This document summarizes a presentation on clinically integrated networks and accountable care organizations (ACOs). It discusses: 1) The policy context and definitions of ACOs, which accept accountability for spending and quality for defined patient populations. 2) Similar past attempts at integrated care in the 1990s and lessons learned. 3) Infrastructure like electronic medical records that now enables more coordinated care compared to the past. 4) Early evidence that ACO-like models in Massachusetts reduced spending and improved quality for Medicare patients. 5) Major ongoing challenges for ACOs around aligning incentives, performance measurement, and investing to reorganize care delivery.

1. Clinically Integrated Networks and
ACOs: Preparing for Risk and Reward
Bruce E. Landon, M.D., M.B.A.
Connected Insight Summit 2013
October 8, 2013

2. Agenda
•
•
•
•
•
Background—Policy context
Defining ACOs
Déjà vu
Identifying Organizations
Early Evidence and Major challenges

3. Average Annual Premiums for Single and Family Coverage,
1999-2013
$2,196
1999
$5,791
$2,471*
2000
$2,689*
2001
Family Coverage
$7,061*
$3,083*
2002
Single Coverage
$6,438*
$8,003*
$3,383*
2003
$9,068*
$3,695*
2004
$9,950*
$4,024*
2005
$10,880*
$4,242*
2006
$11,480*
$4,479*
2007
$12,106*
2008
$4,704*
2009
$4,824
$12,680*
$13,375*
$5,049*
2010
$13,770*
$5,429*
2011
$15,073*
$5,615*
2012
$15,745*
$5,884*
2013
$0
$2,000
$4,000
$6,000
$16,351*
$8,000
$10,000
* Estimate is statistically different from estimate for the previous year shown (p<.05).
SOURCE: Kaiser/HRET Survey of Employer-Sponsored Health Benefits, 1999-2013.
$12,000
$14,000
$16,000
$18,000

4. Cumulative Increases in Health Insurance
Premiums, Workers’ Contributions to
Premiums, Inflation, and Workers’ Earnings, 1999-2013
250%
Health Insurance Premiums
Workers' Contribution to Premiums
Workers' Earnings
200%
196%
Overall Inflation
182%
150%
117%
119%
100%
56%
57%
50%
50%
34%
40%
14%
29%
11%
0%
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
SOURCE: Kaiser/HRET Survey of Employer-Sponsored Health Benefits, 1999-2013. Bureau of Labor Statistics, Consumer Price Index, U.S. City
Average of Annual Inflation (April to April), 1999-2013; Bureau of Labor Statistics, Seasonally Adjusted Data from the Current Employment
Statistics Survey, 1999-2013 (April to April).
2013

5. Health Insurance Coverage in MA

6. Motivation
Unsustainable
Spending
Sub-optimal
Quality
“Accountable” Care
Organizations (ACOs)

7. Defining Accountable Care
Organizations (ACOs)
• A group of providers (can include hospitals)
that accepts joint accountability for health
care spending and quality for a defined
population of patients.
– Spending compared to a target “budget”
– Quality measured separately
– Patients either elect in or are assigned
(prospectively or retrospectively)

8. The Evolution of Payment Systems:
From Quantity to Value
Fee-for-Service
• Time spent
improving
quality is time
away from
revenue
generating
visits
• Rewards
quantity over
quality
Pay for
performance
• Adds
incentives for
quality
performance
• May support
infrastructure
costs
Bundled/
Global
payment
(capitation)
• Rewarded if
downstream
spending
avoided
• Robust
quality
incentives
needed

9. Accountability for Spending
Key: Spending is measured relative to a target.
1-sided
ACO
2-sided
ACO
Excess
--
Penalty
Savings
Reward
Reward
Spending
Last year
Determined
by FFS
Spending
This year
Next year

11. ACOs in Medicare
Pioneer
– 32 “Advanced” orgs, 15,000+
benes
– 1 sided2 sided riskglobal
payment
– Prospective assignment
– 669,000 benes
• Shared Savings Program
–
–
–
–
–
Section 3022 of ACA
220 selected, 5,000+ benes
Mostly one-sided (215/220)
Retrospective assignment
3.2 million benes

12. Déjà vu?
• Why is today different?
• What did we learn from the 90s?

13. Back in the 90s….
• What happened if an organization performed
really well?
LOWER
BUDGETS!

14. Multiyear Agreements
• Global payment is now a multi-period game
– Success is not (necessarily) rewarded with a
budget cut!
• Sufficiently long to learn and then accrue the
benefits of improved care management
• Changing practice (and culture takes time)
• Growth rates trend down over time

15. “I wish I could help you. The problem is that you’re too sick for managed care.”

16. Selection
• If risk plans siphon the healthiest
patients, savings might be illusory
• Many examples from the past
– Medicare plans with offices on the second floor
– Offering free gym memberships, sneakers, etc.

