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When negotiating contracts with ACOs, cover all the bases

From the July/August ACP Internist, copyright 2013 by the American College of Physicians

By Terri D’Arrigo

Accountable care organizations (ACOs) represent a potential sea change in American health care. Their emphasis on improved outcomes, cost-effectiveness and patient satisfaction could revolutionize the way clinicians collaborate.

But ACOs are also business arrangements, complete with the need for oversight, infrastructure, and cold hard cash, and that means that participating physicians will have to sign on a few dotted lines. Whether they wish to join an existing ACO or take the reins in forming one, experts recommend physicians keep several things in mind when negotiating agreements: the costs; whom they will be working with; and details about compensation, access to data, and the possibility of future separation.

Photo by iStockphoto.

Photo by iStockphoto.



Getting started

One of the first issues physicians will have to address is who covers, or will cover, the ACO’s organizational costs, said Richard L. Bouma, JD, partner at Warner, Norcross & Judd in Grand Rapids, Mich. Starting up isn’t cheap: For information technology alone, a 2012 Black Book Rankings survey suggests that startup costs for small ACOs could run to more than $1 million, and up to $4 million for large ACOs.

In physician-led ACOs, it may be possible to raise these funds from payers or hospitals affiliated with the ACO, but physicians may be expected to provide some of the upfront costs or contribute funds to keep the ACO running if it loses money. The amounts that they could be expected to chip in and the circumstances that would mandate contributions depend on the size of the ACO and how many physicians or groups are participating and should be outlined in the contract.

Then there is the Centers for Medicare and Medicaid Services (CMS) to consider. “Be aware that CMS will require some kind of security from the ACO. How much of that additional guarantee will have to come from physicians or practice groups?” said Mr. Bouma.

Knowing with whom one is going into business is just as important as knowing how much it will cost, so to the greatest extent possible, physicians should familiarize themselves with other practices that are or will potentially be in the group.

“Are they likely to save money because they’re careful about ordering tests, procedures, and other things that cost money? Or are they more loose with spending?” said Mr. Bouma. “Practice patterns will determine whether the ACO is successful, so you want to be associated with a group who is conscientious, yet will deliver high-quality care.”

Physicians considering joining a hospital-led ACO should ensure that it takes patient population into account. “Will the organization adjust risk and give you credit for sicker patients?” said Thomas Denberg, MD, PhD, FACP, executive vice president and chief strategy officer at Carilion Clinic in Roanoke, Va. “If they are just telling you how bonuses and payment will work and not addressing the population you care for, that’s really not fair.”

The typical hospital business plan includes keeping beds full and expanding services, so learning about the hospital’s business model is an essential part of doing due diligence, said Neil Kirschner, PhD, ACP’s senior associate for health policy and regulatory affairs.

“In accountable care, the goals include avoiding unnecessary emergency room visits, admissions, and readmissions, so for hospitals to work under an ACO model, they have to change how they operate,” Dr. Kirschner said. “If you’re a primary care physician, find out what value they place on primary care. Are they willing to shift their focus to prevention?”

Dr. Kirschner added that physicians should understand how the funds from shared savings will be allocated. “Will a fair part of the shared savings be going to you, or will the lion’s share go to the hospital, which may be losing patients because of the ACO? If fewer patients are being admitted, the hospital may want to replace that lost revenue by getting more than its fair share of savings.”

Data, data, data

Information-sharing is crucial to the success of physicians practicing within an ACO, and it should be addressed explicitly in any contracts or binding agreements, said Randall T. Curnow Jr., MD, MBA, FACP, chief medical officer of Summit Medical Group in Knoxville, Tenn. “The biggest thing to look for is access to data. You don’t want to enter into an agreement where you don’t know exactly what quality measures you are accountable for and will not have access to data to see how you are doing.”

He emphasized the importance of timeliness in data-sharing. “Make sure it’s stipulated in the contract that you will have regular access to the data. If they can’t produce the data so that you can see your progress and determine whether you need to make any changes, you should not be held accountable for that.”

Unfortunately, this is one aspect of accountable care where the kinks still need to be ironed out, Dr. Curnow cautioned. “I’ve seen a number of ACOs where physicians weren’t getting data in a timely manner, or they were receiving inaccurate data, and they were held accountable for the outcome. The good news is that I have also seen accurate data used by ACOs to improve care and efficiency to the benefit of the all those in the system. The bottom line is to be aware of the importance of access to data when considering joining or starting an ACO.”

So how can physicians ensure that an ACO is not making promises it can’t keep and that they will have the data they need when they need it?

Seeing is believing, said Peter S. Basch, MD, FACP, medical director at MedStar Health in Maryland, senior fellow at the Center for American Progress in Washington, D.C., and chair of ACP’s Medical Informatics Committee. “They’ll have to ask the hospital or ACO leadership to provide samples. If they’re told they’ll get reports several times a year, they should request to see examples and also get clear answers on the specifics of what goes into a report, such as the patient-provider assignment models, and quality-cost attribution models.”

Parting ways

Participation in an ACO may be contractual, but that doesn’t mean it’s forever. Physicians retire, new entities join and affect the ACO’s performance and government requirements and regulations may change. Therefore, physicians need to ensure that their contracts address the possibility of parting ways, said Mr. Bouma.

“Say two years down the road you’re performing well, but you’re stuck with a group that’s not. Or maybe the group is tolerating a low performer for political reasons and it’s costing the group money. Now you need to talk about terms of separation,” he said. “Say you wrote a large check to start the ACO. How do you get that back? Generally, the answer ought to be that you have a right to return of at least some of your initial money, subject to a phasing out of that right over time.”

To that end, the contract should include language that addresses timelines and the repayment of any capital invested in getting the ACO off the ground, he added.

As unpleasant as it sounds, involuntary termination is another possibility. Physicians’ rights in such a situation should be explicitly laid out in the contract, Mr. Bouma said. “How much resistance can you put up to being drummed out? What are the procedures? There needs to be a termination mechanism in place.”

Throughout the processes of due diligence and negotiations, physicians may conclude that participation in a given ACO is not right for them, their practice, or their patients, and that’s okay, said Dr. Kirschner. “If you feel you are not ready to make the practice changes necessary, or if you’re heading for retirement and feel that it’s too much, too close to the end of your practice, it might not be a good option for you.”

In the end, it comes down to physicians engaging in fact-finding missions and making educated decisions when entering into agreements, said Dr. Kirschner. “Overall, you want to be involved in a group that you feel is well-run, has the infrastructure to succeed, and that you trust.”

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