The ACA and Clinically Integrated Organizations

Las Vegas—For the past 15 years, federal government legislation has helped transform the healthcare industry.

In 1997, the Balanced Budget Act established the Medicare sustainable growth rate, which has led to a $300 billion underfunded liability related to physician reimbursement rates. Six years later, the Medicare Modernization Act introduced the Medicare Part D prescription drug benefit.

Since then, the Deficit Reduction Act decreased reimbursement for office-based ancillary services, and the Tax Relief and Health Care Act created the Medicare medical home project.

The most significant changes occurred, though, when President Barack Obama signed the Patient Protection and Affordable Care Act (ACA) into law in 2010. With the Supreme Court upholding the ACA in June 2012 and President Obama’s re-election in November, the future of the law is much clearer, and everyone in the industry is preparing for the changes.

Jacque J. Sokolov, MD, chairman and CEO of SSB Solutions, Inc., a healthcare management, development, and investment firm, discussed several aspects of the ACA in a keynote session at the NAMCP meeting.

A major initiative of the ACA is a focus on creating value-based networks and integrated health systems. Dr. Sokolov defined a clinically integrated organization (CIO) as a legal entity structured to hold contracts for commercial or government value-based products. He added that an accountable care organization (ACO) is a state-based entity that qualifies to participate in the Medicare Shared Savings Program, although some states have used the term ACO for state-specific, value-based commercial programs. Dr. Sokolov said there is “very little difference” between CIOs and ACOs.

By early 2013, there will be between 250 and 300 Medicare ACOs, with many more to come, Dr. Sokolov said. To participate in the program, ACOs need at least 5000 Medicare beneficiaries and must comply with 33 quality metrics. He added that the United States has an “unsustainable” problem with regard to healthcare costs and predicts there will be major changes to Medicare.

“Medicare was the third rail of politics,” Dr. Sokolov said. “You never touched it or you were dead. Now that has changed.”

The primary ACO model is the Medicare Shared Savings Program, which launched in January 2012. The maximum shared savings for hospitals and physicians is 10% of the aggregate cost of patient care. Other models from the Centers for Medicare & Medicaid Services are pioneer ACOs, bundled payments, and patient-centered medical homes.

During the first year of the shared savings program, ACOs must report on all 33 of the required quality measures. By year 2, in order to receive payment, they must be in the 30th percentile of the national Medicare quality performance ratings in 70% of the required measures in each of the 4 quality domains (25 total measures). They must report on the other 8 measures, however, there are no performance requirements. In the third year, they must meet the standard established in the second year for all 33 measures.

Before starting a CIO, groups need to create 6 to 9 legal agreements, which can be a long, arduous process, according to Dr. Sokolov, who recommended that groups understand what a CIO entails. Both CIOs and ACOs rely on switching from a fee-for-service reimbursement system to a value-based payment system. Dr. Sokolov said fee-for-service has numerous drawbacks, including limiting the time physicians spend with patients, discouraging care coordination, rewarding volume of services instead of value, and not focusing on the quality of care delivered.

CIOs are designed to optimize reimbursement changes and quality requirements. Physicians who meet certain standards will be paid for care management and evidence-based care.

Common characteristics of CIOs are physicians (either employed by hospitals or independent) working together to care for patients, integration of physician and hospital practices, integration of the full continuum of care, and a focus on patient-centric care.

Dr. Sokolov said large health plans such as UnitedHealth Group, Humana, Aetna, and Cigna have already launched or plan on launching value-based programs that are based on their core products. For example, Cigna started an administrative service-only employer plan, Humana and UnitedHealth Group have Medicare plans, and all 4 are focused on the individual market through state-based health insurance exchanges as well as Medicaid expansion.

Health plans believe employers, governments, and other payers have embraced value-based plans, partially because they are less costly, according to Dr. Sokolov. He said that as value-based systems become more popular, health plans will likely employ providers and purchase physician practices.

Rules set forth by CIOs and ACOs determine how much money is allocated to hospitals and physicians in value-based programs. Whereas the Medicare ACO program has 33 value-based metrics, some commercial-based products have up to 100 quality metrics, according to Dr. Sokolov. He added that state Medicaid programs would also soon shift toward value-based measurements.

Many of the performance measurements for Medicare ACOs are aimed at providing better care through preventive health, patient/caregiver experiences, patient safety, care coordination, and a focus on at-risk populations that have diseases such as diabetes, ischemic vascular disease, heart failure, coronary heart disease, and hypertension.

Dr. Sokolov said Medicare ACOs are superior to physician/hospital organizations, which had ineffective utilization management, a capitation payment system, full-risk contracts from the beginning, payer-centric leadership, limited technology support, and no active care management.

Successful CIOs and ACOs need to excel in numerous areas, according to Dr. Sokolov. From an organizational structure standpoint, the leaders of these groups must emphasize shared responsibility among employees and discuss the risks and rewards with them. The leaders must also educate and engage physicians, understand the challenges of running a start-up company, implement an operational budget, put together 3 to 5 year financial projections, and develop a network to meet the needs of payers and maximize flexibility and options.