Publisher’s Letter: May 2011

Accountable Care Organizations: 10 Observations - Orthopedic, Spine and Pain Management Driven ASC Conference June 9th – 11th — How Can ASCs and Practices Thrive in Changing Times; How can Hospitals and ASCs Align?; Meet Every ASC Buyer; What Will ACOs Mean for ASCs and Specialists? Deduct $200 from the Registration Fee

I. ACOs - 10 Observations. We have studied closely the accountable care organization proposed rule, which was released at the end of March. Ten of our core observations are as follows:

1. The ACO regulations place a large administrative burden on CMS and related federal agencies. The regulations articulate, notwithstanding the very substantial regulatory framework CMS and federal agencies must put in place, that the Department of Health and Human Services expects approximately 5 million Medicare beneficiaries to enroll in ACOs.

2. It will take a substantial amount of operational leadership, information technology and overall know-how to establish and operate an ACO. CMS estimates it will cost $1.7 million to establish an ACO. We believe, however, that this far underestimates the actual costs that will be required to put all of the parts in place to operate, and have a chance of succeeding, as an ACO. In reality, the amount of real cost to build out an integrated system or a network that can handle an ACO will require a great deal more money and expenditure than the $1.7 million projected.

3. The first ACOs will be enrolled beginning Jan. 1, 2012. Because this date is fast-approaching and so few organizations are really prepared for this, we believe that many will not be able to enroll in the first effort and will wait and see how the process plays out for at least a year or more.

4. Large integrated delivery systems will be the beachhead of ACOs. They are much better prepared to enter into this type of arrangement, take the risk, measure the risk and possibly succeed as an ACO. In both the short- and longterm, it will be very hard to cobble together networks to operate as ACOs without a serious IDS as the beachhead. The overall advantage, in terms of the new regulations and the evolving system, weighs strongly in favor of large and heavily integrated delivery systems. However, the flip side is that many of these heavily integrated systems are accumulating large carrying costs in physicians and others. It is unclear whether they will be able to sustain those costs.

5. A handful of systems, some of which have already gotten out in front of ACO development, will be the most successful in first entering into ACO contracts. There is a great deal of uncertainty about how payments will be made and how much benefit there will be from being a Medicare ACO. Thus, as stated above, until CMS issues more information, many healthcare organizations will likely remain quite cautious about engaging as ACOs.

6. Given the former history with PHOs and multi-provider networks and the fact that CMS estimates that only 5 million people will enroll, a core question that many systems, surgery centers and individuals will ask is “can you ignore this development? — i.e., ACOs.” Generally, we think the risk is too great that ACOs will become key healthcare entities for Medicare or for commercial payors to ignore them. Further, it will continue to impact how healthcare is delivered and how pieces are put together. Historically, when Medicare funds a program, it often becomes a significant driving force as to provider initiatives and efforts.

7. The ACO dialogue places a tremendous amount of faith in a care management model. However, there are still great questions about whether there are sufficient primary care physicians engaged to be able to really handle what is expected under the ACO regulations, as well as whether they have the drive, desire and skills to fulfill those expectations.

8. The ACO regulations appear to view specialists, surgery centers and business interests as necessary evils at best. The regulations limit the percentage of interest that business interests can have in an ACO and, essentially, state that ACOs are aimed at reducing the use of specialists.

9. Many of the ACO concepts are quite aspirational in nature. The regulatory dialogue is very negative toward the current system and idealistic as to how ACO-driven case management can work and how ACOs can offset the fragmenting of care.

10. In terms of pursuing success in this new mode of delivery, most systems have to work through competing agendas. They still must profit in the fee-for-service world but have to be prepared to also live in a managed care environment. This can create conflicting motives, particularly as fee for services is still relied on to keep the lights on.

II. 9th Annual Orthopedic, Spine and Pain-Management Driven ASC Conference - “How should ASCs, hospitals and orthopedic, spine and pain practices align?”; How can ASCs and practices thrive in the next few years?; Meet every ASC buyer; What will ACOs Mean for specialists? June 9th to 11th; Chicago, Illinois, Michigan Avenue.

This year’s Orthopedic, Spine and Pain Management-Driven ASC Conference will focus on several issues that are emerging as critical for orthopedic physicians, spine specialists and pain management physicians. These include issues such as:

  • Should you sell your ASC and/or practice or not? How should you align with ACOs? How should ASCs, specialists and hospitals align?
  • How can independent surgery centers and practices thrive?
  • What is and is not legal with respect to a wide range of issues, including out-of-network issues, anti-kickback safe harbors, recruiting and more.
  • What ancillaries can your practice profit from? What are the best practices for co-management arrangements?

If you are joining us, please register by May 1, 2011 and take a discount of $200. Please note “discount per Scott Becker” on the registration.

We look forward to speaking with you soon. Should you have any questions, please contact me at 312-750-6016.

Very truly yours,

Signature

Scott Becker

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