jma medical home aco article november 2 2010

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Joseph Mack, MPA President

(949) 481-0602 [email protected]

The recently passed House Bill H.R. 3590, Patient Protection and Affordable Care Act (“PPACA”), and H.R. 4872, Health Care and Education Reconciliation Act of 2010 (“HCERA”), signed by President Obama March 23, 2010 create several interrelated demonstration models with the objectives of coordination of health care and lowering expenditures. These add to other recently passed Federal laws impacting health care such as Section 204 of the Tax Relief and Health Care Act of 2006, which authorized a Medicare Medical Home Demonstration project; the Health Information Technology for Economic and Clinical Health Act (“HITECH”) passed as part of American Recovery and Reinvestment Act of 2009 (“ARRA”) that provides incentive payments for the meaningful use of certified electronic health record (“EHR”) technology; the Physi-cian Group Practice (“PGP”) demonstration authorized in the Medicare, Medicaid, and State Children’s Health Insurance Program Benefits Improvement and Protection Act of 2000, which offered 10 large practices the op-portunity to earn performance payments for improving the quality and cost-efficiency of health care delivered to Medicare fee-for-service (“FFS”) beneficiaries. The common themes are testing ways to improve health care quality while decreasing health care expenditures through implementation of “new” care processes and models, and encouraging the implementation and use of electronic health record technology. Some of the in-centives contained in the various laws encourage electronic and process system integration and reengineering, suggesting increased collaboration among physicians, hospitals, home health, ancillary and other care provid-ers – even insurance companies.

The concept of “integrated delivery systems” is not new. What is new are the requirements for patient

involvement or “patient centricity,” and the promulgation of primary care physicians (“PCP”) as the center of care process teams. Medical Homes and Accountable Care Organizations (“ACO”) are the principal “new” model concepts, yet there is no clear cut definition of their organizational design. To the contrary, PPACA suggests preference for using existing organizational models with experience in managing risk. Consequently, as occurred in the 1990s, there is a stampede of consultants, hospitals, health plans and physician organizations rushing to create or fortify various forms of integrated delivery systems to protect or enhance their ability to maintain their Medicare patient base and create systems enabling them to manage patient expenses below budget in order to receive incentive payments. Reexamination of the last 30 years of public and private health care initiatives, especially of the rise and demise of many hospital/physician integrated delivery systems and the leadership role of physicians, is helpful to avoid the same mistakes and improve upon the concepts. Mod-els exist that satisfy Medical Home and ACO general requirements, and are relatively simple to create quickly or modify for compliance. Similarly, while involving a longer process, creating “mergers” involving assets – among physician organizations; physician organizations and hospitals; health plans, hospitals and physicians – is relatively straightforward. The critical factor leading to success or failure is the amalgamation of cultures. The experience of the integrated delivery system movement of the 1990s and the resultant suboptimal perform-ance and dissolution of many of the hospital/physician joint ventures illustrates this requirement. Specifically, the focus must be on creation and integration of a culture that is driven and embraced by physicians. We re-view initiatives of the last 30 years – especially in light of what went wrong – describe Medical Homes and ACOs, and discuss key issues and critical success factors with creating physician led organizations that can enhance and sustain value.

Critical Success Factors in Developing and Implementing

Medical Homes and Accountable Care Organizations

Joseph M. Mack, MPA©

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Historical Efforts at Improving the Quality and Efficiency of Health Care

The future is an unknown, but a somewhat predictable unknown. To look to the future we must first look back upon the past. That is where the seeds of the future were planted. Albert Einstein, 1930

The 1970s-1980s The concept of managed competition or managed care has its roots in the term Health Maintenance Or-ganization (“HMO”), which was coined in the early 1970s by Paul Ellwood and used by the Nixon Admini-stration to propose a “comprehensive health policy for the 70s,” and led to the Federal HMO Act of 1973. HMOs were created as an alternative to traditional FFS insurance. Financially, HMOs enroll defined popula-tions and contract on a fixed payment or capitation basis with providers, pharmaceutical companies and others delivering care or services. Preferred Provider Organizations (“PPO”) arose in the late 1970s as an alternative to HMOs for both enrollees and providers of care and services. Similar to HMOs, PPOs offered the promise of controlling costs through leveraging the ability to direct volumes of patients to contractors in return for obtain-ing “modified FFS” price concessions: generally reimbursing them between what FFS and capitation paid. Other mechanisms such as exclusive provider organizations (“EPO”) and point of service (“POS”) plans arose that were similarly focused on the volume for price concept. All of these approaches had as their objective the transfer of risk for cost control from employers to providers of care and services. None dealt with the funda-mental concept of reducing health care expenses.

This period saw an explosive growth in the number and size of physician group practices. Physicians joining groups often stated objectives of increasing revenue through greater access to managed care contracts, reduction in practice expenses through economies of scale, enhanced ability to focus on clinical rather than administrative tasks, enhanced lifestyle through sharing call with many colleagues, and, in some cases, access to low cost capital. The 1990s

In October 1993, the Clinton Administration launched its health care reform effort as a model for

“managed competition” and universal coverage for all. At the outset, this was largely a market based approach that included the use of purchasing alliances intended to drive costs down by creating larger organizations, or Accountable Health Plans (“AHP”) that would organize providers of care and pharmaceutical companies into integrated delivery systems that could accept a set payment and be accountable for cost and quality. It also gave rise to the concept of Regional Health Alliances that would contract with AHPs for the delivery of care at set rates. Additionally, there would have been Corporate Health Alliances and Regional Health Alliances that would contract with health plans, which would then contract with integrated delivery systems. Notwithstand-ing debate around universal coverage proposals, there was considerable activity among potential components of integrated delivery systems to organize into entities that could accept payment under various Clinton health care reform proposals, as well as capitation – fixed or budgeted payment -- from HMOs. When President Clinton’s health care reform was shelved in 1994, insurance companies and integrated delivery systems fo-cused largely on capitation as a means to control costs.

Physician Group Practices Managed care initiatives that began in the 1980s and increased in the 1990s led many physician groups to invest increasing amounts of capital into information systems. What began initially as billing and collection

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based systems, developed into ways to manage physician productivity against capitated budgets, audit insur-ance enrollees’ enrollment and eligibility status, manage referrals to providers for which they had payment re-sponsibility, align hundreds of payor plans with assigned patient benefits, coordinate benefits and subrogation, manage hospital shared risk pools, and respond to increased demand for utilization and quality management. Contrary to what some researchers have indicated, many of these groups had robust, efficient and effective in-formation systems. They all required increasing investment dollars.

