Small-Picture Approach Flips Medical Economics

CHICAGO — Even as she struggled to manage her Type 2 diabetes, Fannie Cline’s condition spiraled downward. It was not uncommon for Mrs. Cline, a 69-year-old retiree, to have dizzy spells, some so bad that they landed her in a hospital emergency room near her home here on the South Side.

But last May, she began to receive extra attention from Gwlie Lloyd, a registered nurse and care manager at Advocate Health Care, which operates a number of Chicago hospitals and clinics. Ms. Lloyd frequently calls to check on Mrs. Cline; she offers advice on diet and exercise, schedules appointments, orders meals for delivery and arranges appointments with a social worker.

As a result, Mrs. Cline’s health has markedly improved. She is more active, the dizzy spells have subsided and she has not been hospitalized since May. Now she spends her days visiting friends.

“It is nice to have someone call you in between your visits to the doctor’s office to see how you are,” Mrs. Cline said. “If my blood sugar is elevated and I feel off balance, she will ask me what I have been eating lately. She might say, ‘Maybe you need more oatmeal or fruit.’ ”

The extra attention Mrs. Cline receives is the result of a radical departure from traditional fee-for-service medicine. Advocate runs one of the nation’s first and largest accountable care organizations, a new kind of health care practice gaining momentum in part because of the Affordable Care Act signed into law two years ago by President Obama.

A.C.O.’s, as they are known, are collections of medical providers who band together under one business umbrella. The organization can include primary care doctors, specialists, social workers, pharmacists and nurses. The difference is in how these providers are paid: Instead of an insurance company or the government reimbursing each provider for each service provided to each patient, the A.C.O. is paid simply to care for a group of patients.

If the organization can reduce the cost of caring for the patients while maintaining their health, it gets to keep and divide up some of the savings — a powerful incentive to do things differently, experts hope. But if the A.C.O. cannot meet quality measures and costs rise, the providers in the organization may well receive lower payments.

The A.C.O. may strike some critics as a worrying repackaging of the H.M.O. in its earliest incarnations, but there is little doubt that more Americans will be enrolled in these provider groups in the coming years. “A.C.O.’s are coming, and it will change the way we pay for health care,” said Dr. Michael Cryer, national medical director for the employee benefits consultancy Aon Hewitt. “Providers are doing things in a positive way rather than a reactive way. We are seeing the beginnings of a tsunami.”

For the past year, Advocate has cared for more than 200,000 patients insured by Illinois Blue Cross plans, and so far the A.C.O. has managed to reduce hospital stays and overall costs for patients, according to Steve Hamman, vice president for network management at Illinois Blue Cross. Advocate, like other A.C.O.’s, manages to do this in large part by hiring people like Ms. Lloyd to better coordinate patient care.

Care managers exist outside of A.C.O.’s, but they are particularly important in this new health care setting. Care managers keep patients like Mrs. Cline out of expensive hospitals by reminding them to take their medications, helping them to eat properly, and troubleshooting logistical problems that elderly and sick patients often encounter.

“A care manager may care for up to 150 patients, and the savings from keeping these patients healthy, and potentially out of the hospital, pays for their salary several times over,” said Dr. Lee Sacks, chief medical officer at Advocate. “But it’s more than just the economics. It’s the right thing to do.”

Private insurers nationwide have begun enrolling beneficiaries in A.C.O.’s, but they may have an even bigger effect on Medicare participants. In April, A.C.O.’s participating in the Medicare Shared Savings Program will begin accepting Medicare patients. By the end of the year, at least two million will be enrolled, according to government estimates.

Medicare plans to require that A.C.O.’s achieve 33 quality measures for patients, like reducing readmissions of patients who experience an infection or complication the hospital should have prevented. (Private insurers like Illinois Blue Cross have similar requirements, though they can vary.)

Unlike H.M.O.’s that restrict a patient’s choices of doctors and hospitals to the health plan’s network, A.C.O.’s must offer Medicare enrollees a choice of how they get their care and from whom. Patients in A.C.O.’s can go outside of a network and still receive reimbursement, and an A.C.O. has latitude in how it organizes providers and coordinates care.

Medicare beneficiaries will be assigned to an A.C.O. through the doctor that provides them with the most primary care services. They may opt out, but many may not even realize they are enrolled in an A.C.O.

“This is not about restricting care, but to proactively coordinate care and to ensure that the patients’ needs are met early in the process,” said Jonathan Blum, deputy administrator at the Centers for Medicare and Medicaid Services.

Still, some experts are concerned about the advent of an untested model of care that is expensive and complicated to put in place, and that recalls to some degree the practices of H.M.O.’s 20 years ago, when doctors were paid monthly fixed fees in hopes that they could provide all the care a patient needed — and still have money left over for a profit.

Not so long ago, politicians and the news media feasted on terrible stories of patients denied care by their H.M.O.’s. And it was not uncommon to see doctors’ practices go out of business or file for bankruptcy when they were unable to manage the financial risks.

Dr. Joseph Golbus, president of NorthShore University HealthSystem’s medical group, a rival to Advocate in Chicago’s northern suburbs, said the A.C.O.’s structure places even more of the financial risk of caring for sick patients on providers, not the insurance companies or Medicare.

While many hospitals nationwide are snapping up local practices in hopes of transforming themselves into A.C.O.’s, others are hesitating because they worry about high administrative costs and more bureaucracy.

“The costs are going to accrue to the providers, but the benefits are going to accrue to everyone else,” said Dr. Golbus. “What I think killed H.M.O.’s in the ’90s was limiting access to patients and telling the doctor he is now worth 17 cents per member, per month. We don’t want to see that again.””