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At the Intersection of Health, Health Care and Policy

doi: 10.1377/hlthaff.2010.0824, , no. (2010):Health Affairs

A Model For Integrating Independent Physicians Into Accountable Care OrganizationsMark C. Shields, Pankaj H. Patel, Martin Manning and Lee Sacks

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By Mark C. Shields, Pankaj H. Patel, Martin Manning, and Lee Sacks

A Model For Integrating Independent Physicians Into

Accountable Care Organizations

ABSTRACT The Affordable Care Act encourages the formation of

accountable care organizations as a new part of Medicare. Pending

forthcoming federal regulations, though, it is unclear precisely how these

ACOs will be structured. Although large integrated care systems that

directly employ physicians may be most likely to evolve into ACOs, few

such integrated systems exist in the United States. This paper demonstrates how Advocate Physician Partners in Illinois could serve as a

model for a new kind of accountable care organization, by demonstrating

how to organize physicians into partnerships with hospitals to improve

care, cut costs, and be held accountable for the results. The partnership

has signed its first commercial ACO contract effective January 1, 2011,

with the largest insurer in Illinois, Blue Cross Blue Shield. Other

commercial contracts are expected to follow. In a health care system still

dominated by small, independent physician practices, this may constitute

a more viable way to push the broader health care system toward

accountable care.

The Affordable Care Act of 2010 in-cluded several delivery system re-forms intended to address deficien-cies in the way health care isdelivered in the United States.

Among these is the accountable care organiza-tion. The Centers for Medicare and MedicaidServices (CMS) defines an accountable care

organization (ACO) as “an organization of health

care providers that agrees to be accountable for the quality, cost, and overall care of Medicarebeneficiaries who are enrolled in the traditionalfee-for-service program who are assigned to [theorganization].”1

The ACO model is not confined to public pro-grams such as Medicare and Medicaid. Advo-cates of ACOs contend that these future caresystems will strengthen US health care by im-proving care, controlling costs, and being heldaccountable for results. However, there are atleast four major challenges to implementing

accountable care organizations across theUnited States. First is the dominance of soloand small-group independent physician practi-ces that provide care to the majority of the USpopulation. Second is the voluntarymedical staff structure within most hospitals, which fails toengage physicians in leading the systemchangesneeded to deliver consistently safe, cost-effec-tive, and high-quality care.2–4 A third challenge

is the dominance of fee-for-service reimburse-ment, which makes moving to more perfor-mance-based payment systems difficult. Fourthis the need to spur ACOs in the private, commer-cial market and not just confine them to publicly financed programs in Medicare and Medicaid.

Challenges To OvercomeAdjusting To The Dominance Of Small Prac-

tices The current focus for ACO developmenthas been on finding ways to build more fully

doi: 10.1377/hlthaff.2010.0824HEALTH AFFAIRS 30,NO. 1 (2011): –©2010 Project HOPEThe People-to-People HealthFoundation, Inc.

Mark C. Shields ([email protected])is vice president for medicalmanagement of AdvocateHealth Care and seniormedical director of AdvocatePhysician Partners, in Mt.Prospect, Illinois.

Pankaj H. Patel is medicaldirector of qualityimprovement and chair of theQI and CredentalingCommittee for AdvocatePhysician Partners, in Mt.Prospect.

Martin Manning is presidentof Advocate PhysicianPartners, in Oak Brook,Illinois.

Lee Sacks is executive vicepresident and chief medical

officer of Advocate HealthCare and chief executiveofficer of Advocate PhysicianPartners, in Oak Brook.

J an ua ry 2 0 11 3 0 :1 H e a lt h A f f a i r s 1

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integrated systems that for the most part wouldemploy their own staff physicians. However, few such organizations exist. Most parts of thecoun-try have no such integrated health care systems,and fewer than 15 percent of US physicians arebelieved to be affiliated with them.5

Other types of accountable care organizationsfocused on solo and small-group physician prac-

tices could give the concept broader reach. Sev-eral models that could bolster the spread of accountable care organizations include physi-cian-hospital organizations, independent prac-tice associations, virtual physician organiza-tions, and health plan–provider networks.2

