ACCOUNTABLE CARE STRATEGIES LESSONS FROM THE PREMIER HEALTH CARE ALLIANCE’S ACCOUNTABLE CARE COLLABORATIVE Amanda J. Forster, Blair G. Childs, Joseph F. Damore, Susan D. DeVore, Eugene A. Kroch, and Danielle A. Lloyd Premier Research Institute august 2012 The Commonwealth Fund, among the first private foundations started by a woman philanthropist—Anna M. Harkness—was established in 1918 with the broad charge to enhance the common good. The mission of The Commonwealth Fund is to promote a high performing health care system that achieves better access, improved quality, and greater efficiency, particularly for society’s most vulnerable, including low-income people, the uninsured, minority Americans, young children, and elderly adults. The Fund carries out this mandate by supporting independent research on health care issues and making grants to improve health care practice and policy. An international program in health policy is designed to stimulate innovative policies and practices in the United States and other industrialized countries. ACCOUNTABLE CARE STRATEGIES LESSONS FROM THE PREMIER HEALTH CARE ALLIANCE’S ACCOUNTABLE CARE COLLABORATIVE Amanda J. Forster, Blair G. Childs, Joseph F. Damore, Susan D. DeVore, Eugene A. Kroch, and Danielle A. Lloyd Premier Research Institute August 2012 Abstract: Accountable care organizations (ACOs)—groups of providers that agree to take collective responsibility for delivering and coordinating care for a designated population—are being promoted as a means to improve health and health care while containing costs. This report shares the perspectives of hospitals and health systems taking part in the Premier health care alliance’s accountable care implementation collaborative. Lessons emerging from the collaborative relate to the need for ACOs to have certain core structural components; the viability of different organizational models; the importance of people-centered care in all interactions; the need to align business with value-based payments and design incentives to encourage providers to collaborate; the use of financial modeling to assess the impacts of the accountable care model; the need for investments in information technology to enable care coordination; and the importance of performance assessment across a broad range of clinical quality, efficiency, and satisfaction measures. Support for this research was provided by The Commonwealth Fund. The views presented here are those of the authors and not necessarily those of The Commonwealth Fund or its directors, officers, or staff. To learn more about new publications when they become available, visit the Fund’s Web site and register to receive e-mail alerts. Commonwealth Fund pub. no. 1618. CONTENTS ABOUT THE AUTHORS......................................................................................................................................... 6 EXECUTIVE SUMMARY.......................................................................................................................................... 7 THE NEED FOR ACCOUNTABLE CARE................................................................................................................. 9 THE PREMIER ALLIANCE’S ACO COLLABORATIVE.............................................................................................10 THE MAKING OF AN ACO.................................................................................................................................... 11 THE MODEL FOR A SUCCESSFUL ACO...............................................................................................................14 PAYMENT OPTIONS.............................................................................................................................................21 ACO MARKETS AND EXAMPLES OF ACCOUNTABLE CARE IN ACTION........................................................... 22 EARLY CHALLENGES AND POLICY RECOMMENDATIONS............................................................................... 24 CONCLUSIONS AND NEXT STEPS..................................................................................................................... 28 NOTES................................................................................................................................................................. 29 LIST OF EXHIBITS EXHIBIT 1 ATTRIBUTES OF ACCOUNTABLE CARE EXHIBIT 2 PREMIER COLLABORATIVE MEMBERS EXHIBIT 3 ACO CORE COMPONENTS EXHIBIT 4 ACOS IN PRACTICE EXHIBIT 5 FIVE MODELS OF ACCOUNTABLE CARE EXHIBIT 6 COMPENSATION MODELS EXHIBIT 7 SAMPLE ACO PERFORMANCE METRICS EXHIBIT 8 SAMPLE DISTRIBUTION OF MEDICAL MANAGEMENT RESPONSIBILITIES EXHIBIT 9 COORDINATED CARE HIT ROADMAP ABOUT THE AUTHORS Amanda J. Forster, B.A., is the senior director of public relations for the Premier health care alliance. With nearly 15 years of experience in communications, she has in-depth understanding of health care policy and has published dozens of articles on a wide array of issues, including health information technology implementation, ACOs, supply chain security, hospital performance, and quality improvement. Forster is a Phi Beta Kappa graduate of Randolph Macon College, with a B.A. in English and history. Blair G. Childs, B.A., is senior vice president of public affairs for the Premier health care alliance. He is the primary communications strategist for key issues and serves as liaison to the U.S. Congress, White House, and other major bodies involved in health care policy and regulation. Childs has been at the center of policy issues in Washington, D.C., for more than two decades, playing a leading role on issues affecting medical devices, pharmaceuticals, insurers, and hospitals. He has been involved in developing and enacting Medicare and health reform legislation as well as leading the medical technology industry’s development of a Code of Ethics. Childs holds a B.A. in history from Middlebury College. Joseph F. Damore, M.H.A., FACH, is vice president of Premier Consulting Solutions. A former health system CEO, Damore leads Premier’s accountable care readiness assessments, providing counsel and assistance to health care executives, physician leaders, and board members in developing integrated health systems in more than a dozen states. His 34-year career has focused on building and developing nonprofit regional integrated health systems, including integrating comprehensive delivery systems and health plans. Damore holds a B.A. from Thiel College in Greenville, Pennsylvania, and a master’s degree in health administration from The Ohio State University. Susan D. DeVore, I.M.H.L., is president and CEO of the Premier health care alliance, the nation’s leading alliance of hospitals, health systems, and other providers dedicated to improving health care performance. In this role, DeVore leads efforts to help nonprofit hospitals and health systems build, test, and bring to scale new delivery system models that improve quality, safety, and cost of care. She has amassed more than 30 years of experience in strategy, large-scale operations transformation, quality improvement, and financial management. DeVore holds an international master’s degree for health leadership from McGill University in Montreal. Eugene A. Kroch, Ph.D., is vice president and chief scientist for the Premier health care alliance. He has lectured and written extensively on economics, public policy, and health economics. Kroch leads Premier’s efforts to develop measures to track quality, cost, and access, conducting research on large-scale health databases. He is a senior fellow of the Leonard Davis Institute of Health Economics at the University of Pennsylvania. Kroch holds a bachelor’s degree in economics from the Massachusetts Institute of Technology and A.M. and Ph.D. degrees in economics from Harvard University, where he was a National Science Foundation Fellow. Danielle A. Lloyd, M.P.H., is vice president, policy development and analysis, at the Premier health care alliance and is an expert in federal payment policy. She leads the payer partnerships workgroup in the Premier accountable care collaborative that encourages plans, employers, and government entities to adopt the ACO payment model, provides advice to participating hospitals about how to structure agreements with payers, and fosters the exchange of data. Lloyd has a master’s degree in public health from the University of California, Berkeley, and she obtained her bachelor’s degree with honors from the University of Pennsylvania. Editorial support was provided by Martha Hostetter. 6 Accountable Care Strategies: Lessons from the Premier Health Care Alliance’s Accountable Care Collaborative EXECUTIVE SUMMARY the collaborative. Several lessons emerged from the collaborative: To contain spiraling health care costs, expand access to care, promote wellness, and improve outcomes, the • Six core structural components are needed to nation’s health care providers must work together and implement an effective ACO, including: 1) a be held accountable for their performance. U.S. health commitment to providing care that puts people care costs have been growing at an unsustainable at the center of all clinical decision-making, 2) a rate, reaching an estimated 17.3 percent of the gross health home that provides primary and preventive domestic product in 2009, according to the Centers for care, 3) population health and data management Medicare and Medicaid Services (CMS). Yet even with capabilities, 4) a provider network that delivers top these high costs, consumers do not get as much value outcomes at a reduced cost, 5) an established ACO for health care spending as those in other nations, as governance structure, and 6) payer partnership there continue to be gaps and inequities in the quality arrangements. These components go well beyond of health care delivered nationwide. those detailed in the Affordable Care Act or the The nation’s quality and cost problems are Medicare Shared Savings Program. In essence, rooted in the dominant fee-for-service payment the Shared Savings Program creates partnerships system, which has created a health care “production” between a group of providers operating as an ACO model driven by volume and based on incentives and CMS—just one of the elements necessary to to do more, rather than to do better. At the same deliver integrated care. time, incentives reward bad outcomes, as “curing” the harm from a medical error or a preventable • Many different organizational models could readmission earns additional payment. One of the work for ACOs. It is not necessary for a clinically most promising strategies for improvement is the integrated provider network—and, by extension, creation of accountable care organizations (ACOs), an ACO—to be a single, co-owned legal entity in which providers take responsibility for a defined comprising physicians and/or hospitals, whether population, coordinate care across settings, and are held under the Shared Savings Program or in the private to benchmark levels of quality and cost. Unlike some sector. Instead, accountability can be achieved previous delivery system reforms, ACOs seek to balance through a network of coordinated relationships that cost control with efforts to improve outcomes and fall short of corporate integration. A collaborative enhance people’s satisfaction. arrangement based on contractual relationships While much attention has been paid to the among the ACOs owners and provider participants public policy