Medicare ACOs: Healthcare providers and the ACO (Part 4)

The ACO contemplates a paradigm where the entire continuum of care (from physicians to hospitals to rehab centers and everything in between) is coordinated on the beneficiary’s behalf to deliver quality and cost-effective care.   In the fourth installment of our five-part series, we explore the provider aspect of healthcare under the ACO  model.

During the course of the initial agreement with CMS, the ACO’s providers will continue to be paid under the fee-for service methodology, and there will be no prospective oversight of the services delivered to the beneficiary.  The concept is that the providers will deliver only the absolutely necessary care, in the most cost-efficient manner.  So for example, diabetes (DM) is a chronic condition that ravages the entire body and claims countless lives each year.  It is also a condition that can be managed effectively in the outpatient setting with the goal of reducing unnecessary hospitalizations which are not good for the beneficiary and which result in higher healthcare costs. Let’s entertain a fictional scenario in the world of ACOs:

One of the ACO’s primary care physicians, Dr. Smith, has a large number of beneficiaries with DM.  She establishes a diabetic management program that includes longer than average physical examinations by the doctor, which reduces the number of patients she can see each day and the reimbursement she will receive.  [In our last installment, we reviewed that ACO physicians continue to be reimbursed by CMS on a fee-for-service (FFS) basis for the Medicare-covered services they provide.] Dr. Smith launches a diabetic education and monitoring by nurses who regularly call the diabetic beneficiaries and inquire about their health, medication and dietary compliance, etc.  The doctor developed this program because studies show that patient education and engagement are crucial to good diabetic management and lower medical costs.

Dr. Smith also invests in technology that allows her diabetic patients to send their blood sugar readings to her nurses for review and monitoring. However, DM doesn’t take weekends or holidays off so hers is a 24/7 (costly) endeavor which is expected to benefit the beneficiary’s health status, prevent unnecessary hospitalizations and reduce healthcare costs.  Medicare doesn’t reimburse for the electronic monitoring or for the nurses deployed to this project, but the physician (with or without financial help from the ACO) will subsidize the program, hoping to benefit from the expected shared savings generated because of this physician’s investment in this program.

One of our Dr. Smith’s ACO colleagues in the same city, Dr. Jones, also has a fair number of patients with DM.  He sees his patients with DM regularly for a traditional office visit and delegates the education and monitoring so that he can see more patients per day and maintain his billing levels.  He has no diabetic program in place. The endocrinologist, dietician and diabetic educator who take over the diabetic management and education of Dr. Jones’s patients and bill CMS for the services they provide.  Dr. Jones is not too confident that the ACO will realize any shared savings so his attitude is to bill now for everything he can, and to refrain from incurring additional expenses that are not reimbursable, in case there is no surplus at the end of the year.

In contrast, because the MSO is at financial risk for its patients’ care, preventive and management programs are a matter of routine, regardless of the lack of additional reimbursement.  The perspective is that a healthcare dollar saved is a dollar earned.  The added benefit accrues to every MSO patient who receives more comprehensive, quality-focused care, as opposed to our ACO example in which both Dr. Smith’s and Dr. Jones’s patients receive quality care at more than double the cost.

The final installment in our five-part series on ACOs will explain the risk-adjusted component to the ACO’s payment and our concerns about the ACO’s ability to generate the required savings needed to realize any bonuses.

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