Growth of ACOs
Continued growth of accountable care organizations could impact private practice physical therapists.
By Jerome Connolly, PT, CAE
April 4, 2014
A December 2013 announcement1 by the Centers for Medicare and Medicaid Services (CMS) provides evidence of the growth of the so-called Accountable Care Organizations (ACOs). The 123 new ACOs bring the number of Medicare ACOs to 366. In addition, the best estimate for the total number of public and private ACOs is 606.
A list of the 123 new Medicare ACOs announced in January can be found at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/sharedsavingsprogram/Downloads/2014-ACO-Contacts-Directory.pdf.
More proof of the proliferation of this delivery model is found in the formation of the National Association of Accountable Care Organizations (NAACOs), which was incorporated in Washington, DC, and is supported through membership fees, business partner fees, conferences, and with in-kind contributions of its members. The stated purposes of this organization include fostering growth of ACO models of care; participating with federal agencies in development and implementation of public policy; educating members in clinical and operational best practices; and educating the public about the value of accountable care.2
ACOs were authorized under the Medicare Shared Savings Program (MSSP) included in the Affordable Care Act (ACA) and are essentially groups of health care providers that accept responsibility to care for the health needs of a defined population while meeting predetermined quality benchmarks. The specific goals of ACOs are to improve quality outcomes, improve the experience of care, and lower costs. This relatively broad description includes multiple types of organizations operating under many different payment arrangements. ACOs share with Medicare any savings generated from lowering the growth in health care costs when they meet standards for high quality care. While the MSSP is the most publicized incarnation of ACOs, many other public and private models exist, with a variety of approaches to achieving the common goals. That’s why I am fond of saying, “When you’ve seen one ACO, you’ve seen one ACO.”
ACOs are now located in all 50 states and the District of Columbia. California leads all states with 58 ACOs, followed by Florida with 55 and Texas with 44. ACOs are primarily local organizations, with 538 having facilities in only one state. At the Hospital Referral Region level (HRR), ACOs now are present through much of the United States, though some regions, primarily rural areas in the northern Great Plains and Southeast, still have limited ACO activity. Los Angeles (26), Boston (23), and Orlando (17) have the most ACOs.3
Another—some would say a better—way to assess the growth of ACOs is to look at the number of Americans covered by an ACO. Medicare ACOs now cover 5.3 million Medicare beneficiaries, but private sector ACOs now cover more than twice that at 12.9 million lives.4
Major organizations, integrated health systems, and larger entities have comprised the bulk of the players in the ACO game, and their representatives currently comprise the majority of NAACO’s leadership.2 These organizations coalesce around existing relationships and natural partners; which is not to say that hospitals are not making a major push to acquire physician practices, especially primary care, to solidify the professional services needed to form an ACO.
CMS began releasing preliminary results of ACO performance last year, including results from the first year of the Pioneer ACOs. And in January, CMS announced that providers participating in its Medicare ACOs saved a total of $380 million in the first year.5 Specifically, the data showed 54 of the 114 MSSPs had lower spending than projected, with 29 generating $126 million in savings for provider networks and an additional $128 million for the Medicare Trust Fund. Meanwhile, nine of the 23 Pioneer ACOs significantly reduced spending growth and met certain quality measures, generating a total of $147 million in gross savings. Although CMS officials touted the data as a sign of improvement, some experts said the mixed results provide little incentive for others to become an ACO right away.6
To garner savings, Medicare ACOs must meet quality standards that include improving care coordination and providing care that is appropriate, safe, and timely. CMS evaluates ACO quality performance using 33 quality measures on patient and caregiver experience of care, care coordination and patient safety, appropriate use of preventive health services, and improved care for at-risk populations.