around ACOs, there has been less focus is an acceptable model for an ACO. on the health care organizations and private payers • People-centered care entails more than that are building, testing, and bringing to scale new coordination; it takes into account individuals’ models of care delivery, including ACOs. To develop an experiences at every point at which they interact ACO model that can be replicated for both public and with the ACO. ACO leaders must monitor care private payers across many hospitals, health systems, experiences from the individuals’ perspective and and physician practices, Premier, a national performance be willing to address shortcomings. ACOs must improvement alliance of 2,600 U.S. hospitals and communicate effectively with people, help them 84,000 other health care sites, launched an accountable manage their conditions, and empower them to care implementation collaborative in May 2010. This use nontraditional means of accessing care, such as report provides an overview of ACOs and strategies remote monitoring of health status, telemedicine, for their implementation based on the perspectives of and online portals that include personal health hospital and health system members participating in records. www.commonwealthfund.org7 • To maximize potential to control costs and improve service to value-based payments. Equally important, value, it is critical for an ACO to align as much of financial modeling is essential to evaluate various its business as possible with value-based payments. payment options, including the two Shared Savings Many organizations pursuing accountable care Program tracks, capitated payments offered though are already participating in alternative payment the CMS Innovation Center, and private payer mechanisms in the private sector, albeit on a arrangements. limited scale. Working under two different payment • ACOs require an extensive investment in systems creates parallel business models—one based information technology to improve care on shared savings incentives that reward value and coordination and prevent duplication of efforts. another (the traditional fee-for-service approach) However, few providers have developed population that mainly rewards volume. Aligning Medicare health data management capabilities, or have used and private-sector payment models, to the extent information technology to streamline and improve possible, also will create synergies that facilitate the clinical and administrative aspects of care. To transitions to value-based payments. succeed as ACOs, providers need seamless care • ACO leaders need to design incentives that coordination with sophisticated population health encourage providers to work together to deliver status measurement capabilities that will improve effective, efficient care—avoiding unintended health status and reduce overall costs. consequences that could lead to suboptimal • ACOs must be able to measure and assess their outcomes. For example, many compensation performance on a broad range of clinical quality, systems are based on production. In an ACO, efficiency, and patient satisfaction measures. ACOs physicians will need to be rewarded for productivity, typically require de-identified and aggregated and also given incentives to deliver high-quality reports including data on utilization of services, care based on predefined measures. Ultimately, patient demographics, financial performance, compensation systems need to be determined quality scores, and other relevant metrics at based on the makeup of the physician population, least quarterly. Moreover, individual encounter the relationships that exist between providers and records must be linked across the continuum of payers, and other local factors. Leaders should service settings to conduct predictive modeling, explore these issues in collaboration with the appropriately target services, evaluate providers’ physicians who will have to work under the new performance in meeting quality targets, and payment structure, and allow them to influence the determine interventions that may be required in approach. the near term. But such performance reports are • To ensure adequate funding, ACO planners often massive in size and scope. ACOs will need need financial modeling capabilities to assess the to develop reports in formats that cull through the economic impact associated with a system-wide “noise” to find the relevant information and present transition to accountable care. Leaders must have it in a digestible and actionable format. access to resources such as operating cash flow, redistribution of existing capital investments, or external funding to effectively operate and manage the ACO. Financial modeling analyses help providers set appropriate targets for short- and long-term budgets, investments, and other financial needs as they make the transition from fee-for- 8 Accountable Care Strategies: Lessons from the Premier Health Care Alliance’s Accountable Care Collaborative ACCOUNTABLE CARE the number of office visits, tests, or procedures they perform—leading to a health care “production” model STRATEGIES: LESSONS FROM driven by volume and based on perverse incentives: the THE PREMIER HEALTH CARE more services consumed, and the more intense those ALLIANCE’S ACCOUNTABLE CARE services are, the higher the payments, regardless of the COLLABORATIVE outcomes. The result is a system that pays for: • more consumption, rather than better outcomes; THE NEED FOR ACCOUNTABLE CARE and To contain spiraling health care costs, expand access • treatment of illnesses, rather than a culture of to care, promote wellness, and improve outcomes, the wellness. nation’s health care providers must work together and be held accountable for their performance. Health care Such misaligned incentives do more than just costs have been growing at an unsustainable rate, reach- run up health care spending. A 2005 article in the ing an estimated 17.3 percent of the gross domestic Washington Post found that hospitals and physicians product in 2009, according to the Centers for Medicare that provide poor care or harm patients during and Medicaid Services (CMS).1 Over the long term, treatment receive higher payments than those with this has had damaging effects, including insurance pre- better outcomes.4 This is because treating the negative mium increases that have been growing nearly three outcomes of poor care or harm often earns providers times faster than wages.2 Yet even with these high costs, additional payment. research shows that the United States does not get as Further, various providers often fail to much value for health care spending as do other nations. communicate with each other and coordinate care. This There continue to be gaps and inequities in the quality can lead to unnecessary or redundant procedures, for of health care delivered nationwide, as documented by example when individuals’ health records or medical Web sites such as WhyNotTheBest.org.3 histories are unavailable to support decision-making. The nation’s cost and quality problems are For their part, consumers may not understand how rooted in the dominant fee-for-service payment model. to navigate the health care system or how to care for Under this model, physicians are paid according to themselves. Moreover, many believe that more care EXHIBIT 1. ATTRIBUTES OF ACCOUNTABLE CARE üü Provider-led üü Providers and payers co-own responsibility for the cost and quality of care provided to a defined population; shifts both rewards and risks to aligned, integrated care systems üü Population attribution to ACOs, with opt-outs and choice üü Health engagement/wellness initiatives that are tailored to the individual üü Diverse group of providers, including hospitals, specialists, primary care, and postacute care, that can coordinate across settings üü Robust health information technology infrastructure and performance measurement capacity üü Providers and payers share population-based data on a timely basis üü Long-term partnerships with a range of payment options www.commonwealthfund.org9 is better, though the evidence often demonstrates health and wellness. Unlike other delivery reform efforts otherwise. designed to reduce costs, ACOs balance that need A first step to promote the quality and against the need to improve outcomes and enhance sat- sustainability of America’s health care system is to isfaction. Overall, their goals are to empower people to better manage chronic illness, which accounts for take charge of their health, eliminate waste and unnec- more than 75 percent of all health care spending.5 The essary spending, increase preventive and other care to creation of accountable care organizations (ACOs) is keep people well, and deliver high-quality services that one of the most promising strategies for improving encourage continued participation (Exhibit 1). chronic care. Providers working in ACOs take responsibility for a designated population and work across care settings together to coordinate their care. THE PREMIER ALLIANCE’S Primary care “health homes” (also known as “medical ACO COLLABORATIVE homes”) and high-performing hospitals serve as key Although much attention has been paid to the public building blocks of ACOs, along with networks of policy around ACOs, there has been less focus on the primary, acute, and postacute care providers. providers and private payers that are building, test- ACOs have the potential to overcome the ing, and bringing to scale new models of care delivery, fragmentation and volume orientation perpetuated by including ACOs. To develop an effective ACO model fee-for-service payments by creating incentives to foster that can be replicated across hospitals, health systems, EXHIBIT 2. PREMIER COLLABORATIVE MEMBERS WA NH VT ME MT ND OR MN ID SD WI NY MA WY MI RI NE IA PA NJ CT NV OH DE UT IL IN CO MD CA WV KS MO DC KY NC TN AZ A OK NM AR SC AL GA MS TX LA AK FL HI • AtlantiCare, Egg Harbor Township, N.J. • Memorial Healthcare System, South Broward, Fla. • Aurora Health, Milwaukee, Wis. • Methodist Medical Center of Illinois, Peoria, Ill. • Banner Health System, Phoenix, Ariz. • Mountain States Health Alliance, Johnson City, Tenn. • Baystate Health, Springfield, Mass. • North Shore-LIJ Health System, Long Island, N.Y. • Billings Clinic, Billings, Mont. • Presbyterian Healthcare Services, Albuquerque, N.M. • Bon Secours St. Francis Health System, Inc., Greenville, S.C.; • Rochester General Health System / GRIPA, Rochester, N.Y. and Bon Secours Richmond Health System, Richmond, Va.