Morey Menacker, DO

Our accountable care organization quality scores improved and savings were achieved 3 years in a row, with $33 million realized in 2015. How did this happen? Our initial steps were to select physicians whose practices were certified as patient-centered medical homes and to provide them with nurse care coordinators to help manage high-risk, high-cost patients and to assist with quality measure compliance. We continued to add hospitals and providers, which significantly increased the number of patients, which in turn provided a multiplier effect for savings. From the beginning in 2012, the number of inpatient admissions, readmissions, emergency department visits, and ambulatory care—sensitive conditions were reduced, and this trend continued each year. Critical to these trends was the close and frequent physician office follow-up visits. Excessively expensive areas were addressed, such as overuse of skilled nursing facilities and ambulance use for patients undergoing dialysis.

The American Journal of Accountable Care. 2017;5(2):27-31

In 2015, our accountable care organization (ACO) saved approximately $33 million. How did that happen when we saved approximately $10 million from 2012 to 2013 and $6 million in 2014? Why did the savings go up so dramatically when we thought that they would actually go down? Are there some lessons to be learned from this result?

As part of the background for this case study, the Hackensack Physician—Hospital Alliance ACO, LLC (dba Hackensack Alliance ACO), located in New Jersey, became part of the Medicare Shared Savings Program (MSSP) in April 2012. The hospitals participating in our MSSP are Hackensack University Medical Center, Hackensack UMC–Pascack Valley Hospital, Hackensack UMC–Mountainside Hospital, Hackensack UMC–Palisades, and Englewood Hospital. There are 329 practitioners who care for 23,156 assigned beneficiaries. An electronic health record (EHR) is used by over 90% of practitioners, but with more than 5 different EHR platforms. Methods for calculating shared savings and assessing the quality performance of an ACO have been previously reported.

Before presenting our financial results, we should point out that the physicians selected to participate in our ACO are required to be certified as a patient-centered medical home (PCMH) by the National Committee for Quality Assurance (NCQA). Alternatively, they can still join our ACO if they agree to be certified by NCQA as a PCMH within the year; we would then pay for a trainer to have them certified. We have this requirement because PCMH-certified physicians understand the future of healthcare and are willing to cooperate with the changes taking place.

The other major personnel factor is that we hire nurse-level care coordinators and place them into the practices to help with high-risk patients and to aid in ensuring compliance with the 33 quality measures. The care coordinators purposely are not located in a central office because that would remove them from the “action.” We strategically recruit nurses with excellent “people skills” and work ethic who are clinical experts in the specialties pertinent to the MSSP population (ie, diabetes, cardiac, renal, and geriatric/homecare).

Now let us compare our financial results. The total savings in 2015 was $33,353,310  (sourced via confidential data from the A1006 Hackensack Physician-Hospital Alliance ACO, LLC, Financial Reconciliation Report, Performance Year 2015, of the Medicare Shared Savings Program [April 1, 2012, agreement start date]). When our ACO’s quality score and sequestration adjustment were factored in, our 50% came to $15,640,878. Medicare keeps the remaining amount. In prior years, the total savings realized were $10,747,669 for 2012 to 2013 and $6,464,895 for 2014 (sourced via confidential data from the A1006 Hackensack Physician-Hospital Alliance ACO, LLC, Financial Reconciliation Report, Performance Year 2 [2014], of the Medicare Shared Savings Program [April 1, 2012, agreement start date]). Consequently, the dramatic increase in 2015 was a surprise. What accounted for this increase?

One key factor is the significant increase in the number of assigned beneficiaries. The actual number of beneficiaries in 2014 was 15,603 (or 15,158 person-years), and in 2015, was 23,156 (or 22,522 person-years). The difference is a 48.4% increase in 1 year (

), which allowed a multiplier effect. Compared with 2014, we were able to multiply the per-beneficiary cost savings by a much larger number of beneficiaries (or person-years) in 2015. Person-years are shown because they more accurately reflect how long each person or beneficiary is part of the ACO in the performance year.

What led to the assigned beneficiary increase was a significant increase in the number of providers. That number rose from 234 in 2014 to 329 in 2015, representing a 40.6% increase in providers. The increase occurred because the number of hospital sites participating in our ACO rose; in particular, there was the addition of Palisades General Hospital physicians, as well as internal growth of the number of physicians in existing practices.

