Are ACOs Casting a Wide Net for Patients?

Are ACOs Casting a Wide Net for Patients?

With the launch of the Pioneer Accountable Care Organization Model in January, health care provider organizations have been working to build their patient bases. Early signs point to a heated competition among Pioneer ACOs to attract a diverse population now in order to reap financial benefits in later years.

For 32 health care provider organizations, Jan. 1 marked the start of a new relationship with Medicare. Those 32 organizations — called Pioneer Accountable Care Organizations — will work to coordinate care for a defined population of Medicare beneficiaries. If they succeed in lowering the total cost of those patients’ care, they’ll share significantly in the resulting Medicare savings.

Primary care physicians are at the core of the Pioneer ACO Model and a related initiative under the Affordable Care Act, the Medicare Shared Savings Program, that both aim to improve the quality of care and hold down costs. In many cases, physician groups have joined forces with hospitals and other provider organizations to create ACOs. In other cases, physician groups have founded ACOs alone and plan to contract with hospitals and other providers for necessary services.

CMS has required Pioneer ACOs to notify patients that their providers are participating in the model. Following orders, Pioneer ACOs across the country have been sending letters to patients explaining the new initiative and detailing its implications.

Unfortunately, some patients received entirely the wrong message.

The Ventura County Star reported earlier this month that Heritage Provider Network, a physician group serving 700,000 patients in Southern California, issued notices to patients across the county; however, not all of those patients’ care providers were formally affiliated with the Heritage Pioneer ACO. For instance, one physician quoted in the article does only occasional business with Heritage when he sees patients in the hospital — but his patients, too, received the notice.

This wasn’t an isolated instance. One executive at a Southern California hospital (who asked that her name be withheld) said that within 48 hours of Healthcare Partners’ designation as a Pioneer ACO, that organization sent letters to patients across the county, not all of whose physicians were affiliated with Healthcare Partners.

How did she know? “My mom received that letter,” she told California Healthline. “It threw my mom off and it threw me off; I had to read it twice. … It made it look like the only available option.”

Unintended Effects?

In the Star story, Jonathan Gluck, senior executive at Heritage Provider Network, described the mass mailing as a kink that needed to be resolved. However, the structure of the model suggests that this “kink” actually might benefit Pioneer ACOs in the long run.

Initially, Pioneer ACOs are paid on a fee-for-service basis; their incentives take the form of shared savings and losses, to be apportioned at the end of the year based on their performance against cost and quality benchmarks. As a result, Pioneer ACOs will attempt to broaden their patient populations as much as possible, to diffuse the risk of high-cost patients.

In year three of the program, the structure shifts to a partial population-based payment, which intensifies Pioneer ACOs’ risk and the accompanying need to serve a large, diverse population of patients.

In sending notification letters broadly, Pioneer ACOs — however inadvertently — may have recruited new patients.

The Competition Heats Up

With six Pioneer ACOs, California has the most participants of any state. Massachusetts has five; Michigan and Minnesota each have three.

In addition, several California providers have announced risk-based payment arrangements with private health plans, giving them the same incentive to secure their own sufficiently large patient populations.

This migration to risk-based payment models has catalyzed intense competition in many markets across the country, including several in California, as physician groups and hospitals compete to align with physicians (and, by extension, their patients). If Heritage or Healthcare Partners succeeded in broadening patient bases by sending out those letters, they did so at the expense of their competitors.

The Greater Los Angeles market is especially competitive, with three Pioneer ACOs within about an hour’s drive. Moreover, according to an executive of a Pioneer ACO outside the region, the Pioneer ACOs in Los Angeles did not require their specialist physicians to sign on exclusively with one ACO.

In other words, some Los Angeles specialists may be participating in more than one Pioneer ACO, making the market for patients who see those physicians even more in flux. In a case where specialists have more than one option for where to send their patients, alienating a physician is tantamount to losing valuable business.

Disrupting the Market

With the Pioneer program under way and the Medicare Shared Savings Program just a few months from beginning, providers planning to be Medicare ACOs in the short term have already made arrangements. Among them are many physician groups, and they aren’t waiting for hospitals to take the first step.

The Southern California hospital executive told California Healthline that in the wake of Healthcare Partners’ letter, many hospitals in the area suddenly felt compelled to align with the group.

Indeed, between Heritage Provider Network, Healthcare Partners and Sharp Health System’s Sharp Community Medical Group, physician groups are at the helm of many of California’s ACOs. As more physician groups found ACOs, the window of opportunity for hospitals to found their own ACOs narrows.

This trend has hospitals concerned: Their roles in physician group-founded ACOs would be quite different than their roles as ACO founders. At their most involved in a physician group-founded ACO, hospitals might be considered ACO Partners, sharing any savings or losses with the physician group.

But based on early examples, the more likely scenario is that hospitals are simply participants in the physician group’s ACO, seeing the ACO’s patients in need of tertiary care but not sharing savings with the ACO.

According to the Southern California hospital executive, this is exactly what is happening in her market. Physicians are forming ACOs and contracting with hospitals as service providers instead of fully bringing them under the ACO umbrella. In her words, “I don’t care what anyone says: We’re a vendor.”

Ongoing conversations with executives at ACOs across the country suggest that letter campaigns are just the beginning: ACOs are investing significant time and energy to generate interest and drive new business to their organizations.

We’ll be watching closely as ACOs continue to compete for patients and try to cultivate new loyalties. In the meantime, here’s a look at what else is making news in health reform.

Administration Actions

Eye on the Courts

In the States

On the Hill

Public Opinion About Reform

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