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Perspectives on the New "Pioneer" Model for ACOs

June 24, 2011
by Mark Hagland
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Will CMS’s new ACO development option spur provider interest? One industry expert sees a mixed picture

In late May, the federal Centers for Medicare and Medicaid Services (CMS) introduced a new program intended to enhance provider interest in developing accountable care organizations (ACOs) under healthcare reform. The pioneer ACOs program would provide an accelerated pathway to forming an ACO for providers that already have the infrastructure and care coordination models in place to move forward quickly. Such providers could move rapidly from shared savings to a population-based payment model, and could begin officially participating in the program earlier than in the regular program.

Nonetheless, many healthcare provider leaders remain wary of the ACO program as outlined in CMS’s proposed rule, released March 31 of this year. Among the numerous issues that continue to cloud potential participation on the part of patient care organizations include downside risk assumption; patient opt-in/opt-out for release of personal health information to ACO participant organizations; and the requirement that 50 percent of physicians participating in any ACO be “meaningful users” according to the provisions of the HITECH (Health Information Technology for Economic and Clinical Health) Act.
Manuel Lowenhaupt, M.D., a Boston-based senior executive in the Accenture Health division of the global consulting firm Accenture, spoke recently with HCI Editor-in-Chief Mark Hagland regarding his perspectives on the proposed rule for ACO development, and on how providers have been reacting to its release. Below are excerpts from that interview.

What were your own reactions to the proposed rule?
I’m down on the ground, working with three large clients, all of them integrated health systems wanting to develop ACOs. And they were certainly concerned with elements of the ‘regular’ ACO rule—there is the ‘pioneer ACO’ development, which is separate, of course. The folks I enjoy working with are doing this for the right reasons—improving care, improving efficiencies, and wanting to collaborate. And then they came out with these ‘regular’ ACO regulations, and that set folks back a bit. They said, we don’t think we’re going to qualify without a lot of work; the number of measures was frustrating to them; the upfront costs and the application process were frustrating to them.

So in all three cases, they basically said, the regular ACO was not a good fit. And we’ve been working with them around a variety of issues. In one case, we actually helped them go through a formal clinical integration process, and they were very focused on this concept; and they’re three very integrated health systems, ones people might point to as already being ACOs in the general sense, but they are looking at this right now and saying there isn’t a fit.

They all want to develop strong contracts with physicians, as well as become more dominant in their markets. The frustration—and I was sitting down just recently with the president of one of these organizations—and he said he was frustrated with the requirements around the regular ACOs; but he was saying he thought the ‘pioneer’ model might be more appealing. They feel as though they have 90 percent of what’s being asked for in the pioneer program, already in place. His concerns around the regular ACO certification revolve around things like expectations around metrics, and just the documentation and compliance requirements seemed a little bit frustrating.

Manuel Lowenhaupt, M.D.

Do you believe that CMS will show some flexibility and make some modifications for providers in the ACO program?
I think they’re going to try; but my insight is limited. I think there is definitely a school of thought that says, yup, we’ll make this something that will happen. And I think there’s been very thoughtful feedback from folks at organizations like AMGA and MGMA [the American Medical Group Association and the Medical Group Management Association], [with the leaders of those organizations] just being realistic about what it will take. But just because something makes sense isn’t the only reason things will happen around there at CMS. And I consider Don Berwick [CMS administrator Donald Berwick, M.D.] a huge hero in medicine. But it’s unclear to me how all this will play out in the long term. So I have very little insight as to whether they will make significant changes. But some of the organized medical groups have made some very thoughtful comments. And I’m not convinced that the pioneer program has answered all the questions. For example, I’m working with one large hospital system that has been very skeptical of ACOs from the beginning; their CMO has referred to the ACO program as a unicorn.

I think the requirements for IT infrastructure and capability will be quite rigorous, don’t you?
Absolutely. The ability to have all the accurate numerators and denominators will be absolutely crucial. One of our client organizations has been working very hard on meaningful use and has attested on stage 1 for MU and its leaders are very sophisticated on technology, but as they look at the ACO component, they’re very concerned that their inpatient EHR is not fully capable in terms of ACO development, and the investment involved may be very significant. And penetration into the ambulatory sphere will be very daunting, because it’s not just saying, we have an EHR or we have systems in place; instead, there will also be a need to put strong data warehouses and registries and data analysis in place. So you’re very right that the IT investment will be very intense, even for hospitals and health systems that are at HIMSS Analytics stages six and seven levels.