Because half of the total savings is multiplied by the ACO’s quality score, the higher the quality score, the closer the ACO is to getting all of the 50% of the total savings. In our ACO, compliance with the 33 quality measures improved from 2014 to 2015. The score in 2014 was 89.43%, whereas the score in 2015 rose to 95.70%. The improvement is due, in part, to the feedback each Tax Identification Number group receives on past quality measure performance compared with our whole ACO as a unit. In addition, we place an emphasis on reporting to the whole ACO the measures where compliance is low.

We also tracked our quality performance by monitoring a Care Gap Index (CGI), using the Verscend Technologies, Inc, (formerly known as Verisk Health) Provider Intelligence application (Verscend Technologies, Inc, Waltham, Massachusetts). The CGI is a care compliance measure that is a weighted calculation of an individual’s compliance with the quality measures. The measures are weighted based on clinical importance, and the CGI score represents the degree to which the individual has missed recommended care guidelines. The group score is an average of all individuals in the group. Higher CGI scores correspond to a greater number of deviations from evidence-based care within a population. Therefore, in this index, a lower score is better. During the most recent analysis period, our patient population CGI group score was 1.72, substantially lower than the ACO mean group CGI score of 4.98.

It should be pointed out that our patient population is high risk, which contributes to our high benchmark expenditures. Our patient population’s disease burden, calculated using analytics via the

Provider Intelligence application from Verscend and Premier, is higher than that of the average ACO. Consequently, our beneficiaries tend to be sicker and have more complex care needs than those of the average ACO, and are therefore costlier. The actual numbers tell a better story. In 2014, our population risk index was 24.34 versus an ACO mean norm of 17.17, and in 2015, our risk index was 21.65 versus an ACO mean norm of 16.76.

The total expenditures in 2014 dropped by 3.26% over the course of the year (ie, $198,546,103 — $192,081,207 = $6,464,896). In 2015, the annual drop was significantly higher at 10.96% ($304,196,419 – $270,843,109 = $33,353,310) (

). The per-capita benchmark expenditures for 2014 were $13,099, as calculated by dividing the $198,546,103 in expenditures by the 15,158 person-years. It is of note that our per-capita expenditures benchmark actually went up in 2015, which is contrary to the common perception that benchmarks will go down over time. In the first 2 years of the MSSP program, the benchmarks in each year were neutral to decreasing, whereas in the third year of 2015, the national benchmark rose a few percentage points. The actual per-capita benchmark for 2014 was $13,099, whereas in 2015, the per-capita benchmark rose to $13,507. Contributory to this paradoxical phenomenon is that historical benchmarks are adjusted up by CMS when the ACO has had savings in the past.

Before we identify a figure for total savings, we must take out the sequestration adjustment, which is the mandatory reduction in federal budgetary resources required by the Budget Control Act of 2013 after the federal government was temporarily shut down. For our ACO, this tax rose from $57,816 in 2014 to $319,202 in 2015. The number is 452.10% higher because the tax is 2% of the total savings, which had increased significantly in 2015.

To get to our final shared savings amount, we have to account for our quality performance. In 2014, our quality score was 89.43%, so we were only able to qualify for 44.72% of our savings (50% 

 89.43%). In 2015, that percentage rose because our quality score rose to 95.70%. Consequently, we were able to qualify for 47.9% of the savings (50% 

 95.70%). This is what CMS intended: the higher your quality score, the closer you get to keeping 50% of the total savings. At this point, we need to subtract the sequestration adjustment to determine the actual amount of our shared savings that CMS funds to the ACO.

Our final sharing amount less sequestration was $15,640,878 (ie, $15,960,080 — $319,202).

Those are the overall numbers for our ACO shared savings. Now let’s look at the specific areas of potential savings that we addressed this past year. In 2015, the newest area addressed was the skilled nursing facility (SNF). From comparative data in a Premier Inc collaborative, we realized that our SNF spend, days, and discharge rates were much higher than those of our peers in the collaborative. We identified the SNFs that we used most often and spoke with their managers. We essentially mandated that patients be discharged at the time they were identified as potential discharges rather than waiting for the maximum number of days that Medicare will cover. We also put our nurse care coordinators and

physician SNFs in the nursing homes to attend daily rounds where decisions on discharges are made. In addition, we convinced the nursing facilities to accept the physical therapy days recommended by the hospital when the patient was transferred to the SNF rather than reassessing the patient on arrival in the nursing facility and making a recommendation for a longer duration of days than the hospital recommended.

