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Heritage Medical Systems’ Wagar: Pioneer ACO Lessons Abound

July 29, 2014
by Mark Hagland
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At the Northridge, California-based Heritage Medical Systems, president Mark Wagar is helping to lead a broad-based initiative around ACO development—with many lessons already learned

As the accountable care revolution rolls forward, it is inevitable that some of the most innovative leaders of that revolution are senior executives of multispecialty medical groups. After all, it is physicians who work most closely and regularly with patients, particularly the high-risk, high-cost patients whose utilization is leading the bulk of expenditures in the current healthcare system nationwide.

One of the pioneering organizations in the accountable care organization (ACO) space is the Northridge, Calif.-based Heritage Medical Systems, which is operating the largest of the Pioneer MSSP ACOs, with about 90,000 members, called the Heritage Pioneer ACO, and the largest physician-led managed care provider organization in the country. What’s more, Heritage Pioneer ACO, reports president Mark Wagar, was one of two ACOs that generated 40 percent of the savings documented in 2013 in the Pioneer MSSP program (the other was the Montefiore Pioneer ACO in New York City). What’s more, Wagar notes, the Heritage Pioneer ACO is composed primarily of independent (non-salaried) physicians in California, Arizona, and New York, making that achievement even more noteworthy.

Wagar was one of a number of healthcare leaders interviewed by HCI Editor-in-Chief Mark Hagland for the magazine’s July-August cover story. Below are excerpts from his interview with Hagland this spring.

Tell me about Heritage Medical Systems.

Heritage is a physician organization that takes care of about a million patients in California, New York, and Arizona. About 800,000 are in prepaid, capitated, fully delegated care contracts. So we manage the care through our physician groups and independent practices, pay the claims, and so on.

Mark Wagar

How many physicians are involved?

In our groups, there are a couple of thousands, and then several thousand independent practices. In California we have 50 different physician groups with an employed model and then we wrap IPA groups around them on contract basis.

How long has your organization been in existence?

For over 30 years. The origin of this—over 30 years ago, Dr. Richard Merkin was an emergency physician and he founded the group, based on the need on the part of the local Blue Cross plan for better organization of a physician network, back in 1979.

So it was initially something like a contract group like ED physicians?

Actually, Dr. Merkin separated from the ED physicians and created an early capitation agreement. These days, it’s quite formal, but back then, nobody knew quite how to arrange this. So Dr. Merkin had to post the title on his house and car. He was a young, practicing emergency physician. Working together, the  health plan, Dr. Merkin, the hospital, and doctors, put together an organization.

This group has been around a long time, and has helped doctors and everyone begin to achieve the Triple Aim.

Tell me about your Medicare MSSP involvement.

We have one of the largest pioneer ACOs, with about 90,000 members, and several regular ACOs. That’s the Heritage Pioneer ACO. And in terms of recently released recent results, 11 or 12 ACOs out of 29 showed cost savings, and two of those generated 40 percent of the savings; one was Heritage, and the other was Montefiore out of New York. And we did this not only with our employed physician groups; in fact, the majority of physicians involved were independent, and practicing in small practices. The takeaway was that we were able to extend to these independent physicians the same kind of outreach and infrastructure we do here at core Heritage. So it shows if you’re attached to the right entity, you don’t have to be owned or salaried per se—it’s about having the information, having access to the extenders you need to do longitudinal health management. Our entire traditional health system is set up to help people when they present with a problem.

But the value-based system—once you’re able to move it into the hands of providers and extenders, the approach is entirely different. If you’re a pulmonologist, you want to be able to take care of every COPD [chronic obstructive pulmonary disease] patient who comes to you. If you’re responsible for 20,000 people in a county, in a population health context, you want to know about every COPD patient, even if they haven’t come to see you, and want to know about their economic circumstances, their family and social circumstances, etc., and the whole objective is to embrace them in a holistic way.

What have been the biggest challenges in establishing and operating the Pioneer MSSP so far?