Increasing numbers and types of plan offerings driven by payors’ responsiveness to employer demands created greater group practice administrative and information system costs. Also, foretelling increasing ten-sions was the prioritization of information desired between payors and physicians. In 1991, I was Director of Managed Care at the Unified Medical Group Association (“UMGA”) (now the California Association of Phy-sician Groups). UMGA served 53 medical groups in 5 states with an aggregate prepaid enrollment of over 2 million patients, representing over $2 billion in annual revenue. I was the lone provider representative to an 18 member California statewide HMO and PPO information systems work group. Prior to the use of the internet, payors and providers exchanged certain information electronically. There was no standard system or reporting interface, or standard information shared between them. This group was attempting to create standardized electronic data interfaces (“EDI”) between payors and providers. Payors focused their objectives on getting physician groups to submit hospital claims, while providers demanded enrollment and eligibility verification. Payors wanted information to process their largest claims: hospitals. Physician groups wanted information to ensure that patients seen in their offices were actually enrolled in a certain plan and to determine the payment for those services. Neither side could agree on the priorities and the initiative was abandoned. Simultaneously, market forces drove premium rates downward. Physician group practices, already managing at the margin, had their profitability further threatened by decreasing marginal income against in-creasing fixed and marginal costs to service increasing numbers of HMO enrollees. Compounding capital requirements during this period, some physician group practices began to experi-ence retirement of key physicians. While some physician groups had already transitioned from cash-based to accrual-based accounting and had begun to retain earnings, the increasing demands for capital caused by re-tirement, infrastructure expense, and diminishing revenues led many to look for capital partners. Most fre-quently, physician groups looked to hospitals as partners. In some cases, physician groups entered into joint venture arrangements with health plans. Integrated Delivery Systems The potential for some form of managed competition, insurance industry-led managed care, and physi-cian needs for capital prompted the creation of many forms of integrated delivery systems: physician/hospital organizations (“PHO”); physician group practices; independent practice associations (“IPA”); physician prac-tice management companies (“PMO”); management services organizations (“MSO”); physician-owned HMOs, such as California’s limited licensees; and pharmacy benefit management (“PBM”) companies. These market conditions also resulted in many mergers of hospitals, physician groups, and the plethora of other acro-nyms used for “integration.” As risk to control costs was transferred from payors to providers of care and ser-vices, these organizations sought to obtain greater market clout with payors, as well as achieve economies of scale to reduce expenses through various forms of horizontal and vertical integration.

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Frequently cited hospital objectives during this time were to seek alliances with physician or-ganizations to collectively enter into managed care contracts in order to increase the volume of patients admit-ted to their hospitals; leverage their “systemness” to secure higher managed care reimbursement; shift from per diem to capitation; and for direct contracting with regional health alliances, accountable health plans and em-ployers. Hospitals also cited increased loyalty and a more secured referral base as benefits to integrating with physicians.1 “Physician leadership was viewed as important not only to securing physician involvement in governance but also as a mechanism for communicating to, and mentoring, practicing physicians.”2

Critical to this strategy was alignment of incentives between hospitals and physicians to allocate man-

aged care premium “appropriately” across hospital and physician organization cost centers. It was thought by many hospitals that, in addition to horizontal integration, integrated delivery systems would create vertically integrated systems that would improve hospital-based clinical system efficiency and lower marginal costs. This has not been proven in research studies.

Case Study

Mullikin Medical Centers (“Mullikin”) became a powerhouse in California health care and had gained

national recognition as a pioneer in managed-care medicine. It employed more than 400 doctors at 54 clinics and owned its own hospital. Mullikin provided medical care for 320,000 patients. In the early 1990s the or-ganization was one of the first to behave in ways that are aligned with the stated goals for medical homes and ACOs. For example, as its Medicare HMO enrollment increased they found that patients were presenting with multiple, chronic conditions. In response, they hired nurses whose function was to identify and contact by phone high risk Medicare patients at least monthly to ensure that they were following physician recommended behavioral changes, treatment plans and adhering to prescription drug therapy. If the nurse found any devia-tion, they would ask they patient to return to the office to speak with a physician. Mullikin even created its own fleet of vehicles to transport Medicare patients to and from their clinics, especially for those without transportation of their own. This was successful in providing longitudinal care and achieving performance ob-jectives.

As another example, because of its size and contracting clout with HMOs, Mullikin directed and paid for the transportation and health care expenses for a cancer patient and their family to go “out of network” and receive care at a major Midwest university teaching institution that had better mortality and morbidity statistics (two ways of measuring “quality”) than the payor-contracted in network center of excellence. The total cost, including medical care, travel, lodging and meals was less than had Mullikin used the in-network center of ex-cellence. Most importantly, the patient outcome was excellent.

Capital needs forced Mullikin to look for partners or acquirers. A major national hospital company ap-proached my firm and asked us to assist with conducting due diligence for its potential acquisition of Mullikin. The hospital company’s principal objective was the integration of Mullikin’s well respected managed care processes within their hospitals to improve utilization and management of managed care contracts, and to im-prove overall hospital performance. Implied in this goal was that Mullikin physicians and their systems would

1 Gloria J. Bassolli, Linda Dynan, Lawton R. Burns, and Clarence Yap, “Two Decades of Organizational Change in Health Care: What Have we Learned?” Medical Care Research and Review, 2004, 61: 247, p. 314

2 Bassolli, p. 315 3 Bassolli, p. 315

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enhance existing hospital medical staff operations: existing medical staff would be trained by and/or conform to Mullikin policies and procedures. The appraised market value of Mullikin was $367 million and, indeed upon review, their policies and procedures were exemplary. However, when asked for our recommendation whether or not to proceed with the acquisition, I recommended against it for the following reasons. Mullikin owned and managed exceedingly well IPAs, group practices, hospitals and managed care contracts, but inte-grating their approaches and physicians within the national hospital company’s hospitals would be difficult, if not impossible. Existing medical staff would resent the imposition of a “managed care” organization’s poli-cies on them, and would likely shift allegiances to other competing hospitals. Most importantly, however, was the fact that Mullikin’s leadership was led by its lay Chief Executive Officer, John McDonald, and its Presi-dent, Walter Mullikin, M.D. They were supported by an excellent staff, including 5 additional key executives. Mullikin physicians were employees, and they either complied with policies and procedures or were fired. Leadership was unambiguous and strong. However, the 7 key executives had clauses that provided for their buy-out upon sale of the company. I believed that if the hospital company acquired Mullikin, and its leader-ship left, then the company would not sustain its performance. The hospital company decided not to acquire Mullikin.

Shortly thereafter, MedPartners based in Birmingham, Alabama acquired Mullikin for $360 million. Larry R. House the Chairman and Chief Executive of MedPartners at the time of the acquisition stated, “We see ourselves as physician-services organizations, not as getting into the health maintenance organization or hospital or insurance business. We see physicians as the driving force in how health care is delivered and how health care is managed. This is a pure physicians' organization.”4 In California, because it owned a hospital as well as physician organizations, Mullikin had been negotiating and obtaining capitation for hospital and physi-cian services (known as full capitation). Because of concerns about solvency of organizations obtaining full-risk contracts, the California Department of Organizations (now the Department of Managed Health Care) be-gan requiring organizations participating in full risk contract to acquire a “Limited License Knox-Keene.”5

MedPartners contacted my firm and asked me to create what was the first Limited License Knox-Keene or-ganization in California. Essentially, such a license identifies and quantifies the minimum tangible net equity (“TNE”) capital that must be placed in escrow with the State in the event such an organization becomes insol-vent and cannot pay its contracted providers. The calculations were accurate through the first 8 quarters of op-eration. Then, MedPartners in Alabama began to siphon capital from the TNE account to use outside of Cali-fornia. California regulators stepped in, seized MedPartners, and sold it to another organization.

