A Model Program Mercy Touts the Benefits of Its ’Micro-Accountable Care Organization’

Accountable care organizations seem like the next significant trend in health care, and the focal point around efforts to reform the health care payment system in Massachusetts. Mercy Medical Center is proving that such a system works.

“We’re a bit ahead of other health care organizations; we’ve been focused on this for many years,” said Mark Fulco, Mercy’s vice president of Strategy and Marketing.

And that puts it in ideal position to adhere to the recommendations of the Special Commission on the Health Care Payment System, which has proposed a payment system built around ACOs.

“The development of accountable care organizations would move toward global payment, as opposed to fee-for-service reimbursement, where quality and good outcomes are rewarded, not just intensity of services,” Fulco said. “Under the old fee-for-service system, the more you do, the more you get paid. Many people believe that’s perverse motivation. This [ACO] system moves toward rewarding good performance and better health outcomes.”

Mercy was given an award last year by the American College of Healthcare Executives for developing a pilot program built around a ’micro-accountable care organization’ developed in conjunction with Hampden County Physician Associates to manage 5,100 of its members. The results of that program have been impressive, and point to next phase of health reform, Fulco said.

What Is Accountable Care?

Since the 2006 health care reform law passed, 97{06cf2b9696b159f874511d23dbc893eb1ac83014175ed30550cfff22781411e5} of Massachusetts residents are now covered by insurance, but the current payment structure may be unsustainable, which is why the special commission sought another path.

The heart of its proposal is the accountable care organization, each of which would include doctors, other community-based providers, and hospitals collectively capable of providing a full range of services. The ACO takes responsibility for caring for a patient and, in exchange, accepts an annual payment from the insurer to do that.

According to the Dartmouth Institute for Health Policy & Clinical Practice, the ACO model establishes a spending benchmark based on expected costs. If an ACO can improve quality of care while slowing spending growth, it collectively receives shared savings from the payers.

Thus, the ACO model, its proponents hope, will be the first that actively raises quality while lowering costs by forcing decisions on what is the best, most appropriate care — in effect stressing quality over quantity when it comes to determining a course of treatment.

In Mercy’s case, the hospital and Hampden County Physician Associates entered into a risk arrangement with a managed Medicare plan and assumed care coordination and financial responsibility for 5,100 patients in the physician group’s network.

A structural framework was designed to closely manage care, provide quality oversight and medical direction, and tightly manage budget and costs. Performance incentives were aligned so that cost savings are shared by participating HCPA physicians and Mercy if quality and cost-effectiveness benchmarks are achieved.

The results — in terms of reducing hospital admissions and managing chronic disease to improve care and reduce costs — speak for themselves.

Specifically, the Mercy/HCPA partnership totaled 173 admissions and 1,008 hospital days per 1,000 members, compared to 304 admissions and 1,709 days for a comparable managed Medicare population, and 380 days and 2,356 days for an unmanaged Medicare population.

Patient satisfaction was improved, with 86{06cf2b9696b159f874511d23dbc893eb1ac83014175ed30550cfff22781411e5} rating the program ’excellent’ or ’very good.’ And financial performance was equally strong; the total cost of care for those members in 2009 was $61 million, 12.8{06cf2b9696b159f874511d23dbc893eb1ac83014175ed30550cfff22781411e5} less than an average unmanaged Medicare population of the same size, and producing an 8{06cf2b9696b159f874511d23dbc893eb1ac83014175ed30550cfff22781411e5} surplus in the hospital service fund and a 23{06cf2b9696b159f874511d23dbc893eb1ac83014175ed30550cfff22781411e5} surplus in the physician service fund.

Dr. Phillip Gaziano, medical director of senior and managed care programs for HCPA, explained that “the benefits of integrating all this in one team is that our costs are lower; and because we’re integrated with the primary care office, the physician satisfaction is high; and the member satisfaction is high because the member knows their primary care doctor is part of the infrastructure, and is making the management decisions — not someone on the outside of the management structure.”

The fact that Mercy’s initiative has worked on this limited scale, he said, gives him confidence that its approach to accountable-care programs will be sustainable when they are required on a larger scale.

“What is likely to occur over the next several years is a move toward a global ACO program at the state level and the federal level; we’re going to move toward these types of contracts,” Gaziano said. “And in my estimation, we probably have a more advanced infrastructure than any other group in Massachusetts, and probably New England.

“We think the integrative approach that we’ve pioneered in the state is leading to improvements in efficiency, improvements in quality, and improvements in satisfaction,” he continued. “We’re quite pleased with the outcomes — the fact that the infrastructure is efficient and costs are less than with non-integrative approaches.”

Cost and Effect

Fulco said payment reform must stress both cost savings and quality care, and Mercy’s model program does both.

“The incentives are there to provide the right care at the right time, and not to deny care,” he said. “Mechanisms are built into this approach that would disincentivize providers from holding back care, because much of what winds up in the shared savings pool is based on quality outcomes.”

Those are often achieved through frameworks like home care and structured disease-management programs that aim to keep patients healthy while avoiding costly hospital admissions.

For example, Fulco said he observed a home care patient recently. She could walk freely about her house attached to oxygen tubing, and a nurse taught her how to use her medications, inhalers, and other equipment properly and made sure she had these things in adequate supply. “By bringing these services into the home, they’re helping a fragile woman avoid an episode that might put her back in the emergency room of the hospital.”

Robert Suchecki, president of Hampden County Physician Associates, noted last year that “the future of health care delivery will need to focus on effective and highly coordinated care, a longstanding hallmark of HCPA’s medical practice philosophy. The successful ACO model is based on Dr. Gaziano’s breakthrough approaches to physician-driven, closely managed care coupled with Mercy Medical Center’s consistent ability to deliver high-quality, lower-cost hospital care, home care, and disease management.”

Gaziano characterized the partnership as an effective way to manage chronic disease. “Although hospital utilization declined, patients often received more outpatient care that was timely and well-coordinated. This resulted in fewer acute episodes and lower costs.”

Fulco says the hospital’s vision is to formalize its ACO as a nonprofit, 501(c)3 organization that has physician members and a hospital member, and the ACO itself will be the contracting entity; right now, both Mercy and HCPA have contracts under the pilot program.

In the meantime, he’s pleased to be part of an infrastructure that puts physicians and other care providers in the driver’s seat when it comes to making medical decisions, and moves away from the ’defensive medicine’ practice of offering unnecessary treatments simply because they’re available.

“In Massachusetts, we’ve been trailblazers in establishing a system that successfully covers everyone,” he told HCN. “Now we’re developing mechanisms that will finance that extended coverage. We believe this is a very innovative and successful approach.”