Nevertheless, there arenumerous reasons why the ACO model is difficult to apply to solo andsmall-group practice.6 Solo practitioners andsmall groups rarely have the capital to investin the kind of information technology (IT) or quality improvement training for staff that isnecessary to achieve ACO status.7 Their small

size makes it difficult to implement key quality tools such as disease registries or electronichealth records.8 Management support and a cul-ture of developing consistent processes can helplarger groups outperform small groups.9–11

Traditional Hospital Voluntary Medical

Staff The weaknesses of the traditional hospitalmedical staff structure, which relies heavily onindependent, voluntary physicians, have beendocumented by numerous observers.4,12 Theseweaknesses include a lack of demonstrated abil-ity to rapidly improve quality and safety; to re-move from staff any physicians practicing sub-

optimal care; and to reward physicians for improved performance. These limitations makethe hospital medical staff, although widely avail-able across the country, a poor chassis for a suc-cessful accountable care organization. Other structures that include independent physicianswill need to be used.

D omi n an ce of F e e- F or - Se r vi ce P ay m en t

Fee-for-service reimbursementis often criticizedfor rewarding volume and intensity of healthcare services rather than quality and outcomes.For these reasons, many “pay for performance”programs have developedover thepast decade to

encourage higher quality, better outcomes, andgreater cost-effectiveness instead of volume.

Need To Move Beyond Public Programs TheAffordable Care Act offers new potential to testthese approaches, but it focuses on doing sothrough Medicare and Medicaid.13 However,similar innovations need to take place in theprivate, commercial market if accountable careorganizations are to succeed widely. The capital,information technology, and management re-source needs are significant for an accountablecare organization, and the resources must be

spread over a large patient population. Further-more, to most effectively reengineer the clinicalpractice of hospitals and physiciansa funda-mental characteristic of accountable careanACO shouldaddressthe care of allpatients, thosein federal and commercial insurance pro-grams alike.

Accountable Care: A ModelAdvocate Physician Partners, a joint venture rep-resenting approximately 3,500 physicians serv-ingpatientsin Illinois, offersa solid example of acare system that could serve as a model for new accountable care organizations. Advocate Physi-cian Partners, hereafter referred to as the part-nership, is affiliated with Advocate Health Care(hereafter called Advocate), a not-for-profit,faith-based health system in northern and cen-tral Illinois. The system has ten hospitals, offershome care, and employs 800 physicians in large

multispecialty groups who are members of thepartnership.

For more than fifteen years, the partnership, ajoint venture between physicians and Advocate,has performed care management and managedcare contracting. Practices in the partnershipinclude solo and group, single-specialty andmultispecialty, employed and independent.There are 2,700 independent physicians in thepartnership who work in more than 900 solo or small, single-specialty group practices of threephysicians or fewer. There are about 1,700 other independent physicians who are not in the part-

nership but are on the staffs of Advocate hospi-tals. Member physicians provide care for almostone million patients in commercial health insur-ance programs; 230,000 in health maintenanceorganization (HMO) plans and more than700,000 in fee-for-service plans.

The partnership’s independent physiciansshare in its governance with Advocate HealthCare. This is accomplished through two equalclasses of governance votes, one for Advocateand one for local physician-hospital organiza-tions. The votes of a majority of each class isrequired for a measure to pass.

Physicians elect theleaders of each local physi-cian-hospital organization, who then send a del-egate to the overall partnership board. Further-more, employed physicians occupy many of theAdvocate governance seats in the partnership,which places physicians in a supermajority andhospital managers in a minority of individualsserving.

This arrangement creates a structure that en-ables physicians and hospitals to work together to improve care with common quality and cost-effectiveness goals. Physicians and hospitals are

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collectively accountable for quality and cost dur-ing negotiations with payers, because the part-nership negotiates on behalf of both Advocateand physicians and signs single-signature con-tracts. Physicians must also meet strict member-ship requirements, such as threshold scores onannual performance report cards and use of key information technology.

Each hospital and its associated partnershipphysiciansthose employed and those who areindependenthave a local physician-hospitalorganization board that leads physicians towardquality, patient safety, and cost goals. Physiciangovernance contributes to widespread physicianacceptance of performance measurement andimprovement.

For example, during 2004 and 2005 the part-nership removed more than fifty physicians for noncompliance with the use of IT. Such an actwould not have been possible without the strongphysician governance afforded by the overall ar-

rangement. Another example of strong gover-nance is support for a progressively more com-prehensive and challenging set of physicianperformance goals described below, which areset each year and which physicians must meet toremain in the partnership.