The rise and fall of Mullkin is an excellent case study for integrated delivery system review and devel-opment of new models. Mullikin’s success was largely resultant from its strong leadership and processes de-veloped over many years. One cannot “bolt on” processes unique to one organization’s culture, and apply them elsewhere as the hospital company intended to do. Finally, even though obtaining a Limited License Knox-Keene was imposed upon it by regulators, it’s apparent that MedPartners in Birmingham became fo-cused not on managing costs but on using capital required to sustain solvency in the HMO. This would sug-gest that, notwithstanding the capital required to establish and sustain the TNE account, MedPartners was not running the organization as efficiently as had Mullikan prior to the acquisition. The principal hypothesis for its demise was that, once the founding principals left, new leadership could not manage the organization to the same degree of efficiency and effectiveness. MedPartners sold its California medical group business to KPC Global Care Inc. which shortly thereafter went into bankruptcy and dissolved the organization.

4 Judith H. Dobrzynski, “Physician Management Merger Deal,” New York Times, August 16, 1995 5 The Knox-Keene Health Care Service Plan Act of 1975 licenses HMOs in California

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Other physician practice management companies initially gained popularity during this time, but ulti-mately met the same fate as MedPartners and either went into bankruptcy, were sold, and/or dissolved. These include FPA, PhyCor Inc., Pacific Physician Services Inc., and Coastal Physician Group Inc. Pay-for-Performance

In the early 2000s, as health care costs continued to increase, employers formed or sponsored organiza-tions that sought to reward bonuses for achieving pay-for-performance (“P4P”) objectives centered on certain high volume, high cost diseases. Several studies found unexplained variations in services provided across the country resulting in no discernible improvement in quality of care. One study estimated that adults in the United States receive generally accepted standard of preventive, acute and chronic care only about 55% of the time.6 The Leap Frog Group and the Integrated Healthcare Association are but two examples of organizations developing private P4P initiatives. In the mid-2000s the Centers for Medicare and Medicaid Services (“CMS”) launched the first of several P4P demonstration projects. Private initiatives include payors and pro-viders of care and services.

The American Medical Association gave its support to P4P in June 2005, so long as its principles were followed, which include an emphasis on voluntary participation, data accuracy, positive incentives and foster-ing the doctor-patient relationship. Positions by other physician organizations reflect skepticism on the valid-ity of performance measures, and promote accommodation for an individual physician's clinical judgment; protection for a patient's preferences; autonomy and privacy; and reversing the trend of health care cost reduc-tions to accommodate the increased administrative costs required by participation in such programs. P4P models rely generally on four types of quality measurement.7

Patient outcomes; Processes; Structural Factors; and, Patient Satisfaction.

A significant challenge for measuring outcomes is deciding how to adjust for variations such as severity of ill-ness, co-morbidity, and, if used, the proper weight to assign for case-mix indexes. There is no universal en-dorsement for inpatient and outpatient measures, and algorithms used to adjust risk by certain companies creat-ing “report cards” of provider performance are either too general or proprietary, which restricts the reproduci-bility and use of these measures across practice settings and patients. Similarly, there are no universally ac-cepted best practice standards or practice based norms. As providers implement P4P schemes, especially if consistently performing below standard, how will their performance be used by and affect their malpractice insurance underwriting, coverage and costs?

6 Elizabeth A. McGlynn, “The Quality of Health Care Delivered to Adults in the United States.” New England Journal of Medicine, June 26, 2003, p. 2635

7 Michael F. Cannon, “Pay-for-Performance: Is Medicare a Good Candidate?” Yale Journal of Health Policy, Law, and Ethics, December 14, 2006

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Origin of 21st Century Health System Reform

In 2001, the Institute of Medicine (“IOM”) produced a report describing objectives for an improved 21st Century Health System Delivery. The six key goals identified are: Safe: avoiding injuries to patients from the care that is intended to help them; Effective: providing services based on scientific knowledge to all who could benefit, and refraining

from providing services to those not likely to benefit; Patient-centered: providing care that is respectful of and responsive to individual patient preferences,

needs, and values, and ensuring that patient values guide all clinical decisions; Timely: reducing waits and sometimes harmful delays for both those who receive and those who give

care; Efficient: avoiding waste, including waste of equipment, supplies, ideas, and energy; and, Equitable: providing care that does not vary in quality because of personal characteristics such as gen-

der, ethnicity, geographic location, and socioeconomic status.8

Furthermore, the IOM identified ten principles for improvement in health care delivery:

1. Care is based on continuous healing relationships; 2. Care is customized according to patient needs and values; 3. The patient is the source of control; 4. Knowledge is shared and information flows freely; 5. Decision making is evidence-based; 6. Safety is a system property; 7. Transparency is necessary; 8. Needs are anticipated; 9. Waste is continuously decreased; and, 10. Cooperation among clinicians is a priority.9

The IOM suggests focusing efforts on those chronic care conditions that produce the greatest costs to the delivery system. In 2005, the IOM issued a report, “Building a Better Delivery System: A New Engineering/Health Care Partnership,” discussing ways in which engineering applications could be applied to health care to im-prove the delivery system. One of the key findings is that while health care innovations abound in the United States little has been done to improve or optimize operations or to measure the quality and productivity of the system. Among the findings is that improved use of information and communications would likely lead to im-proved safety, quality, and efficiency.10

8 “Crossing the Quality Chasm: A New Health System for the 21st Century,” National Academies Press, Washington, D.C., 2001 9 ibid 10 “Building a Better Delivery System: A New Engineering/Health Care Partnership.” National Academies Press, Washington, D.C., 2005

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Medical Homes A medical home is a model that places PCPs as coordinators of patients’ longitudinal care. The em-phasis is on the process that enables PCPs to lead a medical team, including specialists, in coordinating a pa-tient’s preventive, acute, and chronic care needs.

