New ACOs Emerging in Northern California

Two new accountable care organizations taking shape in Northern California may help determine what works and what doesn’t in the new world of health care reform.

After a successful launch of a two-year ACO pilot with 41,000 CalPERS members in Sacramento, Blue Shield of California, Catholic Healthcare West and Hill Physicians Medical Group will parlay their experience into a new ACO targeting 5,000 members of the San Francisco Health Service System. This time around, UCSF Medical Center will join the ranks.

Another ACO – partnering Brown & Toland Physicians, Blue Shield and California Pacific Medical Center – will offer integrated care to 21,000 members of the S.F. Health Service system. Both ACOs are due to launch in July.

The S.F. Health Service System provides health insurance for employees and retirees of the City and County of San Francisco, the San Francisco Unified School District, San Francisco City College and the Superior Court of San Francisco.

Exactly how ACOs work and where they fit in reform are still to be determined, but there is little doubt that ACOs — called for and somewhat defined in the Affordable Care Act — will have significant influence on how health care is delivered and paid for.

ACOs differ from HMOs in that they serve explicitly as health care delivery systems, not as insurers contracting with a network of providers, according to the Commonwealth Fund.

In a nutshell, ACOs reward health care providers for delivering patient-centered, coordinated care across many care settings to a defined population. Incentives are based on quality and cost savings. ACOs focus on achieving clinical improvement goals rather than on the volume of services provided.

The two San Francisco ACOs have the same goal as the CalPERS pilot — avoiding premium increases.

As in the CalPERS pilot, each ACO partner will contribute to the effort to reduce spending and will forfeit its share of financial incentives if cost reductions do not meet targeted goals. Juan Davila, senior vice president of network management for Blue Shield of California, said the amount of risk each partner assumes is related to its level of involvement in the ACO. The actual amount of risk and shared savings for the two ACOs is considered proprietary.

“The ACO gives us an opportunity to protect our market share,” said Richard Fish, CEO of Brown & Toland. “Putting dollars at risk — a capitated HMO structure with shared up- and downside risk — and making concessions will result in providing a competitive price point for San Francisco employees.”

Jay Harris, chief strategic planning officer at UCSF Medical Center, agrees. “We have to create a coordinated care network to reduce costs and to remain competitive with Kaiser Permanente, who raises the bar for integrated care,” he said.

Trust among partners has loomed as one of the biggest barriers in developing an ACO. “We open up our books to each other and share responsibility for a single contract,” Davila said.

“The hurdle is convincing each other of the mutual benefit of the alliance,” Fish said.

A Hard Act To Follow

If the new ACOs hope to replicate the outcomes of the CalPERS ACO, they have their work cut out for them.

The string of goals includes:

  • Decreasing unnecessary procedures and eliminating variations in care;
  • Reducing hospital readmissions by scheduling follow-up visits during discharge and monitoring post-acute care patients and medications;
  • Integrating information technology;
  • Tracking clinical performance;
  • Reducing costs; and
  • Shifting care to the most cost-efficient setting.

“Taking coordination of care to a whole new level will promote communication, ensuring that appropriate drugs have been prescribed and hospital discharge orders coordinated and implemented,” Fish said.

Synthesizing Multiple Capabilities

The managed care environment in California has paved the way for ACOs, promoting capitated arrangements among payors and physicians.

Davila said, “Our relationship with physicians was based on paying a capitated rate and everyone would go on about their business. Now that we share risk, there is far more collaboration.”

Blue Shield developed the overall program structure of all three ACOs, analyzed cost drivers, oversaw IT integration and provided legal guidance.

The third arm of the new ACOs, the fee-for-service-based hospital has remained relatively independent of its physician and health plan neighbors. Closing that gap is one of the biggest challenges.

“Aligning incentives with ACO participants may be at odds with the way in which some hospitals do business,” said Don Crane, president and CEO of the California Association of Physician Groups. “In ACO arrangements, these hospitals may need to shift their focus to sharing savings that come from reduced admissions and from generating profit from reductions in length of stay.”

Harris at UCSF Medical Center emphasized that filling beds is not at odds with patient-centered, coordinated care.

As an institution with a threefold mission — teaching, conducting research and providing high-quality, clinical care — the hospital found it difficult to establish an ACO on its own. “In response, we identified partners to spread our geography and offer primary and tertiary care,” Harris said.

Fish, the Brown & Toland CEO, said he sees participation in an ACO as a normal progression for his physician group. “We have already achieved clinical integration, emphasizing the patient/physician relationship across an entire system, which can be replicated with any payor,” he said.

“The new ACO enables us to share data, provide an accessible network of providers and create a seamless transition from one setting to another, as well as offering economic value and price transparency,” Fish said.

Health Information at Core of ACO

Joining an ACO takes some accommodation by all parties, primarily an investment in interoperable data and communication systems. Brown & Toland launched an interoperable electronic health record system in 2005 and over the years invested $30 million into deployment and systems to support the EHR system.

Mary Carol Todd – senior vice president, clinical efficiency for the hospital system – said she looks forward to sharing data electronically with the other entities, especially with Hill Physicians’ case managers, who provided disease management in the CalPERS ACO. She admits, however, that while transmitting information to other health care providers is streamlined, the reverse trip back to the inpatient setting is still a bit rough around the edges.

Setting the Pace for ACOs

ACOs got a lift when the Patient Protection and Affordable Care Act created a shared savings program to reward groups of health care providers who can effectively provide coordinated care across of continuum of settings for a designated Medicare population. The program will go into effect Jan. 1, 2012.

Subsequent regulations developed by CMS propose 65 quality measures, still being debated, for ACOs to achieve in order to share in the savings. Some private insurers do not plan to toe the CMS line too closely.

Davila said the new CMS regulations are not relevant to the ACOs started by Blue Shield in California.

“The guidelines are a step backward for us in California. Unless they are significantly changed, we think CMS may set back the ACO movement,” said Steve McDermott, CEO of Hill Physicians Medical Group.

CMS is entertaining feedback on the regulations after many health care providers objected to their complexity, economics and bureaucracy. CMS recently addressed some of these concerns by developing three initiatives promoting health care provider participation in ACOs and a less cumbersome shared savings program.

Davila’s final words of wisdom: “Stay the course even though topline revenue may be less,” he said.  “It is a never-ending effort to maintain what we have done.” 

Categories: Health Industry, Insight, The Health Law