17. Risk Adjustment
• Used to be age/sex
• Now age/sex/diagnoses
– uses concurrent to adjust prospectively set
budgets
– Best models (DxCG)
– Diagnoses (in), procedures/drugs/hospitalizations
(out)
• R2 20.6% in commercial, 15-17% in Medicare
• Prior spending for your population

18. Flying Blind

19. Infrastructure
• Better, more available data
• Widespread adoption of EMRs (particularly
here)
• Increasing EMR functionality
• E-prescribing
• Care management systems, enhanced ability
to coordinate and manage care

22. Robust Quality Incentives
• Pay for performance and other infrastructure
payments
• Robust sets of measures (AQC and Medicare)
• Higher amounts at stake
– AQC: originally up to 10% of budget, now
determines shared savings
– Medicare: determines shared savings

23. Accountability for Quality
Key: Quality is measured and reported, with incentives tied to performance.
Medicare “Shared Savings Program”
Domain
#
Example
Patient Experience
7
Patient’s rating of doctor
Care Coordination
6
Rates of readmissions
Preventive health
8
Tobacco screening
At-risk populations
12
Hemoglobin A1c < 8%
Year 1 – pay for reporting
Years 2-3 – pay for reporting and performance

24. Who Should Become an ACO?

25. Potential Winners and Losers?
McWilliams, Chernew, Zaslavsky, Landon. Delivery System Integration and Health Care Spending and Quality for Medicare
Beneficiaries. JAMA Intern Med. 2013;173(15):1447-1456. doi:10.1001/jamainternmed.2013.6886

26. Profligate Spenders v. Organized
Groups?
• Profligate Spenders
–
–
–
–
Loosely connected
Poorly integrated
Culture of excess
But…..budgets will be
generous
• Organized Groups
–
–
–
–
Tightly integrated
Tightly managed
Culture of value
But…budgets are already
constrained!

27. Identifying ACOs
• Organic networks could form the rational basis for
ACOs
– To identify organizations ready to become ACOs
– To identify markets ready to transition to global payment
• Monitoring performance
– Measuring cohesiveness over time using a variety of
measures
– Measuring leakage

28. Complex Networks of Relevance to Network Medicine
Barabasi A. N Engl J Med 2007;357:404-407

29. Building Physician Networks

30. From: Variation in Patient-Sharing Networks of Physicians Across the United States
JAMA. 2012;308(3):265-273. doi:10.1001/jama.2012.7615
Date of download: 9/21/2012
Copyright © 2012 American Medical
Association. All rights reserved.

31. Methods: Community Detection
• Network communities are associated with
functional networks
• Identify sets of nodes that are more
connected than expected—optimize
assignment across communities
• Straw man—compare properties with hospital
affiliation networks

32. Community Detection Algorithm

33. Tallahassee FL and Norfolk VA
Using Administrative Data to Identify Naturally Occurring Networks of Physicians.
Landon, Bruce; MD, MBA; Onnela, Jukka-Pekka; Keating, Nancy; MD, MPH; Barnett, Michael; Paul, Sudeshna; OMalley, Alistair; Keegan, Thomas;
Christakis, Nicholas; MD, PhD Medical Care. 51(8):715-721, August 2013.

34. Network Characteristics of Community and
Hospital Networks
Communities (n=273)
Hospitals (n=416)
Percent with at least 1:
Orthopedist
97
97
Ophthalmologist
9
92
Cardiologist
96
87***
Neurologist
91
82**
Psychiatrist
84
76*
Dermatologist
85
75*
Gastroenterologist
86
82

35. Percentage of Care in Potential ACOs, at Least 5
PCPs and 3,000+ Patients
Admissions
(%)
75
70
65
Emergency Room Visits
(%)
60
50
Hospital
40
30
20
Community (1
hospital per
community)
10
0
Overall
Standardized to
Median Sized Hospital

36. Percentage of Care in Potential ACOs, at Least 5
PCPs and 3,000+ Patients
Physician Visits
(%)
100
80
60
40
20
0
100
80
60
40
20
0
100
80
60
40
20
0
Specialist Visits
(%)
PCP Visits
(%)
Hospital
Community (1
hospital per
community)
Overall

37. Early Evidence
The Alternative Quality Contract
(BCBSMA)

41. 1
The “Halo” Effect
(Spillover to Medicare Patients)
McWilliams, Landon, Chernew. JAMA. 2013;310(8):829-836. doi:10.1001/jama.2013.276302

42. Challenges/Issues
•
•
•
•
•
Alignment of Incentives
“Keeping Score”*
Investing to reorganize care delivery
Disincentives for advanced organizations
ACO model versus Medicare Advantage
*Perspective. Keeping Score under a Global Payment System. Bruce E. Landon, M.D., M.B.A.
N Engl J Med 2012; 366:393-395
Viewpoint July 24, 2013. Reenvisioning Specialty Care and Payment Under Global Payment Systems
Bruce E. Landon, MD, MBA; David H. Roberts, MD

43. Conclusions
• Maintaining the status quo is no longer tenable
• ACOs are at the vanguard of a larger movement
towards payment reform
• Time of great change…with great opportunity
• To succeed under these arrangements will take
significant efforts to reorganize how care is
delivered
• Network Science might provide useful tools for
identifying and tracking ACO performance

45. Thank you!
• landon@hcp.med.harvard.edu
• blandon@bidmc.harvard.edu