In Miami, a new healthcare model — the ACO — rewards physicians for patient health, controlling costs

After suffering two heart attacks within one month in 1997, Robert Rivera sees a cardiologist regularly, and a nephrologist for an unrelated kidney disorder. But it’s his primary care physician, an internist, whom Rivera trusts most.

“I wouldn’t change him for anything in this world,’’ says Rivera, 71, who lives in South Miami-Dade County and works in the financial industry. “He sees me every three to four months, and he’s been doing this for 16 years.’’

Rivera, a Medicare beneficiary, coordinates all of his medical care through his internist, who referred all the specialists, and he now receives the kind of comprehensive treatment that he never experienced before the two heart attacks, including regular preventive screenings, management of his blood pressure and cholesterol levels, and convenient access to his doctors.

In concept, the coordinated medical care that Rivera receives is nothing new, containing some of the familiar components of traditional health maintenance organizations, such as reducing unneeded medical procedures and careful selection of providers who will work for pre-negotiated rates.

But Rivera’s doctor belongs to a group that has applied to become an accountable care organization or ACO — a creation of the Affordable Care Act that policy makers say will improve the quality of medical care and lower costs by financially rewarding providers who can demonstrate that they keep their patients healthy at less expense.

The aim is to reform a system in which many healthcare providers — physicians, hospitals and insurers — have largely failed to coordinate care for patients because they were not paid based on a patient’s health outcome but instead for each procedure performed, often leading to higher costs and inefficiencies.

Like HMOs

In many respects, ACOs resemble HMOs, with the most significant difference for the provider being that payment is tied to patient health and operational efficiency. Patients in ACOs also can see providers outside of their network, unlike HMOs.

HMOs make money by managing healthcare in one of two ways: either they spend less on healthcare than the fixed amount of dollars that they receive per year for each patient, or they limit treatments, visits to specialists and other care through strict review processes.

ACOs will make their money by meeting benchmarks for healthcare quality, focusing on prevention and managing patients’ chronic diseases while lowering costs with fewer hospital admissions and redundant tests and treatments.

A key point: The more providers keep their patients healthy and out of the hospital, the bigger the bonus the providers are likely to receive.

But if patients undergo unnecessary or duplicate tests and treatments, or fail to take medicines, or don’t receive follow up care, then the ACOs will eventually be penalized and share in the losses.

“It’s an entrepreneurial kind of concept,’’ said Judy Goodman, an attorney who teaches healthcare law at Florida Atlantic University.

Hospitals, physician groups, insurers and even Walgreens have raced to create ACOs, not only for Medicare beneficiaries but for patients with private insurance.

A large specialty physician group also can become an ACO on its own and work with a hospital. In other cases, hospitals are buying up physician practices so they can create their own networks.

Rivera is a patient of PrimeHealth Physicians, which applied for federal approval as an ACO in July. A decision from the federal Centers for Medicare & Medicaid Services is expected in the fall.

The group of 30 physicians — 26 are co-owners — was created by Rivera’s primary care physician, Dr. Diego Saavedra, who said he wants to remain independent rather than be forced into a hospital network or another ACO.

“We just don’t want to get swept up and let big institutions decide when and where and how we should deliver care,’’ said Saavedra, chairman of the PrimeHealth network that includes 18 doctors’ offices from downtown Miami to Homestead, with most of the physicians located in Kendall.

Nationally, there are about 250 ACOs that participate in Medicare’s shared savings program, with 28 of those organizations based in Florida, though ACOs from different states also serve beneficiaries in the Sunshine State.

Florida is a natural for ACOs, Goodman said, given the state’s large population of elderly residents, and because in order to qualify as an ACO, a group must agree to manage the healthcare needs of at least 5,000 Medicare beneficiaries

The concept is especially important for patients in Miami, where the average Medicare beneficiary has close to the country’s highest costs. Studies by Dartmouth Atlas researchers have shown that Miami’s Medicare beneficiaries frequently receive duplicate tests and treatments from specialists who failed to coordinate care.

ACOs may help limit such overuse of tests and treatments by relying more heavily on electronic medical records to improve communication among providers and patient; and by changing the way physicians and other providers are reimbursed, from a fee-for-service model that pays for each individual medical procedure, to bundled payments to be split by doctors, hospitals and other caregivers.

Goodman, the FAU healthcare law teacher, anticipates that dividing that pie will test the commitment of all the providers involved to coordinate patient care and continue as an ACO.

“That’s the rub,’’ she said. “You’ve got to get people to play well together.”

Saavedra said he welcomes the change in payment system because the fee-for-service model pressures physicians to increase volume, which can affect the quality of care, whether it’s reducing the time doctors spend with patients in the examination room, or failing to provide incentives for physicians to follow up.

“There’s a breaking point there where your quality suffers,’’ Saavedra said. “You can’t see 70 patients a day and practice good medicine.’’

Saavedra said he and two other physicians who share an office typically see 20 to 25 patients a day.