We are aware that there are important differences in incentives between the hospital and the SNF. In the hospital, payment is made based on diagnosis (ie, Diagnosis Related Group) whereas payment is per diem in the SNF. The SNFs cooperated with our approach, and implementation of this plan resulted in a quarterly decline in the number of days spent in the SNF: from 3067 days in the first quarter of 2015 to 2484 days by the fourth quarter—a 19.0% drop in days.

Other new initiatives occurred in end-stage renal disease (ESRD). Although this was a tiny part of our overall expenses, the cost was very high on a per-beneficiary basis. We looked into it and realized that almost half of the expense was related to the widespread use of ambulances to transport the patients to and from the dialysis facility. We approached the issue initially, but then Medicare dealt with it on a national basis because ambulances are not supposed to be used indiscriminately. Ambulance use per assigned beneficiary dropped from 203 in the first quarter of 2015 to 97 in the fourth quarter, a decline of 54.68%. In addition, per-capita expenditures for ESRD dropped from $136,774 to $103,686, a decrease of 24.19%, over 2015.

Follow-up on Old Initiatives That Affect Utilization

We continued to pursue the utilization areas that we focused on from the start in 2012, as follows: a) short-term inpatient admissions per 1000 person-years decreased by 14.29% (322 — 276 = 46), and b) emergency department (ED) visits per 1000 person-years decreased by 9.15% (612 – 556 = 56).

We also continued to work on the transition of care utilization as follows: 30-day all-cause readmissions per 1000 discharges reduced by 17.33% (202 — 167 = 35). Additional efforts dealt with ambulatory care–sensitive conditions (ACSCs) discharge rates per 1000 beneficiaries. ACSCs are medical conditions that are potentially preventable as an admission. The top 3 were: 1) exacerbations of chronic obstructive pulmonary disease (COPD) or asthma decreased by 14.12% (10.27 – 8.83 = 1.45), 2) exacerbations of congestive heart failure decreased by 27.27% (13.68 – 9.95 = 3.73), and 3) bacterial pneumonia decreased by 18.81% (8.40 – 6.82 = 1.58). There was 1 important factor that did not decrease: 30-day postdischarge provider visits per 1000 actually increased (821 – 831 = +10. This increase indicates that providers continued to follow their patients closely in the office rather than having them admitted to the ED or as an inpatient to the hospital.

Let us review what we have learned about increasing the level of savings. First, it is important to set the stage right in the beginning. To do this, we pick physicians who accept the future of healthcare as indicated by their getting certified as a PCMH by NCQA. Then we provided them with a nurse coordinator in their office to help them care for their high-risk patients and aid them in complying with the 33 quality measures. Next, we continue to add providers, which in turn increases the number of beneficiaries. In doing so, the eventual per-capita savings will be multiplied by a higher number of beneficiaries (or higher number of person-years). A focus on compliance with the quality measures means that when the quality score is multiplied by the 50% sharing allowed by CMS, the ACO will receive a percentage as close to 50% as possible after the sequestration adjustment is deducted. We also continue to work on reducing the “low-hanging fruit,” such as lowering inpatient admissions, readmissions, and ED visits. At the same time, there is also a focus on minimizing ACSC admissions, such as heart failure, pneumonia, and COPD.

Finally, we turn our focus to new areas, such as reducing length of stay in SNFs. Alternatively, in the future, we can consider other opportunities in postdischarge care, such as home care, hospice care, and hospital outpatient services; examine the use of suppliers and durable medical equipment. We can also consider condition-specific categories like oncology, ESRD, and behavioral health. Finally, we can review patient experiences and their use of telemedicine. In general, we tend to focus on areas where our expenses appear excessive or the quality of care appears to need improvement.

This approach should help an ACO increase the quality of care while reducing expenses at the same time. Once an ACO is on this path, it is likely that savings will continue to accumulate over time.

 As the savings occur over time, bonuses are paid out and aggregate spending is reduced. Medicare itself has achieved a net savings.

Hackensack Meridian Health (PAG, MM, ME, EG, LN, DP, MS), Hackensack, NJ; Verscend Technologies (JAC, JH), Waltham, MA.

Funding supported by Hackensack University Medical Center.

 Dr Colbert and Ms Hart are employed by Verscend Technologies, Inc. The remaining authors report no relationship or financial interest with any entity that would pose a conflict of interest with the subject matter of this article.