— • Saint Francis Health System, Tulsa, Okla. part of Bon Secours Health System, Inc. • Southcoast Hospitals Group, Fall River, Mass. • CaroMont Health, Gastonia, N.C. • Summa Health System, Akron, Ohio • Fairview Health Services, Minneapolis, Minn. • Texas Health Resources, Arlington, Texas • Geisinger Health System, Danville, Pa. • University Hospitals, Cleveland, Ohio • Hackensack University Medical Center, Hackensack, N.J. • WellStar Health System, Atlanta, Ga. • Heartland Health, St. Joseph, Mo. 10 Accountable Care Strategies: Lessons from the Premier Health Care Alliance’s Accountable Care Collaborative and physician practices, Premier, a national perfor- provider networks that are accountable for cost, quality, mance improvement alliance of 2,600 U.S. hospitals and satisfaction, and population health. This disruptive 84,000 other health care sites, launched an accountable innovation requires new systems that keep people care implementation collaborative in May 2010 for healthy, an emphasis on early intervention and primary hospitals and health systems.6 Similar groups have been care to improve efficiencies and avoid unnecessary launched by the Brookings Institution and Dartmouth expense, and new shared savings reimbursement Institute for Health Policy and Clinical Practice as well structures. as the American Medical Group Association, although these focus more on physician leadership.7 These collab- oratives are designed to help providers implement the THE MAKING OF AN ACO key capabilities needed to operate an ACO, based on a To create an accountable care organization, participants common model and consistent measures of success, and first need to define success and then map the opera- to glean best practices for doing so. tional components needed to achieve it. Measurement Premier’s collaborative includes 23 health is central to determining the success of the ACO and systems with more than 70 hospitals, a broad variety monitoring unintended consequences. Agreeing on the of payer contracts, and partnerships with thousands of goals is the first challenge in the measurement process. physicians (Exhibit 2). Participating health systems will Most organizations pursuing accountable care are pur- provide care across 20 states, covering urban, rural, and suing three aims: suburban populations that range in size from 4,000 to 7.5 million residents. 1. Better health care—Improving the individuals’ Collaborative participants are working to care experiences and ensuring that treatments are break down payment silos and create integrated safe, effective, patient-centered, timely, efficient, and equitable. EXHIBIT 3. ACO CORE COMPONENTS* ACO Leadership Population Health Data Management Pharmacy Specialists Payer Partners Health Home Insurers Postacute Home Care Care Employers People States Ancillary Hospitals CMS Providers Long-Term Hospice Care Public Health Agencies * ACO model graphic property of the Premier health care alliance. © 2010. All rights reserved. www.commonwealthfund.org11 2. Better health—Encouraging better health for the centered, coordinated, compassionate, and culturally community by addressing the underlying causes of effective. The model differs from the disease poor health such as lifestyle, lack of preventive care, management models of the 1990s in that health and delayed intervention. homes are designed to serve all people, rather 3. Reduced cost of care—Containing the costs of than just those with certain chronic illnesses. Such care through rational treatment decisions and case organizations exist today. For example, physicians at management. the AtlantiCare Special Care Center receive a flat fee per patient, per month, rather than being paid These goals are aligned with the Institute for for each office visit.11 Individuals have unlimited Healthcare Improvement’s Triple Aim and were further access and can take advantage of open scheduling refined based the Department of Health and Human to secure same-day appointments. People are Services’ National Quality Strategy (NQS).8 monitored using electronic systems to ensure they are meeting their goals, and health coaches help Core Components them make healthy choices; one nurse’s sole goal is Specific corporate functions and system components to encourage all smokers to quit. are required to fully implement an ACO, as depicted in Exhibit 3. Although some U.S. health care organiza- 3. High-value provider network: Since the health home tions have put in place pieces of these accountable care is responsible for primary and preventive care, components (described below), none has fully deployed high-value provider networks include all the other all of them. medical services that may be needed to provide These components do not replace the usual high-quality, cost-effective outcomes. These include operating functions of the existing health care system, hospitals, specialists, rehabilitation centers, mental such as those required to manage day-to-day physician health providers, hospice care, and postacute care. practices and hospitals. But the operating and business These providers must operate in conjunction with models of these entities are expected to evolve in the health home, which is the center of an ACO’s response to the ACO environment. The six core ACO integrated network and responsible for ensuring components include: coordination and seamless transitions between various settings. For example, Geisinger Health 1. People-centered foundation: The ACO model seeks System has an integrated network of primary care to engage people, encourage them to play active practices, hospitals, specialists, as well as its own roles in their care, and increase their satisfaction. insurance plan, and leverages its providers and A good example of this approach comes from the community resources to manage and coordinate Billings Clinic, where diabetics are given an annual care.12 scorecard listing the measures that must be tracked 4. Population health and data management: Population to keep this condition in check.9 Patients and health and data management entails the use providers can then hold each other accountable for of health information technology to support following the care plan. the clinical and administrative aspects of care, 2. Health home: According to the American Academy with the goal of improving health outcomes. It of Pediatrics, a medical home (or health home) is goes beyond the basic electronic health record “not a building, house or hospital, but rather an (EHR) and requires resources to: 1) collect approach to providing comprehensive primary individual health status data; 2) stratify and target care.” 10 Health homes seek to provide care that populations based on their risk and need for care; is accessible, continuous, comprehensive, family- 3) provide tools to engage people in their health 12 Accountable Care Strategies: Lessons from the Premier Health Care Alliance’s Accountable Care Collaborative using individual health records or online portals; leaders, medical and surgical specialists, hospital 4) enable connectivity to a health information system representatives, and a new head of ACO exchange to ensure portability of records; and operations to form the governing board. Beneath 5) support workflow tools that direct physicians the board sit two committees focused on quality toward appropriate, evidence-based care protocols. improvement and finances, and task forces Equally important, all of these systems must be have been organized to take on activities such interoperable, and data must flow freely among as medication management and postacute care them. Aurora Healthcare is an early leader in coordination. this area. For example, in 2009 Aurora developed 6. Payer partnership: ACOs will require a major technology that enables providers across its network shift in the way public and private payers partner to view, magnify, and examine X-ray, CT, and with providers. The goal is to establish deeper MR images.13 Physicians can access the images and broader relationships based on transparency, online, thus enabling collaboration and timely shared value propositions, and joint management responses. Since then, Aurora has adopted database of population health. These new relationships also technologies to mine medical records to identify should be based on full operational interactions individuals who may benefit from a certain therapy. across a wide spectrum of services, including Aurora’s data also can be used to enable scientists predictive modeling, high-cost case management, around the globe to share information for research disease management, provider performance and medical discovery.14 measurement, network and medical management, 5. ACO leadership: A successful ACO requires and financial reporting. It is important not to take a attentive, innovative, and effective leadership at myopic view of the potential payer partners in any several levels, from the governance entity that given market. Medicare is one potential partner, oversees the entire enterprise to the physician either through the Medicare Shared Savings groups that participate. In order to build an Program or payment demonstrations through the ACO leadership capability, executives will need Center for Medicare and Medicaid Innovation to administer corporate functions and at the (CMMI). But there are other potential partners same time work to transform the culture of all for ACOs, including commercial insurers, self- participating organizations. This means managing insured employers, community programs caring for the new ACO business model, formalizing uninsured residents, and provider-sponsored plans partnerships with provider participants in joint (see section on ACO markets below). Effective, governance and operations management, as well private-payer partnerships are perhaps most well as shifting the entire delivery system from a focus known in Minneapolis, where Fairview Health on volume to a focus on value. This shift brings Services has four fully executed, value-based ACO significant challenges for health care leaders in agreements in place, including one with the local establishing legally sound organizations that Blue Cross Blue Shield plan and Medica. support realignment of clinical processes, new These six components go well beyond those operating structures, and the ability to model the detailed in the Affordable Care Act or the Medicare financial implications of shifting reimbursements. Shared Savings Program for ACOs. That program An advanced leadership structure can be seen at essentially offers a partnership with CMS as the Summa Health System, which has its own legal payer—in other words, just one of the components structure and governing board to oversee ACO necessary to deliver integrated care. operations. Summa has taken a highly inclusive approach, bringing together primary care physician www.commonwealthfund.org13 THE MODEL FOR A SUCCESSFUL ACO required to move from volume-based to value-based Exhibit 4 illustrates how an effective ACO might work care. Through effective, collaborative relationships, in practice. At its core are people who have a health payer partners will support the health home, the home that coordinates their care by acting as the quar- specialist network, and other components of the ACO terback for service delivery across the system. Providers with shared savings compensation. Financial incentives need to come from across the care continuum (i.e., will be aligned to reward improved outcomes, increased those delivering urgent, preventive, chronic, and pri- efficiency, elimination of waste, enhanced satisfaction mary care services) to create a high-value network. This with care, and reduced overall costs. model requires the participation of one or more primary care and specialty physician groups and hospitals, as Organizational Models well as ancillary providers, home care, long-term care, Assessments of more than 90 markets implement- hospice, and pharmacies. ing accountable care principles find that a number of In a successful ACO, these providers will be ACO organizational models exist. Stephen Shortell aligned with the organization’s goals and have sufficient and Lawrence Casalino suggest five models of an financial incentives to support high-value care. “Accountable Care System” (their term for an ACO): a Moreover, a sophisticated information infrastructure multispecialty group practice; a hospital medical staff underlies the model