ACOs walk a tightrope between significant risks and ample benefits

Health care providers that participate in a proposed federal cost-saving initiative would be eligible to receive a hefty share of those savings, provided that they meet or exceed performance standards and reduce growth in health care spending.

One caveat: Participating providers would be required to shoulder a certain amount of risk in order to receive larger shares of cost savings. Under the proposed plan, clinicians would be able to assume risk immediately or wait 2 years.

Overall, ophthalmology and other specialties have little to gain or lose from the initiative. Some experts say specialists would need to work closely with primary care providers to obtain patient referrals. And some believe that close collaboration would help coordinate care and reduce health care costs.

Accountable care organizations (ACOs), collaborative entities comprising primary care physicians, hospitals and other professionals, would be eligible to participate in the Medicare Shared Savings Program starting Jan. 1, 2012. ACOs are a key component of the Patient Protection and Affordable Care Act, which was designed to increase access to care, improve public health and slow the trajectory of skyrocketing costs.

The implementation of ACOs may result in “rationing” of health care dollars, according to John B. Pinto. Image: Pinto JB

In late March, the Centers for Medicare and Medicaid Services issued a preliminary rule defining the role that ACOs would play in the Medicare Shared Savings Program. CMS gathered public comment on the proposed rule until June 6 and is expected to issue a final rule in October.

A potential upside of the program for ophthalmologists and other specialists is that primary care physicians would assume a significant share of risk associated with adverse events and poor outcomes. A possible downside is a degree of uncertainty surrounding how much specialists stand to gain in terms of getting patient referrals from primary care physicians who belong to ACOs.

According to Jeffrey R. Ruggiero, an attorney with Arnold & Porter LLP, CMS estimates that aggregate bonus payments will total $800 million and aggregate penalties will total $40 million in the first 3 years of the Medicare Shared Savings Program. Projected savings to the federal government are expected to total $510 million in that period.

“The real figures could differ substantially, but the point is that you’re talking about huge numbers here,” Mr. Ruggiero said.

CMS anticipates that 5 million beneficiaries would be served by providers participating in ACOs, according to a summary of the preliminary rule from Arnold & Porter.

William L. Rich III, MD, American Academy of Ophthalmology medical director of health policy, said there is an upside: Ophthalmologists would retain a great deal of autonomy in being able to control revenues from CMS.

“Ophthalmologists were not bought by ACOs because we don’t generate any money for hospitals,” Dr. Rich said. “We generate the least amount of money of any specialty. Frankly, that’s a huge benefit. You’re not going to have a hospital managing your revenue stream. Ophthalmologists will be able to get paid directly by CMS.”

As with other specialties, ophthalmology stands to lose from the “rationing” of health care dollars to physicians and services to patients, John B. Pinto, OSN Practice Management Section Editor, said.

“If ACOs take off in ways that their progenitors in the 1990s did not, it’s going to have a generally negative impact on ophthalmology because it’s a form of rationing of the dollars from the providers and rationing of care from the patients,” Mr. Pinto said. “As far as the magnitude of that, it’s going to be very much market specific. At the present moment, I can’t think of a single client practice that will be materially impacted, for better or worse, by this in the next few years. If ACOs take off … there could be some markets in which ophthalmologists would have a kind of musical chairs effect and there would be doctors left without a chair or with a smaller chair when the music stops. They’d be locked out of access to some portion of patients and premium dollars.”

John A. Hovanesian, MD, FACS, OSN Cornea/External Disease Board member, said that ophthalmology would be largely unaffected by the Medicare Shared Savings Program.

“From the physician’s perspective, at this early stage in the game, for specialty physicians like ophthalmologists, there doesn’t seem to be drastic change. At least that’s what we’re perceiving in our market,” Dr. Hovanesian said.

Potential impact on ophthalmology

ACOs and the Medicare Shared Savings Program would have a minimal impact on patients’ access to specialty care; specialists would not need to join ACOs in order to get referrals, Dr. Hovanesian said.

“It doesn’t appear that there’s going to need to be any great rush of eye surgeons into ACOs at this early date,” he said. “Those who are currently not heavily in managed care will probably still be accessible to patients because it seems that the ACOs, unlike HMOs, are not going to seek to limit patients’ access to the specialists they want to see.”

Mr. Pinto predicted that ophthalmologists who contract with ACOs would see an insignificant increase in referrals.

