The Role of the Accountable Care Organization in Value-Based Care

Going Beyond Fee-For-Service

Providers have been trained to deliver high-quality patient care. But fee-for-service billing often got in the way of providers looking more holistically at patient care.

“We recognized that patients would need after-hour services that our offices were not equipped to provide such as urgent care or non-emergent care and specialty services that were not represented within Coastal,” said Ed McGookin, MD, chief medical officer of Coastal Medical.

“We accepted, like every other fee-for-service healthcare provider, that patients would get those services from other providers, groups, or organizations in the community that were delivering high-quality medicine,” he continued.

There was a certain level of trust among providers that everyone was providing the highest quality and lowest cost care possible until data showed otherwise. Many emergency room visits were costly and even unnecessary. A lab test run in a hospital could cost drastically more than one run at a freestanding lab. One specialist can have higher costs than another even though they are completing the same follow-up care.

These findings made it obvious the healthcare system as a whole needed to make some changes with how it paid for care and who patients are referred to.

“Prior to this, we were like most medical practices. We focused on quality care and seeing people in a fee-for-service world,” said Stephen Nuckolls, chief executive officer Coastal Carolina Quality Care, Inc. “By being a part of the value-based world, we have preserved those things, but we added additional services.”

The ACO, located in North Carolina, joined the Medicare Shared Savings Program in 2012.

“We felt that payment systems were moving towards value. It was going to be increasingly rewarded in this new world. We wanted to move there at the same time the market was moving there,” Nuckolls explained.

Many of these high-cost services that were traditionally being outsourced from primary care could be taken care of in-house with more robust staffing, improved technology, and later and longer hours. But before the start of the Medicare Shared Savings Program, many organizations did not have the financial backing to invest in such measures.

With support from the Medicare Shared Savings Program, Coastal Carolina Quality Care transformed its systems and how it operates. But the ACO still experiences challenges with successfully implementing value-based care through the model.

Challenges of the ACO model

ACOs models do not have a universal definition of value, making it challenging for ACOs to continue generating success if the target is constantly moving.

Technically, value is defined as quality over cost. A high-value health system emphasizes quality care at low costs and ACOs like the one operated by CHI St. Luke’s uses that as its mantra.

“When we look at managing commercial or Medicare Advantage, we have to provide high-quality care. Then if we can be cost-effective, manage utilization, total spend, that’s great,” said Michael Camacho, MPA, division vice president of the clinically integrated network at Catholic Health Initiatives (CHI) St. Luke’s Health.

True value, though, looks different depending on the patient and the ACO. For example, the ACO model for Rhode-Island based Coast Medical looks completely different than CHI St. Luke’s Health.

“You can define value in multiple ways. What’s most important is that you define value in terms of value to the patient,” explained McGookin. “Patients want something that’s very effective and meets their needs but doesn’t cost more than it’s worth.”

Markets with a diverse payer mix are left to the mercy of their payers to define success.

“We really don’t define value. The payers define what they see as value,” argued Nuckolls. “We move and adhere to the contractual provisions that they give us in these various programs. A payer has some control over what we put on our dashboards because they’re the ones paying the bills.”

Despite this imposition from payers, a provider’s practice is not dictated by these value metrics but by holistic patient care. 

Recently, Medicare removed diabetic eye exams from this list of quality measures for ACOs in the Medicare Shared Savings Program. But Coastal Caroline Quality Care, Inc. kept it on their patient dashboard because they say it as part of their standard of care.

“Patients receive higher value and people who are responsible for paying for the cost of healthcare coverage receive value when more gaps in care are closed,” Nuckolls pointed out. 

Yet closing these gaps can be easier depending on the players involved in the ACO model. Models that include hospitals might actually be counterintuitive to the goals of an ACO. Such large systems have high overhead budgets that are only met when beds are full. Yet ACOs strive to keep patients out of the hospital whenever possible.

“If organizations are working very hard to prevent hospitalizations from happening by doing things like sending nurses out to the patients’ homes to care for them, putting IV’s in at home and giving them antibiotics they otherwise would’ve been in the hospital for, we’re taking revenue away from the hospital,” McGookin pointed out.

Because Coastal Medical does not have a hospital in their ACO contract, their bottom line is not affected by this tension.