There is no standard organizational structure for a Medical Home. Because objectives center on care coordination processes, a Medical Home is really a form of horizontal integration which cuts across histori-cally vertical organizational structures and approaches. The focus is to create a model to provide patient-centered, PCP-guided quality care across all dimensions of care. Medical Homes empower and require PCPs to coordinate care across the delivery continuum to achieve quantifiable increases in outcomes for prevention and disease management. Emerging models may well be “virtual” organizations through which PCPs align with others to form teams of care givers to achieve the goals of a Medical Home. Principles

The American Academy of Pediatrics (“AAP”) introduced the Medical Home concept in 1967 which referred to a central location housing a child’s medical record. In 2002, the AAP expanded its definition to include accessible, continuous, comprehensive, family-centered, coordinated, compassionate, and culturally effective care. In 2007, the principles of the Medical Home were expressed by the AAP, American Academy of Family Physicians (“AAFP”), the American College of Physicians (“ACP”) and the American Osteopathic Association (“AOA”). The jointly developed values for a “Patient-Centered Medical Home” include:

Empowering primary care physicians with coordinating and directing ongoing acute, chronic, preven-

tive and end of life health care services across all elements of the delivery system; Ensuring quality through the use of evidence based medicine to improve clinical outcomes that are de-

monstrable through the use of clinical decision support tools; enhancing patient access and communica-tion beyond traditional practice hours and through the use of new communications processes between patients, physicians and staff; and,

Creation of new models of payment that recognize and reimburse providers for the value added bene-fits created by medical homes.11

In 2008, The National Committee on Quality Assurance (“NCQA”) established criteria for organiza-tions to become acknowledged as a “Patient-Centered Medical Home.” Applicants must pass at least five ba-sic elements from among the following categories: Access and Communication; Patient Tracking and Registry Functions; Care Management; Patient Self‐Management Support; Electronic Prescribing; Test Tracking; Referral Tracking;

11 The American Academy of Family Physicians (AAFP), American Academy of Pediatrics (AAP), the American College of Physicians (ACP) and the American Osteopathic Association (AOA), “Joint Principles of the Patient-Centered Medical Home,” www.aafp.org/online/etc/medialib/aafp_org/documents/policy/fed/jointprinciplespcmh0207.Par.0001.File.dat/022107medicalhome.pdf, February 2007

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Performance Reporting and Improvement; and, Advanced Electronic Communications

There are three levels for achievement of NCQA recognition according to the percentage achieved in the nine general categories above.12

Medicare Medical Home Demonstration Project

The Medicare Medical Home Demonstration project was authorized in Section 204 of the Tax Relief and Health Care Act of 2006. Included was the establishment of a 3-year Medical Home demonstration pro-ject to provide care to patients with chronic or prolonged illnesses. CMS established two tiers of Medical Homes, Tier 1 and Tier 2, which generally correspond to levels 2 and 3 of the NCQA standards. Each tier in-dicates greater capabilities and expectations for care coordination. Similarly, patients with higher acuity will be directed towards medical homes achieving Tier 2 status. CMS compensates participating PCPs a higher per member per month (“PMPM”) payment according to the Medical Home tier group for which they qualify. Tier 2 denotes increased levels of capability. Consequently, Tier 2 accredited Medical Homes receive higher compensation for patients with greater severity of illness.

Achieving CMS Medical Home Tier 1 status requires organizations have 17 basic medical home capa-

bilities. Tier 2 status requires achieving those in Tier 1 as well as two additional capabilities including elec-tronic medical record and follow-up of inpatient and outpatient care. They will also have to achieve at least three of nine optional capabilities.

In the Demonstration Project, patients enrolled in Medicare Parts A and B, Medicare FFS, and Medicare as primary coverage are eligible to be assigned to Medical Homes. Medicare Advantage members are ineligible, as are current hospice and nursing home patients, and those participating in other Medicare demonstrations.13

As of this writing, Medicare has 3 demonstration projects in development of the 8 originally author-

ized.

PPACA Medical Home

Recently passed Federal Health Care Reform legislation includes the following elements for states, state-designated entities or Indian Tribes participating in the Patient Centered Medical Home project:

Personal physicians; Whole person orientation; Coordinated and integrated care; Safe and high-quality care through evidence-informed medicine, appropriate use of health information

technology, and continuous quality improvements; Expanded access to care; and, Payment that recognizes added value from additional components of patient-centered care.14

12 www.ncqa.org 13 www.cms.gov/demoprojectsevalrpts/MD/ItemDetail.asp?ItemID=CMS1199247 14 The Patient Protection and Affordable Care Act. Section 3502(c)(2)

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The medical societies believe that PCPs within Medical Homes would coordinate care for all of their assigned patients. PPACA legislation targets only certain chronic care conditions that would be managed by Medical Home physicians. A potential tension exists between chronic care management models that target typically high cost, high utilization diseases, and the more holistic comprehensiveness of a Medical Home en-visioned by others.

Other Public & Private Medical Home Initiatives

Many States have Medical Home Demonstration projects in their legislation. A few are planning or have created Medical Home projects. In addition, several demonstration projects have arisen through em-ployer and private payor sponsored initiatives.

Medical Home Compensation

PCP participants in Medical Homes receive additional monthly payments in exchange for leading pre-

vention, disease management, and care coordination activities that reflect best practices in primary care. PCPs in various demonstration projects are compensated on a higher PMPM fee reflecting the greater acuity of pa-tient care required to treat chronically ill patients, paid a management fee to implement a minimum number of medical home initiatives, and given a bonus as reward for improvement in specified evidence based outcome objectives. The AAFP, AAP, AOA and the ACP have proposed a FFS, PMPM management fee, and a quality incentive as the three components for paying participants in Medical Homes for increased work effort and value created by physician participants.

In the CMS demonstration projects, Medical Homes receive $40.40 PMPM for Tier 1 and $51.70 PMPM for Tier 2 as a blended base monthly management fee, in addition to any covered Medicare services provided. 80% of the savings that exceed 2 percent of the comparison group costs will be shared with partici-pating providers in the intervention group. CMS will share the savings with participating providers only if the estimated gross Medicare savings (from changes in Part A and B expenditures minus care management fees) exceeds 2 percent of the comparison group costs. Applying Medical Home principles requires a fundamental redesign of historical practices to become patient center. The shifting orientation of traditional practice to implementation of Medical Home principles is depicted below.

Historical Practice Patient Centered Medical Home Practice

Physician Centered Patient Centered

Office Practice Team Based

Diagnosing and Healing Preventing and Curing

Treating Illness Achieving and Maintaining Wellness

Measurement of Certain Outcomes Analysis and Improvement in Cause of Out-comes

Episodic Care Coordinated Care

Reactive Prospective

Paper Records, Stored Locally, Documenting Historical Incidence of Care

Electronic Medical Records, Retrievable by Team to Coordinate Care Processes

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Physician Group Practice Demonstration In April 2005, CMS initiated the Physician Group Practice Demonstration Project offering 10 large practices the opportunity to earn performance payments for improving the quality and cost-efficiency of health care de-livered to Medicare FFS beneficiaries. Each PGP earns quality performance payments based on the size of its quality performance pool and the proportion of quality targets it has met. The demonstration includes 32 qual-ity measures drawn from CMS’s Doctor’s Office Quality (“DOQ”) Project, focusing on measures from five condition modules: coronary artery disease, diabetes, heart failure, hypertension, and preventive care. (See Medicare Physician Group Practice Demonstration).15

Accountable Care Organizations

An Accountable Care Organization is a formal structure with shared governance that is responsible for

coordinating care across multiple sites to achieve quantifiable outcomes. The ACO may include group prac-tices, networks of individual practices, partnerships or joint venture arrangements between hospitals and ACO professionals, and hospitals employing ACO professionals.

