New Dress on an Old Pig?
By Ken Ortolon Texas Medicine February 2010

ACOs Tie Payment to Accountability, Outcomes

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Cover Story - February 2010  


Tex Med. 2010;106(2):20-25.  

By  Ken Ortolon
Senior Editor  

Fee-for-service medicine has been under attack for decades. Insurers and employers have tried HMOs, capitation, pay for performance, and bundled payments to control health care spending and/or improve health outcomes. All have had little or no success.

However, the debate over health system reform in Washington is increasing the pressure to control cost and improve quality in the nation's health care delivery system. That's why a new care delivery model seems to be gaining a considerable amount of national attention.

Accountable care organizations (ACOs) are the latest spin on payment reform to gain traction. Groups such as the  Brookings Institution  and the  Dartmouth Institute for Health Policy and Clinical Practice are pushing the model. It also has found its way into the reform bills pending in Congress as of December. (See " Overview of Accountable Care Organizations: HMO Retread or Visionary Path to Reforming Health Care? ")

And at least one major health care player in Texas - the  Baylor Health Care System in the Dallas-Fort Worth area - is moving forward with plans to become an ACO by 2015.

As defined by the Brookings and Dartmouth groups, ACOs are collaborations that assume responsibility for all care of patients. In an ACO, physicians and other health care professionals have financial incentives to contain costs and improve quality by coordinating care for a specific group of patients. Hospitals, physicians, and other health care professionals in the organization share the savings.

Under the Brookings model, physician participation in ACOs would be voluntary, and physicians, hospitals, and other providers would be accountable locally for cost savings and quality improvements. The ACOs would issue regular reports on performance for physicians, payers, and patients. And, the organizations could be designed to integrate with medical homes and other health system reform models.

The ACO model has gained some physician support. The  American Medical Association generally favors ACOs that allow voluntary physician participation.

However, doctors have concerns, particularly over how to structure ACOs and the financial risk physicians must assume. While ACOs promise additional payments for reduced costs and higher quality, they could subject physicians to capitated payments, bundled payments, or other uncertain payment mechanisms.

In essence, ACOs are another version of a pay-for-performance system.

Texas Medical Association officials say there are few details now on exactly how to structure individual ACOs.

And, physicians say there will be little buy-in from the medical community if ACOs turn out to be just a new dress on an old pig where health plans or hospitals control how doctors practice and what they are paid.

"That's not something they [physicians] are likely to support unless it is organized to give physicians more control over how it's done than just having a hospital run it," said Arlington anesthesiologist Rex Hyer, MD, president of the Tarrant County Medical Society.


Where's the Accountability?  

While ACO supporters say there is great potential for variation in how the organizations are set up, the most likely scenario seems to be a partnership between physicians, particularly primary care physicians, and hospitals or hospital systems. These integrated organizations would be responsible for the overall care of patients and would take on some financial risk for meeting certain cost and quality goals.

If they meet their goals, the hospitals and physicians share in the savings. If not, they could lose money by failing to meet their budget target.

ACOs have gained national attention largely through the efforts of Mark McClellan, MD, PhD, director of the Engelberg Center for Health Care Reform and the Leonard D. Schaeffer Chair in Health Policy Studies at the Brookings Institution. In testimony before a U.S. Senate Finance Committee Roundtable on Health Care Reform last April, Dr. McClellan noted that the reform debate increasingly turns toward not just how to expand coverage, but how to change patient care delivery.

"Dramatic variations in health care spending that bear little relation to health outcomes highlight the fact that simply trying to subsidize more affordable coverage in our existing health care system is not sustainable," Dr. McClellan said. "Further, payments in Medicare and other health insurance programs are largely tied to the volume and intensity of medical services."

As a result, he says, physicians receive less when they use innovative approaches to help patients understand health risks, make needed lifestyle changes, and comply with medication and treatment plans, while patients get little support for taking the steps to improve their own health.

Dr. McClellan, a Texan and former director of the U.S. Centers for Medicare & Medicaid Services, says increasing awareness of these problems led to an array of initiatives to achieve greater accountability for quality and cost. While debate continues over the forms such efforts should take, he says there is a growing consensus on several guiding principles for reform:

  • There must be local accountability for quality and cost, with coordination of care among physicians and other health care professionals of both inpatients and outpatients.
  • Any system that requires greater accountability by physicians must work well for all practice types, from solo and small-group practices to large multispecialty groups.
  • There must be a shift away from a fee-for-service payment system, which Dr. McClellan says rewards volume and intensity, to one that promotes value.
  • There must be greater transparency for consumers.

