Ready or not…
There is no denying that healthcare reform continues to be at the forefront of everyone’s mind these days. With the recent changes in the House of Representatives, many people are wondering if healthcare reform will be repealed. Congress will likely work to cut the budget for the newly formed Centers for Medicare & Medicaid Services (CMS) Innovations Center, and this will slow down innovations that drive down healthcare costs. It will also turn the focus to revoking mandatory healthcare coverage for all Americans, because that adversely impacts large insurance companies and taxes.
While repeal remains to be seen (though the general consensus is no), the Accountable Care health model will go forward, and perhaps even faster than you think. The reason? It’s being driven largely by the private sector (insurance companies and large hospital systems), not CMS.
The driving factors are clear. Accountable Care Organizations (ACOs) were created as a cost-control measure for Medicare, driven largely in part by private insurance companies, not by the government.
ACO Demonstrations In Full Swing (Source: The Camden Group)
Medicare Pilot Sites
Carilion Clinic (Roanoke, VA)
Norton Healthcare (Louisville, KY)
Tucson Medical Center (Tucson, AZ)
Private Payer Pilot Sites
Anthem Blue Cross/Blue Shield (Multistate)
Monarch Healthcare (Orange County, CA)
Advocate Health Care (Blue Cross/Blue Shield of Illinois)
Healthcare Partners (Torrance, CA)
And it’s tough to argue with the goals of the Accountable Care model because when physicians, hospitals, and other provider types in the continuum of care all work together to prevent readmissions and other unnecessary costs, while also providing more accountable care for patients, healthcare is less expensive and safer.
The contingents that will perhaps feel the biggest impact of ACOs are the post-acute and long-term care providers that are referred to as continuing care providers (CCPs). This group has undergone some recent changes in that many providers have added home health and hospice to their continuum of care. With the advent of ACOs, the industry is evolving into a complete range of care for patients, and CCPs are an important part of the new structure. It is important that providers understand that they are auditioning to work with ACOs and be fully prepared to show they’re providing the highest care at the lowest cost.
ACOs need the ability to provide services in the lowest cost venue and they must have enough primary care physicians to provide necessary services. CCPs should begin preparing to partner with ACOs prior to the upcoming implementation. This means understanding the basics about ACOs and showing value to form strong and lasting partnerships.
IN THE BEGINNING…THERE WERE ACOS
There are a number of ACO pilot programs in operation and the formal program will begin implementation in January 2012. The final set of rules around forming an ACO will be made available by October 2011.
In terms of formation, it is important to keep in mind that ACOs must have primary care physicians and enroll at least 5,000 Medicare beneficiaries. There are a number of organizations (e.g., Brookings-Dartmouth, Premier, and AMGA) that are assisting hospitals in aligning with physicians to get them prepared for the processes and procedures that are part of ACOs. For example, if a beneficiary’s physician is in the ACO, the beneficiary will automatically be part of the ACO as well. Having 5,000+ beneficiaries is important in order to mitigate the potential risks of high-cost patients among the ACO’s fee-for-service Medicare beneficiaries.
Most ACOs under development today are hospital-driven. ACOs require an enormous IT platform for operation and EHR and EMR congruity will be required. Some hospitals own post-acute care continuums or they create a continuing care network to meet certain quality and outcome criteria. An effective post-acute continuum allows for easy and quick transfers from hospitals and reduced or eliminated readmissions. Emergency department admissions are also lowered and this results in reduction of cost since ED visits are so expensive. Finally, patients with higher medical acuity are managed more effectively. Hospitals looking to be an ACO either can own a continuum, create a continuum of selected providers, or form a joint venture with a Medicare skilled facility.
SHOW ME THE MONEY
The question on everyone’s mind is undoubtedly, “How will we be paid?” There is not just one answer to this question as there are several ways that payments will occur in an ACO. The following provides a brief overview of each option.
Shared Savings Program. Most payments will be received through shared savings. “For each 12-month period, participating ACOs that meet specified quality performance standards will be eligible to receive a share (a percentage, and any limits to be determined by the Secretary) of any savings if the actual per capita expenditures of their assigned Medicare beneficiaries are a sufficient percentage below their specified benchmark amount.”1 This means that ACOs will receive an average payment for a beneficiary and CMS will then run a projection. If the cost goes up from the projection, a target for reduction will be presented so that the ACO can share in savings.
Medicare Fee-For-Service. Another method of payment is a provider-paid Medicare fee-for-service in which providers are paid for each service rendered to a patient. If providers effectively manage services, this will drive down cost and the ACO will get a share of the savings. Providers will also be eligible to receive additional payment for shared savings if the ACO meets the quality performance standard, and the ACO’s estimated average per capita Medicare expenditures for Parts A and B is at least a specified level below the designated benchmark.
