Will ACOs create a revolution in American healthcare?

Last year, when blocked arteries landed Syed Abdul Qadri, 68, in Jackson Memorial Hospital, the public facility was struggling with some tough statistics: One in four of its heart patients was being readmitted within 30 days, a performance that put Jackson in the bottom quarter of hospitals in America.

The hospital steered Qadri into a pilot program aimed at reducing hospital readmissions through follow-up care — a concept that’s a forerunner of a major medical revolution coming to American healthcare.

In this new healthcare world prompted by national healthcare reforms, systems like Jackson will be held accountable for patients’ care even after they leave the hospital, a restructuring that will push doctors, hospitals, home healthcare agencies and others to work together in new organizations to improve patient care — or suffer financial penalties.

In Qadri’s case, a nurse visited his home in South Miami-Dade to make sure he filled his prescriptions, bought the proper medications for his heart and understood the importance of diet. She left him 10 frozen healthy meals, an improvement on the “spicy and greasy food I usually eat,” he said. The nurse promised to check in with him regularly to see how he was doing and provide more meals, he said.

A model of care that doesn’t stop when a patient leaves the hospital is one of the new ideas now shaping America’s healthcare future. And though Qadri’s case later became complicated by a heart attack, his experience offers lessons on some of the pluses and minuses the new system may offer.

At present, providers are paid on an à la carte basis — each test, each hospital admission is paid individually. The more tests, the more hospitalizations, the higher the pay for providers.

That will change starting next year when the healthcare reform act will start to favor groups of hospitals, doctors and others who band together into accountable care organizations, or ACOs, that will be rewarded for good outcomes of patients and penalized for bad outcomes. The penalty: If too many patients return within 30 days to a hospital, Medicare will penalize the facility by reducing its reimbursement rate by 1 percent starting in 2013 and by 3 percent in 2015, says Steven Ullmann, a health policy professor at the University of Miami.

Ullmann and other healthcare experts are convinced that where Medicare leads, commercial insurers will follow, joining the push toward ACOs. “It’s a wave that’s occurring,” Ullmann says. “You’re starting to see the preliminary adjustment going on. The jury is still out on how much it’s going to do.”

The wave is already influencing some areas of healthcare. Baptist Health South Florida has hired 80 doctors, at least in part to be ready for the ACO days. Elsewhere in the country, health insurers like Humana and Cigna are buying up physician practices for the same reason – a move that has massive implications.

Medicare is now forming regulations for the ACOs, which could be owned by one entity (such as a hospital) or be a network of independent doctors and facilities working together. With the stakes so high, hospitals, doctors, insurers and many others are objecting to the proposed regulations, some of which will kick in next year, as they seek the best possible deal for themselves.

“The rules are likely to change,” says Mike Segal, a healthcare specialist at Broad and Cassel, a Florida law firm. “Every trade organization is trashing them.”

But even if the objections lead to the courts killing healthcare reform, Segal says, that won’t stop the ACO trend: “It’s not going away. The idea of providing better quality care at lower cost through collaboration is here to stay. Fee-for-service as we know it is an endangered species.”

Current proposals envision ACOs starting out with the more traditional fee-for-service model – a separate payment for each service performed – but Ullmann says that’s only because Washington doesn’t want to stack on too many reforms all at once.

Eventually, Ullmann and most other healthcare experts believe, payments to ACOs will be “bundled,” meaning that the group of providers will receive a lump sum for handling “an episode of care,” such as a heart attack, rather than for each separate service to treat the heart attack. Another approach would be for the ACO to be paid to cover a year’s worth of care for a person, whether the person gets sick or not.

At present, providers make their money when people get sick. In the future, providers may need to emphasize wellness, says Thinh Tran, chief quality officer for Baptist Health South Florida.

Baptist recently launched a voluntary wellness program for employees with chronic conditions that could lay the groundwork for an ACO. A nurse, health coach and nutritionist work with the employee. One does a home visit, arriving with a basket of fruit and healthy recipes, going through the cupboards and offering a critique. A blood pressure cuff connects to a home computer, allowing the coach to monitor the person’s care daily – from afar.

While virtually everyone likes the theory of ACOs, many are objecting to the details. The trade association of health insurers – America’s Health Insurance Plans – believes ACOs could drive up costs if groups of hospitals and doctors dominate markets and demand high rates from insurers.

To accommodate ACOs, federal regulators believe they may need changes in anti-trust laws, which forbid companies from monopolizing markets, and anti-kickback healthcare laws, which are meant to block hospitals from rewarding doctors who send patients their way. AHIP, the insurers’ trade association, warns that loosening anti-trust laws could create monopolies that would result in higher insurance rates for consumers. In theory, anyone can form an ACO, but the expenses are huge, including coordinated billing and accounting operations, and software for integrated electronic record-keeping. That makes it likely that most ACOs will be formed by major hospital groups or big investors who will want a return on their money, said Segal, the healthcare lawyer.

“My concern is that the larger hospitals are going to be at the front of this, because they have the capital,” says Bernd Wollschlaeger, a family practice physician in North Miami Beach and former president of the Dade County Medical Association. “A group of physicians may not reach a critical mass,” though Wollschlaeger believes doctors may do a better job of lowering patient costs.

All these factors make the ACO situation “incredibly complex,” says Segal, the healthcare lawyer.

That’s certainly the case with Qadri, the South Miami-Dade heart patient. He says that when his 10 meals ran out, he called several times to the nurse’s company, Independent Living Systems, to get more meals that he says had been promised him. He says no one called back. In April, he had a heart attack and was rushed to Baptist Hospital. There’s no way of knowing if the heart attack could have been prevented by more care from ILS.

Jeffrey King, an ILS vice president, says his staff tried to find a free-meal program for Qadri, who is uninsured, but couldn’t find one he qualified for. “We tried our best. Resources are limited,” he said. He says ILS records indicate a staffer made five follow-up calls to Qadri over 30 days as the program required, and connected with him on all but one of them.

Qadri’s case also beings up another potential ACO issue. He was treated at two hospitals. If Baptist and Jackson were ACOs, which organization should be rewarded or punished for the outcome of his care? Medicare’s answer is that at the end of each year, the insurer will decide retroactively what ACO treated the patient the most, and assign him to that organization for measuring rewards and penalties on outcomes – a situation that has many hospitals concerned they may get blamed for outcomes they had no control over.

Qadri is listed as a Jackson success story because he hasn’t returned to Jackson Memorial. Kevin Andrews, vice president for quality and patient safety, acknowledges that Jackson doesn’t track patients who go elsewhere, but “we’re trying to get a handle on that.”

The Jackson pilot program covered 200 heart patients. Andrews estimates the pilot caused the 30-day readmission rate to drop by a third. Andrews estimated that the $81,000 investment saved Jackson about $400,000 on readmission charges.

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