During the past fifteen years, the governance,culture, incentive programs, and infrastructurefor reengineering care in the partnership hasimproved. Many patients have been enrolledin risk programs, or health maintenance organi-zation–type arrangements, in which overall pay-ments to the partnership are capitated.

During thepast seven years in particular, how-ever, the partnership also has extended its qual-ity and cost-effectiveness programs used for capitated patients to patients in fee-for-servicehealth insurance plans. We contend that, to beeffective, accountable care organizations willhave to be flexible enough to care for patientscovered by payers that have dominant paymentsystems of either fee-for-service or capitation.

Limitations Of This Case ReportThis case study covers both commercially in-

suredriskandfee-for-servicepatientsinthepart-nership’s program. Only a small number areolder than age sixty-five, and it is unknownwhether the model would be successful if ex-panded to Medicare and Medicaid populations.

A number of the inferred medical cost savingsof the program are based on the achievement of key clinical outcomes that have been demon-strated in the literature to reduce costs. For ex-ample,the cost savings from thebetter control of blood glucose for patients with diabetes com-pared to benchmarks is estimated based on the

literature.14–16 At this time, the partnership dem-onstrates better blood glucose control but doesnot yet have the data to demonstrate those sav-ings in its population.

Although the partnership’s program recently expanded to central Illinois physicians, some of whom are in rural practices, performance im-provement has not yet been demonstrated in

those locations. However, the ability to integratesmall practices and use web-based communica-tion are hallmarks of the partnership’s experi-ence and will be important to improving perfor-mance for rural practitioners.

The partnership’s performance for fee-for-service patients exceeds benchmarks, as de-scribed below. However, there are limited pub-lished benchmarks for fee-for-service patients,and data collection methods for those bench-marks may still limit accurate comparison.

Finally, the partnership has deep experienceas a riskcontractor. For example, thisexperience

has helped the partnership establish governanceresponsible for both quality and costs, dissemi-nate and enforce mandatory protocols for physi-cians, and provide regular feedback to physi-cians on performance and incentive payments.

How Advocate Physician PartnersOvercomes The Barriers To ACOAdoptionDominance Of Fee-For-Service Payment Thecurrent fee-for-service system does not reim-burse physicians adequately for beneficial activ-

ities such as chronic disease management, pre-ventive counseling, and care coordination. Thepay-for-performance system developed by Advo-cate Physician Partners addresses these short-comings. It is based on performance againstan extensivelist of metrics, discussedbelow, thatcover technology use, efficiency, quality, safety,and patient experience.

Performance payments to both primary carephysicians and specialists are based on severalfactors. These include individual performanceon a specialty-specific report card; the perfor-mance of a physician-hospital organization on

all metrics; and other “work” incentives. “Work”measures have included the number of patientsin each physician’s registry; physicians’ use of inpatient computerized physician order entry;and inpatient efficiency measures such aslength-of-stay.

The intended effect of these performance pay-ment incentives is to increase individual ac-countability and focus physicians on populationhealth as well as the health of individuals. Theperformance payment system is also intended tocreate accountability for group performance,

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which in turn creates peer pressure to improve;to increase collaboration across specialties; andto increase physicians’ engagement with hospi-tal goals.

Funding for the pay-for-performance pro-gram, currently 10 percent of allowable billings,is established through negotiation with the in-surance carriers. In the future, “shared savings”

from an accountable care organization could fi-nance such a fund and would be distributed us-ing similar techniques. In thespring of 2010, thepartnership distributed $38 million in incentivepayments to its 3,700 physicians, both indepen-dent and employed.

Dominance Of Solo And Small-Group Prac-

tices Federal antitrust law generally prohibitsjoint negotiations by independent practices, butthe Federal Trade Commission has granted thepartnership model regulatory approval that al-lows independent physician practices to nego-tiate together for fee-for-service contracts. The

reason is that the practices are deemed to beimproving quality, patient safety, patient expe-rience, and efficiency, and therefore to be pro-ducing benefits to the public through financialor clinical integration.17 In the case of the part-nership, joint negotiation is crucial to engagingphysicians and rewarding them for im-provement.▸▸JO I NT C O NT RAC T I NG: Because HMO con-

tracts typically include integration throughshared financial risk, the Federal Trade Commis-sion (FTC) has traditionally permitted joint con-tracting for HMO products. The commission has

also allowed joint contracting on the basis of “clinical integration” in a limited number of sit-uations,including thepartnership. Additionally,the partnership accounts for only 15 percent of physicians and hospitals in its market, northernand central Illinois. This is much less than thetypical level at which antitrust scrutiny related tomarket concentration is raised.18

