Will Accountable Care Organizations (ACOs) divide the organized medical staff?

With the March 31, 2011 release of the federal regulations and the recent update by the Obama administration, the form and function of ACOs as a model for healthcare delivery is taking shape.

The key elements of ACOs are as follows:

• Medicare will reimburse based on value (quality/cost), not purely by volume.
• Medicare will create a “shared savings” program that will reimburse ACOs based on their compliance with 65 quality and cost metrics divided into five domains including: 
  • Patient/caregiver experience (seven measures)
  • Care coordination (16 measures)
  • Patient safety (two measures)
  • Preventive health (nine measures)
  • At-risk frail/elderly health (31 measures relating to diabetes, heart failure, coronary heart disease, hypertension, chronic obstructive pulmonary disorder, and frail elderly).
• Organizations will be placed “at risk” for shared losses based on spending greater than the minimum savings rate (MSR) established by the Centers for Medicare & Medicaid Services (CMS). The MSR will be dependent on the number of Medicare beneficiaries covered by the ACO (a larger number of beneficiaries will result in a lower MSR).

Physicians who are willing to partner with an ACO to fully comply with the 65 quality/cost metrics and who are willing to work to reduce the costs of care will achieve greater than average reimbursement, and those who cannot or will not comply won’t receive that benefit. In addition, ACOs probably won’t want to partner with physicians who do not fully commit to managing Medicare beneficiaries according to “best practice” algorithms and who are incapable of optimizing their utilization management.

Thus an interesting question emerges: Will the organized medical staff divide into two groups: those willing to comply and collaborate and those who won’t or can’t?

Furthermore, if an ACO has its own governance and management structure dominated by healthcare practitioners with a physician-led quality assurance program, what will be the relationship between the ACO and the organized medical staff with respect to governance, leadership, and quality oversight?

For most of the 20th century, the self-governed, democratically organized medical staff dominated the political and economic life of physicians. Through the medical staff, physicians were able to communicate with and influence the decisions of senior management and the governing board. How will this traditional structure be altered when certain physicians’ alliances and affiliations are with a sub-group of the medical staff that is completely aligned over federally mandated quality and cost metrics?

One can envision a dual structure of physician leadership reporting to the governing board: one through the traditional medical executive committee (MEC) and the other through an ACO governance structure. Peer review for the organized medical staff may be conducted through a medical staff committee, while the ACO may create its own peer review structure. In addition, physicians interested in seeking membership in an ACO may undergo a dual credentialing process, one facilitated by the organized medical staff and the other facilitated by the ACO credentialing process. The MEC may oversee the traditional medical staff, whereas the governance structure of the ACO may collaborate with the MEC around areas of mutual concern.

The implications of this potential division loom large. ACOs may divide physician affiliation and alignment between the traditional staff and ACOs. The ACO structure would be sub-organizational and it would have little, if any relationship to the MEC if it reports directly up to the governing board.

The medical staff may be divided into traditional members and those who align with a tightly managed ACO that is in competition with the remaining members of the medical staff. This may create “insiders” and “outsiders” and raise questions around how physicians will continue to inter-relate and function cooperatively with such different values and points of view.

The creation of ACOs promises a new way to offer value to Medicare beneficiaries; however, it will also create a significant realignment of traditional allies on the organized medical staff and present new political and organizational challenges physicians and hospitals have not encountered before.

Hospitals that are considering becoming part of an ACO should consider the following questions:

• What will be a better financial and business decision?
• What will be the affect of the ACO on our overall political structure?
• How will an ACO enable us to better compete?
• Will we be able to recruit and retain the kind of physicians we want to partner with going forward?

These are complex organizational decisions that require forethought and careful consideration of the unanticipated downstream implications.

Please let us know if you would like to discuss whether an ACO is right for you and its potential affect on your organization with all of the changes likely to occur. Please contact us at tgc@greeley.com.

Wishing you continued success.

Jonathan H. Burroughs, MD, MBA, FACPE, CMSL is a senior consultant at The Greeley Company, a division of HCPro, Inc. in Danvers, MA.