ACO growth was the topic of a Health Affairs article in January of this year.7 Since January 2013, almost 200 new public and private ACOs have been established, and ACOs now cover more than 18 million consumers. The article pointed out that this year, many of the first ACOs will begin to release their quality results, which other insurers and organizations could use to decide whether or not they will launch their own ACO programs. Positive achievements could motivate organizations to create an ACO, while negative results will likely discourage new ACO development or even lead to existing ACOs abandoning their current value-based contracts.6
Other factors that could determine the fate of the ACO market include state Medicaid activity and consumer reaction to the new delivery model.7
States can encourage more ACO adoption through their Medicaid programs. For example, states that have openly embraced the ACO model for Medicaid members, including Oregon and Utah, have some of the highest percentages of consumers covered under an ACO. As states expand their Medicaid programs under the health care reform law, many could choose an ACO model, especially if they opt for the private option model initiated by Arkansas.7
Presently, consumers often don’t know about ACO agreements because they are typically added into existing payer-provider contracts and, at least under the Medicare program, beneficiaries have a choice of where they receive their care and are not locked into an existing provider network. Consumers may become more aware in the future as private sector ACOs grow and large employers start choosing ACO-based health plans, since individual consumers may have to weigh saving money against being limited to a narrower panel of providers.
Significant widespread effects of ACO growth on private practice physical therapists (PPPTs) have not yet been reported. This could be because physical therapy is not a primary consideration of the founding organizations. In addition, large, integrated organizations may believe their physical therapy needs are being adequately addressed through existing hospital or physician office services. Though ACOs are affecting over 18 million covered lives, the majority of physicians, hospitals, and other organizations are still trying to understand the phenomenon and determine if it is a method of care delivery that they wish to embrace.
As ACOs grow and innovate, PPS members may feel negatively impacted, but could also eventually see more prospects of participating. Bringing value to an ACO may provide revenue opportunities as PPPTs, but private practitioners will need to offer a clear and compelling reasons to be added to the ACO.
The most obvious argument will be evidence of the ability to add value to the ACO, such as better outcomes at a lower cost. As a rule, private practitioners are far more capable than their competitors of demonstrating the value equation, particularly as it is defined as quality divided by cost. Of course, this requires accurate and defensible measures of quality (outcomes).
I suspect some early adopters (innovators) in physical therapy are already forging relationships and participating in ACOs as partners or contractors. Moreover, I suspect this activity will grow as the number and type of organizations associated with ACOs continue to expand.
Since the ACA has been upheld by the Supreme Court and cemented in place by President Obama’s reelection, the ACO is now an accepted integral element of the emerging health care delivery system. In other words, plan on ACOs being around for a while, as it is more likely now that Obamacare will be mended, not ended.
Watch for proliferation in size, number, and variety of ACOs and be ready to analyze opportunities to demonstrate the value of your services.
You should also keep your lobbyist informed if and when you see misapplications or unintended consequences from the ACO authorizing provision of Obamacare.
Jerome Connolly, PT, CAE, is a registered federal lobbyist whose firm Connolly Strategies & Initiatives has been retained by PPS. A physical therapist by training, he is a former private practitioner who throughout his career has served in leadership roles of PPS and APTA. Connolly also served as APTA’s Senior Vice President for Health Policy from 1995 – 2001.
Follow your lobbyist and legislative activities on Twitter: @TherapyPolicy.
NOTES
1. More partnerships between doctors and hospitals strengthen coordinated care for Medicare beneficiaries. CMS web site. http://www.cms.gov/Newsroom/MediaReleaseDatabase/Press-Releases/2013-Press-Releases-Items/2013-12-23.html. Posted December 23, 2013. Accessed February 3, 2014.
2. National Association of ACOs website. http://www.naacos.com. Accessed February 3, 2014.
3. Peterson, Matthew, Muhlestein David, Gardener, Paul. Growth and Dispersion of Accountable Care Organizations. Leavitt Partners website. http://leavittpartners.com/wp-content/uploads/2013/08/Growth-and-Disperson-of-ACOs-August-20131.pdf. Posted August 2013. Accessed March 4, 2014.
4. Geographic Distribution of ACO Covered Lives, Leavitt Partners website. http://leavittpartners.com/2013/12/geographic-distribution-aco-covered-lives/. Posted December 2013. Accessed March 4, 2014.
5. CMS data show mixed results from Medicare ACO programs. California Healthline website. http://www.californiahealthline.org. Posted January 31, 2014. Accessed March 4, 2014.
6. Modern Healthcare, website http://www.modernhealthcare.com. Accessed January 30, 2014.
7. Muhlestein, D, Accountable Care Growth in 2014: A Look Ahead, Health Affairs Blog. http://healthaffairs.org/blog/2014/01/. Posted January 31, 2014. Accessed March 4, 2014