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Accountable Care Organizations (ACOs): A 'Blue Ocean' for the Disease Management Industry?

Posted Jul 16 2009 11:08pm
The Disease Management Care Blog eschews business gobbledygook. Many readers know this stultifying corporate-speak when they see it: jargonesque paragraphs that proclaim fresh enhancements, novel strategic directions, commitments to the value chain, stunning leadership redesigns, solutioning, portfolios, alignments and other such enigmatic nonsense from wannabe corporate titans that actually impair communication for their workers and customers alike.

That doesn’t mean that there aren’t important concepts behind the wordage, which is why the DMCB will apologetically cross the line and use one overused expression for a classic business concept: the ‘ Blue Ocean Strategy.’ While those mots remain a darling of faux-visionary business people and consultants everywhere, it’s still an important concept: there may be markets that can be made tomorrow that do not exist today.

A new market opportunity may be opening up for the disease management organizations (DMOs), thanks to the U.S. House of Representatives. The DMCB went back to the ‘ America’s Affordable Health Choices Act' and looked at what it had to say about ‘ accountable care organizations (ACOs). The DMCB defines these as one or more hospitals and the physicians who work within and around them who are formally organized to manage quality and cost for the local populations they serve.

Like the Medicare medical home pilot, the House bill has a similar trial program for Medicare to test the ACO. The DMCB interprets the House legi-speak to define its version of an ACO as, among other things, a physician-based a) legal structure for the receipt and distribution of incentive payments, that b) has sufficient numbers of primary care physicians, c) can collect quality measures and other data for public reporting and d) prominently uses care management planning for patients. It’s up the Secretary of HHS to set performance targets and, if they’re met, the ACO can receive payments that are, in turn, distributed to the docs. ACOs are also allowed to create similar contracts with other payers. The pilot is to start at the latest by January 1, 2012.

Just like the medical home pilot, there is language aimed at getting smaller physician-owned groups to participate. In this instance participation by high cost patients can be limited, which also decreases variability and increases the likelihood of success. To the DMCB, that makes sense.

Extension of the pilot is possible for the ACOs if they are meeting targets and have qualified for at least one incentive payment. The incentives can also be flexed and expanded. Last but not least, just like the medical home pilot, the CMS’ Chief actuary has to certify that any expansion is budget neutral.

While ACOs have yet to appear in any number, parallel examples of them exist in the Medicare Coordinated Care Demonstration that was described in JAMA this year. They involved disease management organizations (DMOs), many broke even and some even made a profit. In prior posts, the DMCB doubted they had much of a real business model or had much attraction for physicians. Depending on the details of this Pilot, however, that could conceivably change.

And the House's public plan option? The Secretary of HHS is also allowed to include ACOs in its design.

Up until now, typical DMOs have contracted with commercial insurance plans and self-insured employers. While the DMCB thinks that part of the business is still healthy (though threatened by a hardening insurance market, declining insurance rolls and carve-ins), the advent of Medical Homes has presented a number of challenges for the DMOs. Two important ones are a) how to integrate their telephonic programs with team-based primary care management, and b) dealing one-at-a-time with all those clinics across a network.

Along comes ACOs. They not only aggregate primary care sites into a single administrative entity but their funding is contingent on the kind of care planning and management that is very compatible with classic disease management. The DMCB thinks that if the concept survives the legislative process, newly spawned ACOs will face the same buy or build dilemma for the many facets of population-based care management. Since telephonic care is one part of that, many smart ACOs could choose to buy, using part of the check sent to them every month courtesy of Secretary Sebelius. Who knows, they may also turn to DMOs for assistance with more intense care management programs, like case management.

That’s not gobbledygook. If this survives and the DMOs start planning now, that’s Blue Ocean.
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