to provide the data needed to organization; a physician–hospital organization; an assess, monitor, and intervene to optimize the health of “interdependent” practice organization; and a health the entire ACO population. ACO leaders will steer the plan–provider organization or network (Exhibit 5).15 organization through the economic and cultural shifts This list compares with the types of organizations EXHIBIT 4. ACOS IN PRACTICE ACO CEO COO CFO CMO CNO CQO Payer Partners Shared Shared Savings Savings 14 Accountable Care Strategies: Lessons from the Premier Health Care Alliance’s Accountable Care Collaborative EXHIBIT 5. FIVE MODELS OF ACCOUNTABLE CARE Model Characteristics Examples Multispecialty • Usually own or have a strong affiliation with a hospital Billings Clinic group practices • Contract with multiple health plans (Billings, Montana) • History of physician leadership Marshfield Clinic • Mechanisms for coordinated clinical care (Wisconsin and Michigan) Hospital medical • Nonemployee medical staff Memorial Healthcare System staff organization • Strong partnership between physician and primary (Broward County, Florida) admitting hospital St. Vincent Hospital • Electronic medical records and quality improvement support (Billings, Montana) • Self-governing medical staff organization Physician–hospital • Nonemployee medical staff Hoag/Greater Newport organization • Function like multispecialty group practices Physicians • Potential to reorganize care delivery for cost effectiveness (Newport Beach, California) Interdependent • Smaller groups of physicians, often in rural areas, that jointly Catholic Healthcare West/ practice contract with health plans Hill Physicians organization • Active in practice redesign and quality improvement (Bay Area, northern California) • Structure that provides leadership, infrastructure, and resources Health plan–provider • Partnership between health plans and providers Geisinger Health System organization/network • Quality and cost improvements generate insurance products (Danville, Pennsylvania) as well as improved outcomes Summa Health System • Integration with insurers’ disease management and quality (Akron, Ohio) improvement systems Source: S. M. Shortell and L. P. Casalino, “Health Care Reform Requires Accountable Care Systems,” Journal of the American Medical Association, July 2, 2008 300(1):95–97. considered by the Congressional Budget Office to be Capabilities, Activities, and Success Factors “Bonus-Eligible Organizations”: “physicians practic- In order to function, ACOs must implement a range of ing in groups, networks of discrete physician practices, capabilities and supporting activities. partnerships or joint ventures between hospitals and physicians, hospitals employing physicians, integrated Keeping people at the center. People-centered care entails delivery systems, or community-based coalitions of more than coordination across settings of care. It also providers.”16 includes careful attention to overall experiences at every Many organizational models, particularly those point at which they interact with the ACO. For exam- that include hospitals, are viable options for ACOs. It ple, when a person enters the provider’s office, is he or is not necessary for a “clinically integrated” provider she greeted by friendly staff members who introduce network—and, by extension, an ACO—to be a single, themselves? Do clinicians have easy access to medical co-owned legal entity comprising physicians and/or records so that people do not have to repeat their medi- hospitals, whether under the Medicare Shared Savings cal history multiple times? Upon discharge, have physi- Program or in the private sector. Instead, accountability cians and nurses adequately explained to people and can be achieved through a network of coordinated their families the procedures for care at home, taking relationships that fall short of corporate integration. into account their level of health literacy? ACO lead- The providers in the community and the degree of ers must monitor care experiences from the individual’s desired ownership generally determine the chosen perspective, and be willing to address identified issues. approach. A “collaborative arrangement” based on a ACOs also need to communicate with people, contractual relationship among the ACO owners and help them manage their own conditions, and empower participants could be an acceptable model. them to use nontraditional models to access care, www.commonwealthfund.org15 including remote monitoring of health status, telemedi- Value-based contracting. Most provider-payer contracts cine for rural settings, and online portals for accessing focus on the terms of payment, typically fee-for-service personal health records. reimbursement that may include capitated payments for some portions of the covered population. The contracts Integration of old and new. Attention must be paid to the that ACO leaders are currently entering into with payer integration of new ACO-based operating activities with partners include much broader terms such as people- previously existing activities. Even though organizations centeredness criteria, quality metrics, information tech- will need to change their policies and work practices to nology capacity, delegated care management functions, partner with others, an emerging ACO can take advan- and expanded financial incentives. In the early years, tage of the best practices already in place and expand these contracts most likely will pay claims according to them across the network. Leaders should identify areas the preexisting arrangements, but additional financial in which the ACO is not serving its population suffi- incentives for participating providers will be necessary. ciently and expand services to fill the gaps. For example, CMS will continue to pay ACO providers based on the existing Medicare fee-for-service system Selecting and engaging physicians. ACOs need to foster (i.e., the physician fee schedule and inpatient prospec- physicians’ confidence in the care model, particularly tive payment system). However, ACO contracts will in highly competitive markets. Since people tend to need to set out quality benchmarks and spending levels, follow their physicians, the ACO network of primary as well as the method by which any savings generated as and specialty care providers is essential to its success. In a result of ACO activities are to be shared. selecting provider partners, preference should be given ACO contracts also need to take into account to practices that are engaged and ready for the transi- the financial realities facing providers as they make tion to a value-based structure, as well as those with the transition to value-based care, ensuring providers the best track records of cost and quality performance. are able to earn adequate income as they seek to avoid Once providers are selected, ACOs should continue to unnecessary care. ACOs need to explore the following engage physicians by sharing performance metrics on a financial considerations: real-time basis and holding open discussions about the new incentive and compensation system. • The potential impact on volume and revenue It may be difficult for physicians to make the associated with implementing an ACO. These shift from a volume-based delivery system to a system analyses should consider various combinations of in which they are accountable for the cost and quality beneficiary populations to the ACO, by major payer of care. Both physicians and staff will need to commit category (i.e., Medicare, Medicaid, and private to changing their work culture and habits. For example, insurance). they will need to develop strategies for managing care • The financial impact of a variety of shared savings between visits, rather than focusing on care delivered in arrangements, ranging from fee-for-service plus the office. People, too, may resist playing an expanded potential shared savings incentives to full risk role in managing their health. Physicians will need to capitation. explore new approaches to engaging patients, especially • Various shared savings distribution models between those who do not comply with recommended care. For providers and payers. instance, primary care physicians need to screen for depression, which may interfere with individuals’ ability • The total medical cost of services, including services to take their medication, engage in physical exercise, or provided by in-network as well as out-of-network improve their eating habits. providers. 16 Accountable Care Strategies: Lessons from the Premier Health Care Alliance’s Accountable Care Collaborative • Total medical costs per member, per month by build infrastructure to ensure timely care and support major service line and payer in order to understand the appropriate movement of individuals across the care the historical spending pattern of the ACO continuum. Without this foundation, managers will population and allocate spending shifts. have little control over the care provided for the ACO • Changes to utilization patterns that may occur as population and little leverage for improvement initia- systems make the transition to accountable care, tives (e.g., reducing hospital admissions and readmis- such as increased delivery of primary care and sions) across the spectrum of care. decreased inpatient services. Physician compensation and other incentives. ACO lead- • Drivers of labor costs and staff assignments to ers will need to design compensation and incentives support ACO activities during the transition to that align physicians in the effective provision of care. accountable care. In some cases, existing staff Physicians should be rewarded for productivity, while members can be assigned new roles. In others, new also motivated to deliver outcomes based on predefined individuals with different skills and competencies metrics and measures. The pros and cons of a variety of will need to be hired. compensation and incentive models are listed in Exhibit 6. Ultimately, an ACO’s compensation model needs to High-value postacute care services. To be successful, an be locally determined, based on the unique makeup of ACO must have a system in which postacute care can the physician population, the relationship that exists be efficiently delivered by and coordinated among ancil- between providers and payers, and other factors. lary providers, such as skilled nursing facilities, home ACO leaders should discuss these payment health agencies, infusion services agencies, and end-of- options in collaboration with the physicians who will life care (e.g., palliative or hospice care). ACOs need to have to work under them. EXHIBIT 6. COMPENSATION MODELS Implications for Productivity Model Elements and Resource Utilization Straight salary Income level set; may include bonus/ Provides assurance of income level incentive or provision for guaranteed income Without bonus, offers little financial incentive and may support minimum effort Equity/equal shares Income level based on revenues left after Rewards lower utilization; may allow less- expenses, which are divided equally productive physicians to capitalize on the work of more-productive colleagues Production or productivity- Income based on percentage of either Rewards physician effort—but also greater based compensation billings or collections, or on resource- utilization, more referrals, and more based relative value scale units that are procedures; affected by patient mix (i.e., assigned to procedures