What should CIOs, CMIOs, and other healthcare IT leaders be doing right now, in this context?
Let me approach the tactical and strategic aspects. One of our client organizations is going through a budgetary process right now, and I’ve been having significant discussions with the CIO. And a lot of the requirements for meaningful use fall into the ‘must-have’ category for that organization. But nobody’s quite budgeting revenues towards ACO development right now; people are very focused on the ‘must-haves’ around getting through the next 12 months generally, surviving financially, as well as supporting meaningful use development, and supporting clinicians in their growing needs.

So right now, ACO development and preparation fall into the ‘nice-to-have’ category for them. And they also don’t see a good, clean path forward yet in the ACO area. On the other hand, organizations are looking at what they need to do to better serve their communities; and they’re looking at what they need to do to build in cross-continuum care delivery. Let me be very specific: I’ve met with 10 leading CMIOs in the past month, and in many ways, they’re the glue that holds our IT and care delivery system together. I also use the analogy that they’re trying to ride two different parallel trains at the same time; in any case, we’ve talked a lot about just this topic. And their specific belief is that the requirement to build more robust ambulatory systems will be key to ACO development. And they’re saying that’s where they’re furthest behind.

On the one hand, they have ambulatory systems, and they may even have cross-continuum solutions with a particular vendor. But the question is, are we integrating, are we building the analytics we need, are we managing care with any sort of decision support, where we can get to managing care at the point of care? They say they’re doing better inpatient. And the fundamental point, of course, is the question of whether we’re improving patient care or not. And the key to that is getting to the clinician at the point of care or not. And on the ambulatory side, they feel they’re using their systems at about 2 percent of where they need to get—and whether it involves reminders or alerts or whatever, very few of them felt that we’re executing at the level where we could deliver accountable care, at the end of the day. It’s hard!

So the uncertainty around how the ACO rule will play out is really impacting planning for this, right?
Yes, and the uncertainty right now around the proposed rule really empowers the skeptics, who say, well, we don’t know exactly what will happen here, so why don’t we slow down? And unfortunately, the complexity of the rule, the requirements of the rule, really feed a kind of innate conservatism in healthcare, among people who don’t like transformative change anyway. Now, in ACO-land, hospitals become cost centers, and the focus is on cost savings. And that’s very difficult for hospital executives. And I’m being unfair to my visionary hospital CEOs, but there are certainly many out there who are more conservative.

We all lived through the ‘90s, when we tried to do global capitation and PHOs, and we tried to execute, and many of those experiments didn’t really work out. We didn’t have the revenue change involved; at the end of the day, the bulk of how we got paid still had to do with volume-based FFS payment. And if I were Blue Cross Blue Shield of XYZ, why would I want to give away a component of my revenue? There’s one BCBS in the Midwest that pays doctors 10 cents on every dollar to avert hospitalization; and as you might guess, the hospitals are grouchy about this, while the primary care physicians are happy. But in the ACO model, the insurers lose that potential savings as revenue. Now, some insurers might want to become ACOs. But we still have a very complex model of being paid. Even if ACOs come into place, I still have a very significant portion of fee-for-service payment, so until ACOs become 100 percent of payment, I still have that FFS payment portion.

So in the end, it comes down to doing the right things for our communities—we need to do the right things and not get penalized by the payment system for doing those things. And if you look at what’s happening in Vermont, with a single-payer system, those kinds of innovations could help focus providers on improving the health of their patients and communities. And even with ACOs, if there were a small amount of reimbursement going to coordinated care, if I’m a CEO, I’ve got to keep some of my eggs back in the FFS basket. So it’s not as easy as we’d like it to be. I keep going back to the line about doing good and doing well. In an ideal world, I should be able to do well financially by doing the right things. And ACOs push the lines together towards overlap, but we’re not there yet. And this will require a significant investment not only in information technology, but really around business analytics, being able to do a lot of predictive work.


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