“In today’s world, in the average practice in the average market, PCP referrals are usually never more than about 5% to 8% of a practice’s inbound new patients,” Mr. Pinto said. “I don’t believe we’re going to see a material increase in that figure.”

Generally, most patients will self-refer themselves for eye care. Other patients who are within a medical home that belongs to an ACO would likely need authorization to seek specialty care, Mr. Pinto said.

“What we are probably going to find is some variation on the kinds of strictures that are rampant in markets like Las Vegas, where a significant portion of the patients are locked up into HMOs,” he said. “The patients need to receive pre-authorization before a round of treatment.”

William L. Rich III

Dr. Rich said that patients who are assigned to a primary care physician in an ACO would be able to visit any specialist they choose.

“They do not have to see a specialist who is under contract with the hospital or [independent practice association] in the accountable care organization. I think this puts ophthalmology in a very good position,” he said.

It may be beneficial for ophthalmologists to sign a contract, but not an exclusive contract, with an ACO, Dr. Rich said. Existing ophthalmology patients who become part of an ACO can still see their ophthalmologist, with or without a contract between the ACO and the ophthalmology practice. However, by signing a contract with an ACO, the ophthalmologist may garner new referrals.

“The only advantage of signing a contract is to get the referrals of new patients from the doctors in the ACO,” Dr. Rich said.

But, he added, “you should never sign an exclusive contract with a hospital accountable care organization. Why? It precludes them from participating in other ACOs that will be formed down the road by insurance companies and other entities.”

Structure and scope of ACOs

An ACO that meets or exceeds performance standards of care and reduces growth in heath care spending would be eligible to receive a share of the savings below individual benchmarks set by CMS, according to a CMS fact sheet. An ACO would be required to repay Medicare for a portion of losses or expenditures above its benchmark.

CMS will designate savings benchmarks for each ACO based on the type and number of patients treated by the group. Patient and provider participation in an ACO would be voluntary.

ACOs would be geared largely toward primary care. Under the proposed rule, CMS-approved ACOs would be required to accept responsibility for at least 5,000 Medicare beneficiaries and agree to participate in the Medicare Shared Savings Program for at least 3 years, according to CMS.

At least 50% of an ACO’s primary care physicians would have to qualify as meaningful electronic health record users as defined by the Health Information Technology for Economic and Clinical Health Act and Medicare regulations, according to a summary of the proposed rule from Arnold & Porter.

ACOs would be required to report publicly on shared savings and, in certain cases, losses.

Jeffrey R. Ruggiero

They would also need to report on 65 quality measures in five domains: patient experience of care; care coordination; patient safety; health of the frail, elderly or at-risk population; and preventive health.

The first quality reporting period would end Dec. 31, 2012.

Mr. Ruggiero said that most of his clients do not see the quality measures as problematic.

“They think that they can and should be demonstrating benchmarks with respect to quality of care,” he said. “It’s complicated, but there hasn’t been a great deal of concern about that area. So, the clients that we’re working with think that they can likely satisfy [these measures].”

However, he noted that some groups will miss the Jan. 1 participation deadline.

“One of the things that seems to be troubling to the provider community, the physicians in particular, is the deadline,” he said. “If an ACO misses the Jan. 1 window, it needs to know that it will have a subsequent opportunity before the expiration of the 3 years. That has to be clarified.”

Balancing risks and benefits

ACOs would be able to choose one of two risk models for their initial 3-year participation period.

Under a two-sided risk model, an ACO would be accountable for losses but would also be eligible for a larger share of achieved savings than under a one-sided model. An ACO would be able to choose a one-sided risk model for the first 2 years of its agreement period but would be required to shift to the two-sided model for the third year and subsequent agreement periods, according to the Arnold & Porter summary.

CMS proposed a maximum sharing rate of 60% for ACOs that select the two-sided risk model and 50% for those that take the one-sided model. The total amount payable would be capped at a percentage of the ACO’s benchmark for the year, or 7.5% in the one-sided model and 10% in the two-sided model, the summary said.

Mr. Ruggiero noted that CMS’ inclusion of the risk models surprised and troubled some of his clients.

