"A strong primary care base is really essential to quality improvement and cost efficiency when delivering care," notes Dr. Burt Vanderlaan, medical director of network effectiveness at Priority Health.

"A patient-centered medical home helps to reimburse and incentivize primary care and maximize the primary care physician as really being the key coordinator and manager of the care for the population."

"It's a good model for coordinating care, in contrast to a situation in which the primary care physician might not even be aware of all the specialists that a patient is seeing," Kramer says. "In many cases, specialists will give different and conflicting advice about how certain conditions should be treated. And often, the primary care physician is in the best place to sort out all that's going on with a patient and what they need."

"Patient-centered medical homes are doing care coordination," Searfoss acknowledges, "and they're often paid a per-member, per-month care coordination amount, but they do not carry any risk and they aren't capitated. Payers are just paying the PCMH to do more coordination."

"We have three forms of payment to our medical homes," Dr. Vanderlaan explains. "We pay the medical homes on a fee-for-service basis; in addition to that, we pay a care management fee based on the number of members we have in the home. That's money made available to them to both coordinate and manage care and do things that they otherwise would not be able to do — and also to help them build the infrastructure, hire care managers and physician extenders, and to cover pay for pharmacists to do medication reconciliation.

"The third piece besides fee-for-service and the care management payment is the incentive payment," he continues. "About 15 percent of our total payments to primary care now are earned through our incentive program, which is a menu of well-accepted measures around preventive care and management of chronic disease, such as diabetes or hypertension. The preventive measures are ones that would be familiar to any of us — screenings, childhood immunizations, those types of measures.

"We have a high-performing network at Priority, and we set our targets at the 90th percentile of national performance. When medical homes or primary care physicians meet those measures, they're compensated for that," Dr. Vanderlaan concludes.

ACOs

Although the term accountable care organization or ACO is relatively new, organizations that take on a great deal of risk for all of their members have been around for decades.

"The ultimate ACOs are the large integrated delivery systems like Kaiser Permanente that coordinate the care – inpatient, outpatient, pharmacy, lab, radiology – and are structured to accept the financial risk under a capitation payment," Kramer says. "They're fully accountable for the cost and the quality of the care being provided."

However, companies like Kaiser aren't built overnight; they develop over many years, with a great deal of trial and error.

"In recent years, there have been ACOs created that were built upon some of the same basic concepts as HMOs, but are not exactly the same structure," he adds. "A good example of this is the ACO created by CalPERS. Several years ago, CalPERS contracted with Dignity Health System for hospital care and Hill Physicians Group for primary care, and the plan was administered by Blue Shield of California. It used a fixed-price contract for a defined set of patients, and it was very successful in terms of cost and quality. It didn't require Dignity Health System, Hill Physicians and Blue Shield to do a de-facto merger, but there was a lot of collaboration between those groups to make it work. It's a good example of a commercial ACO."

Medicare also launched an ACO program under the mandates outlined by the PPACA, but because Medicare can't restrict patient choice, the success of those ACOs has varied.

"Medicare is also encouraging the creation of ACOs, using a somewhat different model. The underlying Medicare law allows patients to see any provider they want and that provider then bills Medicare, and Medicare will pay the bill," Kramer says.

"If a Medicare ACO has a patient assigned, and the patient wants to go to the most expensive orthopedic surgeon to get their knee surgery, there's nothing that ACO can do," Searfoss confirms. "And the organizations in Medicare's Pioneer program, people who thought they were already doing this and doing it well, found they had already squeezed the easy money out of the system."

And there are other subspecialty care models that take the ACO concept and apply it to specialized health care when a comprehensive care model doesn't make as much sense for a patient's particular condition. One example is an end-stage renal disease seamless care organization.

"DaVita has participated in risk-based reimbursement models that are a little bit different from ACO models but have some similarities," explains Dr. Robert Provenzano, vice president of medical affairs at DaVita. "ESCOs are in a very, very early stage. "A proposed [Centers for Medicare & Medicaid Services] shared-savings risk model is ESRD seamless care organizations, ESCOs, which are in an early stage of development."

"DaVita is prepared to work with payers to determine the best models of care to deliver renal services," he adds. "ESCOs would include accepting risk of care for both dialysis and non-dialysis costs, so a bundle of services is rendered to the patient, and it shifts them away from a volume-based service to a value-based service."

One big, obvious difference between an ACO and an ESCO such as DaVita is the patient population.

"An ACO identifies a general population of patients," Dr. Provenzano says. "That includes the healthy, the sick, the short and the tall – everybody. It's a very broad population-based management process that is very different than a specialty focused process such as the ESCO model. ACOs deal with mostly healthy people, and a big focus is keeping people healthy.

"A subspecialty care model recognizes that there are a group of people with specific diseases, and the risk for managing those patients should be turned over to the sub-specialists who know that disease best," he continues. "Therefore, an ACO could ask an ESCO to manage the care of its renal patients. The ACOs get what they are looking for, expert management of a chronic disease; and the nephrologists get what they want, to manage the patients they're best suited to manage. And, most importantly, the patients get what they need, which is the right doctor with the right patient offering the right care."

In a proposed bundle payment system, the "bundle" is based on the historic cost of the care for both dialysis and non-dialysis care. A dollar amount is allocated to each patient, and if the ESCO can provide high-quality care at a lower cost than that dollar amount, they share the savings with the government. If their costs are higher, the ESCO is responsible for those losses.

Naturally, there are challenges involved in creating an ACO or an ESCO.

"This is an untried process with many stakeholders," Dr. Provenzano says. "Hospitals, dialysis providers and physicians must collaborate in coordinating the care of disparate groups of patients. This can be very difficult at times, and we have much to learn.

"And another challenge is determining the appropriate reimbursement for care," Dr. Provenzano explains. "In a shared risk model, an ACO or ESCO, there will be upfront costs for restructuring the current care model. For example, retooling emergency rooms, physician offices and patient care pathways – just to start – will be expensive."

And like other care and payment models beyond strict fee-for-service, there's a great deal of coordination involved with ESCOs – and much of the infrastructure necessary for that coordination is nonexistent.

"The government has proposed to lift the current onerous regulatory barriers in place that make collaboration difficult," Dr. Provenzano says. "And they have not been lifted, and that is a continued challenge. For example, many patients may miss dialysis appointments because they don't have transportation. It's currently not possible for a care provider to also provide for transportation. And there are many other examples of regulatory barriers to integrated care that will need resolution in order to make these programs a success."