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Vanguard Embraces Them, Kaiser Goes Its Own Way

The Medicare accountable care organization structure established by Affordable Care Act regulations isn't sustainable in the long term and will have to undergo substantial alterations to be truly effective, says Keith Pitts of the Tennessee-based Vanguard Health Systems.
Speaking at the 2012 Wharton Alumni Health Care Conference, the Vice Chairman of the $5.9 billion Nashville-headquartered
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Group President for the Kaiser Foundation Health Plan Donna Lynne: "I meet with employers all the time and they just care about cost. They don't care about anything else."
health care company that operates 28 hospitals in five states, said he considers the ACO structure "transitional" and subject to change over the next three years.

In remarks as a panelist in the "Restructuring the Delivery System" conference session, Pitts, whose company has established ACO operations in its Michigan, Illinois and Texas markets, acknowledged that the idea of provider accountability for patient care and cost controls is here to stay.

He shared the stage with Donna Lynne, Group President for the Kaiser Foundation Health Plan and Kaiser Foundation Hospitals. It was an interesting juxtaposition of one hospital company that's embracing the Medicare ACO model and another that has pointedly declined to do so -- because it believes its own coordinated care system to be superior.

Physicians and hospitals participating in ACOs take on financial risk by assuming responsibility for care, potentially earning more -- or less -- depending on the coordination and measurable quality of that care and any cost savings they achieve.

Medical groups and hospitals have been teaming up with each other and working with private health insurers to establish ACOs or similar arrangements, while the U.S. government, under the Affordable Care Act, has entered into agreements with more than 150 provider ACOs to help coordinate care for seniors in the Medicare program.

Less than enamored
Many industry leaders have been less than enamored with specifics of the government's ACO regulations and have yet to make plans to use that model. But Pitts pointed out that even under the existing fee-for-service payment system, hospitals are being held financially accountable for readmissions and hospital-acquired conditions.

He said Vanguard is already "moving down the road to transforming our business model to more of an integrated services platform," and had started taking steps toward its own accountable care models even before the ACA passed in 2010.

Pitts said one stumbling block for new Medicare ACOs was that they didn't know who their patients would be until people were assigned to them. Another is that to be effective, ACOs need patient information in real time. He also cited a lag in claims data and noted that under the rules, ACOs can't truly manage the patients, who are free to use any provider, not necessarily those in the assigned ACO.

ACOs to change in three years
While Pitts sees problems with the current Medicare ACO model -- a fee-for-service shared-savings program operating under regulations that were issued quickly -- he believes that within three years, the model will look more like the Medicare Advantage plans offered by private insurers.

Current Vanguard ACO efforts include Medicare's Pioneer ACO Model, an alternative "fast track" version for providers with experience in coordinating care. It's designed to let them move more rapidly from the current shared-savings model to a population-based payment model in the third year.

Detailing a completely different approach, Kaiser's Lynne said her nonprofit -- a combined health plan and medical-care delivery organization -- has been doing for years much of what is envisioned for ACOs, including building collaborative partnerships and electronic-medical-records connections with other hospitals in some of its regions.

9 million members
"We think that's sort of the secret sauce of what makes us successful, in terms of being able to deliver quality service and affordability," she said. Kaiser, which primarily uses a health maintenance organization (HMO) model to deliver care, has 9 million members, owns 36 hospitals and has more than 400 medical office buildings that are "one-stop shops" including pharmacies, primary and specialty care, radiology, labs and ambulatory surgery.

"There are lessons that we're learning across our organization that will translate well for us in the future," said Lynne.

The Kaiser health plan isn't getting involved with government-linked ACO programs because they don't have the kind of control that Kaiser does, she said, noting the ability of fee-for-service Medicare patients to choose any provider that accepts Medicare.

"We don't believe in fee for service, we don't engage in a fee-for-service world," said Lynne, citing inefficiencies and duplication. "We're not focused on changing the delivery system or the reimbursement methodologies because we're already there."

She expects more changes from government policymakers.

Payment reform
"The ACA puts a toe in the water on delivery system issues and on payment reform," she said. "But it was too scary for everybody to do with everything else that was being done (when the law was being hammered out in Congress). I've talked to a number of senators who've said, 'When we get back, we know we're going to have to deal with this issue,'" she said.

Vanguard's Pitts doesn't think fee-for-service will be the predominant payment methodology by 2020, and sees a very good chance that health benefits will shift from a defined-benefit model, like the group plans that employers provide, to a defined-contribution model. To get a sense of the difference, consider that a traditional pension is a defined benefit, while a 401(k) is a defined-contribution retirement plan.

"It's a very interesting time," he said, because in the next couple of years, leaders will have to address the conflicts in policies "that are in the way of building a better delivery system. That's the biggest advocacy challenge for changing and restructuring the delivery system -- all of these policies that are in conflict. But I think it can be done in the market but there are a lot of things in the way of it being done smoothly."

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Dinah Wisenberg Brin is a journalist and former staff reporter for Dow Jones Newswires, the Associated Press and Congressional Quarterly.

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