“We haven’t had one of our clients decide to abandon its effort as a result of this, but it has created consternation,” he said. “There’s a feeling here that CMS has somewhat veered off course, that the original premise of the legislation was to create an upside and that now they’ve inserted a potential downside, particularly so early on. Congressional intent, as we understand it, was to foster innovation and collaboration, to really empower the provider community, specifically the physician community, to take on this venture. That seems a little bit inconsistent with this kind of risk component.”

John A. Hovanesian

Physicians, whether in primary care or specialty medicine, should not be forced to assume additional risk, Dr. Hovanesian said.

“Patients who are challenging and complicated cost us in a number of ways that typical patients don’t,” he said. “The implication of taking on risk is that we can control that risk, but we really can’t. What happens is that they end up squeezing physicians to do more for less. … It’s not a winning proposition for physicians, and most physicians are aware of that.”

In an HMO or managed care system, unhealthy patients can see their primary care physicians as often as they wish, with their only costs being co-pays for office visits, Dr. Hovanesian said. He said he was concerned that ACOs would follow a similar trend and that patient care would suffer as a result.

“What doctors end up doing in response to that is trying to do less for those patients who need more,” Dr. Hovanesian said. “Those complicated, unhealthy patients need access to care, want access to care. They want it inexpensively, so the doctors tend to see them as little as possible. I’ve seen it personally, and it’s very disconcerting when patients come to us to pay out of pocket to have surgery outside their managed care plan simply because they didn’t have enough access to their assigned doctors. Maybe some problems are solved by managed care, but others are certainly created.”

Dr. Rich said that the two-sided risk model is advantageous for established entities that evolve into ACOs. Such groups have already learned the ropes when it comes to managing risks and benefits.

“If you have an integrated system where you already have specialists and primary care doctors communicating quite well, not duplicating testing and already cognizant about reporting on quality, you go in and you take the risk contract because you can make more money,” Dr. Rich said. “If you have a real product and you have an integrated system, the people who have done it and have a track record feel confident that that’s what they’ll do.”

Focus on primary care

Patients would be able to seek specialty care inside or outside their assigned ACO. Mr. Ruggiero said that there is no built-in mechanism to encourage patients to seek specialty care within an ACO.

“The primary care physicians, obviously, would be encouraged to persuade those beneficiaries to seek care within the umbrella of the ACO. But they have no tools to do more than to encourage that,” Mr. Ruggiero said. “The ACOs and the primary care physicians in those ACOs don’t really have any meaningful mechanism to impose any sort of utilization discipline on these beneficiaries. Yet, the ACOs are going to be charged with the cost of that specialty care.”

In addition, Medicare beneficiaries who wish to seek primary care outside their assigned ACOs would have to establish a relationship with a new primary care physician, Mr. Ruggiero said. That may prove to be disconcerting for some patients.

“These are elderly patients,” he said. “Presumably, they have a good and productive relationship with their primary care physician. I would assume that they would take disruption of that relationship seriously. They may stay with the primary care doctor, but again, they can seek specialty care elsewhere.”

Collaboration between primary care physicians and specialists is a two-way street, Mr. Ruggiero said.

“I think it’s critical for specialty physicians to get involved in the formation of these ACOs,” he said. “Primary care physicians who are enlightened understand they need to collaborate with the specialists. They need to understand particular clinical protocols and what’s really necessary in terms of the provision of care and, perhaps more importantly, what’s unnecessary and how care can be improved. The primary care doctors can’t do that alone.”

Mr. Pinto said that it is in ophthalmologists’ self-interest to observe how primary care physicians and institutions cut costs.

“Get involved to find out what’s going on,” he said. “Don’t disengage from your local primary care and health system community. Stay nimble and be prepared to adjust your practice cost structure to match any adjustment in cash flow. The future for every single reader is going to be to realize that these efforts to contain costs, whether they’re called HMOs or PPOs or PHOs or ACOs or medical homes or other things in the future, are going to continue for the rest of your career. Stay light on your feet. Expect and prepare for change.”

Regulatory and economic barriers

The CMS and the Office of Inspector General proposed waivers of the Physician Self-Referral Law (Stark Law), Civil Monetary Provision Gainsharing Prohibition on payments from hospitals to physicians and the federal Anti-Kickback Statute, according to the CMS fact sheet.

The waivers would apply to ACOs and their participants, providers, suppliers, and individuals or entities outside of an ACO for activities related to the ACO’s participation in the Medicare Shared Savings Program.

