Uncharted Waters: Navigating the Ins and Outs of ACOs

Examining how Accountable Care Organizations will affect ophthalmology.

By Michelle Dalton, ELS

If you listen in on any conversation regarding healthcare and financial risk lately, you’re sure to hear “ACO” mentioned several times. As part of the Patient Protection and Affordable Care Act, an Accountable Care Organization (ACO) must be “financially accountable for the health care needs of a population, manage the care of that population and bear that responsibility at an organizational level.”¹ By designation, the Centers for Medicaid & Medicare Services (CMS) contract with ACOs to provide integrated healthcare services. In March of 2011, CMS proposed regulations to implement its Medicare Shared Savings Programs, which granted ACOs the responsibility for all aspects of healthcare (quality, costs and overall care) for at least 5,000 Medicare beneficiaries. These shared savings programs went into effect Jan. 1, 2012. Incentives are part of a capitated risk-based model, defined as “a method of prospective reimbursement whereby a health plan or independent practice association) that has accepted risk for medical services pays a provider on a per-member-per-month basis for all members of the plan that are assigned to that provider.”²

CMS estimates that more than 5 million beneficiaries could receive care from ACOs at a savings of almost $1 billion over 3 years.³ ACOs are predominantly hospital-based, but are expanding to include multispecialty practices. By law, an ACO may include group practice arrangements, networks of individual practices of ACO professionals, partnerships or joint venture arrangements between hospitals and ACO professionals, hospital-employed ACO professionals or other Medicare providers/suppliers.⁴

For ophthalmic practices, the challenges of determining how to fit into an ACO, especially for traditional ophthalmic facilities that are essentially extensions of a solo physician or physician group, have only begun to surface. One thing is for certain, in the realm of ophthalmology, no one fully understands what the ACO concept will mean. But experts say it’s likely that only a small portion of ophthalmologists will be employed directly by ACOs. It’s more likely that ophthalmologists will continue to be paid directly by CMS. That said, ophthalmic practices should still be aware of the coming changes.

Focus on how to market your value proposition to providers who are used to offering these services only in the hospital.

—Michael A. Romansky, JD

Providing Value

Ophthalmology is the third largest expenditure in absolute dollars for CMS, says William L. Rich, III, MD, medical director of health policy for the American Academy of Ophthalmology (AAO), and the highest percentage of an ophthalmologist’s revenue comes from Medicare. Yet the majority of hospitals “don’t look at us as integral to providing coordinating care and they certainly don’t look at us as a revenue stream,” says Rich.

David W. Parke, II, MD, chief executive officer of the AAO, says ACOs aren’t a single structural entity but large, integrated medical systems, where individual hospitals are coming together to form hospital systems and spending tens of millions to buy physician practices — but they typically purchase only those practices that are a good marketing fit and will generate “a great deal of ancillary revenue.”

An ACO is much more likely to be concerned about pulling in hospital and primary care physician members than an ophthalmic ASC. ACOs don’t think ophthalmology makes any money in a hospital-based ACO so they’re not aggressively pursuing bringing ophthalmic ASCs into the fold (or ophthalmologists themselves, for that matter), says Michael A. Romansky, JD, Washington counsel and vice president for corporate development, Outpatient Ophthalmic Surgery Society (OOSS). OOSS is “encouraging our members to be mindful of ACOs and to build relationships with hospitals and insurers as they’re creating the ACOs,” he says. “Focus on how to market your value proposition to providers who are used to offering these services only in the hospital.”

Ophthalmology as a profession “hasn’t been approached because, of all the medical specialties, we generate the least amount of money for a hospital,” Dr. Rich says. That may end up working in ophthalmology’s favor, says Lou Sheffler, chief operating officer and co-founder of American SurgiSite Centers. “Under the current scenario, specialists like ophthalmologists are allowed to join as many ACOs as they wish,” he says.

Ophthalmic surgery is a Medicare-based practice, and, except in isolated localities, it is unlikely that ACOs will dominate the Medicare marketplace, Mr. Romansky says, “at least not to the extent of traditional fee-for-service losing its position as the norm.”

“There are two types of ACOs, one that is hospital-based and one where the ACO is built around the managed care organizations that survived the 1980s,” says Dr. Rich. “Those organizations are much more aggressive toward the field of ophthalmology,” he says, and may force physicians who want to participate in a particular insurance plan to participate in a particular ACO and/or purchase a specific EHR system.

Ophthalmology is not profitable for hospitals.

—Lou Sheffler

ASCs and ACOs Working Together?

ACOs shouldn’t be viewed as doom and gloom for ophthalmology. ASCs are competing for a product the hospital doesn’t want to offer — ophthalmic surgery — and that gives ophthalmologists a great deal of leverage.

“We know ophthalmology isn’t profitable for a hospital,” Mr. Sheffler says. They view ophthalmology as tying up valuable time in the operating room that can be used for more profitable surgeries, such as cardiology or orthopedics cases. “The ACOs of today are like revisiting managed care from years ago. It’s a different approach to the same challenge.”

