Accountable Care Organizations (ACOs)

Accountable Care Organizations (ACOs) For the majority of Americans, private health insurance has long served as a reliable method for obtaining high-quality medical care and as a key financial protection product. However, in recent years, the rising cost of medical care has caused private health insurance premiums to rise so that now cost is the primary barrier to health coverage access for millions of Americans. At the same time, our medical care services system has become far too complex and costly. A recent national report by the Institute of Medicine found that, pervasive inefficiencies, an inability to manage a rapidly deepening clinical knowledge base and a reward system poorly focused on key patient needs all hinder improvements in the safety and quality of care. 1 The National Association of Health Underwriters believes that all Americans deserve a private health care system that is accessible and affordable, one that should have a positive impact on the nation s economy. Successful health care reform will enhance consumer choice, restrain skyrocketing medical care costs and increase access to health care for more Americans. The simple truth is that we can't lower insurance costs until we first bring down the cost of medical care. While our nation s health coverage system is currently being transformed by the implementation of the Patient Protection and Affordable Cart Act (PPACA), most of the reforms in the new law focus on changes to insurance market regulation and expanding access to coverage through premium subsidies and an expansion of Medicaid rather than containing medical care costs. One segment of the law that does address the cost of care provides for the development of Accountable Care Organizations (ACOs), and many see the ACO model as a means of dramatically transforming cost and quality of coverage in the American health care system. Section 3022 of the legislation provides for the constructs of a program that will financially incent health care providers and hospital systems to offer coordinated care to Medicare beneficiaries in a cost-effective way. At a time when our health care system s delivery of quality care is continually called into question, can this new and complicated creation called Accountable Care Organizations be the springboard to a new discipline for providers of treating people, making them well and being economically rewarded for positive performance and measured outcomes? The fundamental theory behind the concept of ACOs is that effective delivery of coordinated care must be conducted by integrating the providers who deliver patient care. Under the ACO model, health care providers can seamlessly share patient information across various points of care, as well as coordinate testing and procedures to avoid redundancies. Overall, the ACO model is expected to align with the common thread of the medical group being willing to accept responsibility and accountability for achieving the triple aim of improved quality (clinical outcomes), affordability (lower medical costs) and patient satisfaction. 1 http://www.iom.edu/reports/2012/best-care-at-lower-cost-the-path-to-continuously-learning-health- Care-in-America.aspx

Some have commented that the ACO project as created by PPACA should not have been limited to the Medicare program. The intention of the law in this regard is to alter basic provider practice patterns and that, due to the increasing size of the Medicare population, this would automatically flow down to the under-65 population. This is likely to be true, and in fact many commercial insurance carriers and provider groups are already experimenting with the ACO concept for younger groups of health care consumers. In this paper we will examine the promise of the ACO concept to determine its viability to reward accountability, rein in rising costs and reinvent a health care delivery system in decline. We will review concerns about medical liability, transparency, primary care provider incentives and other cost-containment ideas that have presented themselves as plausible dilemmas without agreed-upon solutions. Further, we will review the impact on our nation s health care providers, including how current changes to the national provider scene such as the decline in primary care providers and independent physician practices will be affected, how reimbursements may change and how providers might cope with this new system of regulations. We also will examine whether ACOs will have a real impact on unnecessary testing, hospital readmissions and malpractice suits, or if there are other reform models that might provide better solutions. Another area of focus will be the impact on health care service consumers, including the types of transparency we can reasonably expect to be available to the patient, and how beneficiaries may be affected by a potentially smaller network of providers who may or may not choose to treat them. Finally, we will examine the impact of this new coverage program on our existing health insurance marketplace and how the advent of ACOs may change the relationship health insurance agents and brokers have with their individual and employer clients. ACOs A History While ACOs have received plenty of national attention during the past few years due to their seven-page mention in the 2,700-page PPACA law, the concept of a health care provider organization defined by reimbursements that are tied to quality-of-care metrics actually dates back to 2006 when it was proposed by Dr. Elliot Fisher of the Dartmouth Medical School at a public meeting of the Medicare Payment Advisory Commission. Dr. Fisher later formalized the concept and term in a Health Affairs article published in December of 2006. 2 The new health reform law creates ACOs as a shared savings program purely for the Medicare, requiring that any new program participants assume the complete care needs for at least 5,000 Medicare beneficiaries. 3 However, the private market has begun to embrace the ACO model too, and all over the country on a regional and national scale, health systems and health insurance carriers are beginning to integrate the ACO model into their private-market coverage offerings. 4 The general concept of better coordinated patient care tied to health coverage payments isn t a new one. ACOs have roots in both the medical home concept, which promotes fully integrated medical care coordinated by a single provider, and Health Maintenance Organizations (HMOs). There are many parallels between ACOS and HMOs, although a key distinction is that, with an ACO, it is the responsibility of the provider, or in many cases the provider group, rather than an 2 http://content.healthaffairs.org/content/26/1/w44.abstract 3 http://www.cms.gov/medicare/medicare-fee-for-service- Payment/sharedsavingsprogram/index.html?redirect=/sharedsavingsprogram/ 4 http://www.healthaffairs.org/healthpolicybriefs/brief.php?brief_id=61

