Health plans wonder about their role in ACOs

Gathered in Chicago for a trade group conference, insurers discuss the possible drawbacks and barriers to the success of accountable care organizations.

By Emily Berry — Posted Nov. 29, 2010

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Health insurance companies are trying to figure out where they fit in with accountable care organizations.

Executives gathered for trade group America's Health Insurance Plans' annual fall forum in Chicago Nov. 8-10, in the middle of what session moderator and Health Affairs editor Susan Dentzer called "the silly season" for accountable care organizations.

Accountable care organizations are defined slightly differently depending on the source, but generally involve a combination of physicians and hospitals taking responsibility for a defined population, working together to improve care and cutting costs.

The Centers for Medicare & Medicaid Services is working on rules for ACOs that will determine exactly what clinical and financial benchmarks will quality ACOs for additonal payments. Under the health reform law, to be recognized by Medicare as an ACO, the organization must exist for a minimum of three years and serve at least 5,000 patients. Generally, all the participants share in the savings created, but models differ in how that happens. Physicians and hospitals do not need formal business affiliations with each other before forming an ACO.

As the "silly season" peaked during the last few months and the first pilots got running, the potential pitfalls and practical conundrums emerged. At the November AHIP meeting, insurance company executives talked through some of them.

Though ACOs are primarily defined as cooperative agreements between hospitals and physicians, health plans are keenly interested in the model and need to keep on top of developments because they will be the ones to reimburse the new entities for care.

Stephanie Kanwit, a former Federal Trade Commission attorney and a former general counsel for AHIP who is now a private consultant, moderated two conference sessions on ACOs. She listed several reasons why health plans will and should be involved in ACO development.

Health plans can track the health of large populations. They have the information technology infrastructure to help monitor the health of patients enrolled with an ACO. They are experts in managing networks like those used in an ACO. They can carry the financial risk that allows an ACO to move forward. And they are experienced in developing multiple insurance products for patients.

So, in one sense, plans have the expertise on hand to make ACOs work.

On the other hand, as Bruce Bagley, MD, medical director for quality improvement for the American Academy of Family Physicians, said, "There are probably no experts about ACOs. It's a developing concept."

Regulations coming

As of this article's deadline, Medicare was preparing to release its ACO regulations, as required by the Patient Protection and Affordable Care Act. The Centers for Medicare & Medicaid Services plans to start the ACO three-year demonstration projects in January 2012.

Meanwhile, private plans, including Humana and Cigna, are piloting ACOs in the first forays for the industry. In each case, the plans joined with certain physicians and hospitals to provide care for the plans' members under the ACO. Physicians and hospitals would be paid on a fee-for-service basis but have a chance for extra money based on quality measures.

But health plans also have some trepidation about ACOs.

Joining physicians and hospitals in an ACO creates the opportunity and pressure for the two groups to merge, experts said at the AHIP conference. In that way, pushing the ACO model could end up creating highly concentrated hospital and physician markets in which the large ACO groups can demand higher payments.

Jeff Goldsmith, PhD, a University of Virginia professor of public health sciences and president of Health Futures Inc., criticized ACOs as he addressed a standing-room-only audience at the AHIP meeting. He believes the ACO model will be bad for both physicians and health plans, in part because the way it is usually described doesn't eliminate fee-for-service payments or transfer financial risk to physicians or hospitals.

"I just think this is a stupid idea," he told the audience. "Managed care without the risk -- that's like gin and tonic without the gin. How do you end up making choices if you're not forced to make them?"

He thinks hospitals and physicians will have a hard time working together. "What aligning incentives means to hospital executives is: You work for me, and we'll do what I tell you to do," Goldsmith said.

In another ACO-focused session, Mary Ella Payne, vice president of System Legislative Leadership for Ascension Health, the largest nonprofit hospital system in the country, talked about how her system is approaching the ACO idea. Ascension, based in St. Louis, runs 70 hospitals in 20 states and has 30,000 affiliated physicians.

Ascension physicians and nurse leaders met in June and agreed that the status quo, fee-for-service system is unsustainable, Payne said. Even in the absence of a health reform bill pushing the idea, ACOs make sense, she said.

"Regardless of what happens with the big picture, we feel like we need to move ahead with reforming our delivery system," she said. "We felt we needed to do this because it's the right way to manage care for our patients."

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