Under the latest round of healthcare reform, hospitals are responsible for providing medical care to Medicare beneficiaries, Dr. Rich says, and “these hospitals have to demonstrate increased quality and savings” to be eligible for bonus payments. Again, hospitals have ignored ophthalmology and “have no intention of buying us” because of the limited revenue ophthalmology generates for a hospital, Dr. Rich says.

“In the end, hospital-based ACOs are going to have to consider us. All services that are covered by Medicare and those affiliated costs are going to be assigned to hospitals and hospital ACOs,” says Dr. Rich. “If physicians aren’t employed by a hospital, but they’re in the hospital ACO network, they’re getting paid directly by Medicare, not by the ACO.”

Meanwhile, each Medicare-certified ASC was required to submit to CMS patient outcomes and quality data beginning Oct. 1, 2012, or face substantial financial penalties, according to OOSS. This may also lay the groundwork for ophthalmic ASCs and ACOs to work together.

“There is an opportunity for ophthalmic ASCs to go to a hospital organization that is setting up an ACO and say, ‘Let us be your provider for eye surgery because we can do it for a fixed price, and we can perform it cheaper than you,’ and advise the hospital to outsource the surgery to an ASC,” Mr. Sheffler says.

From the ASC perspective, the value proposition is that ACOs are ostensibly supposed to improve quality and reduce costs, but the ophthalmic ASCs that are contracting with Medicare already cost less than 60% of what the hospital will receive for the same procedures, Mr. Romansky says.

Ophthalmic practices that hope to avoid becoming part of these integrated systems altogether aren’t being realistic, says Dr. Parke. “ACOs are going to be very important for access to care. And in some cases, they’re going to be setting community-at-large standards of care,” he says. A potential scenario will be the ophthalmologist not working directly in the ACO, but interfacing with it on a contractual basis. And bear in mind “we don’t know what they’re going to look like; we’re all just hypothesizing for now. It’s going to place an opportunity and a burden on the ophthalmologist. We need to understand how to best construct and operate that interface,” says Dr. Parke.

Mr. Sheffler sees two viable possibilities for ASCs similar to those Dr. Parke predicts — in some states, hospitals may lease the surgery center, rendering the ASC a part of the hospital system; in others, the ACO would be entirely separate from the hospital where the hospital ACO splits the insurance fees directly with participating physicians.

Physician-driven ACOs won’t be very different from what ophthalmologists are used to with an ASC, Mr. Romansky says. “The dilemma is this: will the hospital-based ACO transform from the mindset of the ASC being the competition into the mindset of appreciating that the savings accrued by having services performed in a partner ASC will flow to the ACO’s bottom line? I think this is the challenge for the ophthalmic ASC, to market the facility to the ACO.”

In his opinion, the multispecialty ASC, “the facility that essentially mirrors the hospital’s outpatient surgical department, may be in the most advantageous contracting position, if for no other reason than that they may have 10, 20, 30 or more surgeons on their medical staffs from various specialties with patient referral bases of their own, Mr. Romansky says.

Competitive Edge

Dr. Rich adamantly advises against ophthalmologists (and ophthalmic practices) signing an exclusive agreement with a particular ACO. “We have no idea if that hospital ACO is going to be successful and an exclusive contract will preclude you from participating in other ACOs,” he explains. That’s where Dr. Rich believes ophthalmic ASCs have a significant competitive edge. Hospitals don’t want to get involved with cataract surgery or intravitreal injections. “Plus, they need that operating space for their staff physicians. That, in turn, means self-contained ophthalmology practices are especially inviting. They don’t want to exclusively contract with me, but they want my facility for surgery,” says Dr. Rich. In that scenario, solo practices are no more or less attractive than multiphysician ASCs, he says.

Practices with an EMR system in place will be more attractive than those without one.

—David W. Parke, II, MD

Be prepared for the lawyers, Mr. Sheffler adds. A “whole boutique industry of healthcare lawyers” will see this situation as an opportunity to market their services to medical specialty businesses, like ASCs. This will illustrate the benefits of the businesses banding together when being approached by the larger organizations.

Dr. Parke predicts that predicts that a practice with an EMR/EHR system in place will be a more advantageous match with an ACO than on that doesn’t. And if ophthalmologists are going to care for patients within the auspices of an ACO, ensuring that the two EMR systems talk to one another is imperative. Some of the leading EMR systems aren’t user-friendly in ophthalmic settings, which can make the task of cross-sharing data more difficult.

The ACO and the ophthalmic community are going to have to agree to various service standards, says Dr. Parke. The AAO has created “EHR Central” for its administrator and physician members to serve as an information resource on the various vendors, system functionality, educational seminars and even compliance checklists. Likewise, both OOSS and the American Society for Cataract and Refractive Surgery (ASCRS) have guidance documents for their members and administrators on implementing these systems.

