Payment Expert Says Primary Care Physicians Should Drive ACOs

Harold Miller is executive director of the Center for Healthcare Quality and Payment Reform and president and CEO of the Network for Regional Healthcare Improvement, in Pittsburgh, Pa. In addition, Miller is a nationally recognized expert on health care payment, and, like many other health care analysts, he is convinced the U.S. health care system can deliver on the promise of higher quality, lower costs and greater patient access if it can be aligned with a payment structure that rewards care coordination and value. Consequently, Miller works on both regional and national levels to support payment reform that promotes value instead of volume.

Miller also is an authority on accountable care organizations, or ACOs. This payment model encourages physicians and other health care providers to join together and take on accountability for the quality of care and health care costs for a population of patients. Unlike some health care analysts, Miller is convinced that primary care physicians, not hospitals, should serve as the core of ACOs. AAFP News Now recently talked with Miller about the emergence of ACOs in both the public and private sectors, why family physicians need to take the lead in forming ACOs, and how ACOs can be structured to provide the greatest benefit to patients, their physicians and the health care system at large.

Q. Please explain how you think ACOs should work in terms of their structure and function.

A. I think the starting point for ACOs is to look at data and identify where there are opportunities to improve care for patients that will reduce costs for payers. For example, there are many situations now where chronic disease patients are using the emergency room, being admitted to the hospital, and being readmitted to the hospital for exacerbations of their disease that could have been prevented. These are markers of less-than-desirable health care for patients, and they increase health care costs.

If physicians can get access to data to help them identify where those problems are, they can determine how to deliver care in ways that will help chronic disease patients stay well and stay out of the hospital. It's not just chronic disease patients; there are also significant opportunities to improve care for patients and save money by reducing infections and complications in the hospital -- managing maternity care more effectively, etc.

Once you define how you want patient care to change, you then need to change the payment system to support that because in many cases, current payment systems either don't pay for the right kind of care or they penalize physicians and hospitals that improve care. An ACO is nothing more than an organizational mechanism for helping physicians identify and implement opportunities to deliver higher-quality and lower-cost care.

Q. What should an ACO look like?

A. It could look very different in different communities; there is no one particular "best" model for an ACO. An ACO could be a group of independent physicians in small practices working together through an independent practice association, or IPA, to manage care for a population of patients. It could be a group practice of physicians, either a multispecialty group or a group of primary care physicians only. It could be a physician/hospital organization where physicians and hospitals work jointly to manage care for patients. It could be a health system where the physicians are employed by a hospital or health system. It could be any of those things.

Q. You are describing various ways of structuring ACOs, but how are ACOs actually forming in the marketplace?

A. All of those different organizational structures exist. There are IPAs made up of independent small-practice physicians that are already managing capitation or global payment contracts, and they are applying to be ACOs under Medicare's Pioneer ACO Model. There are physician/hospital organizations that are managing capitation and global payment contracts and integrated health delivery systems that are doing that, as well. Global payment or capitation represents a more dramatic change in payment than what CMS is proposing in terms of shared savings arrangements with Medicare ACOs, so any entity that can do that can also do what CMS is proposing.

The Patient Protection and Affordable Care Act basically says that an ACO can be any one of those models. The key thing is being able to accept a different payment model that makes the ACO accountable for cost.

Q. How could an ACO be structured in a way that would benefit family physicians and the health care system at large?

A. Let me answer that question by talking about hospital readmissions. Reducing hospital readmissions represents a major opportunity to both improve quality of care and lower costs. The majority of hospital readmissions are actually chronic disease patients. The fact that these patients are being readmitted to the hospital is not necessarily a hospital problem. It is more a reflection that we do not adequately support primary care.

So, one way an ACO can be successful would be to focus on strengthening the primary care infrastructure and the care delivered by family physicians to chronic disease patients. The ACO would pay family physicians in a way that enables them to spend more time with their patients and concentrate more on care management while rewarding them for keeping chronic disease patients out of the hospital. If family physicians are paid in a way that enables them to keep their patients well and help them stay out of the hospital, they will save money for the ACO. It would be a win-win all around -- the patients are better off, there are costs savings for patients, and the family physicians are getting the financial support they need to provide good care.

