Inside Three ACOs: Why California Providers are Opting for the Model

Visit SDIndyACO.com, and you’re greeted by a Hawaiian shirt hanging in an otherwise empty closet. “Future home of something quite cool,” the page’s headline reads.

Forget unicorns, camels and all the other metaphors used to describe accountable care organizations these past few years. 

The website — the homepage of the newly formed San Diego Independent ACO, which was one of 106 organizations named last week to Medicare’s Shared Savings Program — could sum up where we stand now on ACOs.

While we’re close enough to see their outline, some ACOs are still just teasing their promise. Many organizations have yet to launch a Web presence (or in San Diego Independent ACO’s case, are waiting to get CMS approval). And more health care providers are rushing to build the ACO structure in hopes of winning federal contracts — and filling out the details later.

Understanding the Medicare ACO Model

The ACO model is loosely defined as having integrated teams of providers share responsibility for caring for a select population of patients. (That isn’t a new idea — and based on that definition, California’s had dozens of physician-led groups and integrated networks essentially operating as ACOs for years.)

But under the Affordable Care Act, the government is moving to reimburse organizations that succeed at this integrated approach. The Medicare Shared Savings Program is CMS’ flagship pilot to reward ACOs for reducing the total cost of care for an assigned population of Medicare beneficiaries.

While the year-old MSSP and other CMS programs are still voluntary, and encompass a range of different models, the government’s goal is that the new reimbursement scheme will eventually transition to its entire Medicare population.

Last week’s announcement was another big step in that direction; it nearly doubled the number of ACOs working with Medicare, from 153 to 259. And altogether, CMS says as many as four million Medicare beneficiaries are now covered by ACOs, up from 2.5 million last summer.

The Medicare ACOs include a range of providers and sizes; about half are physician-led organizations that serve fewer than 10,000 beneficiaries. Moreover, roughly one-fifth of Medicare ACOs include rural health centers, community health centers, and critical access hospitals, which serve rural and low-income communities. 

The Golden State’s Outsized Presence

Based on ACO participation, California continues to help set the pace for reform. A June 2012 report from Leavitt Partners found that 25 ACOs — more than 10% of the 221 ACOs that the firm identified across the nation through May 2012 — were located in the state. And in a nod to California’s tradition of strong physician leadership, 11 of those ACOs were sponsored by independent practice associations; no other state had more than six ACOs sponsored by physician groups. (That count has since gone up, as more IPA-led ACOs in the Golden State have come online since last summer.)

The nine newest Medicare ACOs serving patients in California are an eclectic mix. They range from Accountable Care Clinical Services — which will be operated by Accountable Care Associates and also serve patients in four other states — to a handful of ACOs operated by teams of local physicians, a new ACO from Cedars-Sinai Medical Center and an ACO operated by the UCLA Faculty Practice Group.

They join 14 other Medicare ACOs serving patients in the Golden State: six ACOs named to CMS’ Pioneer program; two ACOs named as participants in the MSSP’s first round; and six ACOs named as participants in the MSSP’s second round.

“Road to Reform” spoke to administrators at several of these new ACOs.

Profile: UCLA Faculty Practice Group’s ACO

Because MSSP first launched about a year ago, it begs the question: Why didn’t some of the newest participants try to join the program sooner?

In some cases, providers were waiting for the lawsuit over the ACA to be resolved. Other would-be participants hesitated, trying to figure out if the potential revenue from joining the MSSP would outweigh the sunk costs of investment.

But UCLA didn’t need to do that kind of calculus, according to Dr. Samuel Skootsky, the chief medical officer of the academic medical center’s faculty practice and medical group.

UCLA already was working to curb readmissions, expand its urgent care capabilities and bring a new enterprise-wide health record system online — efforts that essentially parallel the goals of Medicare’s ACO initiative.

While some organizations had to figure out whether they’d see ROI on major investments in case management infrastructure, “we didn’t need to come up with [new spending] of that magnitude,” Skootsky tells California Healthline. “We have all that stuff anyway.”

However, UCLA’s large size and structure presented some unexpected, if minor wrinkles. For example, the CMS application for the MSSP calls for all physicians to agree to participate in the ACO. Securing agreement from every physician posed a bureaucratic challenge for UCLA; the organization has hired more than 1,500 physicians and the medical group contracts on their behalf. The health center eventually smoothed things out after some back-and-forth with federal officials.

While the new MSSP performance period technically began Jan. 1, there’s still necessary administrative back-end involved with the newest ACOs (such as notifying potential patients of the ACO and allowing them to opt out). Meanwhile, UCLA is juggling several concurrent objectives, such as its plan to have its EHR system in place by March. As a result, Skootsky says that he’s circling the second quarter of the year for the system’s new ACO, which is expected to serve about 19,000 beneficiaries, to really kick into gear.

Profile: Affiliated Physicians Medical Group and APCN-ACO

UCLA’s relatively easy glide path to the MSSP was aided by the system’s deep pockets and administrative structure. But a number of the newest ACOs are independent physician groups that don’t have a health system’s resources and turn to management companies or consultants to get off the ground.

Two of these fledgling ACOs — Affiliated Physicians Medical Group and APCN-ACO — worked with MSO, Inc., to successfully apply for the MSSP.