15 www.cms.gov/DemoProjectsEvalRpts/downloads/PGP_Fact_Sheet.pdf

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The minimum number of Medicare beneficiaries assigned to an ACO will be 5,000. The ACO must have the infrastructure and processes to promote evidence-based medicine and patient engagement, report on quality and cost measures, and coordinate care. Emphasis will be given to established organizations, espe-cially those with experience in managing risk based payment. Integrated Delivery System Models

In addition to established group practices, various existing structures may qualify as ACOs. Three California examples are depicted here.

A 1206 (L) Foundation Model is a nonprofit, tax-exempt corporation created by a hospital, which pro-vides physician services through a professional services agreement with a professional corporation. The Foun-dation can guarantee payment to the professional corporation and subsidize its growth. The key structural ele-ments of this type of Foundation is that it must: 1) be a tax-exempt entity and conduct some amount of medi-cal research and health education; 2) provide health care to its patients through a group of 40 or more physi-cians and surgeons who are independent contractors; 3) represent at least 10 board-certified specialties through its aligned physicians; and 4) ensure two-thirds of aligned physicians practice on a full-time basis for the Foundation’s clinic(s). These types of models were attractive in the 1990s, but as the decade drew to a close many of them dissolved. Some of the negatives suggest the challenge for creating and operating 1206 (L) Foundations, such as alienation of excluded PCPs in the service area, extensive start-up and administrative support costs, recruiting the minimum number of physicians and specialists for participation, creating and managing a productivity based physician compensation system, and physician and lay leadership skills.

Another form of Medical Foundation has recently come into vogue: the 1206 (D) or Hospital Outpa-

tient Department Foundation Model which is depicted below. In this model, a hospital establishes one or more

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outpatient department locations in which physician independent contractors provide primary care services. The clinic may either be located on the hospital campus or off-site. The hospital bears the cost of employees, space, equipment (including IT) and supplies. Participating physicians must be members of the hospital’s medical staff, independent contractors, and not employees. They can be staffed by physicians who are mem-bers of a “captive professional corporation” (where one shareholder physician owns the professional corpora-tion, holds the contract with the hospital, and employs the physicians). Implementation challenges for these types of Foundations include lack of physician involvement in management; services subject to medical staff oversight and hospital policies related to licensing, accreditation and certification standards (e.g., JCAHO and Title 22); and they are difficult to manage efficiently with high-cost hospital structure. Regardless of the model, all hospital/physician integration strategies are subject to various Federal and State regulations including: Federal Anti-Kickback Law The Federal Anti-Kickback Law precludes knowingly and willfully offering or receiving payment in any form as inducement for ordering or referring services reimbursed by Medicare, Medi-Cal, and CHAMPUS. Hospitals cannot offer direct or indirect, cash or in-kind, financial inducements for referrals of patients enrolled in Federal programs. To mitigate risks of entering into such relationships, hospitals must ensure that the arrangements have independent business purposes other than generation of referrals, establish fair market value terms for any fi-nancial benefits conferred upon physicians, have agreement terms longer than one year, and have written docu-mentation of all aspects of relationship.

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Federal Stark Law The Stark Law stipulates that physicians may not refer Medicare, Medi-Cal and CHAMPUS patients for designated health services (“DHS”) to a hospital or other facility with which he or she has a financial rela-tionship which does not qualify under statutory exemptions. Relevant DHS include hospital inpatient/outpatient services, lab tests, and most diagnostic imaging services (e.g., radiology, MRI and CT). Having a financial relationship means ownership or investment interest in recipient of referral, or compensation arrange-ment (payment either to or from physician). State Laws Most States have laws mirroring the Federal Anti-Kickback and Stark Laws. Non-Profit Hospital Considerations Non-profit hospitals also must ensure compliance with Internal Revenue Service (“IRS”) rules and regulations to maintain their tax-exempt status. For example, they must follow private inurement and private benefit rules which require that payments to physicians are in furtherance of the hospital’s charitable purposes. To satisfy this requirement, for example, hospitals using loan forgiveness or other means of financial support for recruitment of PCPs must demonstrate to the IRS that a PCP shortage currently exists and that such incen-tives are necessary for meeting the hospital’s non-profit mission. Corporate Practice of Medicine Prohibitions Most States have some form of Corporate Practice of Medicine law providing that only licensed physi-cians or medical groups are permitted to practice medicine. In many cases this means that hospitals may not employ PCPs or control their practices, unless through a legally approved model. Certain other specialists may be employed under certain circumstances. Antitrust Laws These laws pertain to restraining trade through, for example, price fixing of managed care rates by competitors, and exclusion of certain physician participants or managed care plans. In constructing any hospital/physician model, each of the aforementioned issues must be considered and implemented in its integration strategy to minimum risk of exposure. A third model of integration that has benefited from PPACA legislation is the “Limited License HMO” Model. Since legislation has stated preference for ACO organizations with established organizational models and experience in managing risk, models that enable providers to accept capitation are being created. Many states have laws regulating providers’ acceptance of risk based contracts. California’s Limited License Knox-Keene HMO Model is depicted below. The principal objective of State Laws is to ensure solvency of the en-tity. Foremost among their concerns are these types of HMOs becoming insolvent and not paying their sub-contracted providers, who may in turn seek to bill patients for services rendered. The capital requirements for licensure and the managerial expertise to operate effectively are significant (as was alluded to earlier in the dis-cussion of MedPartners’ Limited License Knox-Keene HMO).

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Reinsurance ACOs must enter into 3 year agreements with CMS. ACOs have no way of prospectively evaluating the actuarial risk they are assuming since CMS has indicated they will not provide the risk profile of patients assigned to them. ACOs do know that inasmuch as CMS Medical Homes focus on patients with chronic dis-eases, their patients will similarly have greater severity of illness indicated by more resource intensive, high costs diseases. It is imperative that ACOs purchase reinsurance, especially if they receive capitated payments from CMS. While the goal is to achieve incentive payments for managing costs below budget, there is no way for organizations to determine the risk associated with Medicare patients assigned to them (either through Medical Home or ACO Models). Reinsurance will mitigate organizations’ medical loss exposure. Professional Liability Insurance As standards are established, data captured, and organizations measured against “cohort” groups, there is potential for increased malpractice exposure. Medicare patients assigned to organizations will already have chronic, high cost diseases. Management for these patients have PCPs as the coordinators of care. Unan-swered questions include, what happens when the outcomes associated with one patient, or the organization’s entire Medicare population assigned to it through either the Medical Home or ACO model, differ from other physicians and organizations participating in these models? Do the outcomes produced create a new expected

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usual, customary and reasonable standard of care (“UCR”)? How will outcomes produced from the Medicare demonstration patients be applied to and compared with a physician or organization’s other Medicare and pri-vate patients? What impact will probable deviations have on individual physician and organizational malprac-tice exposure? It is important to review existing malpractice insurance policies and evaluate how to mitigate potential increased risk exposure from participating in Medical Home or ACO demonstration projects.