In a letter to CMS Administrator Donald Berwick, MD, Michael D. Maves, MD, MBA, executive vice president and CEO of the American Medical Association, said that antitrust and anti-kickback laws favor hospital-based systems that employ physicians.

Allowing physicians to form ACOs independently of hospitals and large health systems would maintain robust competition and patient choice, Dr. Maves said. In addition, he said, safe harbors from antitrust laws, anti-kickback laws and the Stark Law would enable small, independent practices to collaborate with hospitals and other providers to deliver coordinated health care.

CMS should offer loan guarantees and technical assistance to help small practices make the investments they need to join ACOs, Dr. Maves said.

In a letter to Donald S. Clark, Federal Trade Commission secretary, Cecil B. Wilson, AMA president, expressed serious concerns about proposed FTC and U.S. Department of Justice rules regarding the enforcement of antitrust policy relating to ACOs.

Dr. Wilson voiced concern that the ACO policy may undermine the ability of physicians in small practices to participate in ACOs. Under the proposed policy, an ACO that controls less than 30% of a designated public service area would be eligible for protection from antitrust law. The threshold should be increased to 40% for ACOs that face stiff competition from other providers, Dr. Wilson said in the letter.

In a separate interview, Dr. Rich voiced opposition to a provision in the policy calling for physicians in smaller markets to sign exclusive contracts with ACOs. Forcing specialists to sign exclusive contracts would curtail their access to patients in competing ACOs and may prevent the development of physician panels by new ACOs wishing to enter the market, Dr. Rich said.

In a later statement to CMS, Dr. Wilson voiced support for the development and testing of ACOs “as one of an array of payment and delivery innovations.” However, the AMA “has urged CMS to make significant changes to the proposed rule to allow all interested physicians to lead and participate.”

For example, the AMA recommended assignment of patients to ACOs based on voluntary agreements and allowing physicians to know which patients are in their ACOs. The AMA also suggested a payment option that does not require shared loss and allows groups to receive a percentage of all savings.

Mr. Ruggiero echoed Dr. Maves’ concern about ACOs not being physician-owned.

“Our clients believe that these ACOs, in order to be successful, have to be physician-owned, physician-managed and physician-governed, and that physicians have to be empowered to help develop utilization protocols, quality protocols and credentialing protocols,” he said. “One of the risks here, and we’re seeing it happening more and more, is that you’re going to end up with the institutional providers buying up the physician practices, meaning the hospitals buying the physician practices,” he said. – by Matt Hasson

What do ophthalmology practices stand to gain or lose as ACOs begin participating in the Medicare Shared Savings Program?

Lindstrom's Perspective
In time of change, the physician must remain the advocate of the patient

References:

• Improving Quality of Care for Medicare Patients: Accountable Care Organizations. Centers for Medicare and Medicaid Services website. https://www.cms.gov/MLNProducts/downloads/ACO_Quality_Factsheet_ICN906104.pdf.
• Summary of Proposed Rule Provisions for Accountable Care Organizations Under the Medicare Shared Savings Program. Centers for Medicare and Medicaid Services website. http://www.cms.gov/MLNProducts/downloads/ACO_NPRM_Summary_Factsheet_ICN906224.pdf.
• What Providers Need to Know: Accountable Care Organizations. Centers for Medicare and Medicaid Services website. http://www.cms.gov/MLNProducts/downloads/ACO_Providers_Factsheet_ICN903693.pdf.

• John A. Hovanesian, MD, FACS, can be reached at Harvard Eye Associates, 24401 Calle De La Louisa, Suite 300, Laguna Hills, CA 92653; 949-951-2020; fax: 949-380-7856; email: drhovanesian@harvardeye.com.
• John B. Pinto can be reached at 619-223-2233; email: pintoinc@aol.com; website: www.pintoinc.com.
• William L. Rich III, MD, can be reached at American Academy of Ophthalmology, Governmental Affairs Division, 1101 Vermont Ave. NW, Suite 700, Washington, DC 20005; 202-737-6662; fax: 202-737-7061; email: hyasxa@aol.com.
• Jeffrey R. Ruggiero can be reached at Arnold & Porter LLP, 399 Park Ave., New York, NY 10022-4690; 212-715-1089; email: jeffrey.ruggiero@aporter.com.
• Disclosures: Dr. Hovanesian, Mr. Pinto, Dr. Rich, and Mr. Ruggiero have no relevant financial disclosures.