An ACO Visionary Talks Implementation, Healthcare Reform

Eli Adashi, MD, MS, CPE; Elliott S. Fisher, MD, MPH


January 25, 2012

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Eli Y. Adashi, MD, MS, CPE: Hello. I am Eli Adashi, Professor of Medical Science at Brown University and host of Medscape One-on-One. Joining me today is Dr. Elliott Fisher, The James W. Squires Professor at Dartmouth Medical School. A noted health policy expert, Dr. Fisher is also the Director of the Center for Population Health at the Dartmouth Institute for Health Policy and Clinical Practice. Welcome.

Elliot S. Fisher, MD, MPH: Wonderful to be here.

What Is an Accountable Care Organization?

Dr. Adashi: One of the most talked about elements of the Affordable Care Act is the Accountable Care Organization, or ACO for short. Perhaps we can start with the definition. What is an ACO?

Dr. Fisher: An ACO is a group of physicians, hospitals, and other providers who come together to take responsibility for the care of a defined population of patients. In turn, they will be rewarded if they improve quality and if they slow the growth in health spending. It's a new model of care intended specifically to be flexible so that the diverse settings within which physicians practice around the United States are able to start working together in ways that they have not been able to do before and with rewards that they have not been eligible for before.

Where Did the Idea for ACOs Originate?

Dr. Adashi: What can you tell us about the origins of the ACO? Is there a particular parentage or provenance that our viewers might want to be informed about?

Dr. Fisher: The idea germinated early in the 1990s when we were trying to think about how we could encourage physicians, hospitals, nursing homes, and others within communities to work together to better coordinate care for the populations they all serve. We recognize that fee-for-service medicine rewards us for each encounter but doesn't really create ways of supporting our work together, and it actually started in the small community of Randolph, not more than 50 miles from the Dartmouth campus.

Dr. Adashi: In Massachusetts?

Dr. Fisher: No, it was Randolph, Vermont. Because we knew the resident population of the town of Randolph, we could calculate how much it would cost to take care of them for a year and we could estimate what it would cost to take care of them the following year. With some partnerships with private payers and with Medicare, we thought, "Gosh, if we can predict what it will be next year, if we allow the physician and hospital to work together to improve care, they would be able to capture a share of that savings."

That was the germ of the idea. It certainly looked back to health maintenance organizations and the integrated delivery systems like Kaiser or like Group Health Cooperative of Puget Sound, which had been in place for years and years. But those systems comprise only about 10% of physician practices within the United States. Most physicians didn't want to work as employees of a large organization, and we were trying to look for models that might allow physicians in small, office-based practices to be rewarded for coming together to better coordinate care.

What Are the Benefits of an ACO?

Dr. Adashi: If I were to encapsulate this as, say, "increased quality, decreased cost, and population health," would I be capturing the entire essence of the concept or is there something still missing?

Dr. Fisher: You're certainly capturing the aim. The aim is to create ways for physicians and others to work together to improve quality and to lower costs and improve population health. The challenge in American policy and in American practice was figuring out how we could do that: How can we create incentives and structure new payment models that might allow us to foster collaboration among physicians who are currently in their office working together with each other but not being rewarded for it?

How Was the ACO Incorporated Into the Affordable Care Act?

Dr. Adashi: As somebody who was involved with the crafting of the Affordable Care Act, can you share with our viewers some insights as to how the incorporation of the ACO idea ended up in the bill and what kind of permutations, adjustments, and revisions transpired in the process?

Dr. Fisher: The idea really started to germinate successfully at a meeting of the Medicare Payment Advisory Commission (MedPAC). It's the major congressionally authorized body that recommends to Congress changes in Medicare. We presented some findings from our own research here at Dartmouth to the Commission, and we showed what most physicians know perfectly well: We tend to practice as natural networks of collaborating small office practices around 1 or maybe 2 hospitals; we refer to our colleagues who we've gotten to know. We showed that most physicians practice in these naturally coherent networks, and we suggested that they consider a way of revising the Medicare payment program and that private payers consider revising the payment programs so that if the physicians in that group could demonstrably improve their care for their patients, they would capture a share of the savings that they receive from those care improvements.