Concept and design (PAG, MM, EG, LN, DP); acquisition of data (PAG, MM, ME, EG, JH); analysis and interpretation of data (PAG, MM, ME, EG, LN, JAC); drafting of the manuscript (PAG, LN); critical revision of the manuscript for important intellectual content (PAG, MM, JAC, JH, DP); statistical analysis (PAG, ME); provision of study materials or patients (ME, EG); obtaining funding (PAG, MS); administrative, technical, or logistic support (PAG, MM, EG, JAC, DP, MS); and supervision (PAG, MM, EG, LN, JAC, DP, MS).

Peter A. Gross, MD, Hackensack Meridian Health, 30 Prospect Ave, Hackensack, NJ 07601. E-mail: Peter.Gross@hackensackmeridian.org. 

1. Gross PA, Easton M, Przezdecki E, et al. The ingredients of success in a Medicare accountable care organization. 

2. A look at MSSP ACO performance years 1-3. NAACOS website. https://naacos.memberclicks.net/assets/docs/news/naacosreport-acoperformanceyears1-3.pdf. Published September 2016. Accessed December 3, 2016.

3. McWilliams JM. Changes in Medicare Shared Savings Program savings from 2013 to 2014. 

. 2016;316(16):1711-1713. doi: 10.1001/jama.2016.12049.

Articles

Increasing accountable care organization savings is dependent on maximizing quality scores and increasing the number of beneficiaries while maintaining a low per-capita spend through efficiencies of care.

Case Study: How Does an ACO Generate Savings Three Years in a Row?

 Accountable care organizations (ACOs) have rapidly become one of the preferred approaches to providing more efficient healthcare to the Medicare population. The ingredients of a successful ACO have not been well described in the literature, however. We present the descriptive epidemiology of our ACO to illustrate the elements in our organization that are critical to its success. We explain how we gained cost savings and show the quality measures that were monitored, which are essential to whether savings are received or not.

Medicare provided expenditure data through claims files collected for the HackensackAlliance ACO. Quality data on 33 measures were collected from 3 sources: the Medicare claims files, a chart review of physician notes in patient charts, and a Medicare patient experience survey of a sample of ACO beneficiaries.

The ACO submitted 9 Claim and Claim Line Feeds (CCLFs) to Verisk Health for analysis. Premier Inc reviewed the analysis and discussed the results with the principals of the HackensackAlliance ACO.

 As a whole, the ACO had fewer hospital admissions, readmissions, and emergency department visits compared with a group of ACOs—these were the major factors that reduced our expenses, as we focused on maintaining a high level of quality. The number of patient office visits far exceeded those found in the comparable ACO group, resulting in better healthcare for all&mdash;especially for those with chronic disease, such as diabetes and heart failure. The complex process for calculating savings or losses is also carefully described. The HackensackAlliance ACO saved expenses in 2 successive years, which is an uncommon feat.

 One reason our ACO succeeded in having savings in 2 successive years is the initial requirement that physician practices be certified as patient- centered medical homes by the National Committee on Quality Assurance. These doctors understood and accepted what would be required in the current evolution of medicine care. Also critical, was instituting nurse care coordination of high-risk patients from the beginning of the ACO contract. These 2 factors helped eliminate waste in the system and changed physician behavior, not physician practice.The accountable care organization (ACO) model has captured the imagination of more than 700 healthcare sites in the United States. However, there is little in the academic literature describing how the model works, and most of the reports in the medical literature are editorials on whether ACOs will succeed, whether the philosophy for their creation is reasonable, and whether progress has occurred in the 5 years since they were created.

 Within the ACO model, there are multiple choices based on whether the organization agrees to assume downside risk and whether the federal government or a private enterprise supports them. The federal government, under the auspices of CMS, created most of the ACOs as either Pioneer ACOs or Medicare Shared Savings Programs (MSSPs). CMS also created other payment models, including Bundled Payments for Care Improvement (BPCI), Value-Based Payment for Physicians, and Comprehensive Primary Care Initiative (CPCI).

 This article will focus on the descriptive epidemiology of the MSSP model, how it assesses the ability to save expenses, and how it evaluates compliance with the 33 quality measures.

Most MSSPs are in Track 1, which aims for upside savings when costs are reduced, and does not assume downside risk when there are losses. Accepting both upside gains and assuming downside risk is referred to as Track 2, Track 3, or Next Generation

—each of the latter 3 has other features that distinguish them from one another. We will focus on Track 1, as that is the model selected by most ACOs.

