Inside Three ACOs: Why California Providers Are Opting for the Model

Visit SDIndyACO.com, and you’re greeted by a Hawaiian shirt hanging in an otherwise empty closet. “Future home of something quite cool,” the page’s headline reads.

Forget unicorns, camels and all the other metaphors used to describe accountable care organizations these past few years.

The website — the homepage of the newly formed San Diego Independent ACO, which was one of 106 organizations named last week to Medicare’s Shared Savings Program — could sum up where we stand now on ACOs.

While we’re close enough to see their outline, some ACOs are still just teasing their promise. Many organizations have yet to launch a Web presence (or in San Diego Independent ACO’s case, are waiting to get CMS approval). And more health care providers are rushing to build the ACO structure in hopes of winning federal contracts — and filling out the details later.

Understanding the Medicare ACO Model

The ACO model is loosely defined as having integrated teams of providers share responsibility for caring for a select population of patients. (That isn’t a new idea — and based on that definition, California’s had dozens of physician-led groups and integrated networks essentially operating as ACOs for years.)

But under the Affordable Care Act, the government is moving to reimburse organizations that succeed at this integrated approach. The Medicare Shared Savings Program is CMS’ flagship pilot to reward ACOs for reducing the total cost of care for an assigned population of Medicare beneficiaries.

While the year-old MSSP and other CMS programs are still voluntary, and encompass a range of different models, the government’s goal is that the new reimbursement scheme will eventually transition to its entire Medicare population.

Last week’s announcement was another big step in that direction; it nearly doubled the number of ACOs working with Medicare, from 153 to 259. And altogether, CMS says as many as four million Medicare beneficiaries are now covered by ACOs, up from 2.5 million last summer.

The Medicare ACOs include a range of providers and sizes; about half are physician-led organizations that serve fewer than 10,000 beneficiaries. Moreover, roughly one-fifth of Medicare ACOs include rural health centers, community health centers, and critical access hospitals, which serve rural and low-income communities.

The Golden State’s Outsized Presence

Based on ACO participation, California continues to help set the pace for reform. A June 2012 report from Leavitt Partners found that 25 ACOs — more than 10% of the 221 ACOs that the firm identified across the nation through May 2012 — were located in the state. And in a nod to California’s tradition of strong physician leadership, 11 of those ACOs were sponsored by independent practice associations; no other state had more than six ACOs sponsored by physician groups. (That count has since gone up, as more IPA-led ACOs in the Golden State have come online since last summer.)

The nine newest Medicare ACOs serving patients in California are an eclectic mix. They range from Accountable Care Clinical Services — which will be operated by Accountable Care Associates and also serve patients in four other states — to a handful of ACOs operated by teams of local physicians, a new ACO from Cedars-Sinai Medical Center and an ACO operated by the UCLA Faculty Practice Group.

They join 14 other Medicare ACOs serving patients in the Golden State: six ACOs named to CMS’ Pioneer program; two ACOs named as participants in the MSSP’s first round; and six ACOs named as participants in the MSSP’s second round.

“Road to Reform” spoke to administrators at several of these new ACOs.

Profile: UCLA Faculty Practice Group’s ACO

Because MSSP first launched about a year ago, it begs the question: Why didn’t some of the newest participants try to join the program sooner?

In some cases, providers were waiting for the lawsuit over the ACA to be resolved. Other would-be participants hesitated, trying to figure out if the potential revenue from joining the MSSP would outweigh the sunk costs of investment.

But UCLA didn’t need to do that kind of calculus, according to Dr. Samuel Skootsky, the chief medical officer of the academic medical center’s faculty practice and medical group.

UCLA already was working to curb readmissions, expand its urgent care capabilities and bring a new enterprise-wide health record system online — efforts that essentially parallel the goals of Medicare’s ACO initiative.

While some organizations had to figure out whether they’d see ROI on major investments in case management infrastructure, “we didn’t need to come up with [new spending] of that magnitude,” Skootsky tells California Healthline. “We have all that stuff anyway.”

However, UCLA’s large size and structure presented some unexpected, if minor wrinkles. For example, the CMS application for the MSSP calls for all physicians to agree to participate in the ACO. Securing agreement from every physician posed a bureaucratic challenge for UCLA; the organization has hired more than 1,500 physicians and the medical group contracts on their behalf. The health center eventually smoothed things out after some back-and-forth with federal officials.

While the new MSSP performance period technically began Jan. 1, there’s still necessary administrative back-end involved with the newest ACOs (such as notifying potential patients of the ACO and allowing them to opt out). Meanwhile, UCLA is juggling several concurrent objectives, such as its plan to have its EHR system in place by March. As a result, Skootsky says that he’s circling the second quarter of the year for the system’s new ACO, which is expected to serve about 19,000 beneficiaries, to really kick into gear.

