ACOs, PHOs and Shared Savings Agreements: Too Risky of a Business?

In a session at the Becker's Hospital Review Annual Meeting in Chicago on May 9, Scott Becker, JD, CPA, publisher of Becker’s Hospital Review, moderated a panel discussion on accountable care organizations and other shared savings arrangements.

Michael Englehart, president of Advocate Physician Partners, based in Oak Brook, Ill., kicked off the panel by discussing the development of the system's clinically integrated organization. Advocate has been recognized as a clinically integrated organization by the Federal Trade Commission, which allows Advocate's hospitals and physician hospital organization to contract jointly with payors. The clinically integrated organization includes 4,100 physicians, and despite trends toward employment of physicians, three-fourths of the physicians remain independent. It also launched an accountable care organization with Blue Cross Blue Shield that has so far reported positive results in cost savings and outcomes.

Michael Shabot, MD, CMO of Memorial Hermann Health System in Houston, discussed his system's effort to align with independent physicians. He explained Houston is one of the "last bastions of [physician] independence," with an average physician practice size of 1.75 physicians. Despite their independence, physicians have been willing to work with Memorial Herman to coordinate care for Medicare patients. The health system's Medicare accountable care organization covers 30,000 Medicare lives, and the system recently inked a contract with Aetna on a jointly branded commercial ACO.

Scott Sarran, MD, CMO of government programs at Chicago-based Health Care Service Corp., brought up the importance of payor-provider collaborations. "If we don’t get better control of healthcare costs, it's just unsustainable. An effective route is payor-provider collaboration based on total cost of care," he said.

Michael Kasper, CEO of DuPage Medical Group, based in Downers Grove, Ill., explained that despite the trend of providers entering into the insurance market, the large group practice he oversees does not plan to enter the insurance business. Instead, it will focus on partnering with payors to take on risk. "Who you are is as important as who you're not," he said.

Mr. Saran agrees underwriting coverage takes very specialized analysis. "This is very risky space; no one knows who is going to show up [in exchanges]. It’s not a space for people that are new in it… or aren’t willing to make a significant bet," he said.

Mr. Englehart concurs that collaboration with payors is the way of the future. He believes narrow network insurance products will be the next big thing, especially with the launch of the health insurance exchanges. He explained that while choice is important to employers offering health coverage, it is less critical for individual families selecting their own coverage.


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