FROM URL:  http://www.npr.org/2011/01/18/132937232/accountable-care-organizations-explained

Accountable Care Organizations, Explained

by JENNY GOLD

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January 18, 2011

As the House begins debate today on an effort to repeal the health care law, we took a closer look at one of the provisions of the law that health care providers are talking about the most — accountable care organizations.

ACOs take up only seven pages of the massive new health law but the idea has providers buzzing. ACOs are a new model for delivering health services that offers doctors and hospitals financial incentives to provide good quality care to Medicare beneficiaries while keeping down costs. A cottage industry of consultants has sprung up to help even ordinary hospitals become the first ACOs on the block.

Yet the concept is still short on details. ACOs have been compared to the  unicorn: Everyone seems to know what it looks like, but nobody’s actually seen one. Exactly how ACOs would work in practice remains to be seen, though that hasn’t stopped the health care industry from embarking on a frenzied quest to create them as quickly as possible. The Centers for Medicare & Medicaid Services is expected to release detailed rules on ACOs within a few weeks.

Here is a brief guide to what we know about ACOs so far.

What is an accountable care organization?

An ACO is a network of doctors and hospitals that shares responsibility for providing care to patients. Under the new law, ACOs would agree to manage all of the health care needs of a minimum of 5,000 Medicare beneficiaries for at least three years.

Think of it as buying a television, says Harold Miller, president and CEO of the Network for Regional Healthcare Improvement and executive director of the Center for Healthcare Quality & Payment Reform in Pittsburgh. A TV manufacturer like Sony may contract with many suppliers to build sets. Like Sony does for TVs, Miller says, an ACO would bring together the different component parts of care for the patient – primary care, specialists, hospitals, home health care, etc. – and ensure that all of the “parts work well together.”

The problem today, Miller says, is that patients are getting each part of their health care separately. “People want to buy individual circuit boards, not a whole TV,” he says. “If we can show them that the TV works better, maybe they’ll buy it,” rather than assembling a patchwork of services themselves. “But ACOs will need to prove that the overall health care product they’re creating does work better and costs less in order to encourage patients and payers to buy it.”

When will ACOs begin operating?

The ACO initiative is scheduled to launch in January 2012, but the race to form ACOs has already begun. Hospitals, physician practices and insurers across the country, from New Hampshire to Arizona, are announcing their plans to form ACOs, not only for Medicare beneficiaries but for patients with private insurance as well. Some groups have already created what they call ACOs.

Why did Congress include ACOs in the law?

As lawmakers search for ways to reduce the national deficit, Medicare is a prime target. With baby boomers entering retirement age, the costs of the program for elderly and disabled Americans are expected to soar.

ACOs would make providers jointly accountable for the health of their patients, giving them strong incentives to cooperate and save money by avoiding unnecessary tests and procedures. For ACOs to work they’d have to seamlessly share information. Those that save money while also meeting quality targets would keep a portion of the savings.

The Congressional Budget Office estimates that ACOs could save Medicare at least $4.9 billion through 2019. That’d be far less than one percent of Medicare spending during that period, but if the program is successful it can be expanded by the Secretary of Health and Human Services.

How would ACOs be paid?

In Medicare’s traditional fee-for-service payment system, doctors and hospitals generally are paid more when they give patients more tests and do more procedures. That drives up costs, experts say. ACOs wouldn’t do away with fee for service but would create savings incentives by offering bonuses when providers keep costs down and meet specific quality benchmarks, focusing on prevention and carefully managing patients with chronic diseases. In other words, providers would get paid more for keeping their patients healthy and out of the hospital.

If an ACO is not able to save money, it would be stuck with the costs of investments made to improve care, such as adding new nurse care managers, but would still get to keep the standard Medicare fees. The law also gives regulators the ability to devise other payment methods, which would likely ask ACOs to bear more risk. For example, an ACO could be paid a flat fee for each patient it cares for.

How will an ACO be different for patients?

Patients may not even know that they are part of an ACO. Although doctors will want to refer patients to hospitals and specialists within the ACO network, patients will still be free to see doctors of their choice outside the network.ACOs also will be under pressure to provide high quality care because if they don’t meet standards, they won’t receive savings bonuses – and could lose their contracts.

Who’s in charge — hospitals, doctors or insurers?