or visits; overhead proportion of patients with commercial is allocated among physicians insurance, Medicaid/Medicare, and no insurance) Incentive-based compensation Some component of income is tied to Rewards physician efficiency, appropriate performance around the ACO core goals utilization, and patient-centered focus in (better health care, better health and care delivery reduced costs) Capitation Income based on distribution of moneys Rewards delivery of cost-efficient, from payers—either equally among effective care physicians or based on a predetermined formula Influenced by marketplace and contract negotiating skill level www.commonwealthfund.org17 Financing. Leaders must have financial resources such case management seeks to manage extremely high- as operating cash flow, redistribution of existing capital cost cases, such as patients with severe trauma or those investments, or external funding to effectively operate undergoing organ transplantation. Disease manage- and manage the ACO. This will be particularly impor- ment programs focus on those with specific chronic tant during early periods, when there will be costs asso- diseases, such as diabetes or asthma. The downside of ciated with investments in new technologies, key staff, such approaches is that the investments will benefit and implementation of new policies and procedures. a small proportion of the total population. Further, There are few estimates of accountable care expenses. comorbidities and risk factors that are not concurrently A recent report issued by the American Hospital addressed will diminish the impact of targeted inter- Association states that start-up costs for a hospital- ventions. Consequently, significant outlays of time and based ACO could range from $5.3 million to $12 mil- money may not “move the needle” for the population as lion, depending on the size and scope of the program.17 a whole. Moreover, ongoing operating costs could range from To avoid this, ACO administrators should $6.3 million to $14 million each year. Being able to target care management interventions at broad fund these costs through a combination of increased segments of the population. It is also important to operating efficiencies, new patient populations, new consider a wide range of services, including prevention investment capital, and shared savings will be vital to and wellness programs in conjunction with case ensuring long-term success. and disease management programs. Targeting such ACOs require comprehensive financial model- programs requires segmenting individuals by risk (e.g., ing capabilities to assess the economic impact of a sys- predictive modeling) to identify those at highest risk tem-wide transition to accountable care. Such analyses of experiencing additional medical care and expenses, will help providers set appropriate targets for short- and no matter what their condition. Individuals at lower long-term budgets, investments, and other financial risk should be evaluated to determine if preventive needs as they shift to value-based payments. Equally and wellness programs may be useful to keep them important, financial modeling is essential for health in good health. Patients with clinically stable, chronic systems to evaluate various payment options, including disease may benefit from disease management the Medicare shared savings tracks, capitated payments programs. Different types of care management have offered though the CMS Innovation Center, and pri- differing potential for impact and different time vate payer arrangements. frames for demonstrating outcomes. Moreover, the Specific considerations to model include the overall care management approach needs to be fluid to ACO size and level of shared savings. A larger popula- accommodate changes needed to serve healthy people tion enables providers to spread cost and quality risk who become sick, and vice versa. across a broader pool, potentially increasing the size of shared savings payments. At the same time, the number Value measurement. Performance measures are needed of hospital admissions and consumption of services will for each of the ACO core goals (better health care, bet- decrease, while staff time and delivery of preventive care ter health, and reduced cost of care) to assess ACOs and services rises, and the shared savings payments must their impact on community health. However, popula- offset these losses. tion-level measures across the continuum are not always available, and many measures rely on labor-intensive Targeted care management interventions. Often, decision- processes of manually abstracting data from medical makers design care management programs for narrowly charts and the integration of claims data to account for defined, high-risk populations. For instance, complex all services received. 18 Accountable Care Strategies: Lessons from the Premier Health Care Alliance’s Accountable Care Collaborative Performance measures that have been adopted to blend administrative claims data with clinical data by CMS as well as many private payers include those to produce meaningful clinical and efficiency measures. developed by the National Committee for Quality However, some measures can be captured from survey or Assurance, such as the Healthcare Effectiveness Data claims data (Exhibit 7). and Information Set (HEDIS). HEDIS is used by more than 90 percent of America’s health plans to assess per- Joint medical management processes. Many payers use formance on important dimensions of care and service. medical management processes to monitor utilization Other measures assess community health and wellness and incentivize lower-cost choices. In ACOs, it will be and the overall experience of care, as collected through essential to create joint medical management processes the Consumer Assessment of Healthcare Providers and that involve both the payers and clinicians. At a mini- Systems.18 mum, payer partners and participating providers need to Measures used to assess ACO performance agree to measures of success based on high-level metrics are in their infancy, and are generally inadequate for such as total per member, per month costs of care as assessing population health. There are a variety of well as detailed measures such as the cost of care for reasons for the lack of robust measures, including a lack specific clinical services. A sample distribution of medi- of data needed and the inability of many organizations cal management responsibilities is shown in Exhibit 8. EXHIBIT 7. SAMPLE ACO PERFORMANCE METRICS Aim Subaims Metric Metric Description f1 Colorectal screening, adults 50–75 Primary and secondary f2 Breast cancer screening, females 40–69 prevention— f3 Flu shot, adults 65+ Health prevention and f4 Pneumonia vaccination status, adults 65+ of the screening population f5 Comprehensive diabetes care—HbA1c control (<8%), adults 18–75 Tertiary prevention— f6 Prevention of harm (composite) prevention of disease f7 Risk-adjusted mortality/1,000 progression f8 Evidence-based care for hospitalized cases (composite) f9 Global rating of all health care f10 Global rating of personal doctor Experience Satisfaction f11 Global rating of specialist seen most often of care f12 Composite score of getting needed care f13 Composite score of shared decision-making f14 Total cost PMPM (e.g., medical and Rx) Cost PMPM Cost per f15 Total cost PMPM trend capita and f16 Admissions per 1,000/year (possibly with case mix) services f17 30-day readmissions (all-cause) rate delivered Utilization f18 ED visits per 1,000 f19 Hospital admissions for ambulatory care–sensitive conditions www.commonwealthfund.org19 EXHIBIT 8. SAMPLE DISTRIBUTION OF MEDICAL MANAGEMENT RESPONSIBILITIES Site Accountable for Operating Activity ACO Payer Related Operating Centralized Centralized Capability Activity Medical Medical Health High-Value Management Management Home Network Within ACO by Payer Utilization X Precertification Management System X X Concurrent review (for ACO (for non-ACO facilities) facilities) X X Discharge planning (for ACO (for non-ACO facilities) facilities) X X (for health (for providers Management of transitions of care home other than members) health homes) Decision support/ Optimizing care of preference- X X X sensitive conditions, those where legitimate treatment options exist Pharmacy Pharmacy & therapeutics committee X X Management Formulary development X X System Physician profiling X Generic optimization X X Pharmacy clinical management X X Medical Policy Formulation of medical policy X System Communication of medical policy X Disease Population identification X X Management Patient education X X Case X X Management (for health (for providers High-risk case management home other than members) health homes) Catastrophic case management X Realistic timelines for cost reduction and resource utiliza- can simulate a range of scenarios and their effects on tion. Leaders must carefully orchestrate cost-reduction business and contingency plans. Leaders must be able efforts during establishment of the ACO. Initial cost- to see a potential return on investment along a specific saving efforts should focus on reducing inefficiencies timeline, taking into account the local market, proposed and eliminating redundant processes. Because inter- population, payment model, and quality metrics. To ventions to improve quality generally do not provide this end, if an ACO successfully identifies and engages an immediate return on investment, these initial cost people who have lacked care in the past, the expenses savings will be essential for carrying the enterprise associated with providing preventive care may initially until the fruits of quality and safety improvements are increase. However, the downstream costs of preventing realized. these people from utilizing emergency or other hospital ACO leaders must carefully plan for the future services with late-stage diseases will decrease. by leveraging financial models and budgeting tools that 20 Accountable Care Strategies: Lessons from the Premier Health Care Alliance’s Accountable Care Collaborative PAYMENT OPTIONS ongoing treatment of chronic conditions. Over time, Many organizations pursuing accountable care are this payment model is intended to reduce overall spend- already participating in alternative payment mecha- ing. However, in order to ensure that spending declines nisms in the private sector, albeit on a limited scale. To and quality improves, payers will need to either with- maximize results, it is critical for an ACO to align as hold full payment until quality and cost improvements much of its business as possible with value-based care are demonstrated, or put in place a penalty structure to and payment. Bringing Medicare and private-sector recoup funds from ACOs that do not achieve these goals. payment models into synch, to the extent possible, will facilitate this. Global Capitation CMS is doing what it can to ease this transi- Under comprehensive care payments, a single price tion by allowing for shared savings within the Medicare would be paid for all services provided to anyone cared ACO program or through the ACO Pioneer Program for by the ACO over the course of a year. Adjustments led by the Innovation Center—thus giving provid- to payments would be made based on health status and ers the ability to choose an approach that most closely quality of care. The underlying payments would con- aligns with payment arrangements they already have in tinue to be paid on an FFS