We don't do a very good job necessarily around the transition of care from hospital to practice. There's no incentive that rewards us for making sure we communicate effectively among specialists and primary care physicians, and they actually seemed to like the idea of an incentive. At that meeting, the Chairman of the Commission, Glenn Hackbarth, said, "We need a better name than the one you've proposed, Elliot." I won't even repeat the name. It was a horrible name. He said, "How about we call them Accountable Organizations," and I said, "I think we need a little 'care' somewhere in there. How about we call them Accountable Care Organizations?" So, part of this germination of the idea was at that point, and MedPAC itself started working on the concept. The rest of the story was that when Dr. Mark McClellan left Medicare, left the Bush administration; he stepped down and we started to work together to say, "How can we take this idea that would let physicians across the country, who don't necessarily want to be employees of Kaiser, come in to a new model?" And we worked quite closely with Congress to sharpen the idea. We worked with MedPAC, with DMA [Division of Medical Assistance], and with the hospital associations. We worked with consumer groups as well to modify this germ of an idea to create something that we all might support.

MedPAC Endorsement

Dr. Adashi: In a sense, the endorsement of MedPAC sounds like it had a great deal to do with the momentum that ultimately was acquired. Although it also sounds as if significant legwork was still required with the various hospital associations, with Congress and the American Medical Association, but the train was out of the station.

Dr. Fisher: The idea had germinated. We started to write about it. We published a few articles. MedPAC had a chapter of one of its reports on ACOs. The next big step was that we did some further modeling along with Dr. McClellan, [now] of the Brookings Institution, to figure out how this might work financially for Medicare. We worked quite closely with the Congressional Budget Office, which did some calculations that also showed that this payment model would save money. Congress has spending rules such that you can't spend more in one area if you don't save in another. Once the budget office scored this proposal as saving the federal government a little money, suddenly everyone in Congress was much more willing to think about having this proposal included in the legislation with a second probable piece of the partnership.

The Final Rules on ACOs

Dr. Adashi: The Affordable Care Act now dates back to March 2010, and almost 2 years later, the final rules that regulate ACOs will take effect. What does this mean to the various parties that may have an interest in taking part in an ACO? What does January 3, 2012, in effect, mean?

Dr. Fisher: There are a number of ACO programs that are under way under the federal legislation, but the national program, referred to technically as the Medicare Shared Savings Program, had the final rules released on October 20, 2011,and people will be able to begin applying for this new payment model starting in January.

Dr. Adashi: So, the whole process is actualized and kicks off beginning January.

Dr. Fisher: The doors open in January. There will be an application process, and the key requirements are that a group of physicians, or a physician in the hospital, be able to define an organizational structure that will take accountability for a population of Medicare patients that's of sufficient size and for which we can measure the cost and quality of care for that population.

You have to have an organizational entity that can take responsibility. There must be enough primary care physicians in that entity who are caring for enough Medicare beneficiaries that can be identified. We must be able to track performance and estimate targets and spending targets against which to calculate the savings. That process of defining the eligible organizations has been done -- it's not too arduous a process. Medicare was tremendously responsive to the comments that many made; these can be physician-led organizations or they could be hospital-led organizations, but they have to include representation from all parties and their special programs must be authorized to support physician-led organizations moving forward. Many physicians are quite nervous that this will be another grab by the hospitals to run our lives, and there are special programs being put in place to provide capital upfront to physician organizations that want to step forward and do this, if they currently don't have enough resources to build the infrastructure to do it.

Do Community-Based Organizations Fit Into ACOs?

Dr. Adashi: As these ACOs are being formed, their constituencies are likely to include, but may not be limited to, physician associations or organizations of varying sizes, obviously hospitals or healthcare systems. Would community-based organizations be a party to some of these arrangements, and are we overlooking potential other parties?

Dr. Fisher: I think there's a very strong openness to a variety of government structures as long as they include enough primary care physicians to make these organizations have a sufficient clinician size to manage the care of a particular population. It is not required that hospitals be members of these organizations. Many of the applicants are likely to be physician networks, independent practice associations (IPAs), or community-based collections of docs who've decided to come together, but the providers have to be part of it. There needs to be a strong community and consumer membership representation. The ACOs need to demonstrate their commitment to engaging consumer organizations because they are intended to make care better in our communities and make it more affordable for our children.

Dr. Adashi: Apart from the indispensability of providers in the mix, this sounds very much like an effort that would need to document that it can, in fact, care for a meaningful population of patients and that the necessary resources, human and otherwise, are in fact at the table.

