow us to optimize outcomes and minimize costs.”

I like to think of the ACO model as turning the current delivery system upside down.  By looking at the following diagram, one can see where the power is shifting to under the new model.

As one can see, it is a dramatic paradigm shift that will occur in the Medicare and Medicaid markets first.  Properly implemented, it can be very successful and adopted by the private sector provided they have the data analytical tools, analytical techniques and expertise, lean processes, and willingness.  These factors together add up to form the bar the industry must leap for a successful adoption.  The following excerpt from an article titled, The Physician's Place in the ACO, by Philip Betbeze, sums up the components of the argument quite well.  The article reads, "Dennis Dahlen, CFO at Banner Health in Phoenix…The payment reform modeling in the healthcare reform [law] is probably the sugar that makes the medicine go down," he says. "Whether it's bundling or an ACO, it provides a currency to work with physicians and other providers for that coordination. Absent that currency, we actually mostly have barriers to working cooperatively."

Despite the fact that, in some cases, physicians might not directly control how the bundled payment is distributed among the entities responsible for a patient's care, the physician is going to have to be in a key leadership role, says George Mayzell, MD, MBA, who is chief patient care officer at Methodist Le Bonheur Healthcare, a seven-hospital system in Memphis, TN, which also owns home health centers and a number of outpatient facilities in the area.

"That's the way this will work," he says of the physician's role in the ACO. "Ultimately, they decide the quality of care and the cost through the mighty pen. If it's an IPA of docs who understand it's about the patient and quality and managing that financial risk, why can't they have the money and bring the other players to the table?" he asks. "It's not about who's calling the meeting—you'll see different models of ACOs in different communities," he says, mentioning Geisinger Health System, Summa Health System, and others as ACO leadership.^[4]

I will leave you with the following quote and thought, Karen Minich-Pourshadi, in her article, Data Mining Hits Pay Dirt, Health Leaders Media, says, “Data mining, or predictive analytics, can overhaul the conventional hospital billing process, plus offer administrators a much-sought after link between the clinical and the financial. These tools can be used to gather the data needed to support high quality care for a better value while improving the charge recovery process, increasing staff productivity and better controlling costs.” ^[5]   Ask yourself today, how effective is your delivery center at capturing and analyzing data?  Could you use the data you have today to equip your primary care physicians with the tools to improve quality of care, improve outcomes, while lowering costs?  It is a challenge we all face and answer we must all ask ourselves if we are to be successful in the new paradigm.

Bibliography:

1. Deloitte Consulting, Health Care Reform Memo, Novermber 29th edition.
   
2. Strategic Financial Planning, Becoming Accountable, Phil Ronning, Summer 2010, p 1-3.
   
3.  ACO’s: Preparing for Medicare’s Shared Savings Program, Phil Ronning, August 2010, p 2.
   
4. The Physician's Place in the ACO, by Philip Betbeze, Health Leaders Media, November 15th, 2010, p 3.
   
5. Karen Minich-Pourshadi, in her article, Data Mining Hits Pay Dirt, Health Leaders Media, November 29, 2010 p 1.
   

Catherine Woods is an accomplished senior executive and experienced US healthcare industry expert.  With 15 years' experience in the US healthcare industry, Catherine has led the strategic development of business excellence, cost containment, and global sourcing programs for Fortune 200 companies.  During her tenure she has built operations across the healthcare services spectrum.   Her areas of expertise include outsourcing, business process management, healthcare cost management, and business development.
Catherine is an author and public speaker covering topics such as leadership development, healthcare reform, global sourcing, outsourcing best practices, and project management.

Today, as Managing Partner at Sloan Solutions, LLC, Catherine has built a leading consulting practice focused on providing Fortune 1000 companies a full suite of consulting services developed to help clients identify and execute business strategies.   Prior to Sloan Solutions, Catherine held executive positions in operations and strategic development at Viant, PacifiCare and CIGNA HealthCare.  She earned a Master of Business Administration from the University of Notre Dame, and holds the Lean Six Sigma Sensei designation.

About The Author

Catherine Woods is a contributing member in the following organisations:

• International Association of Outsourcing Professionals
• Project Management Institute, Los Angeles Chapter; College of Performance Management
• Association for Social Economics
• The American Political Science Association – Foreign Policy Studies
• Public Relations Society of America
• Toastmasters International