basis, but at the end of the place with private payers.19 In some areas, particularly year, payments that exceed what was expected would where managed care is prevalent, ACOs are prepared to either be recouped or withheld. Similar withholds accept additional risk, including partial or full capita- or penalties also would be needed to ensure quality tion, and will not want to diverge from this model to improvement targets are hit. participate in shared savings (either through an up-side only or a reciprocal risk arrangement). Whichever pay- Capitation ment track an ACO chooses, it is important to drive Another model would entail monthly, risk-adjusted consistency across payers so that providers are working capitated payments. These rates could be set based on under a uniform set of goals, incentives, and payment projected spending, but adjusted monthly based on models. the risk scores of the ACO’s patients. The capitated Although there are numerous variants, most amounts could be set well below projected FFS rates, providers pursuing accountable care are considering one guaranteeing savings for the payer. However, if quality of four payment alternatives. targets are met, ACOs would earn back the savings gen- erated beyond the guaranteed savings. Or, the capitation Fee-for-Service Plus Bonus rates could be set modestly below the FFS rates and a Under this model, payers continue to pay ACOs on a quality penalty applied if benchmarks are not achieved, fee-for-service (FFS) basis for all services, but add in a thus obviating the need for a withhold. This could year-end bonus if spending is lower than a benchmark be applied, for example, as a partial capitation model level. In the majority of cases, there is no down-side risk where only physician services are capitated, and institu- for the ACO if it exceeds its spending target. However, tional claims are paid on the fee-for-service plus bonus over time, most payers are requiring ACOs to accept method. symmetrical risk with capped bonuses and losses. Regardless of the payment option selected, each shares common attributes. For instance, in all Bundled Payments Plus Bonus models the ACO is held accountable for total costs, This allows payers to make one payment for hospital, including costs for care delivered outside of the ACO physician, and possibly postacute services provided dur- provider networks. Also, under all models no bonuses ing an episode of care. This could be a shorter period or incentive payments would be paid unless quality associated with a hospitalization or a longer period for standards are met. www.commonwealthfund.org21 SHARED SAVINGS MODELS Under a shared savings model, the payer would pay all claims for a specified target population. ACO leaders would focus resources on the interventions most likely to optimize health outcomes for this population. Data on the agreed-upon measures of success would be compiled for the population after a performance period. If the actual cost of care for the population is less than the projected cost (possibly minus a target or confidence interval), the excess funds would be placed in a savings pool. The ACO would receive a percentage of the savings, subject to its achievement of benchmark levels of performance on measures of quality and patient experience. A clear definition of the target population for which the ACO will be responsible is essential. The target population can be defined in several different ways: all members of a particular health plan, all members in a particular geographic area, or all members participating in a limited ACO arrangement focused on a specific diagnosis. The experience of participants in CMS’ Physician Group Practice Demonstration Project suggests that the most equitable method of attribution is to assign patients to the ACO that includes the site at which they received the bulk of their primary care services. In some markets, specialists, nurses, and other providers may also be assigned to the ACO. To use this method, the ACO provides the payer with a list of primary care providers. The payer identifies the target population based on historical use of services from these providers and distributes this list to the ACO. The payer also creates a historical record of the outcomes for the identified target population, including the total cost of care and anticipated cost trend. A critical element of the shared savings model is defining success. ACO leaders need to negotiate and have clarified in the contract the specific metrics that constitute success, including a target medical cost. ACO leaders also need to ensure clarity in the contracts regarding payments relative to achievement of the specific metrics. For example, if the ACO meets quality goals but fails to attain cost goals will it be eligible for payment? Under a partial capitation contract, the ACO might receive prospective payment for a subset of services, such as inpatient facility care. Other savings might be calculated as above. Inpatient services would be excluded from these calculations because the ACO would already have received payment for inpatient services and—to the extent that the total cost of inpatient care was less than the capitation received— would have collected its incentive payment for inpatient services. Under a full capitation contract, the payer would pay the ACO a fixed monthly amount based on the number of individuals in the targeted population. In most cases, ACO participants would continue to submit claims to the payer and the payer would continue to pay non- ACO providers on a fee-for-service basis. However, the costs of services provided outside the ACO would likely be included in the financial reconciliation, depending on the terms of the contract. ACO MARKETS AND EXAMPLES OF with payers and other providers, offering incentives for ACCOUNTABLE CARE IN ACTION population health and wellness, and deploying health IT. Since CMS issued regulations for the Medicare Shared Based on assessments of nearly 90 markets, Savings Program, there has been a great deal of discus- it is clear that there are at least six other partners or sion on its merits and whether it is a viable option for populations, beyond Medicare, to target in the creation organizations pursuing accountable care. However, it of ACOs. is important for provider organizations to understand that there are many markets in which to test innovative, Employee Health Plans coordinated care delivery models. Like other major employers, many health systems use In private markets, accountable care principles incentives to promote healthy behavior among their can be seen in many places as providers and payers employees. For example, value-based benefit designs move toward new, value-driven models of care in lieu encourage healthy choices. This could involve offering of traditional fee-for-service models. These providers lower premiums, copayments, and/or deductibles for are meeting quality metrics, implementing improved those who participate in wellness programs, or reduced care processes (such as coordinating care transitions and copayments for medications treating high blood pres- engaging patients), assuming risk, forming partnerships sure, diabetes, and high cholesterol. 22 Accountable Care Strategies: Lessons from the Premier Health Care Alliance’s Accountable Care Collaborative Some health systems such as the Cleveland Medicaid Clinic are taking the lead in this area, encouraging their A growing number of state Medicaid programs are own employees with chronic illness to enroll in disease embracing principles of accountable care, particularly management programs and designing benefits to targeted care management and health homes. Moreover, reward employees for taking cost-saving measures, such a number of states, including Illinois and New Jersey, as using generic drugs. Such health systems may be passed laws that would enable Medicaid beneficiaries to interested in forming their own ACO, or working with be cared for in ACOs.24 one to deliver care to their employees. Community Care of North Carolina, for instance, places Medicaid enrollees in health homes Self-Funded Employers for primary care and care management. Each network Large, self-insured employers may also be interested operates as a virtually integrated health system, with in having ACOs provide their care. In Maine, Bath a medical management committee of local doctors, Ironworks, a self-funded employer with 10,000 employ- a medical director, a clinical pharmacist, and care ees, is implementing a shared savings model for their managers who follow up with patients and identify employee health plan with a select handful of health special patient needs. systems. As one of the oldest such program in the This company projected health spending on a country, Community Care of North Carolina has had per capita basis for employees and made an agreement impressive results. It has seen the number of emergency with Central Maine Medical Center that if the department visits by asthma patients fall by 40 percent company came in under the target in 2011, it would between 2003 and 2005, for example, all the while split the savings with the health care organization. spending $574 million less than projected for primary There is no penalty if the company falls short of its care case management services. target. The Uninsured Health Plans/Insurers The Camden Coalition of Healthcare Providers in New Insurers are beginning to enter into accountable care Jersey uses care management programs for the city’s agreements with health systems to create new insurance uninsured residents with both complex medical condi- products. Several agreements throughout the country tions and social issues—individuals who tend to overuse have been announced, including the following: the city’s emergency departments. Using an outreach team consisting of a social worker, a health outreach • Aetna and the Carillion Clinic20 worker/medical assistant, and a nurse practitioner, the • Humana and Norton Healthcare health system21 Care Management Project helps the 115 enrollees sta- bilize their social environment and health conditions • CIGNA and Piedmont Medical Group22 and works to find them a long-term health home. Team • Three major Minnesota insurers and Fairview members visit patients in homeless shelters, abandoned Health Services23 homes, hospital rooms, and street corners.25 Providers in the area are able to avoid The rewards for meeting mutually agreed upon duplication and ensure greater levels of coordination quality standards and cost reductions include bonus using the Camden Health Information Exchange payments and shared savings to the accountable care (HIE), an electronic health record interface that enables network. providers to access patient data across clinics, practices, hospitals, and health systems. Launched in November 2010, the Camden HIE is the first of its kind in New www.commonwealthfund.org23 Jersey and covers an entire geographic area, linking providers need seamless care coordination with sophis- information from all three hospitals in the city. ticated population health measurement capabilities. Moving forward will require a phased approach, Individual Markets ultimately leading to care coordination and clinical An example of accountable care in individual markets integration through the following levels: can be seen in Minnesota, where providers and payers are offering “baskets of care,” or a bundle of health care • Transaction—IT supporting individual