Accountable Care Organizations (ACOs) have proliferated among both public and commercial payers, with the goal of optimizing the value of health care delivered to populations. The ACO model — voluntary networks of doctors, hospitals, and other providers — centers on transferring financial risk for the cost and quality of care from the payer to an ACO, theoretically incentivizing the delivery of high-value health care services and minimizing waste.
Early ACOs have focused on primary care to improve outcomes for high-cost patients with conditions such as diabetes, congestive heart failure, and chronic obstructive pulmonary disease (COPD) through enhanced care coordination and chronic disease management. No better evidence is there of this primary care focus than the way the Medicare Shared Savings Program — the United States’ largest ACO program, currently comprising 480 organizations caring for 9 million people — determines which of its beneficiaries are attributed to an ACO. If a patient’s primary care physician is enrolled in an ACO, then the patient frequently belongs, even though he or she may not know it. However, these same ACOs are accountable for the overall per-beneficiary annual costs, including specialty care.
A large segment of America’s health care is driven by specialties, from surgery to sports medicine. Clinicians in these fields need to prepare for the day when they will be required to participate in payment models arising as alternatives to traditional fee-for-service reimbursement, of which ACOs are one. We offer here a business-based framework for making strategic decisions about whether and how to include specialists in ACOs, and for working toward a common goal of delivering high-quality, low-cost care.
There remains considerable uncertainty about how best to engage specialist physicians in the ACO model. McWilliams and colleagues recently determined that 66.7% of specialist office visits were provided outside of assigned ACOs. These findings are supported by Dupree et al., who suggest that early ACOs have largely not engaged surgeons, instead focusing on care coordination and reducing hospital admissions and readmissions. Additionally, qualitative data suggest that early ACOs rely on “soft” approaches to direct referrals to specialists deemed to provide high-value care. We identified considerable variation in surgeon participation in early ACOs, with this variation largely driven by a practice’s contractual role in an ACO, not the specialist’s strategic value to the organization.
Given the number of common high-cost diseases treated in the specialty care setting, it will become increasingly important to provide financial incentives, including bonuses for meeting cost and quality goals, to make ACO participation advantageous for both primary care and specialist physicians. Currently, specialists are advantaged through fee-for-service, and financial incentives for ACO participation are weak, at best.
The ACO Insource-or-Outsource Problem
The decision to “insource” or “outsource” manufacturing processes has numerous parallels to current questions surrounding specialist engagement in new care delivery models. The decision refers to the choice between producing a good or service internally (insourcing) and buying it externally (outsourcing). Accountable care organizations must weigh whether to include specialists or outsource them, leaving specialists largely in a non–risk bearing, fee-for-service environment. These options are not mutually exclusive.
What, then, might be the criteria upon which we should base decisions about the optimal relationship between specialty care and individual ACOs? We believe that assessing both the strategic value of potential partnerships and predicted cost savings provides the platform for informed decision-making. A proposed conceptual framework is summarized in the figure.
Ravi Venkatesan highlights the importance of “core strategic families,” defined as “the parts that the company is distinctively good at designing and making . . . where the bulk of the investments and best talent should be directed.” Applying “strategic families” to health care, one might imagine that specialty services offer varying degrees of strategic value. For example, an ACO that serves many patients with the chronic lung disease COPD might want to engage pulmonologists, respiratory therapists, and PCPs to drive care management. Each organization has to figure out its strategic families when it comes to specialty services, as these will be largely contingent upon the population served by the individual ACO.
There is little doubt that the choice of whether to insource or outsource specialty care will depend on the type of ACO, since ACOs vary greatly in size and structure, location (e.g., rural versus urban), the availability of specialists, and/or the demand for different specialties in the market in which the ACO operates.
In addition to strategic value, ACOs must gauge the potential for cost reduction and other efficiencies with insourced specialty care. For example, an organization with a broad post-acute care infrastructure (such as rehab and skilled nursing facilities) may reduce emergency department readmissions by investing in a care coordination nurse to follow up with surgical patients after they leave the hospital, resulting in considerable cost savings to the ACO. Additionally, an ACO with an extensive physical therapy network may elect to include a busy orthopedic surgery practice because of potential synergy between the two. Conversely, an ACO without an inpatient hospital or mature post-acute care infrastructure may not elect to contract with that same orthopedic surgery practice, as the arrangement would probably yield few efficiencies. It goes without saying that careful assessment of financial and non-financial incentives for both the ACO and specialist group is a necessary step when considering an insourcing or outsourcing approach.
Beyond leveraging an ACO’s structure to enhance value, insourcing specialist physicians may facilitate the development of clinical guidelines to refine the use of specialists. One example is an existing integrated delivery system that has developed a clinical protocol for hematuria (blood in the urine) in which the patient’s PCP orders and monitors a series of tests before referring a patient to a urologist.
Furthermore, sharing some degree of financial risk for care delivery with specialists, particularly in costly diseases such as cancer, may improve value-based clinical decisions. There are often few high-quality comparative effectiveness data to guide clinical decision-making, and without accountability for costs and quality, physicians may prescribe novel and expensive agents that have seemingly large relative, but small absolute, benefits over less expensive conventional therapies. Transferring financial risk to specialty providers may ultimately reorient focus on incremental value, or improvement per unit cost, when considering therapeutic options.
As important as estimating cost savings, however, is identifying potential barriers to integration. There are significant unanswered questions about the degree to which contemporary ACO programs can control specialists’ behavior, specifically with respect to use of high-cost diagnostic testing and/or procedures. Furthermore, whether the extensive addition of specialists would dilute the shared savings (the pool of bonus money) and financially affect primary caregivers in individual ACOs remains unknown. It is likely that, given aggressive goals set by CMS to tie 50% of Medicare payments to alternative payment models by 2018, specialists and ACO leaders will begin to consider exactly how to reconcile these challenges and develop solutions that ultimately serve each stakeholder group.
There is no optimal “one size fits all” approach to aligning incentives between primary and specialty care physicians. Given the heterogeneous nature of contemporary ACOs, individual organizations will have to continually evaluate the strategic value of specialist integration, as well as the financial benefit (or liability) of partnerships with specialists. Market and organizational factors will mediate these predictions, and both ACO leadership and specialist physicians alike must consider both the potential positive and negative downstream effects of integration. Applying a conceptual framework like this for these partnerships may crystallize the benefit and risk balance associated with engaging specialty practices into ACOs.