Hospitals, doctors and insurers are all vying to run ACOs. Kelly Devers, a senior fellow at the nonprofit Urban Institute, explains that the question was left purposely vague in order to be flexible. “We know there are a range of provider organizations” that could manage an ACO, “but we don’t know which one is superior.”

Some regions of the country, including parts of California, already have large multi-specialty physician groups that may become an ACO on their own, likely by networking with neighboring hospitals. “A lot of health care organizations are going to dust off the existing structures they had in place” in the past, Devers says.

In other regions, large hospital systems are scrambling to buy up physician practices with the goal of becoming ACOs that directly employ the majority of their providers. Because hospitals usually have access to capital, they may have an easier time than doctors in financing the initial investment required by an ACO.

Some of the largest health insurers in the country, including Humana, United Healthcare and Cigna, already have announced plans to form their own ACOs. Insurers say they can play an important role in ACOs because they track and collect data on patients, which is critical for coordinating care and reporting on the results.

If I don’t like HMOs, why should I consider an ACO?

ACOs may sound a lot like health maintenance organizations. “Some people say ACOs are HMOs in drag,” says Devers. But there are some critical differences – notably, an ACO patient is not required to stay in the network.

Steve Lieberman, a visiting scholar at the Engelberg Center for Health Care Reform at the Brookings Institution and the president of Lieberman Consulting Inc., explains that ACOs aim to replicate “the performance of an HMO” in holding down the cost of care while avoiding “the structural features that give the HMO control over [patient] referral patterns,” which limited patient options and created a consumer backlash in the 1990s.

What can go wrong?

Lieberman cautions that ACOs are not a panacea. “ACO has become the three-letter health acronym of the year, if not the decade,” he says. The health industry tends to operate with “kind of a herd behavior,” rushing to implement an idea “without working through the detailed business questions of how they’ll work.”

Many health care economists fear that the race to form ACOs could have a significant downside: hospital mergers and provider consolidation. As hospitals position themselves to become integrated systems, many are joining forces and purchasing physician practices, leaving fewer independent hospitals and doctors. Greater market share gives these health systems more leverage in negotiations with insurers, which can drive up health costs.

But Lieberman says while ACOs could accelerate consolidations, it’s already “such a powerful and pervasive trend that it’s a little like worrying about the calories I get when I eat the maraschino cherry on top of my hot fudge sundae. It’s a serious public policy issue with or without ACOs.”

Are there any possible legal concerns?

Doctors, hospitals and others in the health care industry have raised concerns that ACOs could run afoul of antitrust and anti-fraud laws, which try to limit market power that drives up prices and stifles competition. One concern is that ACOs, particularly those in rural markets, could grow so large that they would employ the majority of providers in a region.

To help providers avoid legal problems, the Federal Trade Commission says it is trying to clarify antitrust guidelines for ACOs, and the U.S. Justice Department’s antitrust division has offered to provide an expedited antitrust review process for ACOs.

This story was produced through collaboration between NPR and Kaiser Health News (KHN), an editorially independent news service and a program of the Kaiser Family Foundation, a nonpartisan health care policy organization that isn’t affiliated with Kaiser Permanente.

(FROM: http://online.wsj.com/article/SB10001424052748703422904575039110166900210.html?mod=WSJ_hpp_MIDDLENexttoWhatsNewsForth )

It wasn’t just an educated guess: Dr. Bussell used a new risk calculator that handicaps an individual patient’s chances of surgical complications based on personal medical history and physical condition. It also helps doctors and patients make tough decisions about procedures.

For Ms. Rivard, who is 67 years old, factors including her age, blood pressure and weight lifted her risks—though the surgeon was able to reassure her that they weren’t out of line, and that any complication would be manageable.

Risk calculators, used by heart surgeons for several years, are now being developed for other surgical specialties. The American College of Surgeons recently introduced calculators for surgery of the colon and pancreas, and is designing similar tools for 18 other procedures, including gastric bypass, hernia repair and prostate surgery. The calculators use data from more than one million patient records gathered as part of the group’s National Surgical Quality Improvement Program, which works with hospitals to reduce surgical errors and complications.

More than 30 million operations are performed in the U.S. annually to remove deadly cancers, repair diseased organs and replace worn-out joints. Yet going under the knife can be risky, leading to serious infections, blood clots, heart attacks and pneumonia. Those risks increase with age and for patients who are obese, smoke, abuse alcohol or have medical conditions such as diabetes and hypertension.