insurance company to control treatment decisions and assume risk and payment incentives based on cost savings and quality-of-care outcomes. Like ACOs, HMOs began as an idea proposed by a single doctor in the early 1970s. Their growth was fueled by federal legislation, including a 1972 measure that authorized their use in the Medicare program and the 1973 HMO Act, which provided subsidization for the private health insurance market to expand the concept. 5 Like HMOs early in their evolutionary process, the definition of an ACO is not completely formed and different variations of the concept are springing up throughout the private and public marketplaces. Many private insurers are already engaging in ACO-model contracts with provider groups, utilizing various shared-risk payment structures. Different players in the private ACO sphere are experimenting with different incentives for providers, including bonuses and financial penalties if quality and cost-saving goals are met. Some insurers are allowing for provider groups to share in the risk if saving goals are not met, whereas others merely incent the providers with rewards and bonuses for meeting spending and quality-of-care targets. Furthermore, the length of provider contracts varies significantly, with some insurers committing to contract durations of up to five years and others committing to much shorter time spans in order to fully evaluate the success of the programs and make adjustments as needed. In some areas of the country, provider groups themselves have led the ACO model development and are fully risk-bearing entities. Even within the Medicare program, there are ACO variations. The primary Medicare ACO program is the Medicare Shared Savings Program. This program is targeted at providers who voluntarily agree to work together to coordinate care for patients. These provider groups must meet approximately 30 distinct quality standards that address patient experience, care coordination and patient safety, preventive health and at-risk populations in order to share in any savings they achieve for the Medicare program. ACOs that elect to become accountable for shared losses have the opportunity to share in greater savings. The higher the quality of care providers deliver, the more shared savings their Accountable Care Organization may earn, provided they also lower growth in health care expenditures. To supplement the Shared Savings Program, Medicare has created an advanced payment model. This program is targeted at independent physician-owned practices and rural providers participating in the Medicare Shared Savings Program that may need additional startup resources to create an effective ACO infrastructure. Providers participating in the program will get advance reimbursements that will be recovered from future shared savings payments. Finally, given that there were already many provider organizations utilizing the coordinated-care and shared responsibility model prior to the passage of PPACA, the Centers for Medicare and Medicaid Services (CMS) also created the Pioneer ACO program for more experienced entities. Thirty-two provider groups are currently participating in this pilot program, which is designed to work in coordination with private payers by aligning provider incentives through outcome-based contracts. The goal is to improve quality and health outcomes for patients across the ACO, and test various means to achieve cost savings for Medicare, employers and patients. There are several major differences between the Pioneer and the Shared Savings programs. First, the Pioneer Program is designed to be a temporary demonstration project that lasts from three to five years, whereas the Shared Savings Program will be a permanent part of Medicare. The 5 http://www.ssa.gov/policy/docs/ssb/v37n3/v37n3p35.pdf

