Physicians Need to Lead Accountable Care Organizations to Protect Profession

November 12, 2010

November 12, 2010 — Physicians need to beat hospitals to the punch in forming accountable care organizations (ACOs) under the new healthcare reform law, or else their income and professional independence will decline, according to a perspective article published online November 10 in the New England Journal of Medicine.

"After decades of hospital hegemony, we stand at another crossroads," write Robert Kocher, MD, a nonresident senior fellow at the Brookings Institute, in Washington, DC, and a former special assistant to President Barack Obama on the National Economic Council, and coauthor Nikhil Sahni, from Harvard Business School, in Boston, and the John F. Kennedy School of Government, Harvard University, in Cambridge, Massachusetts. "Physicians may be able to gain market leadership if they move first."

However, the authors point to hurdles that physicians must first clear; namely, the need to collaborate across specialties, hire skilled managers, and raise capital for sophisticated information technology systems.

The article represents the latest anxiety attack in medicine about ACOs, created by the Affordable Care Act as a means to deliver improved care to Medicare patients and save money in the process. The Centers for Medicare and Medicaid Services (CMS) defines an ACO as an organization of providers "that agrees to be accountable for the quality, cost, and overall care of Medicare beneficiaries" assigned to it.

In addition to receiving the usual fee-for-service reimbursement from Medicare, an ACO can receive a share of any savings if annual per capita expenditures for their patients come under a specified benchmark, provided the ACO also meets quality performance standards. The benchmark for Medicare expenditures that ACOs will try to beat includes hospital services, where healthcare reformers hope to reap big savings by reducing unnecessary admissions, avoidable complications, and readmissions.

Hospitals Have Organizational, Financial Advantages

The quest to curb spending on inpatient services raises the question of hospital participation in ACOs. Under the Affordable Care Act, the cast of players in an ACO can take several forms — a single medical group, a network of medical groups, a hospital and its employed physicians, a joint venture between hospitals and independent physicians, or some other structure approved by the government.

ACOs that consist exclusively of physicians will need to contract with hospitals to control inpatient costs through wiser admissions and better coordination of care. In the other specified ACO models, hospitals are at the helm, although 1 model lets them share it with independent physicians.

In their article, Dr. Kocher and Sahni write that control of ACOs will come down to "2 possible futures" — control by independent physicians, or control by hospitals and their ever-increasing cadres of employed physicians. They predict that neither model will likely dominate throughout the entire country, with hospitals preeminent in areas where the physician base is fragmented and physicians on top where well-functioning group practices reside.

In still other areas, it is a toss-up as to who will take charge of ACOs, and here, hospitals will have an edge, as "they traditionally have more management talent, accounting capability, [and information technology] systems, and cheaper access to capital than do physician groups," the authors write. In addition, physicians have a poor track record in banding together and agreeing on matters clinical and financial, especially when it comes to splitting money between primary care physicians and specialists.

Despite these handicaps, physicians need to take the initiative in forming ACOs, according to Dr. Kocher and Sahni.

"If hospitals come to dominate ACOs, they will accrue more of the savings from the new delivery system, and physicians' income and status as independent physicians will decline," they write. "Once relegated to the position of employees and contractors, physicians will have difficulty regaining income, status, the ability to raise capital, and the influence necessary to control health care institutions."

The authors predict a financial downturn for hospitals if physician take charge of ACOs resulting from fewer admissions and scant growth in outpatient services, as "physicians are likely to self-refer."

"Us-vs-Them" Mentality

Similar to Dr. Kocher and Sahni, organized medicine has preached the need for physicians to assume a leadership role in ACOs. However, Glen Stream, MD, president-elect of the American Academy of Family Physicians, told Medscape Medical News that the journal article struck him as too preoccupied with the physician–hospital power struggle.

"It reads like us-vs-them," said Dr. Stream, the chief medical information officer in a large multispecialty practice in Spokane, Washington. "The real point of ACOs is creating organizations that deliver the best possible care and save the system money. I don't think it will be accomplished by 1 group trying to dominate the other. It has to be about patients."

Likewise, Harold Miller, executive director of the Center for Healthcare Quality and Payment Reform, told Medscape Medical News that the article presents "a very misleading caricature of the ways that ACOs can be created.

"It's just plain wrong to state that ACOs have to be 'controlled' either by hospitals or doctors and to imply that whichever isn't in control is going to be relegated to the equivalent of poverty and serfdom," said Miller. "There are many examples around the country of independent physicians and hospitals successfully working together to manage global payments in ways that benefit both of them, as well as patients."

AMA: Give Physicians Upfront Grants to Form ACOs

Criticisms of their journal article notwithstanding, Dr. Kocher and Sahni are not alone in their apprehension about powerful hospitals and health systems calling the shots in ACOs. A trade group for independent practice associations (IPAs) — seen as natural building blocks for ACOs in some quarters — essentially asks the same question Dr. Kocher and Sahni raise in their article.

"Will [IPAs] step up to the plate to lead in the formation of ACOs, or will they let their physician members be herded by market forces into other, more powerful organizations, such as hospital-led health systems, or large integrated physician organizations?" write Albert Holloway, Jr, president and chief executive officer of The IPA Association of America (TIPAAA), and healthcare consultant Hal Sadowy, PhD. The TIPAA Web site states that the group represents more than 303,000 physicians affiliated with IPAs.

In September, the American Medical Association (AMA) asked the Obama administration to help physicians participate in ACOs, "and not inadvertently bias participation in favor of large health systems and hospital-dominated groups." One AMA worry is that physicians forming ACOs could run afoul of federal laws that prohibit self-referrals, payments for referrals, collective bargaining by independent physicians, and hospitals paying physicians to limit care. So the AMA is urging the Obama administration to give physicians the waivers and safe harbors they need to operate without legal fear.

Yesterday, the AMA went a step further and released a set of principles for ACOs, emphasizing that these groups must be physician-led and enable independent physicians to get involved. To level the playing field, CMS should give grants to medical groups to help cover ACO start-up costs, the association recommended.

For all the incessant discussion of ACOs, CMS is still in the process of drafting rules and regulations for how these organizations will function. The federal program for ACOs to share in Medicare savings is set to debut in 2012.

N Engl J Med. Published online November 10, 2010.

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