Q. What is to stop hospitals from dominating ACOs?

A. There is not a lot to stop hospitals from dominating ACOs unless physicians take the leadership role and say, "We're going to organize and manage the ACO because we are the ones who really define what good patient care is and control what the patients get." However, physician practices face a number of challenges in doing so: They need to have a payment system that will help them make the upfront changes in care for patients, and they will need to join with other practices to form an ACO because they will need to have enough patients to make the finances work.

It's also important to make sure that when CMS, the Federal Trade Commission and others write the rules about how Medicare will pay ACOs, (these agencies) don't have biases in the structure that favor hospitals versus independent physicians coming together to organize.

Q. Is that what happened with the draft regulations CMS issued on Medicare ACOs?

A. Yes. First of all, the draft regulations on ACOs really didn't create any better flexibility or resources in the payment model. The (Medicare) shared savings model is really kind of a pay-for-performance bonus that occurs down the road, so whoever participates in the model has to find a way to invest upfront resources. For example, suppose a physician practice wants to hire a nurse care manager to help their chronic disease patients stay out of the hospital. Hiring the nurse and keeping the patients out of the hospital would save money for Medicare, but Medicare doesn't reimburse for the nurse care manager upfront, so the physician practice would have to spend its own money to hire the nurse and then wait as much as two years for Medicare to determine whether it saved money and pay a share of the "shared savings payment" to the practice. This means that the physician practice would have to lose money in the short run to potentially make more money in the long run. Hospitals and health plans have the capital reserves to enable them to do that, but most physician practices don't.

In addition, if several small physician practices join together to form an ACO but remain independent, they are subject to antitrust scrutiny. The antitrust rules in the proposed ACO regulations were designed to make it easier for physicians to do that, but they were still harder to comply with than for hospitals with employed physicians, which are not subject to the antitrust rules at all. Physicians who want to form an ACO using an IPA would have to go through all of the time, analysis and money involved in being able to prove they were not causing an antitrust problem, but hospitals would not.

Q. What should the final ACOs regulations do to address the issues you raised?

A. That is a long list. Most importantly, what I and a number of other people have argued is that the regulations need to provide some greater flexibility in the payment system up front. The final regulations should not consist of shared savings on top of the existing fee-for-service structure, particularly when CMS is requiring that ACOs accept "downside risk." Downside risk means if costs go up for patients that the ACO is assigned responsibility for, the ACO has to pay money back to Medicare. Yet the regulations do not provide the flexibility for ACOs to decide what they want to spend money on. Upfront payment flexibility is a key thing that needs to be in the final regulations.

Q. What advice would you give family physician practices regarding ACOs?

A. I would say, first of all, "Get informed about the ideas and the ways that family physicians can actually organize and participate in ACOs." This does not necessarily mean structuring ACOs based on existing Medicare rules. In fact, the ideal would be for physicians to define ACOs in a way that will be best for patients and then define the kind of payment system they need from Medicare and other payers to implement that.

It is going to be important for small family physician practices to work with other physicians in the community to coordinate care and manage enough patients in total to succeed under more flexible and accountable payment systems. If a family physician is part of an IPA, for example, start working through that IPA to organize yourself to actually pursue this, because being in the lead on ACOs and structuring the ACOs in a way that is favorable to physicians is much more likely to have good outcomes both for patients and physicians than waiting for someone else -- a hospital or a health plan -- to bring you a deal.

Q. How would a small or solo practice go about forming an ACO?

A. It is impossible for a solo practice to be an ACO all by itself. But the point is you don't have to sell your practice and go work for a hospital to be part of an ACO. A small or solo practice can partner up with other independent practices and remain independent but work together. That is why I emphasize the independent practice association model. Physicians remain in independent practice, but they work together so they can share resources that enable them to participate in models like this. They could join together through a group practice -- that is another model.

The IPA is a mechanism for allowing physicians to remain in their own independent practices but still work together on things like this. The IPA can then go to insurance carriers and to Medicare and say, "Give us the data on our practices so we can identify where there are opportunities for improving care and reducing costs. Then we will bring you back a plan for how we are going to change how we deliver care. If you pay us differently to support that, we will be able to save you money."