An important point to emphasize is that the current approach to ACOs and other alternative payment models is different from the managed care programs of the 1990s. At that time, saving money was the sole goal. Now, under the ACO approach for MSSPs, it is important to achieve a high level of quality in the care of the patient in order to be eligible for sharing any significant savings generated. The ultimate goal for the ACO is to achieve the “Triple Aim”: namely, better care for the individual, better health for the population, and lower growth of expenditures.

Each quarter, we receive the claims files from Medicare—referred to as Claim and Claim Line Feeds (CCLFs). They detail claims Medicare receives from each physician, hospital, and other healthcare service providers, such as skilled nursing facilities. We send the CCLFs to a data analytics firm, Verisk Health, for further analysis, and their findings are forwarded to Premier&mdash;a healthcare performance improvement alliance of 3000 hospitals&mdash;to be digested and to cull out important clinical findings. These findings are then reviewed by our data analyst (author ME) and clinician (author PG) to select the key clinical findings for presentation to our physicians&mdash;mainly, our primary care providers (PCPs).

It should be noted that claims may not be available for all patients, as patients have the opportunity to opt out of sharing their information with their physician. This occurred in less than 3% of our patients, however.

The types of information sent to the PCPs include basic demographics and information on clinical areas that have a significant impact on expenses, such as hospital admissions, readmissions, and emergency department (ED) visits. For example, 

 shows that the largest individual practices—namely practices A, B, and C&mdash;are cost-efficient and have fewer admissions, readmissions, and ED visits than the ACO norm, as well as many more office visits than the ACO norm.

The clinical quality provided by the PCPs is based on the 33 measures required by Medicare (

). These measures cover 4 major areas: patient/caregiver experience; care coordination/patient safety; preventive health; and at-risk populations for diabetes, vascular disease, hypertension, heart failure, and coronary artery disease. A full score is achieved when the measure compliance achieves the 90th percentile level.

The savings achieved by the ACO are determined by an elaborate risk-based formula (

 The following presentation describes our experience in the second year (January-December 2014) of the CMS contract. In the first year, our total savings was $10,747,669 and our savings share came to $5,266,358. It should be noted that the “first year” was 21 months long (April 2012-December 2013) and the quality was measured on reporting, not on compliance. In both contract years, current expenses were compared with a 3-year historical expense benchmark. To eliminate the possibility of random variation being responsible for a savings or a loss, Medicare sets a minimum savings rate (MSR) that has to be exceeded on the upside to be considered a true savings, and a minimum loss rate (MLR) that has to be exceeded on the downside to be considered a true loss.

 The size of the minimum rates is dependent on the number of Medicare beneficiaries at the individual ACO—the larger the ACO, the smaller the minimum rate.

We will review the major steps leading up to identifying whether the ACO achieves cost savings or not in the second year (2014).

If a beneficiary has at least 1 primary care service from a physician in the ACO, the beneficiary will be assigned to the ACO after they complete a 2-step process.

 First, the beneficiary receives the plurality of their primary care services from a primary care physician in the ACO. PCP is defined as a physician specializing in internal medicine, general practice, family practice, or geriatric medicine. Second, if step 1 did not occur, a beneficiary could still be assigned to the ACO if the beneficiary receives the plurality of their primary care services from other non—primary care professionals within the ACO, including physician specialists, nurse practitioners, clinical nurse specialist, and physician assistants.

Let’s consider the method for determining shared savings (Table 3).

 First, we have to identify the number of beneficiaries assigned by CMS to our ACO and, more accurately, the person-years (#2 in Table 3). Next, the per-capita historical benchmark expenditures (#3 in Table 3) and the actual per-capita expenditures (#4 in Table 3) are identified. The total benchmark expenditures and actual expenditures are calculated as shown in Table 3. The total savings is the difference between the two. The minimum savings rate percentage is selected from a table (not shown) that illustrates how the rate varies inversely with the population size. In our case, the minimum savings rate in dollars is less than the total savings

; therefore, our ACO has the opportunity to share in the savings with Medicare. Potential net savings for the ACO are 50% of the total savings, and Medicare keeps the other 50%. How the ACO performs on the 33 quality measures from CMS is critical to receiving all or part of the savings.

 As our final quality score is 89%, we are able to keep 89% of 50%, or 44.7%, of the potential net savings. Then, from that number, a portion is taken out for the sequester adjustment (#15 in Table 3) when the federal government was shut down in 2014. The final net earned savings performance payment becomes $2,832,988.

