Michael H. James

One organization's long experience as an accountable care organization-in essence if not in name-shows that accountable care can be successful, not only in improving population health, but also financially.

At a Glance  

  • Genesys PHO in Flint, Mich., is one of 32 ACOs participating in the Pioneer ACO Model initiative administered by the CMS.
  • Genesys PHO's experience suggests that successful ACOs will invest physicians with decision power and focus on strengthening the physician-patient relationship, restoring patients' trust in physicians, and allocating the right human resources to the effort.
  • Organizations that are considering an ACO strategy should evaluate the risk structures of their proposed contracts and their provider groups' willingness to accept the contractual level of risk.

Are accountable care organizations (ACOs) viable solutions to the financial pressures to which our economy is being subjected under the current fee-for-service healthcare system? Based on the experience of Genesys PHO in Flint, Mich., an ACO can not only lead to cost savings, but also encourage healthier populations-and if adopted on a large scale, these types of organizations could provide an effective means to tackle the problems plaguing our nation's healthcare system. The lessons learned by Genesys can serve as a guide to all healthcare organizations that are preparing for the critical shift from volume- to value-based payment.

Genesys: Steps to Becoming an ACO

An early adopter of many of the main elements underlying accountable care, Genesys PHO is a collaborative arrangement between Genesys Health System and 160 primary care physicians with 400 participating specialist physicians who deliver healthcare services in Flint and the surrounding area.

In 2011, the Centers for Medicare & Medicaid Services (CMS) selected Genesys as one of only 32 ACOs in the nation that will participate in its Pioneer ACO Model initiative. This initiative, which is separate and distinct from the Medicare Shared Savings Program and other ACO initiatives, is testing the effectiveness of several models of payment to help organizations make a transition to higher quality care at a lower cost to Medicare. CMS's Pioneer ACO Model initiative is intended, according to CMS, to "allow these provider groups to move more rapidly from a shared savings payment model to a population-based payment model on a track consistent with, but separate from, the Medicare Shared Savings Program" (see "Pioneer ACO Model").

Genesys launched its PHO back in 1994 during the Clinton healthcare era, when system leaders believed the country was moving toward universal managed care. Although that change did not happen, the PHO continued to encourage physicians to define standards of practice and referral protocols and apply them uniformly to patients whether they were covered by managed care or fee-for-service plans.

Genesys's roots in accountable care also took hold in an economic landscape around Flint that had been dominated by the U.S. auto industry for decades. As General Motors struggled in the 1980s, it put pressure on local healthcare providers to lower costs. Adding to the cost pressures, unhealthy behaviors were prevalent in the local culture.

To thrive, Genesys needed to change its approach to care so that it would reduce its costs and enhance its ability to positively influence health outcomes in the community. The hospital and physicians were compelled to collaborate in ways uncommon to more stable economic environments.

The formation of Genesys PHO itself offers one example of such an uncommon collaboration. The organization was formed at the time Genesys Health System decided to close four hospitals and build a new hospital with 500 fewer licensed beds. An obstacle was that the four hospitals had two distinctly different medical staffs, one being made up of allopathic physicians and one being made up of osteopathic physicians. Working together, a majority of the primary care physicians of both medical staffs were able to form a single business entity, which became a 50 percent owner of Genesys PHO. Genesys Health System assumed ownership of the remaining 50 percent, and both organizations had equal representation on the board of managers. It was the first time in the market that a large physician business group and a health system had worked together for their patients' and community's interest. The organizations have worked in this collaborative manner for 18 years.

As another example, Genesys Health System has formed co-management companies to work with its specialists in making management decisions about how to improve efficiency and outcomes for Genesys Regional Medical Center.

Genesys Health System also helped establish the Greater Flint Health Coalition, a group of local healthcare providers, purchasers, government leaders, and business people who have collaborated to examine and address health issues such as smoking in public areas, high incidence of caesarian births, and insufficient diabetes awareness.

Since its founding, Genesys PHO has always taken substantial risk with all its payer contracts, and each year it has had shared savings to distribute to its providers. The volume of patients covered by these contracts with six different payers has grown from about 40,000 to more than 80,000. Genesys PHO's proportion of the shared savings has averaged 5 to 10 percent of the healthcare premium dollars, which has enabled Genesys PHO to distribute more than $100 million in shared savings to its participating providers.

The Genesys experience illustrates that accountable care can be successful-financially as well as in improving population health-and provides key lessons for budding ACOs.

Give Physicians the Decision Power

The first principle Genesys adopted was that all medical decisions related to utilization should be made at the provider, not the payer, level. To improve patient health, physicians need to make the ultimate decisions.

