• Provider Integration and the Advent of Accountable Care Organizations ("ACOs")
  • May 19, 2010
  • Law Firm: Holland & Hart LLP - Denver Office
  •     Can financial incentives and physician practice structures be enlisted to enhance the quality and reduce the cost of healthcare?  Health Care Reform supporters believe they can and the new Patient Protection and Affordable Care Act ("PPACA")  signed into law by the President recently,  provides incentives for the development of ACOs for Medicare patients. ACOs have been described as HMO’s on steroids, but many wonder whether they will meet the same fate as the managed care systems of the past that focused on blind leveraged cost reductions and favorable beneficiary selection to achieve profits.

        ACOs are independent organizations (some virtual) including independent physicians, practice groups,  ancillary care providers and hospitals organizing among themselves, without insurance companies, for the clinical integration of patient care, with peer oversight to assure quality and continuity of care and the mutual sharing of cost savings.

        One of the most intractable problems in health care reform relating to both quality and cost is the “cottage industry” nature of medical practice in the U.S. One third of all doctors here function in practices of one or two physicians; 15% in 3 to 5 physicians and 19% in 6 to 50 physicians. They are mostly paid in a fee for services system that rewards volume of services and procedures provided with little or no concern given to the quality or consistency of performance. The Dartmouth Atlas Project at the Dartmouth Medical School has for years tracked a wide disparity in medical care across the United States.

        In 2006, Dr. Elliot Fischer from the Atlas Project and others published a paper, “Creating Accountable Care Organizations: The extended Hospital Medical Staff” in Health Affairs wherein he advocated greater peer coordination and oversight to reduce the costs and increase the quality of care in our health care system. This model requires the effective use of electronic medical records and multidiscipline care terms and a willingness for participants to be routinely assessed and held accountable for performance.

        The implementation of ACOs require a great deal of change and organization in an industry largely and historically hyper-invested in the status quo. There is a need for a significant change in the underlying infrastructure of provider practice which will require substantial provider buy-in, an outcome that cannot be imposed externally. There is a need for the incorporation of technology and best physician clinical practices into the daily framework of service. There is a need to maintain a consistent base of patients over defined periods of time to be able to measure performance longitudinally. There is a need for provider protection from catestrophic outlier risk and the installation of reachable financial incentives.

        That is a lot to chew on, but there can be a lot learned from the successes and failures of Intermountain Health, Kaiser, Geisinger and other integrated service organizations which may be pointing a way to a future where the health care industry moves  haltingly but irrevocably into the industrial, if not the technological age.