Dr. Fisher: That's the critical piece of the application process. For you to be eligible to participate in this program, you will have to convince Medicare in your application process that you have the capacity to do this, that you're willing to report on the performance measures that are required to track quality. You must show that you have a sufficient population size and that you've thought about how you're going to do care transitions and how you're going to inform patients about what's going on for them. The plan you've suggested must be exact.

The Importance of Care Coordination

Dr. Adashi: Maybe we have not emphasized as much as we should have the issue of coordination, although it obviously falls under the rubric of quality. But perhaps it deserves additional emphasis.

Dr. Fisher: It's very clear that the measures of quality that the government will be relying on include some measures that we would think of as technical quality. How are we doing on preventive services? For example, how are we doing in diabetic care? Many of the measures are already used to form other physician quality-measurement initiatives, but these measures also require surveys of patients who will be asked, "Were you able to get in to see the doctor when you wanted to?"

Dr. Adashi: So the quality of the experience.

Dr. Fisher: The quality of the experience and of care transitions. Was care well coordinated? This is a high priority for this very vulnerable population of patients with multiple chronic illnesses who do make transitions across settings of care.

Better American Medicine

Dr. Adashi: It may not be an exaggeration to say that the ACO at its best will implement some of the best features of American medicine as we would like to see it.

Dr. Fisher: I think there's a tremendous opportunity for us to step off the treadmill that so many physicians feel they're running on. It's probably better to think of a hamster wheel that's turning; they cut the fees and you have to just run that much harder. The major aim of this is to figure out a way to support clinicians, physicians, nurses, and others in their capacity to deliver the best possible care through this new payment model that, while not overly generous (because it puts some responsibility on us for savings), is very much intended to say, "How can we create the best possible care for the patients we serve?"

Which Party Will Lead?

Dr. Adashi: You alluded earlier to some concerns as to who might lead. From the point of view of the regulations, are there any expectations as to which party might be expected to lead? Or which party is most appropriate to lead? Or is that left wide open to be decided in the review process of the various applications?

Dr. Fisher: I think there is recognition that to do the work requires real resources. It requires an investment. It requires putting in place electronic health records that can help us make sure we know where our patients are. It requires new governance models that find ways of creating new relationships among physicians and hospitals; it requires care management. Who it won't be necessarily is the physician who's taking the complex frail elderly person and helping them manage the trajectory. It will be a nurse or a social worker. It's going to require resources to effectively transition from our current care models to the new care models that can really deliver on the potential of American medicine. Most physicians in small office practices don't have access to that kind of capital or resources. So there is legitimate concern on the part of smaller physician groups, smaller office practices and physicians; they believe they're going to be vulnerable to hospitals, who seem to have all the money in the current system.

That said, Medicare has established this specific program I mentioned -- the advanced payment model -- and there are lots of private payers and shared service organizations who are trying to build the capacity to support physicians leading these initiatives. I think it's a very open question as to who will succeed in the long run. We know that if you look for the waste in American medicine, most of it is in the hospital sector. At Dartmouth, I spent my first 20 years working on something called the Dartmouth Atlas of Health Care; we've shown dramatic variations in spending and quality across the United States and tremendous potential to achieve savings. Most of those savings will come from reducing avoidable hospitalizations. Physician leadership and physicians' willingness to step forward and say, "We will make this model work" creates a great opportunity for them to capture those savings from the hospitals.

There are many hospitals that are nervous that this model will be hard for them to be partners in. We've been working with a number of early ACO initiatives in Tucson, Arizona, and Southern California, and those are physician-led initiatives where physicians have majority control over the operations. One has a strong partnership with a hospital, but the other two that I'm most familiar with are purely physician-led, and they'll be choosing which hospitals they want to work with based on what kind of partnership is offered in care transitions and care management and what kinds of services they can expect from the hospitals.

Are Integrated Health Centers Likely to Get Involved?

Dr. Adashi: As someone who is close to this evolving scene, is it your sense that integrated health centers, including academic health centers, are more likely to be involved? Are other providers at the forefront of this movement or is it really an equal-opportunity employer with grass-roots movements all over the place?

Dr. Fisher: Academic medical centers will be quite challenged to succeed under this model. They've got some ways of practicing. They're just as tied to the fee-for-service system as everybody else is. There are160-odd places that we recognize around the country involved in these ACO initiatives and the vast majority are not academic health centers. It's likely that the nimble smaller initiatives, not tied to current academic promotion and structures, may have an easier time demonstrating that this model can work. I have been really struck by watching our Tucson ACO and its variation on the Southern Arizona ACO; it's a very promising initiative.