The permission from the FTC for joint con-tracting by independent physicians has madeit possible for the partnership to negotiate fee-for-service (preferred provider organizations)contracts with the nine major managed care or-

ganizations in the northern Illinois market. Thepartnership also has two HMO (risk) contracts.

Because managed care organizations typically reimburse providers using fee-for-service pay-ment arrangements, the model that the partner-ship has developed with them, which includesbothfee-for-service and incentive arrangements,couldeasily be extendedto other provider organ-izations across the country.▸▸O T H E R RE AS O NS F O R P H Y S I C I ANS T O JO I N:

In addition to joint contracting, physicians jointhe partnership for several other reasons. Most

view it as an opportunity to take a lead role inimproving health care. Because the partnershipnegotiates on their behalf, physicians need notdirectly interact with multiple managed care or-ganizations.

Similarly, because all of the local-market man-aged care organizations delegate credentialingof physicians to the partnership, the administra-

tive burden for physicians to obtain networkcredentialing by each organization is greatly re-duced. The partnership uses a central verifica-tion organization accredited by the NationalCommittee for Quality Assurance (NCQA) to es-tablish thatparticipating physicians areproperly credentialed.

The partnership provides physicians withquality improvement expertise and an infra-structure to drive performance improvement.That infrastructure includes electronic informa-tion systems that would otherwise be beyondtheir capital resources (see Appendix).19,20

▸▸C O M M ON M E AS URE S: The partnership hasalso negotiated a common set of performancemeasures with all contracting managed careorganizations to improve quality and cost-effectiveness (see Appendix).20 By identifying asingle set of measures with standard definitionsand data collection mechanisms spanning allpayers, the partnership can focus the attentionof physicians and hospitals on meeting theseperformance measures.

Before this single set of measures was ac-cepted, each managed care organization hadits own set of measures, thresholds for success,

and data-reporting processes. This proliferationof metrics created a sizable administrative bur-den for providers and resulted in diffusion of improvement efforts.

In contrast, the use of a single set of measuresis a key reason that outcomes improvement hasbeen realized. It is rare that a single payer hasadequate data on physicianperformance to draw any statistically sound conclusions. By havingthe same set of metrics across all payers, thepartnership provides meaningful feedback onphysician performance.

The partnership’s pay-for-performance pro-

gram rewards physicians for activities notcovered by the traditional fee-for-service system,such as patient outreach, reduced hospitallength-of-stay, reduced emergency departmentuse, and counseling of patients about optimumuse of generic pharmaceuticals. At the sametime, the partnership provides transparency of performance results to the public, as de-scribed below.▸▸P H Y S I CI AN L E AD E RSH I P: Physician leader-

ship has been essential for the success of thisapproach. At any given time, more than 100

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physicians are involved in various governanceactivities across the partnership.

Given thephilosophy that a governance body ’smostimportant resourceis its time,considerableeffort is spent to ensure optimal use and out-comes of that time. Each governance body including the partnership board; each localphysician-hospital organization board; and key

partnership committees such as quality, creden-tialing, utilization, and contractinghas a writ-ten committee charter outlining the scope of itsresponsibilities and formal position descrip-tions for chairs and members of those bodies.New physiciangovernance members areselectedthrough dialogue between management and lo-cal physician-hospital organization boards, andprospective candidates are also screened for po-tential conflicts of interest.

A formal orientation program is required for all physicians engaged in governance. This ori-entation provides background and perspective

on the organization and its key strategies, as itallows for a discussion of fiduciary responsibil-ities and other performance expectations. Thepartnership pays physicians for their time onkey governance bodies.

Limitations Of The Traditional Hospital

Voluntary Medical Staff Model Hospitalsview the partnership model as a way to meetcritically important clinical, efficiency, and pa-tient satisfaction goals. Furthermore, the part-nership model allows education, peer pressure,and financial rewards to stimulate physicians tomake use of hospital technologies, such as elec-

tronic health records. This redresses a commonproblem: Hospitals often invest heavily in tech-nologies that are then underused by physicians.