The primary goal of these systems and government regulations is cost reduction, Dr. Parke says. “A second goal is improved quality of care.” Both sides of that are equally important as AAO looks to refine and enhance the value of ophthalmology as a profession to the hospital ACOs, he says. “If we can demonstrate that we’re trying to be methodical in our use of resources, and we’re going to improve quality and safety where we can, the value of what we have to offer increases and we’ll be recognized by our peers, by society, and by our patients,” he explained. “Anything we can do to put hard data out there to highlight the work that we do is going to increase our value.”

AAO is developing a clinical registry its members can use to evaluate their own components and benchmark them to demonstrate quality and value to ACOs, among others. “It would be a huge mistake for ophthalmologists to turn our backs on ACOs,” Dr. Parke warns. “It’s just that we need to do things in a different way than a hospital-employed cardiologist would.”

Bottom Line or Bottom Dollar?

ACOs aren’t the worst thing in the world for ophthalmology and ASCs, nor do they represent the best scenario, Mr. Romansky says. At this point, though, most ACOs aren’t ready to contract with facilities as far down the food chain as ophthalmology, he adds.

As long as ACOs don’t mimic the managed caretype organizations of the 1980s and 1990s, they may succeed, Dr. Rich says, noting the physician hospital organizations of the 1990s all failed. “Right now, the hospitals that are allegedly building their staff of physicians to integrate care under ACOs are dramatically increasing the current cost of care,” he says, and that can’t bode well for a system that was legislated to reduce costs.

ACOs will not control your flow of money.

—William Rich, III, MD

“It’s all about the money and where the money’s flowing,” Mr. Sheffler says.

Another reason ophthalmic ASCs and individual practices may not be heavily pursued by ACOs or hospital groups is that “they don’t have the data tracking capabilities that hospitals and other large physician groups do,” Mr. Romansky says, reiterating the need for practices to have an EMR/EHR system.

For hospitals, the incentive to buy practices will continue. Hospitals can pay physicians what they’ve been earning in practice, and be reimbursed at a 44% higher rate. Hospitals may be interested in building integrated teams to provide integrated care under an ACO as well, but the reality of it is that hospitals “had been buying physician practices well before the ACO model,” Dr. Rich notes.

Taking baby steps is the general advice for ophthalmology and the ACO models. “It’s hard to get your arms around a ghost,” Mr. Romansky says. “There isn’t a legislative or regulatory answer for ACOs. It’s going to be dictated by the market and it’s market penetration and impact on physicians and ASCs will be very localized.” OOSS fields calls from members concerned about ACOs, but the ophthalmic ASC is farther down the ladder than other specialties and that’s not going to change any time soon.

AAO is trying to determine where meaningful relationships with ACOs and ophthalmology exist, and to that end, has requested to see members’ contracts with ACOs to use as examples for other practices.

“We’re also trying to influence in Washington the construct of regulations that pertain to ACOs. We’re reviewing with the American Hospital Association and the American Academy of Family Practice trying to find a way for ophthalmology to have the right kind of access to patients and access to direct procedures in a resource-strained environment,” Dr. Parke says. “We’re trying to put as much information as possible out there, but at the same time, realizing that these things will continue moving forward.”

For now, AAO’s advice for its membership? Don’t sign an exclusive contract and don’t agree to use a specific EHR or EMR system is mandated in order to participate in a particular ACO. “You’re going to get paid fee-for-service anyway,” Dr. Rich says, so there’s little benefit in agreeing to a system that hasn’t been vetted by your administrators and IT personnel.

Dr. Rich continues to doubt any scenario will exist where ophthalmologists are employed by a hospital (exclusive of academic settings). “I think we’ll sign contracts with ACOs,” he says, “and the ACO may dictate that we have to send letters to our patients’ primary care physicians (to keep the lines of communication open) in those contracts. But the ACO can’t control where you refer patients for ophthalmic specialty care — or who gets referred to you. ACOs will not control your flow of money.” ◊

References

1. Muhlestein D, Croshaw A, Merrill T, Pena C. Growth and dispersion of accountable care organizations. Leavitt Partners — Center for ACO Intelligence. Published November 2011. http://leavittpartners.com/accountable-care-organization-intelligence. Accessed online January 14, 2013.

2. Pearce J. The Return of Capitation: Preparing for Population-Based Health Care. http://www.hfma.org/templates/interiormaster.aspx?id=33188. Accessed online January 2, 2013.

3. Academy of Managed Care Pharmacy. Pharmacists as Vital Members of Accountable Care Organizations: Illustrating the important role that pharmacists play on health care teams. Published March 2012. www.amcp.org/aco.pdf. Accessed online January 14, 2013.

4. Patient Protection and Affordable Care Act, P.L. 111-148, 111-152. www.gpo.gov/fdsys/pkg/BILLS…/pdf/BILLS-111hr3590enr.pdf. Accessed online January 14, 2013.