Will Americans Use ACOs?

Dr. Adashi: What would be your projections as to the number of Americans who would be enrolled in an ACO in the near term? And to the extent that you can project -- and I realize this may be difficult -- if we were to have this conversation a decade from now and all your dreams were to come true, how many Americans might be cared for by an ACO?

Dr. Fisher: First we should remember Niels Bohr. He said, "Prediction is really tough, especially about the future." So I'm glad you framed that around my hopes as opposed to my confident prediction. But in the near term, I think we'll have several hundred organizations caring for tens of thousands. So we can do the math. It won't be huge at the outset. It may grow rapidly. I think it's very important for us to recognize that there are 2 ideas at heart here: One idea is the notion that we will transition to more integrated systems, whether they're virtual or real, that are capable of managing patients' care over time. I hope that 100% of Americans are in organizations that are committed to taking good care of them wherever they are and not based on the patients having to drop in to find their doctor. We need to make that transition. Whether you're on the right or the left of the political spectrum, the notion toward integrated, coordinated care is coming. And if that's what you mean by accountable care, I'm hoping for 100% of that notion of accountable care -- we want to be responsible for all of our patients. This is about creating a path for physicians to move toward better ways of providing care.

Making Money as Reimbursements Fall

Dr. Adashi: Perhaps one way of thinking about the efforts currently under way under the leadership of the Centers for Medicare & Medicaid services is as a catalyst for the movement you envision. This may have much broader implications and really reemphasize what we may have underemphasized before: that coordinated and managed care all seemed to be long overdue.

Dr. Fisher: I think Medicare is one catalyst, but every major health plan has multiple initiatives under way in their current payment models to test these new approaches, and it may start with episode payment where you might be paid a single amount for a hip replacement over 90 days. This is very much about starting the conversation between hospitals and physicians about how you're going to coordinate care.

The patient-centered medical home, the redesign of primary care practice, is very much about getting primary care physicians to be conscious of their responsibilities and capable of managing care over time for a population of patients. I think that's where we're going. Any physician who thinks fee-for-service medicine is going to continue without stress hasn't been reading the newspapers. We know fees are going to fall. They're probably going to fall further if the sustainable growth rate fix isn't straightened out. That could make things even worse than they're predicted to be. We know Medicare fees are not going to keep up with medical inflation. They're going to be below medical inflation. These new payment models, whether bundled payments, ACOs, medical home, all offer physicians a way to start thinking, "How can I hedge my bets? How can I make this transition to a new way of practicing?" And there is this strong window of opportunity; the federal government, for the moment, is willing to help with new programs and new rewards.

Dr. Adashi: Changes are coming.

Dr. Fisher: Change is coming.


Dr. Adashi: On a personal note, perhaps you could share with our viewers what it is that led you to medical school and into health policy.

Dr. Fisher: It's an interesting story. I grew up with a very famous lawyer father (Roger Fisher, Director of the Harvard Negotiation Project) who cast a long shadow and wrote a book called Getting to Yes, which everyone should read because it turns out to be pretty useful. I had to run away from him for a long time. I didn't know what I would do. In college, I majored in mountaineering. Actually, that was not possible, so I had to minor in East Asian studies and I still was completely unsure what I would do with my life. After graduating, I decided to drive an ambulance in Somerville, Massachusetts, 5 miles from where I'd grown up. And kids in Somerville were dying of things that my classmates didn't get, like asthma and juvenile-onset diabetes -- actually, a couple of kids had juvenile-onset diabetes in my class in my private school but no one was dying of it -- and there were kids dying of it in Somerville. I saw how poor the care was and I thought, "Gosh, I'm enjoying being on the ambulance. It's kind of exciting to do this clinical work and it's not in law." I knew we had an opportunity to make a difference through policy if we could just get people to pay attention and help the system change so that doctors could be more effective in their practices. I do have to pinch myself a little bit 30 years after medical school; not only did I have a chance to have 25 years of wonderful clinical practice, but now I get to be involved in health policy as well. You know, that's an awful lot of luck.

Dr. Adashi: You are making a difference. Thank you very much.

Dr. Fisher: Thank you.

Dr. Adashi: On this note, sincere thanks to Dr. Fisher and to you, our viewers, for joining Medscape One-on-One. Until next time, I am Eli Adashi.


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