The partnership has coordinated its annualincentive program with the hospital manage-ment incentive program, so some goals areshared. These include CMS performance mea-sures and patient safety goals. In addition, thepartnership’s membership criteria are morestringentthanthoseofthehospitalmedicalstaff.Another advantage for the hospital is the devel-opment of physician leaders through the part-nership governance structure and an opportu-

nity to plan jointly with this leadership.Finally, this partnership is expected tostrengthen physicians’ loyalty to the hospitals.

Success In The Private MarketThe partnership has successfully negotiated fee-for-service contracts with all major managedcare organizations in the northern Illinois mar-ket, as well as two risk contracts from 2006through 2010. Payers view the partnership’s ap-proach as a way to collaborate with providers to

reduce medical costs and improve care.As described above, negotiations have led all

managed care organizations to agree to a com-mon set of performance measures, thereby al-lowing the partnership to focus its efforts onshared goals (see Appendix).20

The partnership works to reducethe resourcesused across episodes of carefor example, an-

nualtotal costs for patientswith chronic diseasessuch as asthma and diabetes, or total episodecosts for patients with severe arthritis requiringtotal joint replacement. This strategy has perma-nent benefit, unlike simple reduction of unitcosts, which can result in volume increasesattributable to physician-induced demand anddesire to achieve target incomes.21

The partnership follows a deliberate process tomake it responsive to the market by selecting,dropping, or modifying performance measures,which currentlynumber 116. These measures aregrouped into five categories: clinical effective-

ness; cost-effectiveness; patient safety; patientexperience; and use of key technology. Staff and physicians evaluate nationally recognizedmeasures endorsed by the National Quality Fo-rum and other national organizations. The part-nership sets priorities based on discussions withkey external stakeholders, hospitals, and physi-cians. When best-practice performance targetsare achieved consistently, measures are retired.

Communicating performance to payers, em-ployers, the general public, physicians, and sys-tem hospitals is important for accelerating im-provement as well as for documenting success

and identifying opportunities for improvement.An annual Value Report20 is published eachspring documenting the prior year ’s perfor-mance (see Appendix for excerpt).22 This publi-cation highlights actual performance againstbenchmarks. Incremental performance abovethe expected level is translated into value for an employer and payer.

For example, the report translates the successof depression screening into reduced costs of medical care and reduced indirect health carecosts such as days lost from work. The structureof this report helps maintain the partnership’s

focus on having a business case. By aligning theindividual self-interests of key stakeholders, thepartnership creates valuethrough collaboration.

Success In Improving Quality AndReducing CostsExamples of success in improving quality andreducing costs are provided below. Further re-sults are available online in the Value Report.22

I n te n si ve Care U n it M ort al i t y AdvocateHealth Care hospitals invested more than







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$10 million in the technology of eICU, an ITsystem that provides biometric, electronic, andvideo monitoring at a centralized commandcenter for all 250 adult intensive care beds ineight of its ten acute care hospitals. (BroMennand Eureka hospitals were recently added to Ad-vocate and are not yet included in the eICU pro-gram.) There are computerized prompts and

reminders to provide eICU staff with early warn-ing that a patient’s condition is deteriorating or that an adverse drug interaction could occur.

This “command center ” is staffed around theclock by board-certified intensivists and inten-sive care nurses. The command center staff sup-plements the bedside staff and attendingphysicians.

Four levels of participation by attending physi-cians with eICU have been used. Some attendingphysicians have been reluctant to allow the eICUphysician to modify a treatment plan until they have been reached and consent given. This can

delay interventions when attending physiciansare in surgery or when response by theattendingto the eICU is delayed. Furthermore, compliancewith evidence-based protocols have improvedwith more delegation to eICU physicians.