There are some finer points that are considered in the calculation. Knowing the distribution of the population is also relevant. There are 4 enrollment groups that CMS reports: 1) patients with end-stage renal disease (ESRD), 2) patients who are disabled, 3) aged and dual- eligible patients who have both Medicare and Medicaid coverage, and 4) aged but non—dual-eligible patients who have only Medicare coverage. The patients with ESRD are the most expensive, but make up only 0.6% of our total patient population; consequently, focusing on the expenses generated by patients with ESRD, while important, is not an initial priority. The aged/non–dual eligible patients are the largest percentage of our population (86.5%). Even though they are the least expensive, they receive our immediate attention because this group incurs the largest overall expense. Fee-for-service expenses are then analyzed for each of the 4 enrollment types, annualized, truncated, and a payment completion factor is added in. Indirect Medical Education (IME) payments and Disproportionate Share Hospital (DSH) payments, as well as uncompensated care payments, are not included.

Next, using a complicated process, we identify the historical benchmark for per-capita expenditures in the previous 3 calendar years. The first benchmark year is 2009, and it is weighted 10%; the second is 2010 with a 30% weight, and the third is 2011 with a 60% weight. In addition, the federal Office of the Actuary (OACT) updates the benchmark to account for changes in beneficiary characteristics and the absolute amount of growth in per-capita expenditures. The historical benchmark is updated for subsequent years.

Beneficiary risk scoring uses the CMS-Hierarchical Condition Categories (HCCs) retrospective risk-adjustment model to adjust the benchmark years when updating the historical benchmark in subsequent years. Each year, the historical benchmark is updated for changes in health status and demographic factors that occur in the originally assigned beneficiaries. Consequently, the risk scores could go up or down depending on the diagnostic codes gathered by CMS claims. In the Verisk Health application, the DxCG risk scores for Models 125— a risk score that indicates how much the individual is predicted to cost (includes age, gender, eligible months, diagnostic codes, selected utilization, and prior cost) by multiplying the risk score by the plan average cost per person per year&mdash;were developed in concert with the HCCs.

Distribution of Net Savings Within the ACO 

There are many different approaches to dividing up the shared savings. In our case, this amount is divided into 2 parts. One part goes to Hackensack University Medical Center to repay part of their initial investment in the ACO—the balance goes to the primary care practices. The practices then divide up the amount among their physicians. The actual amount each practice or tax identification number (TIN) receives is based on the number of beneficiaries cared for by the TIN.

The story on the ability of MSSP to reduce costs is mixed. In performance year 1, which was 21 months long, 53 of 220 ACOs (24.1%) earned shared savings.

 In performance year 2, 97 of 353 ACOs (27.5%) earned shared savings.

 Behind the numbers is the fact that approximately half of the ACOs saved money in each of the performance years, but only the numbers shown exceeded the minimum savings rate to allow those few MSSPs to earn savings. For the 2 performance years, only 38 of 353 ACOs (10.8%) generated savings (according to a memo from Holly Wittenberg, Avalere Health, February 2016). The key factors that we believe most likely made a difference and permitted us to generate shared savings are as follows.

In the initial design for our ACO, the selection of the membership was critical. We decided to select practices that were already certified as patient-centered medical homes (PCMHs). A PCMH is defined as “a way of organizing primary care that emphasizes care coordination and communication to transform primary care into ‘what patients want it to be.’ Medical homes can lead to higher quality and lower costs, and can improve patients’ and providers’ experience of care.”

 The National Committee for Quality Assurance grants the certification. For those physicians who want to join the ACO but are not certified as PCMHs, we insist that they acquire the software to practice with an electric health record and become certified as a PCMH within 1 year. We agree to provide, free-of-charge, a trainer to facilitate their acquisition of PCMH certification.

The other major commitment we made initially was to provide a nurse care coordinator for the larger practices. Their goal is to identify the high-risk patients, get to know them well, and assure those patients relate to them whenever they felt ill to avoid the knee-jerk response of going to the ED immediately.

To minimize waste and avoid unnecessary hospitalizations, the combination of physician and nurse coordinator working in concert enabled the identification of areas of wasteful spending, creation of work plans, and provision of timely appointments to see the PCP team.

The physicians and nurses were informed of the 33 quality measures required by CMS. It was made clear that compliance with these measures determines whether savings generated by more efficient care will accrue to the ACO.