Bundled/Episode-Based Payment. Perhaps the biggest paradigm shift is that CMS will no longer be the payer for continuing care and that this responsibility will come from the ACO and, for some conditions, will be in the form of bundled payments. The shift makes CCPs cost centers for ACOs. This type of payment reimburses providers for expected costs for clinically defined episodes of care and was developed as a strategy for reducing healthcare costs. Bundled payment opposes unnecessary care, supports coordination across providers, and may result in improved quality of service.
Capitation. Under a capitation system, providers are paid a set amount for each enrolled person assigned to that physician or group of physicians, whether or not that person seeks care over a period of time. As ACOs achieve full capitation, portions of continuing care will also be capitated. Capitation is projected to be the primary payment mechanism by the end of the decade.
It is important that providers understand that they are auditioning to work with ACOs and be fully prepared to show they’re providing the highest care at the lowest cost.
WHAT’S NEXT FOR CCPS?
So, what does this mean for CCPs? There is no denying that ACOs are on the horizon and providers need to be ready for them when they arrive. By 2017 or 2018, it is likely that all hospitals will be part of a local or regional ACO. According Loren Claypool, vice president and managing director of VCPI, Milwaukee, Wisconsin, “ACOs are looking for ‘one-stop shopping’ for post-acute care and there are a few options that a provider can do to thrive.”
Key ACO Milestone Dates
October 2011: Final set of rules to form ACOs available
January 2012: Formal implementation of ACO program begins
December 2013: ACO program implementation concludes
Own the continuum for its specialty area (e.g., rehab, wound care, etc.).
Develop a continuing care network.
Establish joint ventures by operating skilled nursing facilities on hospital property. (This trend is already currently happening because it is so easy and cost-effective to transfer back and forth.)
The next couple of years will require us all to live in two worlds. CCPs will need to take lots of Medicare patients with a focus on those who need rehabilitation, all while preparing for the payment system from ACOs. There are a number of next steps for CCPs to take in preparation today for the full implementation of ACOs in the near future.
Collect and use data to determine cost and patient outcomes, and any changes that can be made to improve these. This includes information demonstrating patient outcomes tied to cost and readmissions, determining the number of subacute patients that go home (Medicare Part A/Part B), and disclosing 30-day readmission rates by condition. Take this information and meet with C-Suite executives at hospitals to determine how you might best partner with them.
Be familiar with what is going on in the market. The Accountable Care model is always in the news. Make sure you are keeping up with what is being said and done. The Brookings-Dartmouth Collaborative is a great place to learn more about ACOs and find peers who may be able to share experiences.
Know where referrals are coming from. Use this information to determine how those relationships might be strengthened to increase referrals.
Listen to the needs of the hospitals. CCPs should be proactively engaging with targeted hospitals to do market assessments and learn from them what their needs are. This will help CCPs understand where and how they can fit into the ACO model. Ask to create a joint-operating committee to create care pathways, or take some time to develop expertise with staffing and go back to the hospital with proof that you are the best partner for them.
Make staff adjustments to meet industry needs. The transition to the care continuum and the requirement of dealing with more medically complex patients is driving current staffing needs. RNs and nurse information specialists are needed, as are nurse practitioners, who can provide 24/7 coverage for higher acuity patients. Providers should make sure their staff is properly positioned to meet these challenges.
As quickly as possible, get your EMR house in order. ACOs will be data-driven organizations and the outcomes on which your competitive edge depends must be easily reportable out of your clinical systems. No data, no seat at the ACO table.
Use this information to determine how those relationships might be strengthened to increase referrals.
ACOs are all about creating greater accountability in healthcare delivery. There are many ways for CCPs to be involved and with 2012 less than two years away, now is the time to start. LTL
Kathleen Griffin, PhD is National Director, Post Acute & Senior Services of Health Dimensions Group, a senior living healthcare management and healthcare consulting firm. She can be reached at (480) 922-9366 or
Pam Selker Rak is president and Shannon Webber is senior communications specialist with CommuniTech, LLC, an independent marketing and business consultant for the healthcare sector and beyond. Rak can be reached at (412) 221-4550 or
- U.S. Centers for Medicare & Medicaid Services.(2010). Medicare Accountable Care Organizations Shared Savings Program New Section 1899 of Title XVIII. Washington, DC. Retrieved from https://www.cms.gov/OfficeofLegislation/Downloads/AccountableCareOrganization.pdf
Long-Term Living 2011 February;60(2):33-35
Topics: Accountable Care Organizations (ACOs) , Articles