providers in services packaged together to create incentives for pro- delivering care and measuring outcomes. viders to cooperate and develop innovative approaches • Interaction—Basic care coordination capabilities to reducing health care costs while improving quality. with initial population-based metrics. Each basket of care is paid for at a set rate and offered • Integration—Care coordination capabilities improve as a product that consumers are able to purchase. and health status measurement is possible. Succeeding in the individual market will • Collaboration—Seamless care coordination with depend on finding the right payer partner that is will- demonstrable improvement in population health ing not only to design products for individuals, but status. also to partner with the accountable care network to manage care. To keep costs down for individuals, it will • Transformation—The ACO core goals of better be essential to include effective care management and health care, better health, and reduced costs of care chronic disease management programs in the benefits are achieved for all covered patients. package. Detailed requirements for each of these levels are shown in Exhibit 9. EARLY CHALLENGES AND POLICY RECOMMENDATIONS Gain-Sharing Since many organizations are working to deploy ACOs In many respects, ACOs are large-scale gain-sharing in the near term, early work has focused on remov- arrangements. Although a standardized approach to ing barriers that could stand in the way of creating gain-sharing will not accommodate all ACO stakehold- fully functional ACOs. However, there are factors that ers, agreements to share risk and rewards should incor- are proving difficult for ACOs to address. Policy and porate the following four principles. These principles other changes are needed before full implementation of can be easily adapted to local situations and provide ACOs can occur. enough guidance to avoid unintended consequences such as stinting on care or “cherry picking” populations. Health Information Technology and 1. Identify specific targets that reduce cost or lower Meaningful Use unnecessary variation in a manner that ensures ACOs require an extensive investment in technologies patient safety and high-quality care. such as electronic health records (EHRs) to improve coordination and convenience. However, few providers 2. Objectively evaluate whether these targets were have developed population health data management met, and measure the realized savings. capabilities, or used information technology to stream- 3. Share success in a manner that rewards hospitals line and improve the clinical and administrative aspects and physicians equitably and avoids perverse of care. Most health systems only have limited IT incentives. capacity to coordinate care across settings. To succeed, 24 Accountable Care Strategies: Lessons from the Premier Health Care Alliance’s Accountable Care Collaborative 4. Engage in a process of continued monitoring to together diverse corporate and team cultures is complex. ensure the quality of care is not adversely affected, if Managing this well is critical for fostering the collabo- not improved. ration needed to support the ACO model. ACO planners must take a critical look at the Following these four steps will encourage pro- core competencies the new organization will need in its viders to work together to identify areas of excess or leaders, and then complete an inventory of skills—and waste, such as by avoiding errors or taking advantage of gaps—across the existing organizational leaders. ACOs economies of scale rather than cutting needed services. require leaders who have facility with quality metrics, These principles also will ensure that adequate checks physician leadership, driving culture change, actu- and balances are in place, and any payment policies that arial capabilities, as well as analytics and information conform to them should be allowed. They will safeguard technology. against setting overly aggressive goals, while continuous Leaders should enter into this exercise recog- monitoring of process and outcome measures will keep nizing that the ACO model is, for the most part, a new track of care quality. one, and the core competencies required may well be different from those needed for leadership of health Change Management plans or hospitals. Managing the cultural, operational, and organizational Because ACO management will require an changes necessary are some of the most challeng- unparalleled level of collaboration, flexibility, and coop- ing aspects of creating and maintaining a successful eration, the personality and differences in decision- accountable care organization. making styles among staff also should be assessed. As any health care leader who has gone Human resources tools are available to measure these through an acquisition or merger knows, bringing areas; these could be helpful in matching people to EXHIBIT 9. COORDINATED CARE HIT ROADMAP Transaction Interaction Integration Collaboration Transformation IT supports Basic care Care coordination Seamless care Triple Aim goals realized across individual coordination capabilities coordination with the population providers in capabilities improve and demonstrable delivering care emerge with health status improvement and measuring initial population- measurement in population outcomes based metrics is possible health status • Advanced population analytics Accountable • Continuous process care improvement sustainability • Risk and financial management • Evidence-based standards Population • Team-based care collaboration management • Individual accountability • Outcomes measurement and reporting Clinical • Virtual care team coordination integration • Individual engagement • Clinical decision support Care • Care management and registries coordination • Population analytics • Process measurement and reporting Meaningful • Health information exchange use • Clinical systems (ancillary, EHRs, EMRs) www.commonwealthfund.org25 roles within the new ACO organization and maximiz- not be well suited to roles within the new organization. ing communication and teamwork. Training, incentives, Certainly, a successful ACO will need to shift resources and innovative recruitment policies will help build a from some activities to others, which will affect person- cohesive and effective management team as part of the nel at all levels. For example, an ACO will continue to shift from a hierarchical to a team-based and shared require staff capable of measuring patient satisfaction, decision-making organization. but with a focus on the whole continuum of care, not Assessing leaders’ ability to thrive in an ACO simply the inpatient experience. The ACO will likely will be a difficult exercise, because some people may need additional primary care providers and, possibly, CULTURE CHANGE ISSUES Each component of the ACO is potentially affected by significant culture change issues, as listed below. High-value network: • Developing reimbursement models for physicians • Sharing power with physicians • Focusing on people, not just patients • Shifting toward process-oriented thinking Health home: • Educating stakeholders about the ACO and their role in the organization • Communicating to primary care providers to encourage them to want to change, as opposed to changing because of fear: 1. Success of the ACO is reliant on physicians’ role in driving the new care model 2. Need for a critical mass of engaged physicians 3. Need for one physician champion for each four to five physicians to articulate the ACO’s goals, validate early attempts at improvement, etc. • Ensuring effective processes are in place to foster physician leadership Payer partnership: • Communicating the need for transparency in the market • Implementing a new way of thinking ACO leadership: • Shifting from the siloed approach of care to focusing on the continuum • Addressing generational gaps among providers (for example, how to communicate to providers of the “old school” of thought) • Changing organizational hierarchy so primary care providers are placed at the top of the pyramid • Avoiding the depiction of the ACO in a hierarchical fashion—that is, a network rather than a pyramid People-centered foundation: • Empowering people to manage their care, which will affect their health and provider satisfaction • Facilitating communication among physicians to coordinate care • Dealing with physician autonomy associated with new behaviors (for example, involving the people in care decisions, the use of care models) • Evolving the role of physicians so they work as part of a team Public policy and communication: • Developing a shared understanding of ACO-related terminology • Clearly explaining the net effect and financial ramifications of change and articulating the financial “tipping point” of the new ACO model 26 Accountable Care Strategies: Lessons from the Premier Health Care Alliance’s Accountable Care Collaborative fewer specialists. Because of shifts to more cost-effective ambulance, and is admitted to the inpatient setting sites for various procedures, the ACO may need to close for care. one or more inpatient units (or hospital) and retrain Such examples of individuals “falling through staff for other care venues and functions. Similarly, the cracks” of the health system occur too often. To the ACO may need additional home health and care date, there has been some resistance to allowing added management staff who are able to care for a variety of incentives because of a fear that ACOs will provide patient needs, and fewer bedside nurses assigned strictly marketing material, rather than legitimate health ser- to a single hospital unit. Nurses may be needed for work vices, to consumers. But given that people are typically in different settings, such as call centers. assigned to an ACO, there should be no need for mar- keting to persuade them to “enroll.” Moreover, health Engaging Consumers care providers are often regarded as trusted community In an ACO, accountability should run both ways, with leaders, and should be allowed to take an active role in consumers as well as providers taking responsibility for helping people meet their basic needs. This becomes improving health and wellness. But individuals have even more important in an ACO, particularly because varying levels of health literacy and may face social, some models, including the Medicare Shared Savings economic, or other challenges that stand in the way of Program, do not place any obligations on individuals to improved health. remain within the ACO network. Thus, the only way to Hence, an ACO must give people tools, edu- retain consumers is by engaging them in a wide array of cational materials, and incentives to become engaged care management and care coordination programs. health care consumers. They must introduce and explain the ACO model of care delivery. They also should offer Performance Data incentives to engage people, including free screenings In order to judge their success, ACOs must be able to or wellness services, gym memberships, copayment and measure and assess performance on a broad range of deductible waivers, transportation vouchers, and/or clinical quality, efficiency, and satisfaction measures. financial rewards, for meeting key health goals (e.g., a The ACO’s own internal data will not suffice for the gift card if individuals attend diabetes education classes required activities. To do this, ACO providers will need or complete