The next part was not so easy. We knew that information would be the key to success for this project. Consequently, we had to identify a data analytics firm to help determine which practices were and were not doing well. This information came from CMS in several reports—namely, the CCLFs and Financial Reconciliation Reports.

 We identified 3 companies—Health Endeavors, Verisk Health, and Milliman&mdash;that are helping us with various parts of our data analysis. The data from Verisk Health and Milliman go through a second filter at Premier Inc, which helps us identify key areas of required attention and areas where more investigation is needed.

Using these data analytics firms, we found from the Verisk Health analysis that our risk score for our population was higher (24.34) than many ACOs (17.17). This factor, in turn, meant that CMS determined that our historical expenses should be relatively high.

Although there is some evidence that ACOs with higher initial benchmark expenditures are more likely to be able to reduce expenditures, 

 this factor did not guarantee a reduction in expenditures for all high-cost ACOs. Regional differences need to be examined more closely to fully understand this phenomenon.

There are many areas where CMS and the ACOs themselves need to improve their programs, but time does not permit serious consideration of all these areas. For CMS, some of the areas, for example, include revision of the retrospective attribution of beneficiaries, reducing the complexity of determining cost savings, reexamining the “normal variation” in savings and losses, considering regional effects on cost, the role of merit-based incentive payment system, and competition from other alternative payment models such as bundled payments and the comprehensive primary care initiative. ACOs, themselves, need to deal with leakage of beneficiaries to other ACOs, performing annual wellness visits on all assigned beneficiaries, interconnectivity of numerous EHRs, choosing other areas to reduce waste such as skilled nursing facilities and other post-acute care options, and selecting appropriate data analytic software.

The MSSP’s ACOs appear to offer ample opportunity to improve the quality of care for the patient while at the same time, reduce the cost of care. Initial factors that should facilitate these changes are having physicians certified as patient-centered medical homes by NCQA and providing financial support for increased care coordination. In this setting, high-risk patients are likely to be seen more often in the office in order to prevent deterioration and to better manage their chronic conditions. PCMHs and care coordinators will provide the greatest opportunity to impact a large segment of medical care costs by decreasing hospital admissions, readmissions, and ED visits, while maintaining a higher quality of healthcare.

We should emphasize that we do not change physician practice, we change physician behavior. By creating the appropriate interventions, we eliminate waste in our bloated healthcare system. We learn to address patient needs better. Although we are still good at disease management, we learn how to perform health management better from the PCMH model.

The authors appreciate the editorial assistance provided by Regina G. Gross, MA.

Hackensack Physician-Hospital Alliance Accountable Care Organization, LLC (dba HackensackAlliance ACO) (PAG, ME, MM, EG, IS, RCG, RLG), Hackensack, NJ; Hackensack University Medical Center (PAG, ME, MM, EG, IS, RCG, RLG), Hackensack, NJ; Rutgers New Jersey Medical School (PAG, IH), Newark, NJ; Premier Inc (EP, VC), Charlotte, NC; Verisk Health Inc (JH), Salt Lake City, UT.

 The Hackensack University Medical Center supplied the startup and continuation funds.

 Dr Sawczuk is an employee of Hackensack University Medical Center CMO. MS Hart is an employee of Verisk Health. Mr Garrett is a member of the Hospital and Network Board of Hackensack and is the CEO of Hackensack University Health Network. The remaining authors report no relationship or financial interest with any entity that would pose a conflict of interest with the subject matter of this article.

 Concept and design (PAG, EG, MM, VC, IS, RCG, RLG); acquisition of data (PAG, EG, ME, EP, VC); analysis and interpretation of data (PAG, EG, ME, MM, EP, VC, JH); drafting of the manuscript (PAG, MM, JH); critical revision of the manuscript for important intellectual content (PAG, ME, MM, JH); statistical analysis (PAG, ME, EP, VC); provision of study materials or patients (PAG, EG); obtaining funding (PAG, IS, RCG, RLG); administrative, technical, or logistic support (PAG, EG, ME, EP, VC, IS, RCG, RLG); and supervision (PAG, EG, MM, IS, RCG, RLG).

 Peter A. Gross, MD, Chair, ACO Board of Managers, 30 Prospect Ave, Hackensack, NJ 07601. E-mail: pgross@hackensackumc.org.

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For 2 successive years, the Hackensack Alliance Accountable Care Organization achieved cost savings and maintained quality by using physicians with patient-centered medical homes and nurse care coordinators focused on high-risk patients.

