Hospitalist Value in an ACO World

The accountable care organization (ACO) concept, elucidated in 2006 as the development of partnerships between hospitals and physicians to coordinate and deliver efficient care,¹ seeks to remove existing barriers to improving value.² Some advocate this concept as a promising payment model that could successfully realign the current payment system to financially reward improvements in quality and efficiency that bend the cost curve.^3,4 Hospitalists fit well with this philosophy. As the fastest growing medical specialty in the history of American medicine, from a couple of thousand hospitalists in the mid-1990s to more than 50,000, the remarkable progression of hospitalists has ostensibly been driven partially by hospitals’ efforts to improve the value equation through enhanced efficiency in inpatient care. Importantly, hospitalists probably provide care for more than half of all hospitalized Medicare beneficiaries and increasingly patients in skilled nursing facilities (ie, SNFists).⁵ Along with primary care physicians, hospitalists thus represent an essential group of physicians needed to transform care delivery.

When the Affordable Care Act (ACA) established the Medicare Shared Savings Program (MSSP), ACOs leaped from being an intellectual concept^1,2 into a pragmatic health system strategy.^3,4 Following Medicare, various private health insurance plans and some state Medicaid programs entered into contracts with groups of healthcare providers (hospitals, physicians, or health systems) to serve as ACOs for their insured enrollees.⁶ Leavitt Partners’ ACO tracking database showed that the number of ACOs increased from 157 in March of 2012 to 782 in December of 2015.⁷

Until recently, the federal government’s commitment to having 50% of total Medicare spending via value-based payment models by 2018, coupled with endorsement from state Medicaid programs and commercial insurers, demonstrated strong support for continuation of ACOs. Unexpectedly on August 15, 2017, the Centers for Medicare & Medicaid Services (CMS) outlined a plan in its proposed rulemaking to cancel the Episode Payment Models and the Cardiac Rehabilitation incentive payment model, which were scheduled to commence on January 1, 2018. CMS also plans to scale back the mandatory Comprehensive Care for Joint Replacement (CCJR) bundled payment model from 67 selected geographic areas to 34. Although this proposed rulemaking created some equipoise in the healthcare industry regarding the future of value-based reimbursement approaches, cost containment and improved efficiency remain as major focuses of the federal government’s healthcare effort. Notably, CMS offers providers that are newly excluded from the CCJR model the opportunity to voluntarily participate in the program and is expected to increase opportunities for providers to participate in voluntary rather than large-scale mandatory episode payment model initiatives. In 2018, the agency also plans to develop new voluntary bundled payment models that will meet criteria to be considered an advanced alternative payment model for Quality Payment Program purposes.

Importantly, the value-based reimbursement movement was well underway before ACA legislation. Through ACA health reform, value-based reimbursement efforts were expanded through ACOs, bundled payments, value-based purchasing, the CMS Innovation Center and other initiatives. With health systems having an overflowing plate of activities, a wait-and-see attitude might seem reasonable at first. However, being unprepared for the inevitable shift to value-based reimbursement and reduced fee-for-service revenue places an organization at risk. A successful ACO requires system-level transformation, especially cultural and structural changes to achieve clinical integration. Being embedded in health system delivery, hospitalists can help shape a team-oriented culture and foster success in value-based payment models. This requires hospitalists to take a more active role in assessing and striking a balance between high-quality, cost-efficient care and financial risk inherent in ACO models.

The key to hospitalists fulfilling their value creation potential and becoming enablers for ACO success lies in developing a thorough understanding of the aspects of an ACO that promote efficient and effective care, while accounting for financial factors. Fundamentally, the ACO concept combines provider payment and delivery system reforms. Specifically, the definition of an ACO contains 3 factors: (1) a local healthcare organization (eg, hospital or multispecialty group of physicians) with a related set of providers that (2) can be held accountable for the cost and quality of care delivered to (3) a defined population. While the notion of accountability is not new, the locus of accountability is changed in the ACO model—emphasizing accountability at the level of actual care delivery with documentation of quality and cost outcomes. The ACO approach aims to address multiple, frequent, and recurring problems, including lack of financial incentives to improve quality and reduce cost, as well as the negative consequences of a pay-for-volume system—uncoordinated and fragmented care, overutilization of unnecessary tests and treatments, and poor patient experience all manifested as unwarranted geographic variation in practice patterns, clinical outcomes, and health spending. Participants in an ACO are rewarded financially if they can slow the growth of their patients’ healthcare costs while maintaining or improving the quality of care delivered. To succeed in this ACO world, hospitalists must assume greater prudence in the use of healthcare services while improving (or at a minimum, maintaining) patient outcomes, thus excising avoidable waste across the continuum of care.