Pioneer Program participants must agree to accept responsibility for at least 15,000 Medicare beneficiaries in densely populated areas, or 5,000 in rural areas, whereas the Shared Savings Program only requires providers to have the charge of 5,000 beneficiaries total. The Pioneer program begins with fee-for-service payments and then transitions to populationbased capitation payments for year three if goals and savings are achieved. There is an option to extend Pioneer contracts for an additional two years if savings and outcome goals are being met. There are stringent requirements that at least 50 percent of Pioneer ACO revenue must be derived from shared savings contracts with non-medicare payers (including Medicaid) by the end of their second performance year, and Pioneer plans may be liable for losses beginning in their first year of operations depending on the payment tract choices made by the Pioneer provider. Pioneer program participants take on a far greater share of risk, particularly initially, but they also have the opportunity to share in far greater financial rewards if they meet quality and cost-savings goals. Cost Containment For all of the various ACO models currently in place in the market, as well as the new concepts being developed, a key focus is controlling medical care costs. According to estimates from the Congressional Budget Office (CBO), by 2019, the evolution of the ACO model is expected to lead to $4.9 billion in savings for the federal Medicare program and private market experiments. Earlier provider payment models, on which the ACO concept is based, illustrate that there is great potential for tying provider cost-accountability to their compensation to yield savings. A studied released in the Journal of the American Medical Association in September 2012 examined a 2005-2010 federal demonstration project called the Medicare Physician Group Practice Demonstration. This project targeted physician groups serving Medicare and Medicaid dual-eligible patients and gave providers bonus payments for meeting patient care quality targets and keeping costs lower than what was spent on other Medicare patients in the same geographic region. The study, which was conducted by the Dartmouth Institute of Healthcare and Clinical Practice, itself one of the forerunners of the ACO model, found that while overall savings varied significantly on a provider-by-provider basis, as a whole, medical spending for each dual eligible patient went down by an average of five percent once that patient s physician joined the demonstration program. Existing private-market ACO programs have also yielded significant cost savings. The Dartmouth- Hitchcock Medical Center in New Hampshire studied the success of the CIGNA ACO program with its hospital and found that patient-care savings were 10 times greater than national medical care spending. A separate CIGNA ACO pilot program in Phoenix, AZ, has lowered annual average costs per patient by $336, or roughly four percent per patient. The study also found that the patients in the ACO model had seven percent lower emergency room costs. 6 Determining an accurate measurement of cost containment of ACOs at this point is difficult and likely to be inexact. Based on two years of the Medicare ACO pilot program, five of the test sites had absolute (non-risk-adjusted) cost growth that was higher than the control group, four had roughly the same cost growth, and only one had a lower cost growth. However, the extremely 6 http://www.cignaproducer.com/pdf/848121_b_cac_flyer_v4.pdf?elq=b3aba5d97b974bfab68ed4272e837b 9a

small sample size of 10 groups and relatively short sampling timeframe of two years lead these results to be inconclusive at best. Longer-term evaluation of these test sites, in addition to regularly analyzing data of the growing list of private-aco groups, will give a clearer indication of the relationship of cost containment and the ACO model. Quality Outcome-Driven Care As part of Medicare s ACO program, quality will be measured across four primary areas: patient/caregiver experience, care coordination/patient safety, preventive health, and at-risk populations. Among these four groups, there are 33 individual measures of quality. 7 To be eligible to take advantage of the cost savings of the group, the ACO must perform at a minimum level in each of these metrics. If the ACO does not make adequate progress on the metrics within one year, then it will be terminated from the Medicare ACO program. However, as an incentive, ACOs that outperform on the metrics will be eligible for greater shares of the savings. Participants in the Medicare ACO program are also required to submit strategic plans outlining how they will meet all of the metrics. They must indicate how they will promote evidence-based medicine, coordinated care and beneficiary engagement, and how they will measure quality. Medicare beneficiaries must also be sufficiently included in the process, including participating with the ACO s governing board, to ensure that patient input is incorporated into overall qualityimprovement plans. Meaningful use of health information technology (HIT) will be essential for the success of care coordination of ACOs. However, many providers are still struggling to adopt HIT or to achieve meaningful use of HIT to achieve care coordination. ACOs will need to meet several metrics, including adequate levels of individual HIT use by the provider, the use of HIT to encourage interaction among providers and integration within the system, and the use of HIT to ensure actual collaboration amongst all parties involved in the delivery of care. A CIGNA ACO pilot program in New Hampshire tested two separate groups, a treatment group for those receiving coordinated care from the Dartmouth-Hitchcock system and a control group not receiving coordinated care. Over six months, the study found that patients in the coordinated-care group had a 10 percent higher rate for closing the gap in care coordination among physicians. A separate CIGNA ACO study in Arizona found that utilization of services had a reverse effect on quality and cost. Despite a 12-percent higher rate of preventative visits for adults, the total cost of care was seven percent lower and quality was three percent higher than average. 8 Access Evolution of Access to Providers Medicare beneficiaries who are participating in the Medicare ACO program will not have any changes to their provider access; patients will continue to be able to choose their own hospitals and doctors as under the current Medicare model. Any provider participating in an ACO will continue to be paid the same as current models, such as through private insurance plan, Medicare or Medicaid. 7 http://www.cms.gov/medicare/medicare-fee-for-servicepayment/sharedsavingsprogram/downloads/aco_qualitymeasures.pdf 8 http://newsroom.cigna.com/images/9022/media_gallery/knowledge_center/collaborativecare_whitepaper _2011.pdf

