ADVISORY e-ALERT     August 31, 2010
Advisory Law Group, a Professional Corporation
A new acronym to save health care has arrived: the ACO, or "accountable care organization" which links hospitals and providers for delivery and payment. It's all the rage with hospital executives. Which means it's trouble for you. Unless you push back or, even better yet, hijack the process.
Words Matter
Say them slowly:  "Accountable."  "Care."  "Organization."
Words do matter.  They are a chief element in propaganda.
Heck, who would argue with "accountable"? We're all for accountability, right? We all want "care," don't we? After all, isn't that what health care is all about?
But accountability to whom? And for what care, exactly? Last, and most important, who controls the organization?
Back to the Future
If all this sounds familiar, it's because we've seen this movie before. We just gave it a different acronym, the "PHO," "Physician Hospital Organization."
In the mid-1980s into the early 1990s, hospitals needed a way to assure that they, and not competing facilities, would capture referrals from primary care doctors both directly to their facility and to the specialists within the hospital's sphere.
At the same time, managed care was making increasing inroads into the market. As a result, these same hospitals needed to assure their position in managed care networks.
In the PHO model, the hospital sponsored the creation of a linkage between primary care, as well as some specialty, physician practices and the hospital. In some instances, this included the acquisition of physician practices, either directly by the hospital or indirectly through a related tax-exempt foundation. In other instances, it included management services organization-like arrangements in which the PHO provided space, equipment and personnel support. In all instances, it included a participating provider structure for the PHO to bind physicians to the terms of managed care deals.
In other words, the PHO became a one stop shop under the de facto, if not legal, control of the hospital.
Many PHOs formed during the rise of managed care failed, especially those that embraced an employed physician model. The formerly independent practitioners who had built successful practices through focused work and entrepreneurial skill were frustrated by the hospitals' multiple levels of bureaucracy and mind-numbing internal politics; they quickly understood how to game that system: just enough work, not more.
Back to Your Future
Over the past decade, significant focus has been given to the notion of paying for quality care as opposed to simply for the volume of care. The recent push for pay-for-performance is one example of this trend.
Of course, quality in terms of overall patient outcomes is linked to treatment across many providers. As a result, analysts have suggested that hospitals, physicians and other providers should band together, take risks based in part on achieving quality (however quality is defined), and distribute the income.
Although policy makers love to toss the idea around, no one can pin down what structure an ACO will take in operation. Indeed, there's dizzying variation in how ACOs are defined. What is clear is their defining characteristic:  A set of physicians and one or more hospitals accept joint responsibility for the quality of care and the cost of care received by the ACO's panel of patients.
Of course, ambiguity didn't stop Congress from including in the newly enacted Patient Protection and Affordable Care Act (that is, ObamaCare) authority for the Secretary of Health and Human Services to utilize "innovative payment mechanisms and policies" including ACOs. The new law even includes a pilot program for the payment of care through those organizations. But, again, the bill contains no set definition of an ACO, although it does state that an ACO is an organization to provide, in part, physician services and may include a hospital and other providers.
In other words, an ACO is a PHO on steroids. On its face, it's about quality, combining physicians and facilities, patient-flow, contracting and payment. But at its heart, it's about contracting and payment, the same notion as a PHO; however, in the context of ObamaCare, an ACO bypasses managed care payors by receiving payment for governmentally funded programs directly from the government. An ACO could be used to receive traditional third party payment funding as well.  And, if and when the scope of socialized medicine expands, the ACO would be in a position to receive direct funding in respect of a larger pool of patients. That funding would then be sprinkled among the providers as well as retained by the hospital.
The reality is that there is only one acronym here: PCN-Power, Control and Naiveté. Issues of power and control underscore all levels of health care. As to the naiveté, it's the physicians' that hospitals and their existing integrated delivery systems are counting on.
An ACO is about power and control over physician services rendered and, importantly, power and control over physician incomes. ACOs are the intended funnel of payer funds. They serve as a mechanism to distribute those funds.
Physicians who think that it's difficult now to negotiate with third party payors or to obtain stipend support from a hospital to shore up declining reimbursement should consider this: What it will be like when there is only one real payer in town, the hospital-controlled ACO?
Physicians long ago abdicated the power of controlling the future of health care in favor of other tradeoffs.  Obamacare is leading physicians down the path of less control than before.

Hospitals and their associations are scrambling to build ACO networks. Do not for a minute think they have the interests of physicians at heart. Although the new health care law caps existing physician investment, and prohibits future physician investment, in hospitals participating in federally funded healthcare programs, ownership is generally not the key. Control of the cash is.
One alternative is to fight the creation of an ACO.  The other is to engage deeply in the process, but with a twist: Use the opportunity to seek physician control of the hospital funded ACO. After all, there is no rule that requires that control run one way, from the hospital to the physicians.
Having even a chance of accomplishing either of these goals requires developing strategy and implementing tactics on multiple levels, including at the facility and medical staff colleague levels.
Difficult, yes. Costly, yes. But what's the real alternative?
Start the process by contacting Mark F. Weiss now. 


Escape the Carnage of the "ACO", published in the August 2010 issue of Anesthesiology News and in the August 2010 issue of Pain Medicine News.
The Profit Center: Part 15 -- Managing Risk:  Required For Success, published on on August 13, 2010.
Mark's article Accountable Care Organizations: Accountable to Whom? was cited in Back to the Future: The return of the PHO, by Jack M. Bert, M.D., in the August 1, 2010, edition of Orthopedics Today.
Mark was quoted in an August 30, 2010 article, Physician Involvement Key to Successful Accountable Care Organizations, by Caitlin LeValley on 


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