The four levels allow attending physicians tocontrol the level of delegation of authority. Atone extreme (lowest level), the attending physi-cians allow intervention with patients only if acardiacarrestoccurs; at the other (highest level),attending physicians allow the plan of care to bechanged by eICU staff before notifying the at-tending physician. To use eICU optimally, at-

tending physicians agree to participate at thehighest level and allow the command center in-tensivists to modify the treatment plan in real

time based on patients’ condition.The partnership actively promoted this pro-

gram by educating its members. In addition,physicians’ participation was part of the physi-cian and local physician-hospital organizationincentive program. Over a three-year period,the percentage of member physicians participat-ing in the highest-level eICU program rose from

73 percent to 96 percent. In 2007, partnershipphysicians had a much higher rate of participa-tion at the eICU highest level for every specialty than nonmember physicians, who constituteabout 35 percent of physicians on the staffs of Advocate Health Care hospitals (p < 0:005)(Exhibit 1). Subsequently, a high level of partici-pation in eICU became a membership require-ment for partnership physicians.

Mortality (both raw and risk-adjusted) has de-creased for adult intensive care patients steadily since the eICU program was implemented in2003. A key reason for this outcome is the high

participation in eICU by partnership physicians,which has greatly facilitated the implementationof clinical protocols such as those that reducecentral-line infections and ventilator-associatedpneumonia.

Between 2004 and 2009, central-line infec-tions fell steadily from sixty-four to thirty-threeper year, which equates to 0.8 infections per thousand central-linedays. That compares favor-ably to the national average of 5 infections per thousand central-line days.23 Ventilator-associ-ated pneumonia and associated costs from thiscomplication havebeen reduced (Exhibit 2). The

rate of fewer than 0.5 cases per thousand venti-lator days compares favorably to the nationalrate of 2–11 per thousand ventilator days.24

Over all R ank i ng F or Qu ali t y An d E f fi -

ciency Advocate Health Care management be-lieves that the physician and hospital collabora-tion drivenby thepartnership was a major factor behind the outcomes that led Thomson Reutersto rank Advocate in the top 10 of 252 healthsystems for quality and efficiency for 2009 and2010. For many of the partnership’s 116 perfor-mance measures, hospital managers have thesame incentive metrics that physicians have.

Immunizations And Chronic Disease Out-

comes The partnership’s focus on disease regis-tries and practice reengineering has drivenperformance improvement in such areas as im-munizations and chronic disease care. Resultsnow compare favorably to the best resultsachieved by HMOs and preferred provider or-ganizations (PPOs) as reported by the NCQA.Exhibit 3 shows 2009 results for HMO andPPO patients for the partnership as well as na-tional means.

In particular, the partnership’s results typi-

Exhibit 1

Adoption Of eICU By Physicians At Advocate Hospitals, 2007

Advocate Physician Partners

Non–Advocate Physician Partners

Cardiology

Family practice

Surgery

Internal medicine

Orthopedics

Pulmonology

Percent

SOURCE Advocate Health Care. NOTE Data for hospitals with electronic intensive care unit (eICU)available.

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cally exceed NCQA results for measures that in-volve significant condition management such ascontrol of blood sugar, cholesterol, and bloodpressure.25,26 Previously, the NCQA and others27

have reported that the performance for patientsin PPOs significantly lags that of patients inHMOs. However, the partnership has narrowedthis performance gap.

Exhibit 2

Ventilator-Associated Pneumonia In The Intensive Care Unit: Avoided Cost Trend, 2004–10

Ventilator-associated pneumonia cases

Ventilator-associated pneumonia direct variable cost

Avoided cost

Ventilator-associated pneumonia cases

SOURCE Advocate Health Care. NOTES Cost per million is the avoided direct variable cost and avoided cost expressed in millions ofdollars; it is represented by red and blue bars and relates to the left-hand y axis. The number of cases is represented by the green lineand relates to the right-hand y axis. Cases for 2010 were forecast based on an annualization of January 10–April 10 data. BethanyHospital was excluded from January 2007 forward. BroMenn Medical Center was included as of January 2010.

Exhibit 3

Quality Outcome Comparison: HEDIS National Means Versus Advocate Physician Partners (APP) Scores, 2009

Measure

Health maintenance organization (HMO) Preferred provider organization (PPO)

HEDIS (%) APP (%)

Difference(percentagepoints) HEDIS (%) APP (%)

Difference(percentagepoints)