In addition to being able to access any ACO provider under the existing Medicare framework, beneficiaries will also be able to see any non-aco providers. Not being limited to a single ACO network has its advantages and disadvantages. For the consumer, access is greatly expanded from what otherwise could be a limited network of only those providers participating in the ACO. However, allowing patients to have access to non-aco providers puts those providers who are in the patient s ACO group at a disadvantage, as they are no longer within the same central care-coordination group and will not be able to as easily manage the patient s full continuum of care. Additionally, the ACO will still be held liable for the patient s care, regardless of whether the care was administered by an ACO provider. Meeting quality metrics to be eligible for cost sharing or penalized for failure to meet metrics will be complicated by the inability to control the patient s access to only those providers who are directly connected with the ACO. Private-market ACOs that are not part of the Medicare program will have more flexibility in designing their networks and requirements for consumers to seek care only within the designated network of providers. This will be especially true for private-market ACOs that choose to form partnerships between provider groups and insurers, which will be able to establish exclusive ACO networks for consumers. Consumers will need to have access to networks that can provide sufficient continuity of care to meet their needs. Thus, the challenge for the private ACO will be to have a large enough network to meet the needs of all of the participants that will seek care in order to maximize the care coordination, and therefore improve quality and reduce costs. In spite of efforts to expand access, some access may be constrained over the next several years, which will challenge the amount of access available to patients. A survey by The Physicians Foundation of more than 13,000 physicians found that there will be more than 44,000 fewer physicians in practice over the next four years. 9 The study found that over half of all physicians expect to retire, reduce the number of patients they see, work part-time or otherwise reduce their availability to patients. Medicare and Medicaid patients will see the most dramatic decrease in access, with 52 percent of physicians saying they will limit access for Medicare beneficiaries, and 26 percent reporting they have stopped offering service to Medicaid beneficiaries. A total reduction of 91 million fewer patient encounters is expected over the next four years due to this reduction of access. Provider Participation Most ACOs depend on a large field of participation, both from patients and from providers, to be successful. Care coordination must involve a network that includes physicians, specialists and hospitals that can work in concert for all aspects of a patient s care. Care coordination in patient-centered care demands having networks of physicians that can address the needs of the patient. Increasing the number of physicians who participate in the provider network for the patient will greatly improve the ability for physicians to coordinate care. Providers who participate in the Medicare Shared Savings ACO model will be required to have at least 5,000 beneficiaries in their system for a period of three years. Any Medicare provider can be eligible to participate in an ACO. Providers who are able to sponsor an ACO include physicians in group practices, individual practitioner networks, hospitals with eligible physicians, nurse 9 http://www.physiciansfoundation.org/news/comprehensive-survey-of-13575-us-physicians-points-towardsubstantial-challenges/

practitioners, physician assistants and specialists. Rural Health Clinics and Federally Qualified Health Centers that have a minimum of 5,000 beneficiaries are also eligible to participate. As of October 2012, approximately one in five primary care physicians surveyed in a report by Decisions Resources participated in some form of an ACO. The number is expected to grow rapidly in the coming years, with nearly half of all primary physicians expecting to participate in some form of an ACO by 2014. Federal and State Oversight and Regulations CMS, FTC Reserve Requirements (State Level) As ACOs are tasked with creating large provider networks to give patients the greatest potential for care coordination, there has been concern that they could grow so large that they could over-exert their market power to demand higher prices from insurers. The final rules on ACOs that were released in October 2011 included guidance on the formation of ACOs without violating antitrust regulations. The Department of Justice and Federal Trade Commission issued a joint Statement of Enforcement Policy Regarding Accountable Care Organization Participating in the Medicare Shared Savings Program. Through this program, ACOs will have rule of reason to analyze treatment if they have the same governance and leadership structure in both the private market and their Medicare ACO program. ACOs will be required to follow specific guidelines before they can begin fully realizing benefits in the shared-savings program. ACOs will be able to share in the savings under the either the one- or two-sided shared-savings models. Under the one-sided shared-savings model, ACOs will be able to share in savings, without regard to losses, for the first two years. After the second year, they will need to move to the two-sided shared-savings model. The final rule further requires that ACOs withhold 25 percent of their savings during their three-year agreement. In its final rule in November 2011, CMS affirmed that Medicare will continue to assume the insurance risk and responsibility for paying claims of Medicare beneficiaries. Further, any losses would be between Medicare and the ACO. While CMS will continue to monitor the implementation of ACOs in the states, there is no further guidance about oversight within state insurance departments or any preempting state laws that would hinder the formation of ACOs. 10 Impact to Public Market Medicare, Medicaid and VA Many states have moved to adopt ACO legislation for their Medicaid programs. The Community Care program in North Carolina is one of the oldest ACO models in the nation and has seen a significant impact to its health spending. From 2003 to 2005, emergency room visits by asthma patients fell by 40 percent and overall spending was $574 million less than the control group not participating in the ACO. The growth of ACOs in the public market could help to provide greater access to public program beneficiaries from Medicare, Medicaid and the Veterans Administration, which could help to drive down costs by expanding the care-coordination network. Depending on the progress of Medicare s ACO Shared Savings program, ACOs are likely to continue their growth in the public sector. There is limited data to calculate the effectiveness of 10 http://www.gpo.gov/fdsys/pkg/fr-2011-11-02/html/2011-27461.htm