“When we keep the patients out of the emergency department and out of the inpatient ward of the hospital, we reduce our costs of care,” McGookin emphasized. “And we don’t take revenue out of an expensive facility like a hospital that we’re paying for.”

“In many ACOs, they are running both the inpatient hospital side and the outpatient side. They do all of this work on the outpatient side, but they’ll cannibalize their inpatient business,” he maintained.

The same mentality applies to specialists. ACOs are centered around well-coordinated primary care and the quality metrics for reporting are often tasks completed by a primary care team not specialty providers.

Specialists have different priorities than their colleagues in primary care, so the specialist’s role in a clinically integrated network like CHI St. Luke’s can be hard to define.

“If I had to start from scratch, I would not have specialists in the CIN. It’s very confusing when Medicare is attributing these patients and you’re responsible for annual wellness,” Camacho argued. “Orthopedic surgeons or cardiologists simply just don’t do those things.”

However, CHI St. Luke’s market leaves the ACO no option but to include specialists as it is nearly monopolized by a large academic medical center.

“As far as participants in an ACO, most likely specialists aren’t going to perform and aren’t going to do the quality metrics. They really shouldn’t have to because the metrics are tied to primary care,” Camacho noted.

Accepting the inevitable and including the specialty group in their ACO actually gave CHI St. Luke’s Health the power to point their patients to these specific specialists. Rather than seeking care outside of the ACO, a primary care provider can recommend a specialist a part of CHI St. Luke’s Health.

“It’s a unique challenge, but we’re able to ensure that the patient is connected with a primary care physician within the same network,” Camacho noted. “We try to mitigate some of that risk.” 

The future of ACOs in a value-based world

The challenge of hospital inclusion is one of the primary reasons experts do not see ACOs as the golden standard of value-based care models. ACOs are moving the industry in the right direction but they are not the final answer.

“ACOs are a magnificent model that without which we would not have made the move to value-based care as effectively as we would have liked,” McGookin insisted. “But most of us who are in the industry recognize that ACOs are a step along a path towards value-based care. They’re not a destination.”

One of the biggest challenges to continued success for ACOs is the race to the bottom. Each year the ACO generates savings, the next year the bar to earn savings shifts. So ACOs are left competing with themselves to out-perform the previous year.

“You reach a point where it becomes harder and harder to generate the same savings year after year. You just reach a point of diminishing returns,” McGookin emphasized. “That’s a well-known ACO problem. And one that takes about three to five years to fully feel the effects of.”

“There has to be some sort of payment mechanism change other than the ACO model that bridges you from that to the next big step,” he continued.

The race to the bottom and slow build toward shared savings is why the adoption of the ACO model has slowed in recent years.

“We’re starting to see some evidence that the ACO formation has stalled because of the force into downside risk,” Nuckolls argued. “The best way to do it is to have people ease into it. Have them have a couple of years in upside-only contracts.”

Because the ACO model is so new, the standard benchmarks have also been moving. Quality metrics fluctuating year to year make it challenging for ACOs to measure their success over time. And providers are left confused as to where they should be focusing their efforts.

“We need stable benchmarks, which we haven’t had. We moved a little too quickly into forcing groups into downside risk,” said Nuckolls. “The best way to do it is to have a slower, longer on-ramp, especially when the benchmarks and the rules of the game keep changing. That’s a very difficult decision for a CFO to help make.”

ACOs play a critical role in moving the healthcare industry further long the value-spectrum. But they are not the ultimate model for success.

“I see the ACO as a vessel to get us there, but I don’t see it as a final destination,” McGookin argued. “We’re going to need payment reform or changing payment models that are more progressive than the ACO model. At some point, the ACO model falls short.”

Continuous evaluation of these models and adjustments when methods work, or don’t, will help ensure success.

“It’s not going to be a straight line of movement. It’s going to have starts and stops,” Nuckolls concluded. “Moving forward, having doctors accountable for cost, quality, and creating incentives to keep people healthy, those are all concepts that will continue to be rewarded. That’s the right thing to do.”

Explore how Coastal Medical, CHI St. Luke’s, and Coastal Carolina Quality Care, Inc. are succeeding as ACOs. Click here for four key strategies for improving care quality and patient outcomes while lowering costs and earning shared savings.