According to Lan Pham, MSO’s CEO, Affiliated Physicians Medical Group represents about 75 doctors and will serve patients in the Long Beach area and North Orange County. The two organizations had a pre-existing relationship (MSO manages the physician group), which made the collaboration on the MSSP application a natural fit.

Meanwhile, APCN-ACO has a unique distinction: It will target Chinese patients in the San Gabriel Valley, Pham tells California Healthline. While most of the 100 participating physicians are Chinese, APCN-ACO has a plan to accomplish better care delivery: The organization will hire more Chinese-speakers to work on the organization’s administrative and support side to improve communication with doctors, beneficiaries and family members.

Pham notes that physicians at both ACOs wanted to participate in the MSSP given ongoing concerns about managing costs and being part of the industry’s care transformation.

However, the doctors “didn’t want to be the first ones to jump on the ship,” given that CMS was still fine-tuning requirements for the program last year. It also takes some time to get doctors psychologically ready for a new model of care delivery, she adds.

Looking Forward

The latest wave of ACOs underscores the new reality in health care: With the federal reform law now locked in place, real change is coming to the industry.

And while possibly disruptive, those changes also are potentially transformative.

“As a taxpayer — and as someone who’s been in health care for decades — I don’t see the fee-for-service model as sustainable in the long run,” says Pham. The ACO model has potential to better incent quality and teamwork, she adds.

“It’s a better way to care for patients, even without pre-payment,” Skootsky agrees.

“Participating in the MSSP contract is participating in a journey.”

Here’s what else is happening around the nation.

Expanding Medicaid

  • During her 2013 State of the State speech on Monday, Arizona Gov. Jan Brewer (R) — a longtime opponent of the ACA — announced that her state will participate in the ACA’s Medicaid expansion (Sanders/Wingett Sanchez, Arizona Republic, 1/14). Brewer noted that virtually all of the expansion costs would be covered by the federal government, but her plan includes automatic “circuit breakers” that would reduce Medicaid enrollment if federal funding levels drop (Christie, AP/Washington Times, 1/14).
  • On Wednesday, New Mexico Gov. Susana Martinez (R) announced that her state will participate in the ACA’s Medicaid expansion (AP/Modern Healthcare, 1/9). The expansion is expected to extend health coverage to nearly 170,000 additional state residents (Massey/Bryan, AP/Santa Fe New Mexican, 1/9). Martinez said the decision was part of “an obligation to provide an adequate level of basic health care services” for state residents (Reichbach, New Mexico Telegram, 1/9).

Inside the Industry

  • Health insurers are asking HHS to implement additional penalties on U.S. residents who do not acquire coverage beginning in 2014 as a way to prompt healthy, younger individuals to sign up for coverage. Penalties assessed under the ACA’s individual mandate begin at $95, but insurers are worried that fee will not be enough to motivate healthier individuals to purchase coverage. The penalty will increase to $695 or 2.5% of their income, whichever is greater, beginning in 2016 (Nather, Politico, 1/13).

In the States

  • On Wednesday, the Democratic and Republican leaders of the National Governors Association delivered NGA’s inaugural “State of the States” addresses, which discussed the ACA and its Medicaid expansion. Delaware Gov. Jack Markell (D), chair of NGA, and Oklahoma Gov. Mary Fallin (R), vice chair of NGA, delivered the speeches. Markell and Fallin also discussed their reasons for supporting and opposing the health insurance exchanges (Kulkarni, “Capsules,” Kaiser Health News, 1/10).
  • The Obama administration has scaled back Maine Gov. Paul LePage’s (R) request to reduce coverage in the state’s Medicaid program (Sharp, AP/Boston Globe, 1/8). Maine had sought to scale back Medicaid eligibility for nearly 15,000 parents with annual incomes of between 100% and 133% of the federal poverty level, as well as cut more than 6,000 low-income adults between ages 19 and 20 from the program. Acting CMS Administrator Marilyn Tavenner said the cuts would have violated the maintenance of effort provision in the ACA (Goodnough, New York Times, 1/8).
  • Florida Gov. Rick Scott (R) is being accused of overestimating the state’s cost of participating in the Medicaid expansion in the ACA. In a meeting with HHS Secretary Kathleen Sebelius last week, Scott said Florida would have to pay $25.8 billion over 10 years to participate in the expansion, citing estimates by the state Agency for Health Care Administration (Deslatte, Orlando Sentinel, 1/8). However, that figure does not account for the federal subsidies the state would receive under the ACA (Saunders, News Service of Florida/WZVN, 1/10).

Rolling Out Reform

  • States are struggling to advertise health insurance exchanges to hard-to-reach populations, whose participation is crucial to the marketplaces’ success. In particular, states are strategizing on how to reach non-English speakers, young people, uninsured residents and politically conservative individuals who might be reluctant to participate in any part of the ACA. Colorado, Hawaii, Nevada, Washington and other states have hired public relations firms to help market the exchanges (Cunningham, Politico, 1/10).
  • A number of fast-food franchisees have begun cutting workers’ hours in order to avoid penalties under the ACA. Under the ACA, businesses with at least 50 workers beginning in 2014 must provide access to affordable health coverage to employees who log at least 30 hours per week, or pay a penalty of $2,000 per employee. The moves reflect a cost-control strategy by businesses that has recently become commonplace (Scherzer, “The Exchange,” Yahoo!Finance, 1/9).

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