Overview of the concept of Accountable Care Organizations.

1. Accountable Care Organizations Charles DeShazer, MD

2. What is an Accountable Care Organization (ACO)? An Accountable Care Organization (ACO) is a provider-led organization whose mission is to manage the full continuum of care and to be accountable for the overall costs and quality of care for a defined population. An ACO is a combination of a hospital, primary care physicians and possibly specialists. Potential ACOs include: Integrated delivery systems Physician hospital organizations (PHO) Hospital plus multispecialty groups Hospital and independent practices Three essential characteristics: Ability to manage costs and quality for patients across the continuum of care and across different institutional settings Capability to prospectively plan budgets and resource needs and distribute payments Sufficient size to support comprehensive, valid and reliable performance measurement (estimated to be at least 5,000 Medicare or 15,000 commercial patients)

3. Genesis of the ACO Concept Concept began to take shape in 2001 based on work of AMGA to define principles of Accountable Physician Groups Council of Accountable Physician Practices (CAPP) formed in 2002 by AMGA Vision: to foster the development and recognition of accountable physician practices as a model for transforming the American health care system Elliot Fisher “Creating Accountable Care Organizations: The Extended Medical Staff”, Health Affairs, 2007,26:w44-w57 “Fostering Accountable Health Care; Moving Forward in Medicare, Health Affairs, 2009, 28:w219-w231 Formally proposed and defined in MedPac report to congress in June 2009 ACO Pilots supported in reform bills

4. Rationale 2001 IOM Report the “Quality Chasm” Working harder will not be able to correct the fundamental deficiencies Restructuring is needed to create a system that produces safety, effectiveness, patient-centeredness, timeliness, efficiency, and equityas a reliable property of the system Payment reform FFS payment structure seen as a one root cause of fragmented, poor quality and low value care delivery Capitation and global payment schemes require a certain level of sophistication and integration P4P mixed results ACO structure considered mechanism to enable transformation of the delivery system Strong interest in improving quality and decreasing costs to maximize the value equation Many best practice models in terms of value are IDSs (e.g. Kaiser Permanente, Intermountain, Mayo, Cleveland Clinic) Need to separate performance risk from insurance risk and place accountability for performance risk where those decisions are made – at the point of care Bundled and global payments are a key enabler Reduces the need to micromanage the delivery process Encourages redesign and innovation to maximize efficiency and performance Supports collaboration and integration

6. How is this Different from IDS Strategy of Late 1990’s? IDS strategies of late 1990’s These were mainly defensive strategies to create leverage with health plans IPAs formed primarily to create a contracting structure for greater leverage and control Groups formed to be able to take on and manage capitation payments Hospitals bought physician practices to create leverage, generate referrals and increase FFS revenue There was not much focus on creating a truly integrated system of care capable of taking on performance risk Quality measurement was in a nascent stage and there was not much focus on cost efficiency, quality, transparency nor overall performance Lack of good risk adjustment methodologies and performance assessment lead to some organizations taking on inappropriate levels of insurance risk Very little attention to physician management and productivity dropped in owned practices Information Technology in general and EMR technology in particular was immature ACOs are designed to take on and manage performance risk Goal is to create a structure capable of balancing cost, quality, access and service to optimize care for a defined population across the entire system Performance measurement to evaluate the quality of care and to prevent potential overuse (in fee for- service organizations) and underuse (in capitated ones) is a cornerstone of the Accountable Care Organization (ACO) model Mature IT today creates the opportunity to wire organizations and create new levels of integration, transparency and performance management

7. Health Plans Integrating Care through ACOsACOs can serve as “integrators” that link fragmented entities of the health care system around accountability for value Illustrative ACO Other Providers Operating Outside the ACO Home Health Services Mental Health Facility PCPs or PCMHs Specialty Group Other providers Other Providers Hospitals Affordable, safe housing Community Services & Supports (e.g., transportation, translation services) Employer Initiatives (e.g., smoking cessation, wellness programs) Wellness Initiatives

8. What are the Challenges to ACO Development The historical lack of collegiality and collaboration between the various organizations, in particular, physicians and hospitals The need for strong leadership to address the cultural, legal, and resource-related barriers to creating new provider organizations Ensuring a strong primary care base with adequate infrastructure and resources to be accountable for a full scope of responsibilities Governance and creating joint accountability Determining who will and how to distribute revenue and "shared savings“ Cultural and workflow shifts necessary to implement more efficient and high-quality models of care delivery Holding physicians accountable for productivity, quality and efficiency Implementation of necessary infrastructure, especially IT, in a capital constrained environment Source: McKethanA, McClellan M. Moving from volume-driven medicine toward accountable care. Health Affairs Blog. August 20, 2009. (Accessed October 26, 2009, at http://healthaffairs.org/blog/2009/08/20/movingfrom-volume-driven-medicine-towardaccountable-care/)

9. Current Activities Early pilots promising; many organizations supportive Physician Group Practice demonstration successful Congressional Budget Office scored as cost-saving Support from key stakeholders has solidified ACOs component of reform bills May survive politics Initiatives at state and local level Brookings-Dartmouth supporting pilot development in multiple sites Learning collaborative underway with 40+ health systems Massachusetts, Vermont, others moving forward