Key Issues in Creating Medical Homes and ACOs Since the principles of Medical Homes are required to be an ACO, the focus of this discussion is on organizational determinants for success. While structure is important, especially to mitigate legal and business risk, the process of integration is most important. A typical process frequently used by those building inte-grated delivery systems to develop shared vision, goals and objectives is presented below.

Organizations began building integrated delivery approaches because of market forces. In the 1990s it was the Clinton Health Care Reform and Managed Care: in 2010 it is PPACA. In each case, providers (hospitals and physicians) can easily see the threat to them. In the 1990s it was potential public and actual pri-vate payors. Today the threat is Medicare. Identifying a threat enables hospitals and physicians to develop a shared mission and vision. The purpose is to mitigate the potential loss caused by the external threat.

Viewing Physician Organizations as “Family-Owned” Businesses

The most important elements always mentioned in any strategy are effective governance and leader-

ship. However, the critical issue is to understand that joint-ventures bring together two or more physicians to create a de facto “family owned” business: with physicians as family, and hospital management as outsiders. A successful integrated delivery system development strategy requires implementation of a process to help the

Starting Point ProcessesOutcome of

Proposed Project

Health Care Organization Mission and

Vision

Comprehensive Action Plan:

•As specific and measurable as possible

•Clear timetables for implementation

Clinical Integration

Functional Integration, Including

Managed Care

Role of Physicians

Reporting and Rewarding

Governance and Management

Major Strategic Implications

Development and Implementation of Performance Improvement Best Practices

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“family” members (e.g., physicians) develop shared beliefs and values within their “group,” prior to focusing on the hospital/physician relationship.

One of the reasons that many forms of integrated delivery systems either failed or performed below

expectations was that physician leadership came from “outside” the family. Medical Directors or other physi-cians employed by a hospital or management company attempted to lead a disparate medical staff and in some cases a “group” of physicians. In many cases, there was a strong vision with clear goals and objectives created and agreed upon by all. The common global strategic intent and vision for creation of the integrated delivery system could be readily adopted. Poorer than expected operational performance of the joint venture caused physician participants to rethink their commitment to the shared vision. For example, physician organizations seeking capital infusion to improve their own operations overtime became disenchanted with its partner focus-ing its efforts on reengineering department level functions or core processes of the wider organization, instead of on initiatives that would quickly benefit the physician organization. The strategy did not fit the implemen-tation. More accurately, the strategies of the “outside” entity did not improve operational performance of the physician organization.

Most medical staff are independent physicians not employed by the hospital. As supportive as they

may be towards the hospital, self-interest compels them to prioritize success of their practice over hospital ini-tiatives that are conflictual, detrimental, or add no-perceived value to their practice. In the 1990s, as capitation subsided so too did the mutual threat to hospitals and physicians. Not coincidentally, many PHOs and other integrated delivery strategies were disbanded or under performed.

From an organizational structure perspective, a hospital is relatively top down as indicated in the dia-

gram that follows. A Board of Directors comprised of community business leaders, hospital executives and medical staff oversees the management and clinical operation of the hospital, and ensures that its mission, vi-sion and strategies pertain to the hospital’s external constituencies. Management control is delegated by the Board to hospital administration and the medical executive committee. This relationship is illustrated below.

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The organizational structure within physician organizations is illustrated below. Physician owners elect the Board of Directors which is comprised exclusively of physician owners. The Board oversees the management and clinical operations of the physician organization. Management control is delegated by the Board to a physician leader (frequently the Chief Medical Officer or Medical Director) and a non-physician administrator (“Administration”). Administration is directed to create and implement polices by a Board com-prised of physician owners through managing physician owners (and physician non-owners) who elect the Board, who evaluate Administration.

Neglecting to recognize that physician organizations operate similar to a family owned business re-sulted in suboptimal performance of previous hospital/physician integration strategies. Specifically, trust is-sues and differences in risk tolerances must be overcome within the “family owned” business before they can be identified and overcome in the proposed joint venture. There must be mission, vision and goal agreement within the physician organization before similar objectives can be met in the integrated delivery model. Sec-ondarily, the identical process must occur between the physician organization and the hospital, recognizing that as negotiations and modifications occur, they must then be taken back to the physician organization and recalibrated once again within the “family.”

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Understanding High Performing Physician Organizations

Elements of High Performing Physician Organizations

The highest performing physician organizations (including group practices, IPAs, PHOs, etc.) create cultures in which physician participants are generally satisfied with three issues: governance, equity and com-pensation. The degree of satisfaction affects their ability to agree upon and define a shared vision, create real-istic goals and objectives, and to develop and operationalize strategies for sustainable performance. Share-holder organizations seek to enhance firm value. The goals of the family owned business on the other hand are driven by the collective and individual objectives of the participants, which may not have as their principal ob-jective maximization of corporate profit. Historically this has held true for physician organizations. Studies of family owned businesses have suggested certain goals that are similar to physician organizations such as to:

Have a company where employees can be happy, productive and proud; Provide financial security and benefits for the owner(s); Develop new quality products; to serve as a vehicle for personal growth, social advancement, and

autonomy; and, Promote good corporate citizenship; and to provide job security.16

In our model, governance pertains to management control and power. Equity refers to ownership of assets; especially of the shared group culture. Compensation relates to financial security. Each of these is in-terrelated and takes on different levels of importance depending upon the particular physician organization, and is influenced significantly by physician leadership. Family owned businesses and physician organizations

16 R. Tagiuri and J.A. Davis, “On The Goals of Successful Family Companies,” Family Business Review, 5(1) (1992), 43-62.

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have relationships that other organizations do not: those among “family members” and those between family members and non-family professional managers. A nation-wide study of PCP and specialist career satisfac-tion, in part, substantiates our model. Governance: While not addressing overall governance per se, the study found that changes in profes-

sional clinical autonomy affected physicians’ perceived career fulfillment. Equity: PCPs and specialists who were owners of their practices reported increased satisfaction. Compensation: Change in PCP income was identified as a significant factor in satisfaction.17

The interrelationship of governance, equity and compensation affect individual physician satisfaction within their organizations and among their colleagues. Lack of understanding of the role these three factors play in physician organizations resulted in high profile failures of physician management companies such as MedPartners, FPA and PhyCor, and presents challenges for creating Medical Homes and ACOs that will achieve their lofty goals. Not All Physicians Want to be Part of a Group Many physicians do not want to belong to a physician group. In 2005-2006 nearly 37% of physicians were solo practitioners. The distribution of physicians by organizational setting was:

Solo 36.8 Partner 12.1 3–5 27.8 6–10 14.3

11 or more 9.118

In a study of benefits and barriers to large group practices, physician group respondents cited autonomy and inability to get along with one another as the most significant barrier. Lack of capital was second, and lack of physician leadership was third. Leverage with health plans was the benefit cited most often, with economies of scale, leverage with hospitals, ancillary service revenue and better lifestyle following in impor-tance.19