a health risk assessment). Such incentives access to a much broader set of data for current as well could provide substantial value to consumers, particu- as prior periods for trend analysis, and will need to larly vulnerable populations such as the frail/elderly or coordinate with payer partners to ensure performance the indigent, and will give an ACO the ability to direct reports are accurate, timely, and actionable. and improve care. ACOs typically require de-identified and Consider the following example, shared by aggregated reports with data on utilization, population one of the hospitals participating in the collabora- demographic characteristics (e.g., race, sex, and other tive. A disabled, low-income Medicare beneficiary has characteristics, financial performance, quality scores), uncontrolled diabetes but cannot afford the copayments and other relevant metrics at least quarterly, and and transportation costs to attend diabetes educa- preferably on a monthly basis, to form a comprehensive tion classes or physician visits. The individual does not view of their effectiveness. Moreover, individual meet Medicaid eligibility, but also does not meet the records must be linked across the continuum of service hospital’s charity care guidelines for a reduced deduct- settings. This information is required on an ongoing ible. The health system is legally precluded from waiv- basis to conduct predictive modeling, appropriately ing copayments or providing transportation for free. target services based on the needs of the population, As a result, several times a year when the beneficiary’s evaluate providers’ quality performance, and establish prescriptions run out, the patient lapses into a diabetic performance targets and other interventions. But such coma, arrives at the hospital emergency department via www.commonwealthfund.org27 claims files are often large, unwieldy reports. ACOs there is no single path to the envisioned future, nor is will need to request data in formats that cull through the journey to high-value health care free of obstacles. the “noise” and share reports with stakeholders in a There remain many unknown factors like the digestible, actionable format. following: If an ACO reduces costs, what portion of Moreover, because ACOs take responsibility the savings should it be allowed to keep? How do ACO for an entire population, it is critical for them to participants put in place high-value provider networks? track the services people receive outside of the ACO How should participants forge partnerships with pay- provider network. This can only be done if payer ers based on shared savings and shared data? What partners provide them with claims data from across consumer protections need to be put in place to protect the care continuum. Further, having the full picture people from unintended consequences? How should of services provided is critical to understanding where payments be divided between the physicians, special- opportunities exist to improve care and contain costs. ists, nurses, and others providing care? What financial Equally important, ACOs should have access to benefits will flow to covered individuals? How should pharmacy data to improve quality and reduce costs, even ACOs be organized and led? How fast can ACOs be though pharmacy expenses may not be included in the implemented given the cultural, financial, and operating shared savings calculations. For example, pharmacy data changes required? The authors will explore these issues can be used to identify high-risk cases (e.g., diabetics in future studies assessing organizational readiness to on insulin); monitor medication compliance (e.g., filling pursue accountable care, as well as case studies docu- prescriptions on the right schedule); check appropriate menting best practices and lessons learned from partici- use of medications (e.g., polypharmacy interactions); pants in the Premier collaborative. and identify beneficiaries who will hit the “doughnut Successful deployment of ACOs on a hole” in coverage (risking noncompliance). nationwide scale will require research and testing of the broadest possible range of ACO models. Perhaps even more important, the key to success will be continued CONCLUSIONS AND NEXT STEPS flexibility to test different organizational models, Like many other countries, the United States is look- payer–provider relationships, performance measures, ing for ways to expand access to care while improving and payment approaches, so that ACOs will be truly its quality and efficiency. Over the years, various health able to meet the needs of their communities. Many care delivery models, including the managed care model provider organizations are attempting this work now, of the 1990s, have been tried with limited success. and making assessments as to their effectiveness. No Accountable care organizations offer a dra- one segment of health care can accomplish this work matic shift in health care financing and delivery—a on its own, and success will be easier to achieve with change that will touch virtually everyone providing, good partnerships that span the care continuum. receiving, or funding care. By emphasizing wellness and Ultimately, whether ACOs gain widespread adoption prevention and facilitating clinical integration across will depend on the degree of cooperation that health providers—with people at the center—ACOs have tre- care stakeholders are able to reach. mendous potential to improve population health. But 28 Accountable Care Strategies: Lessons from the Premier Health Care Alliance’s Accountable Care Collaborative 9 NOTES “Billings Clinic Enhances Quality of Care Under 1 Federal Demonstration Project” (Billings, Mont.: Centers for Medicare and Medicaid Services, “NHE Billings Clinic, July 11, 2007), available at http:// Fact Sheet” (Washington, D.C.: CMS), available at www.billingsclinic.com/body.cfm?id=568. http://www.cms.gov/NationalHealthExpendData/ 10 25_NHE_Fact_Sheet.asp. American Academy of Pediatrics, “Children with 2 Special Health Care Needs” (Elk Grove Village, Ill.: G. Claxton, B. DiJulio, B. Finder et al., Employer AAP), available at http://www.aap.org/healthtop- Health Benefits 2008 Annual Survey (Henry J. Kaiser ics/specialneeds.cfm. Family Foundation and Health Research and 11 Educational Trust, 2008), available at http://ehbs. A. Gawande, “The Hot Spotters,” The New Yorker, kff.org/pdf/7790.pdf. Jan. 24, 2011. 3 12 http://whynotthebest.org/pages/maps. G. D. Steele, J. A. Haynes, D. E. Davis et al., “How 4 Geisinger’s Advanced Medical Home Model G. M. Gaul, “Bad Practices Net Hospitals More Argues the Case for Rapid-Cycle Innovation,” Money,” Washington Post, July 24, 2005, available at Health Affairs, Nov. 2010 29(11):2047–53. http://www.washingtonpost.com/wp-dyn/content/ 13 article/2005/07/23/AR2005072300382.html. TeraMedica Healthcare Technology, “Aurora Health 5 Care: Medical Images… By Special Request” Centers for Disease Control and Prevention, (Milwaukee, Wis.: TeraMedica, Inc., 2009), avail- “Chronic Diseases: The Power to Prevent, The Call able at http://www.teramedica.com/component/ to Control: At A Glance 2009” (Atlanta, Ga.: CDC), docman/doc_download/6-aurora-case-study.html. available at http://www.cdc.gov/chronicdisease/ 14 resources/publications/AAG/chronic.htm. L. Welch, “Aurora Launches Technology-Driven 6 Biobank,” WTN News, April 29, 2009. Premier, Inc., “New Accountable Care Organization 15 Collaboratives Will Focus on Creating Healthier S. M. Shortell and L. P. Casalino, “Health Care Communities” (Charlotte, N.C.: Premier, Inc., May Reform Requires Accountable Care Systems,” 20, 2010), available at http://www.premierinc.com/ Journal of the American Medical Association, July 2, about/news/10-may/aco052010.jsp. 2008 300(1):95–97. 7 16 Anthem Blue Cross, “Monarch Healthcare, Congressional Budget Office, “Option 37: Allow Healthcare Partners, and Anthem Blue Cross Physicians to Form Bonus-Eligible Organizations Chosen for Innovative National Healthcare and Receive Performance-Based Payments” Budget Program” (Thousand Oaks, Calif.: Anthem Blue Options, Volume I: Health Care (Washington, D.C.: Cross, March 2010), available at http://www. CBO, Dec. 2008), available at http://www.brook- anthem.com/ca/health-insurance/about-us/press- ings.edu/~/media/Events/2009/3/11%20aco/cbo- releasedetails/CA/2010/439; and American healthoption37.pdf. Medical Group Association, “Press Ganey, 17 American Medical Group Association Join Forces American Hospital Association, “The Work Ahead: to Improve Accountable Care Organization Patient Activities and Costs to Develop An Accountable Experience” (Alexandria, Va.: AMGA, Jan. 2011), Care Organization” (Washington, D.C.: AMA, April available at http://www.thestreet.com/ 2011), available at http://www.aha.org/aha/con- story/10959920/1/press-ganey-american-medical- tent/2011/pdf/aco-white-paper-cost-dev-aco.pdf. group-association-join-forces-to-improve-account- 18 National Committee for Quality Assurance, HEDIS able-care-organization-patient-experience.html. and Quality Measurement (Washington, D.C.: 8 U.S. Department of Health and Human Services, NCQA), available at http://www.ncqa.org/tabid/59/ “National Quality Strategy Will Promote Better default.aspx. Health, Quality Care for Americans” (Washington, 19 Center for Medicare and Medicaid Innovation, D.C.: HHS), available at http://www.hhs.gov/news/ “Seamless and Coordinated Care Models” press/2011pres/03/20110321a.html. (Washington, D.C.: CMMI), available at http:// innovations.cms.gov/areas-of-focus/seamless-and- coordinated-care-models/. www.commonwealthfund.org29 20 “Aetna and Carilion Clinic Announce Plans to Collaborate on Accountable Care Organization” (Hartford, Conn.: Aetna, Inc., March 10, 2011), available at http://www.aetna.com/news/newsRe- leases/2011/0310_Aetna_and_Carilion.html. 21 “Norton Healthcare and Humana Launch Accountable Care Organization in Louisville, Ky. Program Intended to Increase Quality and Efficiency of Health Care” (Louisville, Ky.: Norton Healthcare, 2010), available at http://www.norton- healthcare.com/body.cfm?xyzpdqabc=0&id=1402& action=detail&ref=356. 22 “CIGNA and Piedmont Physicians Group Launch Accountable Care Organizaiton Pilot Program in Atlanta for Better Care Coordination” (Bloomfield, Conn.: CIGNA, Sept. 7, 2010), available at http:// newsroom.cigna.com/article_display.cfm?article_ id=1242. 23 “Fairview and Medica Sign Contract That Addresses Health Care Cost, Quality” (Minneapolis: Fairview Health Services, July 24, 2009), available at www.fairview.org/About_ Fairview/Newsroom/c_659762.asp. 24 “Regional Integrated Behavioral Health Networks Act,” HB 2982, Illinois Legislature, 2011, available at http://www.ilga.gov/legislation/fulltext.asp?GAI D=11&SessionID=84&GA=97&DocTypeID=HB&Do cNum=2982&LegID=60319&SpecSess=&Session=; and “Medicaid Accountable Care Organization Demonstration Project,” S2443, 214th New Jersey Legislature, 2011, available at http://www.njleg. state.nj.us/2010/Bills/AL11/114_.htm. 25 Camden Coalition of Healthcare Providers, “Care Management Program: An Initiative to Reduce Unnecessary ED Utilzation in Camden” (Camden, N.J.: CCHP), available at http://www.camden- health.org/programs/care-management-program/. 30 Accountable Care Strategies: Lessons from the Premier Health Care Alliance’s Accountable Care Collaborative 1150 17th Street NW One East 75th Street Suite 600 New York, NY 10021 Washington, DC 20036 Tel 212.606.3800 Tel 202.292.6700 www.commonwealthfund.org