Childhood immunization

Combination 3 73.4 83.0 9.6 40.4 78.0 37.6

Diabetes

HbA1c testing 89.2 88.0 (1.2) 83.3 70.0 (13.3)Poor HbA1c control (> 9)a 28.2 32.0 (3.8) 44.6 43.0 1.6Good HbA1c control (< 7) 42.1 42.0 (0.1) 30.3 35 4.7Eye exams 56.5 54.0 (2.5) 42.6 37.0 (5.6)LDL-C screening 85.0 84.0 (1.0) 78.6 67.0 (11.6)LDL-C control (< 100) 47.0 54.0 7.0 36.8 47.0 10.2Monitoring nephropathy 82.9 88.0 5.1 69.9 60.0 (9.9)Blood pressure control (< 130=80) 33.9 72.0 38.1 23.6 58.0 34.4Blood pressure control (< 140=90) 65.1 72.0 6.9 46.3 58.0 11.7

Cardiac

LDL-C screening 88.4 88.0 (0.4) 80.2 79.0 (1.2)LDL-C control (< 100) 59.2 72.0 12.8 42.3 68.0 25.7

SOURCES Advocate Health Care; National Committee for Quality Assurance (NCQA). NOTES Entries in parentheses indicate worse score for Advocate Physician Partnersthan NCQA. HEDIS is Healthcare Effectiveness Data and Information Set. HbA1c is hemoglobin A1c, a measure of diabetes control. LDL-C is low-density lipoproteincholesterol. aLower number is better.

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Success With Asthma As part of a compre-hensive program for care of asthma patients, thepartnership has implemented standardizedasthma action plans for patient home manage-ment that can be individualized for specific pa-tients. This tool has been recognized as the op-timal strategy for integration of differentcomponents of asthma treatment.28 In 2009

the partnership implemented annual plans for 83 percent of its 5,268 asthma patients. In con-trast, a national study showed that only 26 per-centofcontrolledasthmapatientsand35percentof uncontrolled asthma patients received such aplan from their physicians.29

Examples Of Cost ReductionUse Of Generic Drugs The increased use of clin-ically appropriate generic drugs is a major op-portunity to improve the cost-effectiveness of health services. A 1 percent increase in the use

of generic drugs leads to a 1 percent decrease inthe overall cost for a pharmacy benefit plan.30

The partnership has used a variety of tech-niques to accelerate the use of clinically appro-priate generic drugs, including employing twofull-time pharmacists who provide academic de-tailing to physicians.31 Academic detailing is atechniqueof evidence-basedcounseling of physi-cians by pharmacists about the benefits, risks,patient costs, and other aspects of pharma-ceuticals.

The partnership provides each physician withan online listing of all filled prescriptions, high-

lighting opportunities for substitution of ge-nerics. The partnership also provides patientswith vouchers for generic drug copays, whichhas increased the use of clinically appropriategeneric drugs and reduced out-of-pocket ex-penses for patients.32

At the end of 2005, the partnership’s genericprescribing rate (total generics divided by total

prescriptions) was 52 percent; at the end of 2009, it was 71 percent. The comparable ratesfor two major insurers in the Chicago metropoli-tan area were 64.6 percent and 66.4 percent,respectively.33 The partnership’s performanceled to annual savings of $14.8 million for insur-ance companies, employers, and patients com-pared to the Chicago market.

Administrative Savings Electronic data in-terchange of claims has been a key metric in thepartnership’s program because it is a rapid way for insurance companies and physicians to re-duce costs by eliminating manual handling of

claims. Industry research estimates that theuse of electronic data interchange can result ina savings of $3.73 per claim for providers com-pared to the cost of processing claims man-ually.34 The savings by the insurance companieswould be expected to be an equal amount.

In 2007, as reported by a major insurance com-pany, partnership physicians across all locationswere submitting claims electronically at a ratewell over theChicago market rate of 74.5 percent(personal communication between authors andJ. Lindquist, March 20, 2008) (Exhibit 4). Thiscarrier reported the overall rate of electronic

Exhibit 4

Percentage Of Physician Service Claims Handled By Electronic Data Exchange In Physician-Hospital OrganizationsParticipating With Advocate Physician Partners, 2006 And 2007

Percent

Christ GoodSamaritan

GoodShepherd

IllinoisMasonic

Lutheran SouthSuburban

Trinity

SOURCES Advocate Health Care. Community performance (denoted by dotted rule), 2007, Aetna Health.

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submission by partnership member physiciansto be 88.7 percent. This submission rate repre-sents an annual savings of more than $2 millionto providers andanother $2 million to insurancecompanies, because partnership physicians sub-mit more than four million preferred provider claims annually.