To get insurance companies' buy-in, Genesys needed to take on more of the economic burden and risk than the insurer. From the start, the Genesys PHO used a collaborative model working with the payers to take capitated payments and full risk. It became one of the few providers in the country to be certified by the National Committee for Quality Assurance (NCQA) in credentialing, utilization management, and more recently, quality assurance. (Provider organizations should look to national accrediting companies such as NCQA for a road map in developing their accountable care or medical home models. Genesys PHO started working with NCQA more than 10 years ago.)

Genesys leaders also believed that physician-directed practice standardization would ultimately lower costs by reducing unnecessary and duplicative specialty services and tests and improving chronic disease care. Therefore, Genesys adopted a bottom-up structure where physicians heavily dominate the board of managers and 12 operational committees. These committees include about 100 physicians working to improve care by tackling clinical and patient-engagement issues. Meanwhile, senior leadership's responsibility is to allocate the resources, prioritize ideas for change, and make sure they fit with the organization's mission and contractual obligations.

Strengthen the Physician-Patient Relationship

A focus on the physician-patient relationship is another key component enabling Genesys to provide higher quality care more efficiently.

Patients in an ACO have the right to choose which providers they use, so the challenge is to keep patients within the organization. For that to happen, care needs to be compassionate, comprehensive, coordinated, and collaborative.

Genesys also battles outward migration by highlighting high-quality outcomes for patients. For example, when referring a patient to a specialist, a primary care physician will routinely commend the specialist's strength and skill, reinforcing to the patient the specialist's long-standing record of providing patients with good access, good collaboration, and great results.

Conversely, if the data show that care is better somewhere else, that information is shared, too. For example, Genesys does not have a full-scale bariatric program, so patients are encouraged to visit a competitor for most bariatric surgeries. When providers face truths about their weaknesses, it ultimately makes them better.

In an ACO model, physicians need to operate with a collaborative mindset. Physicians have too often tended to operate in silos, focusing only on the disease they are treating, not in the totality of patient needs for health care. Medical schools teach physicians to look at a problem, analyze a problem, and solve a problem. Genesys has sought to capitalize on this strength in the area of collaboration. To this end, Genesys encourages physicians to work as care teams, seek other opinions, and develop solutions as a group. This teamwork among physician peers is critical to changing utilization, referral, and care-management patterns, thereby achieving higher quality at a lower cost.

Genesys has found that electronic health records (EHRs) with open architecture are important to this process because they enable providers to capture necessary patient data, share their workflow and data management accomplishments, support care-related transactions such as e-prescribing, and provide clinical decision support for the delivery of evidence-based medicine. It is important that an EHR offer more than simply dictation of a regular chart: An ACO requires an EHR that truly facilitates and encourages exchange of information.

Restore Trust in Physicians

Early on, Genesys recognized that for the physician- patient relationship to flourish, it needed to restore patient trust in healthcare providers.

That trust had suffered as patients turned to the Internet to help make their healthcare decisions, with the enduring belief that more care is better care and that a physician who declines to perform a procedure or give a prescription is not doing a good job. The irony is that these patients do not see that better physicians often do less.

To overcome this challenge, Genesys physicians work to educate patients to help them truly understand their health issues and the solutions, including lifestyle changes.

For example, when a patient arrives wanting pain medication for his or her back, the physician may prescribe an exercise program and take time to explain that medication is just a temporary solution, but exercise can actually help resolve the problem.

Primary care physicians also further relationships with their patients through annual physicals, in which they discuss lifestyle and genetic health challenges. Patients are asked to select one issue per year to focus on. These efforts have persuaded patients to become more engaged in changing lifestyles and improving health and have been instrumental in building their trust in physicians.

Allocate the Right Human Resources

To support the lifestyle change process, health navigators offer follow-up services to patients with chronic diseases and provide education, care coordination, and communication to encourage these patients to adopt the plans they have established with their primary care physicians.

For example, if lack of exercise is a challenge for a patient, and the patient and his or her physician have decided walking three times a week should be the goal, the navigators will check in with the patient once a month to see how the patient is doing. The navigators also can help a patient meet the goal-for example, by helping the patient identify and join a walking team.

For utilization management, Genesys also added PHO concurrent review nurses for all patients in the health system's hospitals. These nurses rotate throughout a hospital to coordinate care, discharges, and lab reports and ensure follow-up visits with primary care physicians are scheduled within three days of release to help patients transition back home successfully.

The PHO concurrent review nurses are trained to coordinate care, deliver high-quality care, and discharge patients back home as quickly as possible. As an example, when a patient comes into the emergency department (ED), the nurses will review the patient record to see what tests have been performed recently, communicate with the primary care physician, and launch a care plan immediately to share with the ED physicians.

Evaluate Risk Structures

Because Genesys had a deep history in assuming risk, it made sense to choose the more aggressive risk payment structure offered by CMS under the Pioneer ACO Model. Genesys settled for the payment arrangement under the Pioneer ACO Model identified as Alternative 2, in which, in the third year of participation, the organization would receive a population-based payment up to the full amount of its expected revenues for all billed Part A and Part B services.a  

However, that structure is likely too aggressive for organizations without a lot of experience and the infrastructure in place to support it.