Locus of Control

Locus of Control In some parts of the country established physicians are abandoning their solo practices to become part of larger group practices or physician owned organizations. Organizations must identify and evaluate individ-ual physicians’ locus of control orientation to determine if they fit within the organization. Locus of control refers to the extent to which individuals believe that they can control events that affect them. Individuals with

17 B.E. Landon, J. Reschovsky, and D. Blumenthal, “Changes in Career Satisfaction Among Primary Care and Specialist Physicians, 1997-2001,” JAMA, Vol. 289 No. 4, January 22-29, 2003

18 E. Hing and C.W. Burt, “Characteristics of office-based physicians and their medical practices: United States, 2005–2006,” National Center for Health Statistics, Vital Health Stat 13(166), 2008

19 Lawrence P. Casalino, et al, “Benefits of and Barriers to Large Medical Group Practice in the United States,” Archives of Internal Medicine, Vol. 163, September 8, 2003

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a high internal locus of control believe that events result primarily from their own behavior and actions. Those with a high external locus of control believe that powerful others, fate, or chance primarily determine events. A strong physician organization creates a culture establishing a strong sense of group: a robust organizational-wide internal locus of control. Improperly blending physician organization culture within the integrated deliv-ery system model creates conflict between the physician/group’s attitude towards locus of control and that re-quired by the newly developed model’s mission, vision and strategies. Too many hospital led initiatives have required physicians to relinquish their personal and group’s internal locus of control and effectively become subservient to the hospital. Creating a joint venture between two parties requires addressing locus of control issues, which are more fundamental than organizational vision. True integration is impossible to achieve with-out having processes in place that continually satisfy locus of control issues. Physician Satisfaction and Burnout One of the key ingredients for creating or improving a Medical Home or ACO is physician satisfaction. As mentioned earlier, changes in professional clinical autonomy affect physician’s perceived level of career fulfillment. Clinical autonomy pertains to a physician’s ability to manage their time and day to day patient in-teractions 20 Another study identifies higher perceived autonomy and lower perceived patient complexity as higher than desirable as strong indicators of high career satisfaction among primary care physicians.21 A study investigating links of physician satisfaction with delivery of quality care reported that no consistent associa-tions were found between adverse work conditions and adverse physician reactions and the quality of patient care. Analyzing responses from 119 ambulatory clinics comprising 449 physicians in New York and the Mid-west researchers found the following: 53.1% of physicians reported time pressure during some physical examinations; 30.3% needed at least 50% more time than allotted for physical examinations; 21.3% needed at least 50% more time for follow-up appointments; 48.1% physicians reported chaotic environments; 21.6% reported at least moderate control of their work environments; 23.7% of physicians felt that their practices strongly emphasized quality; 28.2% noted a strong emphasis on information and communication; 30.6% of physicians reported high trust 33.9% reported high cohesiveness (33.9%); and, 14.2 reported strongly aligned values between physicians and leaders.

Adverse workflow, low work control, and unfavorable organizational culture were strongly associated with low physician satisfaction, high stress, burnout and intent to leave .22 Creating Medical Homes and ACOs that put PCPs in charge of coordinating resource intensive Medi-care patients may decrease PCP satisfaction and increase burnout. In “Medical Group Management of Medi-care Capitated Programs: The Critical Success Factors,” we examined the factors influencing performance in

20 B.E. Landon, J. Reschovsky, and D. Blumenthal, “Changes in Career Satisfaction Among Primary Care and Specialist Physicians, 1997-2001,” JAMA, Vol. 289 No. 4, January 22-29, 2003

21 David Katerndahl, MD, MA, Michael Parchman, MD, MPH, and Robert Wood, DrPH, Journal of American Board of Family Medicine, Vol. 22 No. 1, January–February 2009

22 Mark Linzer, MD, et al., “Working Conditions in Primary Care: Physician Reactions and Care Quality,” Annals of Internal Medicine, Vol. 151 No. 1, July 7, 2009

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13 medical group practices in two States participating in the Secure Horizons Capitated Medicare Plan. Among the findings was that groups with experience in managing Medicare patients prior to entering into a senior capitated plan performed better than those with little or no experience. Other factors identified as criti-cal to success included achieving a sufficient critical mass of enrollees to mitigate medical management risk from a small number of adverse cases negatively impacting the risk pool created by these patients, enrollment growth, vertical integration, and patient management. growth, vertical integration, and patient management.23

These findings have implications for participating in Medical Home or ACO projects. Organi-zations with little or no experience in managing high risk Medicare patients will be at greater risk of poor per-formance than those with a history of providing care to similar populations. Will 5,000 patients be sufficient to mitigate medical loss exposure from treating Medicare patients with chronic issues? Will there be enrollee growth throughout the 3 year period, or will it be static at approximately 5,000? Finally, in addition to poten-tial strain on an organization’s systems, what effect might there be on PCPs treating patients requiring greater resources and time? How might this affect physician satisfaction and burnout? Forward looking organizations will proactively prepare for such issues, especially in the form of physician training and support.

Balancing Physician Attitudes within the “Family” Positively Affects Performance The diagram on the next page illustrates the attitudinal issues physician organizations manage.

23 Joseph M. Mack, MPA and Joan Krueger, PhD, Medical Group Management of Medicare Capitated Programs: The Critical Success Factors, Unified Medical Group Association, September 1991

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Physician Attitudes Affecting Work Satisfaction Successful physician organizations balance individual physician and group needs. Physician leadership continuously evaluates information pertaining to physician attitudes and manages processes to produce maxi-mum performance. In this model of a physician organization as a “family,” leaders gather and disseminate in-formation enhancing management, apply this knowledge to reengineer group processes by applying various components of total quality management (“TQM”), to create and sustain the “family” or group cohesiveness. Physician leaders successfully balance individual physician attitudinal needs with those of the group to achieve strategic and operational objectives. For example, autonomy is balanced with interdependence. On balance, physicians practicing in physician organizations have more of their needs fulfilled than if they were in solo practice. Others who do not perceive the same fulfillment the group provides do not join, or leave the organi-zation. Balancing individual with group needs requires strong leadership. Leadership

Most successful groups are led by strong physician leaders. Governance is not as much a democracy as

it is a benevolent dictatorship or oligopoly. Only within a physician organization whose members have shared beliefs, values, risk and reward can such a style be successful. Moreover, only through strong physician lead-

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ership can a group remove political impediments and successfully balance individual and group needs. Physi-cian leaders understand that consensus means agreement, not unanimity. They lead their organizations to seek a common ground, and will not allow the pace of change to be dictated by the person least willing to change. Only a physician leader can best communicate with an intransigent colleague resistant to change. Finally, strong physician leaders ensure that strategies created match the organization’s culture.

