Health Reform After the Election: Accountable Care Organizations and Population Health

Much has been written and said about the effect of the election on the implementation of federal health reform initiatives.  The commentariat, including the blogerati and twitterati wings, have focused on the budget battles of the future to come from Capitol Hill, the flurry of regulations to come from HHS, and the last stand of the boys in red in certain state capitals around the country against implementation of health insurance exchanges and Medicaid expansion under the ACA.

I spoke recently about the importance of the Accountable Care Organization law and regulations, and related initiatives being undertaken by the Center for Medicare and Medicaid Innovation (CMMI) at CMS, and the ways in which these initiatives are likely to affect the next phase in the development of the health care system in this country.  I thought I'd share a few of the highlights here.

We have built a system of sick care in the USA, not health care, and the disruptive forces contained in the Affordable Care Act, including the ACO provisions, have the potential power to change our system to a system of health care – by changing the focus, by changing the incentives, by changing the behaviors of both patients and providers.

The goal for all of us in health care these days is to be better integrated with other parts of the system, so that we can do more with less in the future. We all know — or should know by now — that we will have to do more with less. The key to future success will be managing patients’ care and its attendant costs over the long term, managing an episode of care that extends beyond an inpatient surgery to encompass pre-admission and post-discharge services, managing a chronic condition with a multidisciplinary approach using medicine, nursing and even social media and game theory to motivate patient behavior modification. We need to move from reimbursement-based medicine to evidence-based medicine.

When the ACA was enacted, folks likened the ACO to the unicorn: Nobody's ever seen one, but everyone knows exactly what it looks like.  Once the ACO regulations were finalized, I called it as I saw it: the ACO is a camel — a horse designed by committee. And now I see the ACO and related initiatives under the ACA as a camel with its nose in the tent: a disruptive force beginning to change the world as we know it.

When the final ACO rules came out about a year ago, CMS actuaries predicted that there would eventually be about 270 Medicare ACOs — including large and small organizations and urban and rural organizations — by the end of three years (we are less than one year in at this point), providing care to up to 2 million Medicare beneficiaries.  We're on track to get there and beyond, with over 150 Medicare ACOs already approved and several hundred more applications queued up for the future. (Keep in mind there are approximately 150 commercial ACOs out there as well – according to an inventory updated this spring by Leavitt Partners.) 

In addition to the estimated 270 Medicare ACOs, HHS estimates up to $1 billion in savings to Medicare over four years, and the Congressional Budget Office estimates $5 billion in savings over eight years.  At first blush, these look like impressive figures, until we recall that there are 6000 hospitals in the US, nearly 50 million Medicare beneficiaries, and that Medicare is a $500 billion line item in FFY 2013 alone. The ACO initiative is a drop in the bucket.

The ACO initiative is generating a lot more interest than perhaps they should, based on these numbers – but this is legitimate, for a couple of reasons.  ACOs really form the conceptual building blocks for a new approach to achieving the Triple Aim – which is now the mission of CMMI: Better Healthcare, Better Health and Lower Costs Through Improvement. CMMI seeks to: "Encourage better health for entire populations by addressing underlying causes of poor health, such as physical inactivity, behavioral risk factors, lack of preventive care and poor nutrition."  It is using the levers of the ACO program to enlist ACOs in the execution of this element of its mission.

So, the camel’s nose is in the tent – we're at the leading edge of a significant disruption built around the Affordable Care Act’s provisions on ACOs and related initiatives: a sea change in the way health care is conceptualized, and radical change in delivery and payment systems.  We’re ahead of the curve on these issues in Massachusetts, with a law passed this summer that will move us into ACOs for all — not just Medicare beneficiaries — and away from fee-for-service medicine, and a local Blue Cross-Blue Shield plan known as the Alternative Quality Contract that has been working on this basis — budgeted caps with quality kickers — for several years already. It’s the latest form of pay for performance, or value-based payment.

An ACO has to have at least 5000 Medicare beneficiaries attributed to it, but the beneficiaries cannot be forced to enroll in a closed network. Because Congress sees elimination of choice of provider as a third rail of health care, ACOs do not know for certain which patients will have more than 50% of their primary care encounters with an ACO PCP in any given year and thereby be attributed to the ACO, Thus, in order to succeed, ACOs must be focused on population health, on prevention and wellness in a population, not just on individual encounters with patients.

CMMI is also using the power of the purse — its $10 billion budget, to be spent over ten years on experiments with the health care system.  Nearly two dozen experiments are already under way, including three flavors of ACOs. While CMMI is experimenting with a wide variety of methods to incentivize health care providers to change the way they provide care (check out the CMMI "What We're Doing" page), the health care providers participating in these innovations should be laser-focused on the 10% of chronically ill Medicare beneficiaries whose health care expenses consume 50% of the Medicare dollar. If they change their approach to managing these patients' care through patient-centered medical homes or otherwise, there are great opportunities to achieve significant savings through avoiding preventable hospitalizations and the like.

The keys to success will be clinical integration — not just in word but in deed — and turning data into actionable intelligence.  Health care systems that can achieve these two interim goals will be well-positioned to achieve the broader goals of improving population health and quality of care while

bending the cost curve — and not just for Medicare beneficiaries attributed to Accountable Care Organizations.

David Harlow
The Harlow Group LLC
Health Care Law and Consulting