ACOs, Bundled Payments and New Models of Care Integration

Thursday, February 17th, 2011
This post was written by Jessica Fornarotto

Case management, the medical home, telehealth and other efforts are helping to move volume, improve quality, reduce cost through greater throughput and reduce consumption of resources, explains Steven Valentine, president of The Camden Group.

What becomes key, and what is mentioned in the NCQA guiding principles, is the primary care base. We need to get primary care a big enough base — multiple access points that we believe will drive up the cost of acquiring primary care physicians (PCPs) and medical groups. We anticipate that within the next few years, we’ll begin to see an oversupply of specialists in a few areas as ACOs take hold and begin to reduce referrals to the specialists, which means we have to consolidate both specialists and hospitals because again, we will see a shrinkage — a reduction in inpatient use.

For any medical group looking at an ACO today, the greatest cost reduction opportunity is in inpatient utilization first, pharmaceuticals second and emergency room (ER) use third. The strategic thrust of most organizations is to broaden the base, which is attacking market share through an adequate primary care base and having the specialists and tertiary facilities be the throughput areas that they focus on for efficiencies. We see the ACO as providing a continuum of care. You know you’re on the hook for clinical care management, capturing the data across this continuum of care and measuring and monitoring your cost and quality. It’s no longer good enough to deliver better quality; you’ll have to do it below a certain cost threshold to drive greater value.

Some of the models of integration being pursued in 2011 would be hospitals moving from centers of excellence and specialty institutes and becoming more like an integrated delivery system. You might think of the Kaiser Health System or a few others around the country as truly integrated. Kaiser as well as other health plans are going to seek to own or operate the delivery system. We do see opportunities with specialty co-management agreements as precursors to filling in and getting into bundled payments, where we’ve seen much activity. We anticipate there will be more bundled payment activity starting in 2011 because we have seen in the demonstrations — the five pilots — that market share has moved in those markets. Those that were designated did gain a competitive advantage and are also working with commercial plans besides just the Medicare pilot. We also see the clinical integration developing and taking off. This is the effort to reduce costs through clinical resource consumption. Or we see the medical foundation, which is the same as an employed model around the country. We’ve seen more physicians seeking to join health systems, participate in bundled payments and participate in clinical integration.

Bundled payments attach the hospital and physician payment together for a specified period of time. That would include post-acute care and in some cases pre-hospitalization, but it does articulate a defined period of time accountable for delivering care and covering certain services and procedures. But by having a fixed case payment rate, we see a great effort to try to reduce the consumption of resources, shorten the hospitalization through case management and protocols, and getting the doctors into gain-sharing mode and gain-sharing thinking versus the doctors coming together with the hospital and thinking they could charge higher prices by coming together. That’s not the intent; the intent is to have a gain-sharing model, which is one of the major themes of healthcare reform.

In a co-management agreement, physicians come together with the hospital, forming an actual management company and then managing a department or service line. We have seen this be effective in the orthopedic and cardiovascular arenas.

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