The Ingredients of Success in a Medicare Accountable Care Organization

In the “good old days,” the hospital had a designated department for utilization management that was supposed to monitor the appropriate utilization of hospital services by physicians for the patients they were caring for. Then, the era of Diagnosis-Related Groups financing brought the change to case management, and hospitals were being compensated by diagnosis, not per-diem. Therefore, the game was to decrease cost by decreasing hospital stay, and maximize documentation to increase presumed severity. Today, we are being told that we are accountable for patients throughout the continuum of care—inpatient, post acute, and outpatient&mdash;and are expected to be aware and supervise the entire process. Do we need a GPS for patients to track and guide them through that process?

There is a dramatic change toward healthcare compensation, driven by the Affordable Care Act. Regardless of one’s attitude regarding the law, its goal is to maintain stable healthcare costs and expand access to care. Although there is no argument that the quality of care provided by the healthcare system in the United States is unmatched, this quality is not uniform to all constituents, and costs more than in other comparable countries. Analysis shows that the reason for the excessive cost is multifactorial: one major factor is that based on our compensation system, we manage disease very well, but pay little mind to promoting health. If you ask the butcher what to have for dinner, he will not recommend fish.

Case management was promoted with the idea that by improving utilization of hospital services, we could decrease costs and maximize profit. Case managers were tasked to move patients out of the hospital as quickly as possible—we didn’t care if they returned soon for readmission, because it was another billable event&mdash;out of sight, out of mind. Hospitals could negotiate rates with insurers and had no obligation to develop a cost-based accounting system. The entire financial structure was based on charges and working against proposed budgets; the more that was billed, the more the hospital would receive.

We are now moving rapidly toward a value-based healthcare finance system. Whether the end result is global capitation, disease-based episodic payments (bundles), risk contracting, or another similar compensation plan, fee-for-service is going the way of the dinosaur. Networks are going to be responsible for the comprehensive care of the patient, and this serves to magnify the need for health promotion, as healthier people cost less. We will still need to manage the very sick patients, however—which we already do quite nicely&mdash;but we will also need to prevent unnecessary complications, minimize unnecessary procedures and diagnostics, improve patient compliance, and increase efficiency.

The new paradigm will be to keep patients out of the hospital if possible. Once in the hospital, we need to plan the most appropriate postacute care experience, and then monitor and prepare for the outpatient follow-up. Although not rocket science, this is a new concept for most hospitals and healthcare systems. It is clear that case management is becoming a process that will be the lynchpin of any continuum of care program. A mechanism of continually monitoring patients involves the inpatient service, subacute care, and outpatient care; each location requires different skillsets and care plans. In addition, we need to monitor patients differently with specific conditions, such as congestive heart failure, renal disease, and diabetes, which requires a disease-specific care plan model.

Technology will play a major role in this process too. Outpatient monitoring is available for many vital signs, including heart rate, blood pressure, temperature, oxygen saturation, weight, blood sugar, and exercise. These can passively be sent to case managers with alerts for unexpected results. In addition, software is available to promote medication and dietary compliance, with automatic notification of variance. Telehealth will aid in follow-up care, although it will never replace the physical examination. Additionally, new portable technology will allow providers to perform many diagnostic tests in patients’ homes. This may bring back the house call as a valuable tool in the comprehensive care management plan; it is cheaper and more effective to bring the doctor to the patient, rather than use ambulance transport to bring a noncritically ill patient to the emergency department.

The concept of appropriate health care has evolved from managing conditions/episodes of care, to a comprehensive care model.  It requires an ability to track patients throughout the continuum and insure the appropriate prevention, education, and intervention needed to minimize unexpected outcomes.  The future is not about finding new ways to treat sick people. It is about finding ways to keep people healthy.

Population Health Institute for Global Healthcare Experience, Hackensack University Medical Center, Hackensack, NJ.

 The author reports no relationship or financial interest with any entity that would pose a conflict of interest with the subject matter of this article.

Concept and design; drafting of the manuscript; critical revision of the manuscript for important intellectual content.

Morey Menacker, DO, Population Health Institute for Global Healthcare Experience, Hackensack University Medical Center, 30 Prospect Ave, Hackensack, NJ 07601. E-mail: MMenacker@HackensackUMC.org.  

The author discusses the new paradigm for case management services, including inpatient and outpatient responsibilities, in order to succeed in the era of the Affordable Care Act.

Morey Menacker, DO

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