Will Surgery Centers Fit Into ACOs? Q&A With Craig Garner, CEO of Garner Health

Accountable care organizations do not necessarily provide an environment for ambulatory surgery centers, but there are a number of ways in which ACO growth may be stalled in the years ahead, says Craig Garner, attorney and CEO of Garner Health, a healthcare consulting firm focusing on industry management in the climate of reform.

Mr. Garner discusses the relationship between ASCs and ACOs, as well as the regulatory and financial obstacles that ACOs may face.

Q: Do ambulatory surgery centers have a place in the realm of accountable care organizations?

Craig Garner: At their core, ACOs are designed to reduce healthcare expenses and improve efficiencies and the standard of care. In many ways, ACOs create a system that brings the doctors back to the hospital, a reversal of the trend that Medicare set in place back in 1965. By aligning doctors and hospitals — to the chagrin of insurance companies — ACOs realign a tenuous infrastructure that encompasses a fragile relationship between hospital and physician.

If successful, it will be difficult to break the inertia of ACOs, and the result will not be favorable for ambulatory surgery centers. ASCs are the antithesis of the ACO, providing a place for physicians to exist outside of the hospital environment, a climate set in place by Medicare and in particular the days of the diagnosis-related groups.

For ACOs to set the benchmark of hospital medicine, however, this will not occur overnight. Moreover, there are many opportunities for ACOs to stall along their laudable ways, perhaps only accomplishing a part of their ultimate objective. Therein exists the possibility for ASCs to flourish in the changing climate of health care reform. If set into full effect, however, ACOs do not provide an environment for ASCs.

Q: Can you describe some of the ways in which ACO growth might be stalled?

CG: To date, I believe there are 27 ACOs approved by CMS. I think the number of hospitals in the U.S. is close to 5,800. While few disagree that the ACO model is the preferred future for the delivery of health care in the U.S., even fewer disagree that the ACO model, as integrated managed care consortiums of sorts, is still in its very early stages.

One way in which it can stall may include an adverse ruling by the U.S. Supreme Court.  It is difficult to image that the 27 CMS-approved ACOs will be "out of business" if the U.S. Supreme Court rules that the Affordable Care Act — in its entirety — is unconstitutional. However, the varying degrees of decisions by the U.S. Supreme Court may slow the next round of ACO applications.

Q: Can you elaborate on how ACOs are impacted by the Affordable Care Act?

CG: ACOs, to the extent contemplated by the Affordable Care Act, do not work.  In the ACO application, CMS asks the following:

  • "Please describe in a narrative how you plan to use shared savings payments, including whether you intend to share savings with ACO participants and ACO providers/suppliers, or to use the shared savings to re-invest in the ACO's infrastructure, redesigning care processes, etc. . . . Additionally, describe how this plan will achieve the specific goals of the Shared Savings Program and how this plan will achieve the general aims of better care for individuals, better health for populations, and lower growth in expenditures."
  • "Submit a narrative describing how the ACO will define, establish, implement, evaluate, and periodically update its process to promote evidence-based medicine. This process should cover diagnoses with significant potential for the ACO to achieve quality improvements, taking into account the circumstances of individual beneficiaries."
  • "Submit a narrative describing how the ACO will define, establish, implement, evaluate, and periodically update its process to promote patient engagement."
  • "Submit a narrative describing how the ACO will define, establish, implement, evaluate, and periodically update its process and infrastructure to support internal reporting on quality and cost metrics to enable the ACO to monitor, provide feedback, and evaluate ACO participant and ACO provider/supplier performance and to use these results to continually improve care and service over time."
  • "Submit a narrative describing how the ACO will define, establish, implement, evaluate, and periodically update its care coordination processes."

Many things need to occur for ACOs to succeed as contemplated in the Affordable Care Act. But if the ACO model does not succeed in every way contemplated, it does not constitute a failure, nor is it likely the federal government will toss the ACO model to the curb. Rather, it is possible the federal government may choose to keep the ACO models for certain aspects of medical care, and abandon it for others, or anything else in between this chasm of possibilities.

Q:  What financial or regulatory issues might impact ACO growth?

CG: ACOs do not make money. The ACO model incorporates performance measures in its compensation model. The 33 measures that ACOs must monitor in the first year constitute a "pass fail test" for the ACOs. In the following years, the ways in which ACOs perform will impact their financial remuneration. If ACOs are not able to meet the strict standards of performance and begin to lose money, it is unlikely that the ACO model will flourish.

There are also regulatory obstacles. Last fall, three separate federal agencies all weighed in on ACOs and provided some much-needed clarification. The Office of the Inspector General clarified its position on fraud and abuse, the Federal Trade Commission clarified antitrust issues, and the IRS explained how non-profit institutions could participate in ACOs without losing non-profit status.

Indeed, the industry was somewhat shocked that all three agencies made so many concessions on behalf of ACOs, although in each instance the agencies reserved its ultimate discretion to determine otherwise. As just one example, the FTC explained that a CMS-approved ACO would exist within an antitrust "safe zone," unless extenuating circumstances warranted otherwise. Other issues are bound to arise that may include additional Federal agencies. The ways in which these agencies respond may also impact the growth of ACOs.

Q: How will ACOs affect ambulatory surgery centers long-term?

CG: ACOs bring doctors back to the hospital. ASCs create an opportunity for physicians to flourish away from the hospital. While the two are not quite equally balanced, the pendulum that swings between ACOs and ASCs is bound to speed up, and slow down, from time to time. ASCs are already established, and no doubt will be wise to be watching from the sidelines, waiting for the appropriate opportunity to strike.

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