Accountable care organizations, the patient-centered medical home, and health care reform: What does it all mean?

Medical homes lower costs, improve quality

Integrated delivery system models such as patient-centered medical homes have demonstrated cost-savings while improving quality of care.^8,9 Reducing hospital admissions and visits to the emergency department shows the greatest cost-savings in these models. Several projects have shown significant cost-savings¹⁰:

The Group Health Cooperative of Puget Sound reduced total costs by $10 per member per month (from $498 to $488, P = 0.76), with a 16% reduction in hospital admissions (P < .001) and a 29% reduction in emergency department visits (P < .001).

The Geisinger Health System Proven-Health Navigator in Pennsylvania reduced readmissions by 18% (P < .01). They also had a 7% reduction in total costs per member per month relative to a matched control group also in the Geisinger system but not in a medical home, although this difference did not reach statistical significance. Private payer demonstration projects of patient-centered medical homes have also shown cost-savings.

Blue Cross Blue Shield of South Carolina randomized patients to participate in either a patient-centered medical home or their standard system. The patient-centered medical home group had 36% fewer hospital days, 12.4% fewer emergency department visits, and a 6.5% reduction in total medical and pharmacy costs compared with controls.

Finally, the use of chronic care coordinators in a patient-centered medical home has been shown to be cost-effective and can lower the overall cost of care despite the investment to hire them. Johns Hopkins Guided Care program demonstrated a 24% reduction in hospital days, 15% fewer emergency department visits, and a 37% reduction in days in a skilled nursing facility. The annual net Medicare savings was $75,000 per coordinator nurse hired.

ACCOUNTABLE CARE ORGANIZATIONS: A NEW SYSTEM OF HEALTH CARE DELIVERY

While the patient-centered medical home is designed to improve the coordination of care among physicians, ACOs have the broader goal of coordinating care across the entire continuum of health care, from physicians to hospitals to other clinicians. The concept of ACOs was spawned in 2006 by Elliott S. Fisher, MD, MPH, of the Dartmouth Institute for Health Policy and Clinical Practice. The idea is that, by improving care coordination within an ACO and reducing fragmented care, costs can be controlled and outcomes improved. Of course, the devil is in the details.

As part of its health care reform initiative, the state of Massachusetts’ Special Commission on the Health Care Payment System defined ACOs as health care delivery systems composed of hospitals, physicians, and other clinician and nonclinician providers that manage care across the entire spectrum of care. An ACO could be a real (incorporated) or virtual (contractually networked) organization, for example, a large physician organization that would contract with one or more hospitals and ancillary providers.¹¹

In a 2009 report to Congress, the Medicare Payment Advisory Committee (MedPac) similarly defined ACOs for the Medicare population. But MedPac also introduced the concept of financial risk: providers in the ACO would share in efficiency gains from improved care coordination and could be subjected to financial penalties for poor performance, depending on the structure of the ACO.¹²

But what has placed ACOs at center stage is the new health care reform law, which encourages the formation of ACOs. On March 31, 2011, the Centers for Medicare and Medicaid Services published proposed rules to implement ACOs for Medicare patients (they appeared in the Federal Register on April 7, 2011).^13,14 Comments on the 129-page proposed rules were due by June 6, 2011. Final rules are supposed to be published later this year.

The proposed new rule has a three-part aim:

• Better care for individuals, as described by all six dimensions of quality in the Institute of Medicine report “Crossing the Quality Chasm”¹⁵: safety, effectiveness, patient-centeredness, timeliness, efficiency, and equity
• Better health for populations, with respect to educating beneficiaries about the major causes of ill health—poor nutrition, physical inactivity, substance abuse, and poverty—as well as about the importance of preventive services such as an annual physical examination and annual influenza vaccination
• Lower growth in expenditures by eliminating waste and inefficiencies while not withholding any needed care that helps beneficiaries.

DETAILS OF THE PROPOSED ACO RULE

Here are some of the highlights of the proposed ACO rule.

Two shared-savings options

Although the program could start as soon as January 1, 2012, the application process is formidable, so this timeline may not be realistic. Moreover, a final rule is pending.

The proposed rule requires at least a 3-year contract, and primary care physicians must be included. Shared savings will be available and will depend on an ACO’s ability to manage costs and to achieve quality target performances. Two shared-savings options will be available: one with no risk until the third year and the other with risk during all 3 years but greater potential benefit. In the one-sided model with no risk until year 3, an ACO would begin to accrue shared savings at a rate of 50% after an initial 2% of savings compared with a risk-adjusted per capita benchmark based on performance during the previous 3 years. In the second plan, an ACO would immediately realize shared savings at a rate of 60% as long as savings were achieved compared with prior benchmark performance. However, in this second model, the ACO would be at risk to repay a share of all losses that were more than 2% higher than the benchmark expenditures, with loss caps of 5%, 7.5%, and 10% above benchmark in years 1, 2, and 3, respectively.