The nonprofit Institute for Healthcare Improvement, which works with hospitals to improve the quality of care, estimates that 2.5 million to 3.5 million surgical patients each year experience unintended harm resulting from or contributed to by surgical care. While some complications are unavoidable, surgical teams often make mistakes, such as leaving a surgical sponge in a patient, or fail to take steps known to prevent complications, such as delivering antibiotics to a patient within one hour before beginning surgery, which can dramatically cut infection rates.

Complications are also costly. The Centers for Disease Control and Prevention estimates that there are more than 290,000 surgical-site infections each year, and the cost to treat them ranges from about $12,000 to nearly $35,000 per patient—or as much as $10 billion annually.

The American College of Surgeons’ quality-improvement program is one of several efforts to help reduce such risks. It was adapted from a program originally used by the Veterans Health Administration and shown to reduce deaths at VA hospitals from surgery by 27% and complications by 45%.

Since its launch in non-VA hospitals in 2005, 250 hospitals have signed on. The program costs hospitals about $35,000 annually to participate. But a study published last September in the Annals of Surgery found that it helped 118 hospitals prevent from 262 to 524 complications per year, saving each an average of $3 million.

Preventing Complications

“If these results were translated across all U.S. hospitals, we would have the potential to prevent millions of complications a year, save potentially billions of dollars a year and provide evidence to health-care reformers that higher-quality care can cost less,” says Clifford Ko, a colorectal surgeon at the University of California, Los Angeles, and director of research and optimal patient care for the American College of Surgeons.

The calculators allow surgeons to enter a patient’s risk variables and in a matter of minutes receive a customized report outlining the risk of death and specific complications. For example, using data from 28,863 patients who underwent colorectal surgery at 182 hospitals from 2006 to 2007, the colorectal risk calculator has 15 variables to help predict complications and death within 30 days of surgery, including age, body mass index, the extent of disease—whether it is cancer or a digestive disease—and how much of the colon must be removed.

David Bentrem, a surgeon at Northwestern University’s cancer center who has used the colorectal surgery calculator, says it not only helps assess whether a patient is a good candidate for surgery, but also helps him make sure patients understand what they are getting into—the process known as “informed consent.”

Patients often don’t read or understand the documents they sign prior to surgery, studies show, and after meeting with a surgeon they may be anxious and confused, making it hard to process and remember information key to deciding whether to go ahead with surgery or not.

“The more information we can offer surgeons to give their patients that are specific to their own individual case, the better,” says Dr. Ko. If the surgery isn’t urgently needed, Dr. Ko says he may delay it until a patient loses weight or stops smoking to lessen the risks. Patients may also decide to delay surgery after learning of the risks.

Patients considering any kind of surgery should ask if their hospital participates in surgical-quality improvement programs, and whether risk calculators are available. For example, the Society of Thoracic Surgeons offers heart surgeons a calculator to predict the risk of death and complications from heart-bypass and other cardiac surgeries.

While generally surgical risk calculators are not designed for use by consumers, patients can visit euroscore.org to calculate their risks for cardiac surgery, using a free program from the European System for Cardiac Operative Risk Evaluation, widely used in European hospitals.

Hospitals in the American College of Surgery quality-improvement program can also compare their performance against a national benchmark, and tell patients whether their complication rates are lower than the national average.

‘An Easy Recovery’

At Danbury Hospital, Dr. Bussell was also able to reassure Ms. Rivard that the facility has among the lowest infection rates among hospitals in the American College of Surgery’s quality-improvement program, and because her results were comparable to the average low-risk patient, he expected her procedure to be “uneventful and dull” with “an easy recovery.”

“Telling a patient there is a risk of dying from a cancer surgery is not an easy conversation to have,” says Pierre Saldinger, a surgeon who oversees the quality-improvement program at Danbury Hospital and was also in the room when Ms. Rivard heard about her surgical risks. “The calculator is a tool you need to use in a judicious way, so as not to scare the patients, but to make them feel more comfortable that you are being honest and open with them.”

Ms. Rivard says she had already determined that she needed the surgery before learning of the risks, but she and her two daughters, who accompanied her to the consultation, wanted to hear the doctor put the calculator data in perspective.

The last time she had surgery—on her hip, nine years ago—no one discussed risks with her. While hearing about the risks of complications and infections was “a little overwhelming,” she says, “I want to know everything that might happen.”

Write to Laura Landro at informedpatient@wsj.com