Provider organizations often need to spend $10 million to $15 million on new information systems, personnel, and training processes to prepare for that kind of risk taking.

Organizations that lack prior experience with the ACO model might be more comfortable with the lower risk structure, which has high upside potential but no risk on a three-year contract. This choice affords organizations the flexibility to develop the infrastructure over three years and the ability to learn as they go and have their mistakes forgiven.

In short, organizations should remember six key points when considering accepting risk:

  • Leadership should be ready to accept risk; the culture should be fearless.
  • The provider base should understand and embrace concept of value over volume.
  • The organization's leaders should possess deep clinical knowledge to understand utilization management.
  • Excellent financial management is critical.
  • The organization must have an excellent information system in place, which should be used to track all claims and double-check payer reports. (By double-checking claims, Genesys typically finds $1 million to $5 million a year when it settles contracts with payers.)
  • Physician leadership is critical; physicians should own the process on the clinical side.

CMS also offers Part C, Medicare Advantage, contracts in which providers may participate. These contracts are substantially different from the ACO in that patients enroll individually instead of being assigned in actuarially sound groups as under the ACO system, and an insurance company between the provider and CMS charges between 15 and 20 percent. Therefore, when Genesys PHO contracts with Medicare Advantage Plans, it negotiates to assume no risk until enough members are enrolled to be actuarially sound and to require that the payer reduce its administration fees.

Organizations should also keep in mind that performance risk with Medicare Advantage is greater than with commercial managed care contracts because Medicare revenue is much higher than commercial revenue, being based on the substantially higher acuity of the Medicare members. Decisions regarding risk therefore should be based on data, and not simply made intuitively.

Organizations will need to take more risk as they evolve as ACOs. Being accountable for this risk requires long-term relationships, so the terms of provider contracts should be three to five years minimum, rather than just one year as they have been historically.

Understand the Utility and Limits of Technology

IT plays a pivotal role in many of the success factors for an ACO. IT provides critical information about the potential to be successful when developing an ACO business plan. Genesys relies on systems analytics to mine data on patient mix and pinpoint waste in the system.

It is key for organizations that are contemplating becoming an ACO to determine whether they can save enough by improving quality and coordinating care to earn money. Based on analysis, over the next three years, Genesys plans to further reduce healthcare costs by 25 percent through increased waste reduction and continued engagement of noncompliant patients with chronic diseases. IT is critical in helping to identify these opportunities.

Another important benefit of IT is that it can supplement physician knowledge around predictability of patients having occurrences. For example, if a diabetic patient's sugar is out of control and the patient lacks a good relationship with a primary care physician, an IT system can flag the problem, prompting action to get the patient in for care.

Finally, IT enables organizations to generate qualitative reports on physicians. When reports showing a physician's performance as compared with the performance of a blinded peer group are shared with the physician, they can induce a naturally competitive response, prompting the physician to focus more on improving his or her financial performance, utilization management, access, and quality.

The one caveat with IT relates to the fact that sometimes-particularly in predictive modeling-organizations use IT in lieu of personal communications. Organizations should be sure to continue talking with providers and not rely solely on IT to identify areas of opportunity, because IT is not all-powerful.

What Does Success Look Like?

About half of organizations applying as ACOs seem to be doing so to protect market share. Genesys adopted the ACO model to improve health care. That philosophy speaks to employers that are already engaged in wellness products for their employees and are eager to collaborate with a provider group to expand the use of such products.

Ultimately, the organizations that are most successful as ACOs will likely be those that measure success by asking five questions:

  • Have we created shared savings?
  • Have we reduced waste?
  • Have we opened access?
  • Are our patients and caregivers better educated?
  • Have we improved health?

Organizations should not expect to accomplish this transformation overnight because the road to success is a long one. Fundamentally improving health of the population is extremely difficult, but Genesys PHO's early utilization data indicate that it is on the right path. Genesys PHO uses the information provided to it by CMS to establish its performance target, looking at the historic actual healthcare costs of the 18,000 patients assigned to the organization. Genesys PHO also supplements and validates CMS information using its own utilization data, which it collects through its own internal referral and hospital information systems. Using these early data, Genesys PHO projects that it will have about 8 percent shared savings in addition to the 2 percent that CMS retains under the pioneer ACO contracts for this performance year.

Michael H. James, JD, is president and CEO, Genesys PHO, Flint, Mich. (mike.james@genesyspho.com).


a. For details about this arrangement, see "Alternative Payment Arrangements for the Pioneer ACO Model" issued by the Center for Medicare & Medicaid Innovation.

Publication Date: Wednesday, August 01, 2012

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