the Medicare ACO program at this point, and any data that is used from such a small sample size is unlikely to draw any conclusive results about the program s ability to contain costs or improve quality of care at the macro-level. The further push by states to implement ACOs through their Medicaid program will add to the data collection to better evaluate the cost savings and qualityimprovement potential of the program at the public level. Impact to the Private Market Collaborations Individual, Small Group, Large Group, Impact to Exchange Products Plan Designs While the public-sector versions of the ACO model have been functioning in some degree for several years, there has not yet been a widespread adoption of ACOs by the private market. Providers have only recently begun creating ACO networks with insurers; however, the adoption rate is expected to grow significantly in the coming years. Additionally, there has been some movement, albeit not significant, by self-funded employers, as well as by health plans and insurers beginning to enter into ACO models. Several private health insurers have entered into ACO contracts with providers under the shared-risk model. Similar to the Medicare Shared Savings model, the private equivalent, used by insurers such as Blue Cross Blue Shield in Illinois, Massachusetts, New Jersey and North Carolina, incents providers to reduce costs by not only providing bonuses, but also through financial penalties if they do not meet quality targets. Other groups have entered into plans that give providers shared savings without the risk of being penalized. Consumer Impact The current Medicare ACO model does not require participants to be made aware of their involvement in the ACO. Regardless of whether or not beneficiaries are aware of their involvement in the ACO model, they will not necessarily need to change their health care providers. Beneficiaries retain the option to continue to choose their providers through the existing Medicare framework without any additional rules or conditions for their care. Some providers may elect to make the patient more fully engaged in their care delivery within the ACO. To ensure the best outcome from the ACO model, Consumers should be made aware of their involvement in the ACO model and types of provider choices they can make to ensure they receive the most coordinated care. There is a correlation between the degree of involvement of the patient in his or her care and the outcome. Actively encouraging the consumer to be more engaged in their care coordination and delivery will further advance the integration of the ACO model. A survey of the Minnesota ACO program found that it encouraged patients to select more cost-effective providers and has spurred providers to reduce their costs while maintaining or improving quality to attract more consumers. Depending on how the ACO group determines how it will handle network issues, consumers may or may not be able to seek care from non-aco providers. For the most coordinated care, providers will be incented to limit the access of their groups to only providers who are part of the ACO and restrict patients from seeking care outside of the ACO. A consumer receiving care outside of the ACO will theoretically have increased access to different providers, which some claim will increase competition through a widened market. The reverse side of that argument is that they will be seeking care without the coordination of the ACO. By seeking care outside of the ACO, redundancy and waste could drive up costs and negatively impact quality, as all providers in the ACO are not making a coordinated and consultative decision on the patient s

care. Therefore, increased consumer choice outside of the ACO network will come with a tradeoff of less coordinated care, but restricted consumer choice could force consumers into a narrower network of providers from which to choose. Conclusion ACOs continue to work within the existing health insurance framework, both in the public and private sector. Providers will continue to contract with insurance companies in care delivery, and patients will continue to receive their care from a patient-directed network. Improving health outcomes has been demonstrated to be most successful when patients have a high degree of involvement in the delivery of their health care. Agents and brokers will be a powerful tool for the integration of ACOs by serving as the educators of the new system to patients. Consumers will need to be educated about the benefits of the ACO system to achieve the highest level of care coordination. The use of ACOs will help enable care coordination among those performing the care, but any meaningful improvements in quality must be assisted by the patient also assuming responsibility. Agents and brokers will be invaluable for providing consumers with the resources and education they need in order to be active participants in their health plans and the delivery of their health care. The end result of this new model for health care should be higher quality and eliminated waste. Ultimately, high-quality care is the most cost-effective type of care. Making health care less expensive will ultimately make health insurance less expensive, and will serve as a true measure of increased affordability of both health care and health care coverage.