Electronic Health Information and the

Use of Clinical Informatics to Improve Physician Performance

As part of ARRA, CMS created financial incentives for providers of Medicare and Medicaid patients to obtain incentive funds for the “meaningful use” of certified EHR technology. An eligible professional (“EP”) is one who demonstrates meaningful use for the EHR reporting period. Hospital-based EPs who furnish sub-stantially all of their services in a “hospital setting” are not eligible for incentive payments. In 2011, the re-sults for all objectives and measures, including clinical quality measures, will be reported by EPs and hospitals to CMS; for Medicaid EPs and hospitals, results will be reported to the states. In 2012, CMS has proposed requiring the direct submission of clinical quality measures to CMS (or to the states for Medicaid EPs and hos-pitals) through certified EHR technology.

The performance measures required by CMS for participation in a Medical Home or ACO have not

been created. The Physician Group Practice Demonstration Project identified reporting criteria for coronary artery disease, diabetes, heart failure, hypertension, and preventive care. NCQA established criteria for Medi-cal Homes used in the Medicare Medical Home Demonstration Project. Other public and private Medical Home initiatives have established measurements, as have P4P programs. Organizations with established infor-mation systems should look to these standards as criteria they will ultimately need to report while participating in Medical Home or ACO projects. Organizations, especially Medical Homes comprised of individual physi-cians without the capital to acquire the required information technology, should weigh the costs and benefits of complying with the meaningful use and certified EHR technology requirements to obtain funds to help offset acquisition costs.

Procedural and structural demands for data impose varying and complex requirements for more infor-

mation. It is easy for organizations to lose focus and emphasize compliance rather than creatively deploying capital to produce information that enables them to substantiate and improve their quality outcomes. A critical success factor in evaluating the strategic acquisition and implementation of electronic solutions is that it must produce credible information to assist physicians in improving clinical outcomes and financial performance internally within their organizations, as well as for demonstrating their value to external constituencies such as patients, payors and government. First, organizations must define a vision for how electronic solutions will produce meaningful information for continuous improvement of internal operations, and then identify how they will comply with external demands for information. Data gathered from information systems should em-power physician performance improvement. Shifting from “data-centric” to applying clinical informatics con-cepts will facilitate the development of clinical process redesign and information flow to provide physicians with information needed to improve clinical and economic performance, while being the most cost-effective approach to integrate electronic health information within an organization.

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Critical Success Factors

Existing medical groups with established management capabilities, IT, and capitation experience are well

suited to participate in the ACO program.

Creation of the Medical Home or ACO model may be accomplished through existing organization

forms, and be accomplished relatively quickly.

Operational transformation and performance improvement will take much longer

Strategies must match operational capabilities

Frequent meetings must be held by participants to assess successes and failures, recalibrate efforts, refo-

cus on priorities, and to celebrate successes

Medical Home and ACO participants must evaluate and ensure their capabilities to absorb the potential

volume of chronically ill Medicare patients that may be assigned to them.

Recognize physician organizations as de facto “family owned” businesses ensuring cultural alignment and

integration of individual and group attitudes and culture is required prior to concentration on a joint-

venture model outside of the “family.”

Merging of physician and non-physician cultures is crucial and continual.

Support and safeguard PCP fatigue caused by reengineering care processes, with the establishment of PCPs

as coordinators of the Medical Home principles, and evaluate the effect of elderly, chronically ill pa-

tients on their ability to provide quality care.

Evaluate Medical Home or ACO patient per physician ratio, and adjust downward if necessary.

Assess Medical Home or ACO enrollee impact on office visit time and adjust accordingly.

Integrated delivery systems including a hospital should consider placing physicians in charge of the Medi-

cal Home or ACO, especially those with experience from potential physician group partners.

Significant capital will be required to successful transform any organization into a Medical Home or ACO.

Monitor utilization and adjust panel sizes downward as appropriate to mitigate unanticipated medical

care expenses.

The panel size is likely to be different than their other managed care panels.

The organization must ensure that is has appropriate levels of insurance since it will be treating chronically

ill Medicare patients, as well as to prepare for additional patients assigned to them through co-ops who

may have pent up needs not heretofore treated.

Reinsurance to safeguard additional utilization caused by more and more thorough care, especially if

receiving capitation;

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Appropriate levels of professional liability protection to mitigate risks.

Create Realistic Time and Effort Expectations

Implementation of Medical Home Principles is a fundamental reengineering of historical care processes,

and will take much longer than anticipated.

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About Joseph Mack & Associates

Joseph Mack & Associates (“JMA”) is a full service health care management consulting firm. Our specialties include: Strategic Planning and Business Development; Performance Improvement and Process Redesign; Hospital/Physician Integration; Revenue Cycle Enhancement; Cost Reduction; Creation and Implementation of Business and Clinical Informatics; and, Implementation and Enhancement of Electronic Medical Records.

Integrated Delivery Systems Qualifications and Experience Directed the financial and operational due diligence for Tenet of Mullikin Medical Centers (later MedPart-

ners), a $367 million integrated delivery system including a hospital, physician group and IPA network throughout the State of California that was over 90% capitated representing in excess of 300,000 commer-cial and senior HMO members. Evaluation and analyses led to do not buy recommendation. Two years later, MedPartners sold off the group which then went bankrupt.

Created first Limited License Knox-Keene HMO organization in the State of California for Mullikin Medi-cal Centers, calculating the organization’s tangible net equity. Projections were accurate through the first eight quarters of operations.

Created process adopted firm wide within Ernst & Young that used organizational change management techniques to overcome resistance to change, and to create or reorganize integrated delivery systems.

Created medical groups, management service organizations, hospital physician organizations and other de-livery models nationwide.

Wrote the strategic/operational plan for Catholic Healthcare West's Physician strategy, which included a medical foundation, IPAs, MSOs, and a decentralized local involvement of hospitals in each region.

Served as integrated delivery system advisor for Palomar Pomerado Health System for 4 years, including improving it’s hospital physician joint venture MSO, and spinning off 8 physicians who had been em-ployed by the system into an independent group practice.

Assisted Eisenhower Medical Center prior to becoming Vice President, on several projects including: Creation of a primary care affiliation plan which had as its principal objective creation of a barrier-to-

entry from physician management companies and other hospitals from contracting with or employing independent PCPs in Eisenhower service area to create new “groups” to take ancillary services out of the hospital and to leverage the hospital to gain price concessions.

Evaluated and assessed Eisenhower’s options for the following: Acquire existing MSO Create new MSO Develop a limited liability corporation (LLC) joint venture Employ facility services agreement for joint venture Acquire medical groups Develop or acquire limited license Knox-Keene organization

Other hospitals and systems for which we provided integrated delivery system consulting advice include:

Geisenger Health System. Danville, PA. Winchester Hospital. Winchester, MA

Good Samaritan Hospital. Cincinnati, OH Catholic Healthcare West. San Francisco, CA

Sharp Health System, San Diego, CA St. Joseph Health System. Orange, CA

Sutter Health System, Sacramento, CA UniHealth Burbank, CA

Catholic Healthcare West

jma medical home aco article november 2 2010

Health & Medicine