Start-up costs include significant investment in computers and software to manage electronic medical records that will allow physicians to collaborate, and the groups to report data on costs and patient health as required by Medicare.

Cesar Ortiz, chief executive of PrimeHealth, said one big difference between the HMOs introduced about 20 years ago and the new ACOs is the technology to hold providers accountable for the coordinated care.

All of the physicians in PrimeHealth have agreed to share their back office infrastructure, he said, spreading the cost among the group.

With integrated medical records and a goal to coordinate patient care, Ortiz said, the ACO concept will give primary care physicians a chance to reclaim a leading role in healthcare, as opposed to specialists driving the care.

“We saw a small window of opportunity for the primary care physician to go back to center stage,’’ he said, adding that the group has identified “a lot of low-hanging fruit’’ in the ACO concept, such as opportunities for managing chronic diseases, and even delivering care to patients at home.

Though groups of specialists also have formed ACOs, Saavedra said he believes that many patients seek the care of specialists when a primary care physician will do.

“My experience is that sometimes people think, ‘I need to see a cardiologist’,’’ he said, “and my question to them is, ‘Do you have heart disease?’ Their answer is, ‘No. I don’t. But I want to make sure I don’t’.’’

Physicians in the PrimeHealth group will provide extended care hours, weekend hours, home visits, nursing home visits and hospitalist services. And the group will use economies of scale to find savings on everything from medical supplies to office equipment.

“We’re able as a large group to negotiate better rates,’’ said Ortiz, who added that PrimeHealth’s goal is to bring 75 physicians into the group, with 50 by summer’s end.

While ACOs are intended to improve quality and lower costs, though, it’s important to remember that the groups are still an experiment, said Goodman, the FAU teacher.

“The jury is still out as to whether doctors and providers with different incentives in mind can, in fact, collaborate,’’ she said. “It’s an experiment.’’

As with any experiment, Goodman said, there are risks of failure.

Ortiz said the process of merging dozens of independent physician practices under a single entity — with one human resources department, one billing system and shared systems for electronic medical records and data gathering — must be done seamlessly or risk failure.

“If we don’t do it the right way,’’ he said, “we could implode.’’

Goodman said her concerns include the incentive for hospitals and providers to consolidate into ever larger groups, which could run afoul of anti-trust laws or encounter other legal barriers.

“Economies of scale get better the larger you get,’’ she said, “and you can be more experimental if you have a lot of economies of scale to work on.’’

Already, there is evidence that ACOs have helped slow increases in medical costs and reduced emergency room visits. But they also appear not to be for everyone.

This week, federal health officials reported on the results of 32 organizations selected in April 2012 to participate in the Pioneer ACO model, which was designed for groups already experienced with coordinated care.

According to the Centers for Medicare & Medicaid Services, the program showed improved patient health and lowered costs.

For the more than 669,000 Medicare beneficiaries who participated, costs grew by 0.3 percent in 2012 compared to costs for similar Medicare beneficiaries that grew by 0.8 percent during the same period.

But nine of those 32 organizations also announced their intention to leave the program after the first year of the three-year program, which was voluntary. Seven of those nine will participate in the Medicare Shared Savings Program, another ACO model with less risk of losses.

Of the 32 ACOs participating in the Pioneer model, 13 produced shared savings with the government, generating gross savings of $87.6 million in 2012.

The ACOs earned over $76 million by providing the coordinated care called for under federal healthcare reform, according to the government report. Two had shared losses totaling about $4 million.

Savings were driven, in part, by reductions in hospital admissions and readmissions. Patient satisfaction measures also showed high ratings for ACOs.

Now, private insurers are ramping up their ACO efforts.

In July, the nation’s largest private healthcare insurer, UnitedHealth Group, Inc., announced that within five years it will more than double payments to physicians tied to ACOs.

The insurer said its ACO contracts have led to the increased use of less-costly generic prescription drugs, a higher survival rate for transplant patients, and fewer emergency room visits and days spent in the hospital for its clients.

The news is significant for the healthcare industry because UnitedHealth has ACO contracts with about 575 hospitals, more than 1,000 medical groups and 75,000 physicians around the country — spending about one-fifth of its reimbursement expenditures, or about $20 billion, on ACO programs in 2012.

UnitedHealth, which began working on such value-based contracts in April 2010, said it expects to spend about $50 billion under ACO contracts by 2017.

Saavedra, the internist who launched PrimeHealth, said he’s enthusiastic about the attention he now receives from insurers since announcing his intention to create an ACO. He says he has more leverage to negotiate rates with insurers, and push for the healthcare he feels his patients deserve.

But Saavedra is careful to note that ACOs are not a magic pill that will dramatically shift the balance of power in healthcare.

He just wants to practice medicine, he said, and feel good about helping patients lead healthy lives.

“We’re trying to find something where the parties involved all benefit,’’ he said. “I’m not looking to punish anybody. I have no expectation of becoming wealthy beyond my wildest dreams. But I am looking forward to coming to work every day, and enjoying what I do.’’

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