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Hospital Alliance Kicks Off Big Test of Health Delivery Redesign

By John Reichard, CQ HealthBeat Editor

May 21, 2010 -- "Accountable care organizations" are at the heart of a section of the health care overhaul law that isn't discussed much but is its most important part, asserts Senate Finance Committee Chairman Max Baucus. The section? Language to reorganize health care delivery to bend down the health care spending curve.

And a big part of the "ACO" movement, the Montana Democrat noted this week, is Premier, a consortium of some 2,300 hospitals nationwide that jointly purchases health care supplies and also has been a pacesetter in testing Medicare payment approaches that reward higher quality care.

Premier made a big splash this week by announcing that it is launching at least 19 ACOs, entities that team up doctors, hospitals and other kinds of providers in new payment arrangements with insurers designed to reward treatment that keeps patients healthy and out of the hospital.

Premier said the ACOs will be responsible for taking care of a total of 1.2 million patients, who it said will receive safer, higher-quality, and lower-cost care.

The key to the ACO approach is a "shared savings" model that allows hospitals and other providers to share in the savings insurers get when providers do a better job of keeping patients healthy rather than being rewarded for performing a higher volume of care.

In effect, hospitals in ACOs are working to deny themselves revenue by keeping patients from being admitted. So "the only way this is going to work is if we can work out some kind of shared savings model," says Amanda Forster, a Premier spokeswoman.

The 19 health systems involved operate in 15 states. They include some 70 hospitals and have partnerships with 5,000 physicians, Premier says. They are working with various types of payers, including nonprofit and for-profit insurers and employers and unions. "We're kind of past talk and into the 'do' mode," says Forster.

The systems may be among the first applicants for ACO contracts signed by Medicare under the overhaul law (PL 111-148, PL 111-152). The law requires the Centers for Medicare and Medicaid Services to establish a voluntary program that can begin contracting with ACOs by 2012. Forster notes that the program is permanent, not a demonstration program.

While only a limited number of health systems are at the point of being able to form ACOs, Premier says it is trying to bring others along with what it calls a "readiness collaborative." It is designed for "health systems that must first develop the organization, skills, team and operational capabilities to become ACOs," Premier said in a news release Thursday.

"Clearly, the promise of ACOs is many years from being fulfilled on a wide scale given legal and operational challenges that must still be met to produce efficient cooperation. But "given the urgent need for quality and results-based healthcare on a national scale, we must start executing now," says Michael Bryant, CEO of Methodist Health Services Corporation.

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