Accountable Care Organizations Detected on Health Care Horizon

Despite signed legislation intended to overhaul the current system, the future of health care in America remains cloudy.

About two hours from Northwest Arkansas, however, Dr. James Rogers just might be providing a peek at tomorrow.

Rogers is chair of the primary care division at St. John’s Clinic in Springfield, Mo., and also medical director of a project the federal government might use to define the accountable care organizations that are becoming increasingly popular all across the country.

ACOs are health care providers – often groups of providers that come together to form a new entity – who are designed to coordinate and improve the care of an assigned set of patients. Medicare patients are just such a set.

Under the new law, if an ACO reduces costs for its Medicare patients by a certain percentage below a benchmark, the provider can receive extra payments drawn from the money it saved. The primary goal of such a plan is to reduce the growth of spending for Medicare, which many don’t believe is sustainable.

According to a recent article in The Wall Street Journal, Medicare cost about $509 billion in 2009, a year-over-year jump of almost 9 percent. With more than 30 million new patients about to be added to the equation via the new legislation, the math looks even worse.

But that’s where Rogers and others become noteworthy. Having completed a five-year project in March, half of the 10 participating groups have shown they can save millions by operating in a fashion similar to the perceived notions of an ACO.

“We actually believe ACOs are patterned after our project,” Rogers said, “and there’s a lot of truth to that.”

Medical History

St. John’s is a Springfield, Mo.-based integrated health system that’s served southwest Missouri and northern Arkansas for more than 120 years. It is under the same umbrella as Rogers-based Mercy Health System of Northwest Arkansas.

Rogers said the St. John’s project was mandated by Congress during the Clinton presidency and consisted of 10 sites around the country. Each was guaranteed an 80-20 split of any savings.

“The idea was to watch what we do, see if we’re successful, and if we are successful … then share that with the rest of the country,” Rogers said.

One of the main ideas behind the effort was to promote preventive care, and also “improve the confirmation and reporting of quality measures,” Rogers said.

Primary-care physicians, he added, traditionally have not done extensive reporting.

Another challenge was the fact preventive care generally doesn’t produce immediate results. Jim Wardein, executive director at Health Partners in Fayetteville, said preventive care hasn’t even always been the focus of America’s health care system.

Health Partners is the contracting agency for Washington Regional Medical Center and about 325 of its physicians, as well as other entities.

“We’ve just been a fix-and-mend industry,” Wardein said. “Hopefully we can get away from that, be more proactive in terms of total health care of our individuals.”

Rogers said the release of results from his project is controlled by the Centers for Medicare & Medicaid Services, and only three years’ worth of data is currently available. In the first two years of the program, he said, only two of the 10 participants received paybacks.

That number doubled in the second year and increased to five in the third year.

“I mention that because it shows how hard it is,” Rogers said of implementing the practices necessary to reap financial benefits. “It’s not easy.”

In that third year, the St. John’s payoff was about $3.1 million, Rogers said. And while results of the fourth year haven’t been released, Rogers hinted the number of sites making money should be similar to third-year figures.

St. John’s payoff, meanwhile, could be significantly higher.

The success, Rogers said, is due to focusing on – and fine-tuning – practices that have been the most efficient and rewarding rather than trying to implement sweeping changes.

“Our saying is, ‘Don’t hang too many ornaments on the tree,'” Rogers said. “The meaning behind that is that more ornaments might make the tree look better, but it puts too much burden on the limbs.”

Philosophical Shift

Wardein believes ACOs could prompt a needed change in the way physicians and patients – and maybe those enrolled in Medicare, specifically – approach health care. That’s especially true given the large number of previously uninsured people who will be added to the system.

“We’re going to be giving insurance to 32 to 34 million people that haven’t had it,” Wardein said. “How are we going to afford that, out of the same pot of dollars?

“Medicare has been an open checkbook to this point in time. They need to put some clamps on it.

“We’ve got to start driving people towards taking better care of themselves.”

One way to do that is by creating programs like the one in place at Washington Regional Medical Center. Discounted premiums are available to WRMC employees committed to better health and wellness.

Hospitals and physicians groups have another reason to investigate the viability of ACOs, Wardein said, especially when Medicare is involved. Wardein estimated 50 percent of WRMC’s patients use Medicare, and that some physicians count an even higher percentage.

“Medicare keeps the doors open,” he said. “It’s not profitable for the providers, but it keeps the doors open and it helps tremendously with fixed costs.

“If Medicare goes away, if Washington Regional loses 50 percent of its business … Wow! So you can’t afford to ignore it.”

No Easy Answer

As many indicators exist to support the widespread use of ACOs, however, there are some concerns.

“It’s not a magic bullet,” said Mike Stock, president and CEO of QualChoice of Arkansas Inc. “There are no magic bullets.”

Even Rogers, who has seen ACO-type success firsthand, acknowledges pitfalls.

“Got an hour?” he joked when asked about potential problems.

For starters, there could be anti-trust and collusion concerns for hospitals and physicians groups who come together to form one entity. There’s also the issue of dealing with the Stark Law, which actually consists of three provisions governing physician self-referral for Medicare and Medicaid patients.

Wardein said the current best guess as far as the set-up for ACOs includes only Medicare A and B patients; Medicare C patients, meanwhile, make up about 20 percent of the Medicare population.

ACOs almost surely would need technology infrastructure improvements too, as cohesive, centralized records system are a must.

“Those come with a price tag,” Stock said.

Still, even with so many unknowns, ACOs appear to be a coming reality.

“We want the program to create incentives, both clinical incentives and payment incentives, that encourage providers to provide better and more low-cost care,” CMS deputy administrator Jonathan Blum told The Wall Street Journal.

Closer to home, Wardein said he already has had talks with two major Northwest Arkansas insurers. Rogers also believes it’s just a matter of time before ACOs become commonplace, and he has a better understanding than most.

“I think we understand it very well,” he said, “because we’ve been living it.”