Contemporary Alignment Models: The Basics

Within the healthcare market, the number of contemporary alignment structures in existence is increasing rapidly. As reported by Premier, Inc.’s 2013 survey of more than 100 healthcare executives, provider participation in an ACO model has nearly quadrupled since spring 2012 when the ACO participation rate was approximately 4.8 percent. These rates are projected to continue rising with participation. As the reimbursement paradigm continues to shift from being strictly fee-for-volume to include fee-for-value (FFV) payments, this trend is likely to continue and be emblematic for all four contemporary alignment options available today (i.e., ACOs, CINs, QCs, and PCMHs). The models are conceptually similar. They represent risk-based, clinically integrated entities that are bound by the same cultural ties and function along one common information technology (IT) platform so data can be easily shared among each party for the delivery of valuable care to its respective patient population.

Models are also guided by the Institute of Healthcare Improvement’s Triple Aim, which is an approach for optimizing health system performance via the following:

• Improving the patient experience of care (including quality and satisfaction)

• Reducing the per capita cost of health care

• Improving the health of populations

The first two points of the Triple Aim outline the value proposition (defined as outcome per unit of cost), and population health management. All contemporary alignment models exist to advance the value proposition. Despite these similarities, none of these models are “one size fits all”; several factors will dictate which model is the most appropriate for the provider group. In some cases, a contemporary alignment model may not be necessary at all. For example, if a provider’s current market is projected to remain fee-for-service (FFS) only for some time, there is very little immediate need to pursue contemporary alignment. We note, however, that the move toward FFV payments is a nationwide trend although some areas are realizing this shift at a faster rate than others.

Options For Structuring a Contemporary Alignment Model

Single or Multi-Specialty Models

A frequent question is whether contemporary alignment structures must always be multispecialty in nature. The answer is simply that it depends. For various reasons, single specialty partnerships may be easier to deploy than multi-specialty models, and thus, single-specialty clinically integrated models may be desired by some constituencies (including well-establish single specialty private practices) more than others. This concept is becoming increasingly common; for example, US Oncology has announced its decision to explore a Medicare ACO specifically focused on oncology.

However, single specialty ACOs/CINs/QCs must focus on the care of patient populations, and therefore, these organizations must be “multispecialty” in function to meet patients’ needs. While single-specialty models are possible, they must incorporate methodologies for coordinating care with varied specialties of providers, multiple other single-specialty ACOs, or multi-specialty ACOs in their market to achieve the Triple Aim.

Physician-Based Options Contemporary alignment does not necessarily entail robust relationships with hospital providers. Physician-based models are gaining momentum in the industry as private physicians continue to explore long-term strategies that do not necessitate complete loss of independence and autonomy (which many providers associate with hospital relationships).

In this scenario, ACOs, CINs, and QCs are established under the control and direction of a network of aligned private practices/physicians that have joined forces to finance and implement these undertakings. Arguably, these providers are more entrepreneurially minded and receptive to some element of risk as they opt to use the current challenges affecting private practices as an opportunity to improve patient care and the practice environment for themselves.

Three notable forms of physician-consolidated structures exist, with two serving as the precursor to a full-form clinically integrated entity. These include independent practice associations (IPAs) and physician hospital organizations (PHOs). Both of these structures are moderately integrated forms of traditional alignment wherein private physicians have loosely affiliated contractual relationships with each other. For the most part, each individual practice retains its current status, structure, and operations; however, each physician becomes a part of a separate entity (the IPA/PHO) that affords each individual group the ability to reap the benefits of a much larger group. IPAs/PHOs typically can contract as a group to provide services to payers and managed care organizations or utilize group purchasing power. For example, a managed care plan (such as an HMO) can negotiate and contract with an IPA, which would then contract with its independent physicians using the negotiated/discounted fees or on a capitation basis. IPAs and PHOs can also contract with hospital systems and ACOs/CINs to provide services. Clearly, under the PHO model (as its name would imply), hospitals are more commonly part of the organization as well.

While there was an abundance of IPAs and PHOs across the country in the mid-1990s to late-1990s, many of these organizations were terminated or went dormant due to a lack of funding, limited benefits to participants (real or perceived), or conversion into other forms of alignment. However, more recently, IPAs and PHOs are being resurrected to serve as foundational models for physician-based consortiums (such as QCs and CINs) given that they can provide a forum for members to improve collective results in case management and manage the quality and cost of patient care. They can also facilitate data collection, analysis, and application of data for the continuous improvement of care related and operational protocols.

Simply put, IPAs allow groups of like-minded private physicians to do the following:

• design highly reliable, cost-efficient, evidence-based, patient-centric processes of care

• develop measurement systems to monitor above processes of care (true outcomes and true costs, i.e., value)

The IPA Model

To utilize data metrics to drive continuous value improvement and creation of a true learning organization:

• create a self-governing system of accountability that holds all participants to the physician determined standards of care

• apply care processes to drive pricing, which will accurately reflect true costs of care delivery

For most of the aforementioned goals/functions to materialize, all members of the IPA/PHO must be on one EHR system or must utilize an interface that robustly links the varied systems. Once this and other criteria of CI are met and the entity is officially recognized by regulatory bodies as a CIN, the organization will be able to enter into direct negotiations with payers for pay-for-performance or value-based contracts.

Depending on the sponsoring payer, this model may be a QC/CIN or an ACO.

Hospital-Based Options

Even physician-based collaborative structures should incorporate hospital partners in some manner even if that is limited to the physicians continuing to practice (when patient care necessitates such) in a hospital and, hopefully, engaging that hospital in discussions regarding value creation referenced above. In fact, a large component of long-term success for providers (hospitals and private physicians alike) will be driven by their partnerships and ability to work with each other. Nonetheless, hospitals are arguably facing the pressures of change more than private physicians and, thus, many have been compelled to strategize and reform their current care delivery structures faster than independent providers.

Hospitals also have the wherewithal and management expertise necessary to contemplate, and eventually implement, an ACO/CIN strategy. Thus, more hospital-based ACOs/CINs exist than do physician-based models at this time. Hospital-based collaboratives are driven by the hospital or health system’s physicians and administrators who often belong to a governing board and at least one of its subcommittees.

Examples of sub-committees include, but are not limited, to the following:

• Information technology (IT) committee

• Clinical performance/quality committee

• Finance/capitalization/compensation committee

Regardless of structure and underwriting provider, a key ingredient to the success of any collaborative model lies in physician engagement. In fact, even hospital-based QCs/CINs/ACOs can be led by physicians. In this scenario, the hospital will provide capital for developmental and CI initiatives and collaborate with physicians to govern IPA/PHO- Based Collaborative Structure.

Physicians will oversee day-to-day operations of the CIN, innovate, lead novel CI initiatives and coordinate care, and develop performance measures and metrics that steer the direction of the CIN. However, the hospital will have the final decision-making power on all major matters (such as those that involve capital investment). Physicians make up the backbone of contemporary alignment and are often the driving forces for CI initiatives.

While physicians are often considered the drivers of cost, it only makes sense to make them the champions of change. Needless to say, the industry is in the midst of a significant cultural shift. The engagement of physicians will certainly help lead the way to change as significant clinical buy-in will be necessary to re-tool a care delivery process. Physicians are arguably the best equipped to influence change among support staff, other physicians, non-physician providers, and other caregivers throughout the entire care delivery continuum. Whether physician-based or hospital-based, new delivery models necessitate heavy buy-in from participating providers.

Excerpt from Physicians at the Bargaining Table: Alignment, Clinical Integration, Value-Based Contracting, and Population Health Management by Max Reiboldt, CPA, MBA.