Monday, January 17, 2011

Accountable Care, Version 2.0 - The Business Line Approach to ACOs

Is the Disease Management Care Blog a picayune naysayer when it comes to Accountable Care Organizations (ACOs)? Is it a petulant personality disorder that accounts for its unwillingness to recycle the progressives' praises, the academics' accolades and the Obama Administration's nostrums?

Fortunately for the DMCB's self-esteem, it found it isn’t the only nattering nabob out there. The latest issue of Health Affairs has an article by another skeptic who reminds us that ACOs are a fragile species. The DMCB also gives author Jeff Goldsmith extra credit for not going completely negative in his article titled Accountable Care Organizations: The Case For Flexible Partnerships Between Health Plans And Providers. After reviewing all the things that could go wrong, he has some ideas on what could be done to make things right.

In other words, while the regulations haven’t even been written yet, but it’s not too early to start thinking about ACO Ver. 2.0.

A lot could go wrong. According to Dr. Goldsmith, early-mover hospitals that already have acquired physician practices are experiencing financial losses. Their initial mistakes were assuming that docs do what their told and guaranteeing their salaries in excess of billings. Once ACOs launch, those blunders could easily compound thanks to allowing the work units to function independently while underinvesting in utilization management, administrative support and clinical discipline. There is a good chance that, once they are confronted with declining revenues and disappointing gainsharing, ACOs will have to turn to the only option they have left: using their market dominance to squeeze higher payments from the commercial insurance sector. At the end of the day, it’ll be managed care that once again cross subsidizes Medicare.

In the unlikely event that gainsharing that's been grafted onto a still dominant fee-for-service system does change physician behavior, high revenue specialists will need to not only need to forgo some of their practice income but agree to a redistribution of what’s left over. That will be a tall order. Physician lines could end up exiting the ACO relationship, becoming large single specialty regional providers with considerable market clout.

Dr. Goldsmith proposes that the commercial insurers rethink ACOs and consider economically dividing payment for medical services into three physician-based service lines. This “modular approach” preserves the better elements of “ACOness” but avoids many of the dysfunctions mentioned above:

Primary medical care: reimburse primary care providers with risk-adjusted monthly payments for medical home services. Unlike full capitation, primary care physicians would be shielded from the downsides of any overutilization, especially for services that they can’t control. Evidence-based medicine at the point of care will hopefully lead to smarter patients, greater coordination and less downstream health care expenses (The DMCB thinks of this an enlightened form of capitation but thinks some fee-for-service is necessary to incent physicians to also provide timely and convenient care).

Unscheduled care: use traditional fee-for service to pay for episodic care, diagnostic services and unscheduled emergency services with the right degree of patient cost-sharing and the right amount of insurer-based preauthorization (The DMCB agrees that using fee-for-service will likewise incent providers to see these patients. The problem is that there is no one-size-fits-all cost sharing, meaning some patients will inevitably forgo care for the wrong reasons).

Specialty care – reimburse hospitalizations or organized outpatient services that involve multiple specialists by using a global payment that pays for a service from the start (the initial evaluation) through the middle (the operation) to the end (all the aftercare services). Hospitals, health systems or physician groups could develop or sponsor “specialty care marts” that organize the care and disburse the payment for each episode (The DMCB thinks this borrows heavily from Porter and Teisberg's book on Redefining Health Care. It liked it then and it still likes it today)

The DMCB is intrigued by this because

1) Payment seems to better “targeted” to the unique circumstances of the three lines. Primary care physicians get a global payment to reimburse them for the tangled suite of services encompassed in a medical home, episodic care is supported by episodic payment and the specialists share in a payment that spans a coordinated period of time that also rewards them for efficiency.

2) Hospital mischief is minimized and restricted to the third line specialty stuff they’re good at. Having a single payment to pay for a span of care is not unlike familiar inpatient DRGs.

3) Instead of ending up with large ACOs that will probably end up being regulated like electric utilities, small clusters of providers can really compete for patients. On the other hand, there is nothing to keep ACOs from using the three payment models above when it comes to their own internal transfer pricing.

The DMCB hopes the coming ACO regulations permit the varied payment methodologies described above.

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