John Bertka, FSA, an actuary and visiting scholar at the Engelberg Center, says everyone recognizes that the fee-for-service system is broken.

"In the '90s, we tried the capitation route but, frankly, that put perhaps a bit too much risk on providers and didn't put enough emphasis on quality," he said.

Through ACOs, "we're trying to put budget responsibility without full insurance risk on the providers and make sure even if they earn their bonuses through greater efficiency they don't get paid their bonuses unless they have measurable quality and they meet those quality standards," he said.

Mr. Bertka says the idea is to create more coordination of care among physicians, other health professionals, hospitals, and payers.

"And then, lastly, we're trying to do it on a local level, so most of these ACOs would be organized around delivery systems in a given city, maybe a county, maybe even a couple of counties," he said.


Putting the Model Into Practice in Texas  

Mr. Bertka says Brookings is working with three groups across the country to establish ACOs. While two of those sites have not been disclosed, he says the Carilion Health System in Roanoke, Va., could be operating as an ACO early this year.

That ACO would be organized around the large hospital system with 700 to 800 physicians who are employed by Carilion. Some community physicians who practice in their hospital system also would be involved, Mr. Bertka says.

Another ACO that Brookings is helping organize involves a community hospital with affiliated groups of private practice primary care physicians, cardiologists, and hospitalists.

Officials at Baylor Health Care System say their effort to create an ACO is in its infancy, but they are committed to moving in that direction. While not one of the Brookings projects, Baylor has had multiple discussions with Brookings on how to set up its ACO.

Baylor's plans to become an ACO were discussed at a health care summit in Dallas late last year. Dr. McClellan also spoke about ACOs at that meeting. Physicians and county medical society executives who attended the meeting say Baylor is positioned well for that care delivery model because it already has a network of more than 600 physicians it can bring into the ACO through its 501(a) corporation, the Health Texas Provider Network.

Gary Brock, chief operating officer for Baylor, says Baylor's first step is to get the physicians in the Health Texas network and outside physicians who might want to participate to commit to use electronic medical records that can communicate and share data with the components of the Baylor system.

That will enable Baylor to collect and report the quality data required of an ACO.

Mr. Brock says the system already collects data on core measures on several preventive care services involving acute myocardial infarction, congestive heart failure, community-acquired pneumonia, and surgical care infection. And, it reports both risk-adjusted readmission rates and risk-adjusted mortality scores through the Hospital Consumer Assessment of Healthcare Providers and Systems, a national survey of patients' perspectives on hospital care.

"What I don't have is the physician community connected to all that," Mr. Brock said. "So I can talk about my process measures related to congestive heart failure inside my hospitals, but what are the ambulatory measurements that we want to try to work on with our cardiologists and internists once those patients leave our hospitals?"

Mr. Brock says Baylor also wants the physicians in its Health Texas networks to achieve patient-centered medical home certification through the National Committee on Quality Assurance. That requires participating in chronic disease management for conditions such as asthma, diabetes, and hypertension.

Mr. Brock says the priority is positioning the system to focus on patient-centered care. That would include providing easy access to appointments with primary care physicians, using health information technology, monitoring treatment compliance, providing easy access to lab tests, and coordinating care with specialists. Baylor will discuss what payment system will be used after those steps are put in place, he says.


Follow the Leader?  

Physicians at the Dallas health care summit say that if organizations Baylor's size jump on the ACO bandwagon, other hospital and physician entities likely will have to follow suit.

"Baylor is a big player in Dallas," said Phil Huber, MD, immediate past president of the Dallas County Medical Society. "If you have an accountable care organization that has a fair penetration in the market, the rest of Dallas has got to get up and say, 'How do we want to compete?'"

And, pressure to move toward accountable care may be even greater since the government and private health plans, such as CIGNA, are showing interest in the model.

David Toomey, CIGNA's president for Texas, organized the Dallas health care summit.

"Our goal really was to focus on how do we address the wide variability of care in place today amongst the health care system, how do we improve the connectivity between the physician community and the hospital community, and how do we address the declining health risk factors that we're faced with in the Dallas-Fort Worth area," Mr. Toomey said. "What we're striving for is greater accountability tied to clinical performance."

While several models could improve accountability and outcomes, Mr. Toomey says pay for performance is the basic concept.

"Today in the Medicare system, for example, there's no motivation for a physician or a hospital to do anything different," he said. (Medicare's  Physician Quality Reporting Initiative gives physicians financial incentives to report performance measures but does not actually reward them for performance.) "Under this arrangement, there's a lot of motivation to participate and share in the rewards of doing a good job. So if you can make sure there is consistent practice tied to evidence-based medicine and remove the deviation and wide variability, there is financial motivation from those who participate in this accountability concept to really share in that reward."