Profile: Affiliated Physicians Medical Group and APCN-ACO

UCLA’s relatively easy glide path to the MSSP was aided by the system’s deep pockets and administrative structure. But a number of the newest ACOs are independent physician groups that don’t have a health system’s resources and turn to management companies or consultants to get off the ground.

Two of these fledgling ACOs — Affiliated Physicians Medical Group and APCN-ACO — worked with MSO, Inc., to successfully apply for the MSSP.

According to Lan Pham, MSO’s CEO, Affiliated Physicians Medical Group represents about 75 doctors and will serve patients in the Long Beach area and North Orange County. The two organizations had a pre-existing relationship (MSO manages the physician group), which made the collaboration on the MSSP application a natural fit.

Meanwhile, APCN-ACO has a unique distinction: It will target Chinese patients in the San Gabriel Valley, Pham tells California Healthline. While most of the 100 participating physicians are Chinese, APCN-ACO has a plan to accomplish better care delivery: The organization will hire more Chinese-speakers to work on the organization’s administrative and support side to improve communication with doctors, beneficiaries and family members.

Pham notes that physicians at both ACOs wanted to participate in the MSSP given ongoing concerns about managing costs and being part of the industry’s care transformation.

However, the doctors “didn’t want to be the first ones to jump on the ship,” given that CMS was still fine-tuning requirements for the program last year. It also takes some time to get doctors psychologically ready for a new model of care delivery, she adds.

Looking Forward

The latest wave of ACOs underscores the new reality in health care: With the federal reform law now locked in place, real change is coming to the industry.

And while possibly disruptive, those changes also are potentially transformative.

“As a taxpayer — and as someone who’s been in health care for decades — I don’t see the fee-for-service model as sustainable in the long run,” says Pham. The ACO model has potential to better incent quality and teamwork, she adds.

“It’s a better way to care for patients, even without pre-payment,” Skootsky agrees.

“Participating in the MSSP contract is participating in a journey.”

Dan Diamond (@ddiamond) is Managing Editor of the Daily Briefing, a CaliforniaHealthline columnist, and a Forbes contributor. This post originally appeared at CaliforniaHealthline.org.

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5 replies »

  1. Did anyone notice in the ACA that ACOs enjoy all consumer protection laws such as antitrust, antikickback (Stark laws), etc, WAIVED? These are utterly corrupt, gainsharing vehicles of the nsurance industry and place the physician employee squarely at odds with the best interests of patients. It’s Gatekeeping on steroids.

    Elliot Fisher and several of his disciples published a paper in the March 2013 edition of Health Affairs which indicates half of the patients attributed to ACOs aren’t “theirs.” (Valerie Lewis et al., “Attributing patients to accountable care organizations….,” 32 (3)).

    Fisher et al. analyzed two methods of attributing Medicare beneficiaries to “naturally occurring physician-hospital networks.” These “naturally occurring networks” were proxies for ACOs (a reasonable assumption if ACO-inspired merger madness doesn’t abate). The methods were retrospective and prospective. Prospective attribution is also known as “performance year” attribution.

    Under retrospective or performance year assignment, ACOs are assigned patients on the basis of the doctors seen by patients in the year for which ACOs will be rewarded or punished. Under prospective attribution, ACOs are assigned patients based on the doctors patients saw in the previous year.

    Fisher et al. found that under prospective assignment, only 45 percent of the patients actually seen by an ACO would visit a doctor affiliated with the ACO. Under performance-year assignment, the number rises to 57 percent.

    From the patient’s perspective (a perspective that seems to get little attention at Dartmouth), prospective assignment appears to be more dangerous. Under prospective assignment, the ACO will know at the start of the year which patients it will be rewarded and punished for and which patients it would pay to ignore or devote fewer resources to. Under performance-year assignment, ACOs won’t know till the end of the year who “their” patients were, and therefore will have a harder time identifying non-ACO patients.

    Do you get the picture? If you don’t then you deserve all that ACO employment will bring you.

  2. >>While the year-old MSSP and other CMS programs are still voluntary, and encompass a range of different models, the government’s goal is that the new reimbursement scheme will eventually transition to its entire Medicare population.<<

    I agree that's important to focus on the population health features of the various ACO programs. I expand on this theme in this post:

    Health Reform After the Election: Accountable Care Organizations and Population Health (HealthBlawg) – http://shrd.by/Q0y9a8

    Thanks for the nod re: camels. (One hump or two?)

  3. Great piece Dan! One small quibble though MSSP is not a “pilot” it’s hard wired into Medicare I believe. Thanks for heads-up on Sa Diego ACO.


  4. One question that I still have is whether the ACO model is a bug or a fix. What I mean by that, is have we come up with the ACO as a patch for our dysfunctional system that desperately needs more integration, or is this truly the best care transformation model we could have?

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