October 11, 2010

ACO? Yes, another three-letter abbreviation is wending its way into our awareness. Although it sometimes seems as though healthcare will soon have used up all 17,576 (26³) possible three-letter combinations, that is far from the reality.

Get ready for Accountable Care Organizations, the ACOs provided for in the Affordable Care Act (ACA) that became law in March of this year. Section 3022 of the ACA requires the Secretary of Health and Human Services (HHS) to launch the first of these shared savings programs, ACOs, by January 1, 2012.

The ACO programs can include various configurations of providers: groups of physicians, networks of individual practices, partnerships or joint ventures between hospitals and/or ambulatory surgical centers (ASCs) and physicians, hospitals employing physicians, and any other provider groups that the Secretary determines is appropriate. To qualify for the ACA demonstration project, an ACO must agree to be accountable for the quality, cost and overall care for the Medicare fee-for-service beneficiaries assigned to it. An ACO must have at least 5,000 assigned Medicare beneficiaries and have in place, among other things, the following:

• a formal legal structure that would allow the organization to receive and distribute payments for any shared savings;
• a sufficient number of primary care professionals for the number of assigned beneficiaries;
• sufficient information regarding participating ACO health care professionals as the Secretary determines necessary to support beneficiary assignment and for the determination of payments for shared savings;
• a leadership and management structure that includes clinical and administrative systems;
• defined processes to promote evidence-based medicine;
• processes to report the necessary data to evaluate quality and cost measures -- this could incorporate requirements of other programs, such as the Physician Quality Reporting Initiative (PQRI), Electronic Prescribing (eRx), and Electronic Health Records (EHRs);
• mechanisms to coordinate care, and
• the ability to meet patient-centeredness criteria, as determined by the Secretary.

Medicare payments will continue to be made to physicians and other ACO participants under the usual payment structure (i.e., for physicians, the Medicare fee schedule). Additionally, ACOs would share among their provider participants a portion of any savings achieved in excess of a threshold benchmark. ACOs must agree to participate in the demonstration for at least three years.

ACOs are thus generally reminiscent of various Health Maintenance Organizations (HMOs), Independent Practice Associations (IPAs), and Integrated Delivery Systems (IDSs). The ACA requirements define the objectives for ACOs rather than their shapes, which we will probably see develop over the next few years.

Like the majority of healthcare delivery systems in their infancy, ACOs will not necessarily contain a specific role for anesthesiologists or other specialists. The anesthesia practices that ultimately do well in ACOs will be the ones that begin to consider how best to participate now. Hospitals are eager to get involved in ACOs; they account for 70% of health care costs – and of potential savings. It is to a great extent the physicians, however, who control costs. This could result in another surge in the number of hospitals seeking to employ physicians. If the hospital creates, defines and controls the ACO, with or without employing the physicians, the anesthesiologists are not going to be the providers who receive the heftiest portion of the shared savings.

That is why it behooves anesthesia groups to take the initiative and stay in the lead. You need to position yourselves to be in control of the cash, and not necessarily the ownership, of the ACOs in which you will participate, as Mark F. Weiss, Esq. points out in his article Escape the Carnage of the ‘ACO,’ (Anesthesiology News, August 2010).

One small part of such preparation is to understand how current laws may influence the development of ACO models. Antitrust law and the anti-kickback and physician self-referral (Stark) rules all restrict the very kinds of arrangements on which the quality improvements or efficiencies of ACOs will depend – giving physicians bonuses for reducing perioperative infection rates, for example, or even agreeing on how to hold down charges. The ACA authorized the Federal Trade Commission (FTC), the Office of the Inspector General (OIG) and CMS to develop safe harbors and waiver programs in order to implement the ACO concept. The three agencies jointly held a major public workshop in Baltimore on October 5, 2010, to consider the implications of these laws for ACOs. The agencies will need to publish proposed rules soon in order to have ACO contracts in place by the 2012 deadline. All three agency chiefs indicated their intent to eliminate regulatory obstacles to ACOs. We will watch what happens.

To the 13 abbreviations already used in this Alert, we will add Mark Weiss’s “PCN,” which stands for Power, Control and Naiveté. As Mr. Weiss writes, “Issues of power and control underscore all levels of health care. As to the naiveté, it’s the physician’s that they are counting on.”

We hope that we have put a big dent in any ignorance or naiveté on the part of our readers concerning ACOs. We plan to publish another Alert soon that will focus on ACOs and similar new managed care models in the private sector (which, incidentally, is subject to the antitrust constraints but not to anti-kickback and Stark regulation). As always, we encourage your comments and questions.

With best wishes,

Tony Mira
President and CEO 

If you have any questions or would like additional information please call 517-787-6440 x 4113, send an email to info@anesthesiallc.com, or visit our website at www.anesthesiallc.com.