The House of Representatives health system reform bill allows creation of three- to five-year ACO pilots and gives the health and human services secretary authority to extend and permanently implement ACO models across the country.

The Senate reform bill allows the secretary to create Medicare ACO pilots for at least three years with at least 5,000 beneficiaries assigned to each.

The Texas Legislature also is interested in the ACO model. Lt. Gov. David Dewhurst led efforts to implement the model in Medicaid in 2009. Senate Bill 7, the omnibus Medicaid bill filed by Sen. Jane Nelson (R-Lewisville), included language to test the concept in Medicaid. The bill died, but TMA officials say the idea likely will reemerge in 2011.


Getting Physician Buy-in  

There appears to be some support for ACOs among physicians. Spencer Berthelsen, MD, chair of the Board of Managers of the Kelsey-Seybold Medical Group, a large multispecialty group in the Houston area, is among those who support ACOs.

"I believe that in order to move the country forward, we're going to have to focus on controlling the overall cost of health care," he said. "The current health care reform ideas really have not addressed the cost of care, which is fundamental in order to make care affordable and available. It's my perspective, my belief, that what really is able to control cost with the most desirable outcomes is the concept of accountable care organizations."

While AMA gives ACOs qualified support, it is concerned over their structure, particularly about physicians being required to accept financial risk for patients who seek care from other physicians and health care professionals.

TMA also is worried that ACOs might be just another arrangement in which health plans can dump risk onto physicians, or hospitals can wrest control from physicians over how care is provided.

"If the physician is just a unit of production, then we're not going to be real excited about the accountable care organizations," said Darren Whitehurst, TMA vice president for advocacy.

Mr. Whitehurst says physicians must direct the health care team and be actively involved in managing these organizations.

"We want to make sure that the people aspect of the health care delivery system is not swamped by the business model of health care," he said.

Others are concerned that ACOs could lead to severe financial problems for physicians if they have to take on too much risk. They want to avoid situations such as occurred in Texas where PacifiCare refused to pay physicians for thousands of claims after several independent practice associations (IPAs) that had subcapitation agreements with PacifiCare went bankrupt.

In a lawsuit filed by TMA and several physician groups, a state district judge ruled that PacifiCare is still liable for those claims even though it argued it should not be responsible since the IPAs were paid. That case is still under appeal.

Mr. Bertka, however, says those types of concerns should be mitigated by the fact that all parties would have to be willing partners in the ACOs.

"First off, this is all locally determined," he said. "And so, if the answer in Texas is, 'We don't want to take that risk,' that's fine with us."


Eyeing Corporate Practice  

However, physicians at the Dallas summit say they are still concerned about how to organize an ACO and who would drive the train. There is skepticism that physicians would agree to take a back seat to a hospital or hospital system in designing such organizations.

"The big medical groups are going to be players in this," Dr. Hyer said. "At some point, a big multispecialty medical group is going to buy into this because that's what they're built to do. It's just too early right now to know what form this is going to take and exactly how it's going to work."

Dallas CMS President Steve Ozanne, MD, adds that ACOs could push Texas toward the corporate practice of medicine where physicians would become employees of the hospitals, such as in Roanoke.

"I think the big issue is the corporate practice of medicine and how this would affect the independent practice of physicians in terms of their business and financial structure, but, even more importantly, their sense of freedom to do what they think is best in medical care," Dr. Ozanne said. "It's clear that if the hospitals are in charge, there is going to be a lot of pressure for cost containment and restriction on physician independence to practice."

That, Dr. Berthelsen says, is why physicians must get out in front of the hospitals in creating ACOs.

"Physicians really need to get out in front of it and form accountable care organizations that are centered on physician practices rather than wait for hospitals to develop them," he said. "It is possible to work within a hospital structure and a medical staff arrangement, but I think it's better for physicians and patients for physicians to take the lead."

Doing that likely will require more physicians to move into large group practices, he says.

Dr. Berthelsen says he believes payment reform, such as contemplated in ACOs, is necessary to move payment away from a system where the money is tied to providing services and toward coupling payment to desired outcomes. But that could be a tough sell to the broader physician community, he says.

"I think it will be a substantial cultural shift for them," he said. "But I think faced with the prospect of a single-payer system with low fee-for-service payments, which is common in other industrialized counties, if they have a chance to think that through, they will see this is a more desirable alternative."

Ken Ortolon can be reached by telephone at (800) 880-1300, ext. 1392, or (512) 370-1392; by fax at (512) 370-1629; or by e-mail at  Ken Ortolon .  


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