ACOs: A Concept in Motion

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While health-policy experts debate the potential of accountable-care organizations (ACOs) to address the problem of cost in US health care, a panel held on July 22, 2011, at the RBMA Executive Education Program in Scottsdale, Arizona, reveals that with prototype ACOs already in play and health-care systems assessing their ACO needs, radiology practices should waste no time in securing a seat at the table. Otherwise, they risk being left on the sidelines, with limited options.

The panel, “Setting Up an ACO: The Good, the Bad, and the Ugly,” included Palmer C. Evans, MD, senior advisor, Southern Arizona Accountable Care Organization (SAACO) in Tucson; Brent Hardaway, vice president, Premier Inc (Charlotte, North Carolina); and W. Kenneth Davis Jr, JD, partner, Katten Muchin Rosenman LLP (Chicago, Illinois). I also was a member of the panel.

The Prototype

Evans presented first on the ACO built by the 612-bed Tucson Medical Center (TMC) before the term gained currency. TMC shares the Tucson market with the Carondelet Health Network division of Ascension Health (St Louis, Missouri) and the University of Arizona Medical Center, among others; in this region, some systems are attempting to purchase additional practices, Evans notes. TMC is not pursuing that strategy, preferring to confederate independent practices.

The seeds for the ACO were planted in 2007, when TMC discovered that it was going to have to partner differently with its physicians in order to succeed. One indicator was supply costs. TMC’s primary orthopedic practice was ordering more hips and knees from one major orthopedic vendor than any other practice in the country was, but it was paying list price.

“In talking with the CEO, we decided the best place to start was in co-management,” Evans says. Beginning with orthopedics (and later adding neurosciences, cardiac imaging, and cardiovascular surgery), TMC announced each service-line partnership as an LLC, with 75% owned by the physicians and 25% owned by the hospital.

“What that does is get collaboration on a different level,” he says. For starters, TMC saved $13 million on orthopedic supplies within 18 months.
Late in 2008, TMC discovered that one of hospital’s primary-care groups had entered into a gain-sharing agreement with UnitedHealthcare (Minnetonka, Minnesota) that would result in shared savings if chronic-care patients could be kept out of the hospital.

On notice to expect reduced admissions from a loyal referrer—but understanding that this was the right thing for patients—TMC reached out to UnitedHealthcare Western Region. It discovered that Tucson—with few major employers and many small businesses—was a tough market for UnitedHealthcare, and it was interested in working with a system in which physicians and the hospital were working toward better-quality care, lower cost, and higher efficiency. It had also launched seven patient-centered medical-home projects in Arizona, four of which were associated with TMC.

Brookings Comes Calling

When the Engelberg Center for Health Care Reform/Brookings Institution (Washington, DC) approached TMC to become one of three pilot sites for the Brookings/Dartmouth collaborative ACO model late in 2009, the hospital already had experience with medical homes and in collaborating with primary-care physicians to manage chronic-care patients.

“That was the first time I heard the word ACO,” Evans recalls. Before accepting the offer, the board had to be convinced that TMC could reduce hospital admissions, improve population health, and remain viable. “Our board—which is a community board—as stewards of the community resource decided this was the best thing to do,” Evans says.

SAACO is 80% physician owned and 20% hospital owned. With the aims of local accountability for cost, standardized performance/quality measures, and payment incentives for provider collaboration, SAACO formed a physician steering committee in early 2010 made up primarily of four primary-care physicians, a hospitalist, a cardiologist, and a general surgeon.

SAACO subsequently formed a management-services organization (MSO) that will serve as a steering committee for the Medicare ACO that it plans to build. “The purpose of the ACO is to collect shared savings, distribute them, and measure physician quality,” Evans explains. “The MSO will be the engine that will drive the ACO.”

The MSO, a commercial enterprise run by a team from some of the participant physician groups, is responsible