Implications For ACO Design AndRegulationThe partnership’s structures and processes haveovercome the four challenges to widespreadadoption of accountable care organizations:dominance of small physician practices; tradi-tional hospital medical staff structures; fee-for-service reimbursement; and private-sector acceptance.

Advocate Physician Partners signed its firstcommercial accountable care organization con-tract effective January 1, 2011 with the largest

insurer in Illinois, Blue Cross Blue Shield. Other commercial contracts areexpected to follow. Thepartnership model has broad applicability for the future of ACOs within the US health caresystem. Implementation guidelines and regula-tions by CMS should encourage this ACO modeltype in federal and federal-state programs.

Other key elements of the Advocate PhysicianPartners model that lend themselves to anaccountable care structure include the ability to operate such a program over a large and di-verse geographic area, financial arrangementsthat permit sharing of medical cost savings

within an accountable care organization, andthe ability to engage physicians in leadingchange. Given the cost of infrastructure, organ-izing for both governmental and commercialpayers offers the best prospects for success.The partnership has demonstrated a model thatsucceeds with commercial payers.

Making The Model Work ElsewhereThere arereal and perceivedhurdlesto overcomebefore the Advocate Physician Partners modelcan be attempted in other communities. First,

infrastructure such as information systems,clinical protocols, patient outreach tools andstaff, and professionals to coach physiciansand their staffs is needed to drive performance.Partnering withhospitals can helpovercomethis

obstacle, because hospitals typically have datamanagement and quality improvement infra-structure. Further help with infrastructure cancome from several industry-sponsoredorganiza-tions that offer programs to help physicians andhospitals together improve outcomes, as well asa growing number of commercial vendors thatprovide both technical assistance and consulta-

tions. For example, the American Medical GroupAssociation and VHA have designed collabora-tives to prepare physicians and hospitals to beaccountable care organizations.

Second, physicians and hospitals have to dem-onstrate sustained commitment to improvinginpatient and outpatient performance. Third,contracting with one or more managed care or-ganizations for both base and incentive compen-sation is essential; it is facilitated by demonstrat-ing value to employers and patients, the primary customers.

Finally,meeting the expectations of regulators

such as theFederal TradeCommissionhas been aperceived barrier. However, publications and re-cent decisions by the commission, sponsoredworkshops, and statements by at least one com-missioner point the way to acceptance of an ACOprogram by the FTC.35,36 Furthermore, indepen-dent observers have provided detailed guidanceon how to structure clinically integrated net-works thatwill improve performance, meetregu-latory concerns, and be accountable for per-formance.37,38

ConclusionAlthough the integrated care model with its em-ployed physician workforce could easily becomethe dominant template for future accountablecareorganizations, thistype of modelrepresentsa small fraction of all US providers at present.

A physician-hospital organization such as Ad-vocate Physician Partners, with 2,700 indepen-dentpractice physicians, demonstratesthatsuchan organization can win market and regulatory acceptance; reduce costs; improve health out-comes; be held accountable for outcomes; incor-porate payment mechanisms that reward value

instead of simply volume; and report outcomesto the public. These critical components and thismodel fora successful ACO canbe adapted acrossthe current US health care system. ▪

Although none of the authors has afinancial interest in the venture,Advocate Physician Partners is aparticipant in a joint venture, CI-Now,

that assists physicians and hospitals indeveloping clinical integration programs.The authors thank Joanne Detch andKaren Pubentz for their assistance with

the manuscript. [Published onlineDecember 16, 2010.]







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NOTES

1 Centers for Medicare and MedicaidServices. Medicare “AccountableCare Organizations,” SharedSavingsProgramnew Section 1899 of TitleXVIII, preliminary questions andanswers [Internet]. Baltimore (MD):CMS; [cited 2010 Dec 13]. Availablefrom: https://www.cms.gov/

OfficeofLegislation/Downloads/AccountableCareOrganization.pdf

2 Shortell SM, Casalino LP. Healthcare reform requires accountablecare systems. JAMA. 2008;300(1):95–7.

3 Fisher ES, Staiger DO, Bynum J,Gottlieb DJ. Creating accountablecare organizations: the extendedhospital medical staff. Health Aff (Millwood). 2006;26(1):w44–57.DOI: 10.1377/hlthaff.26.1.w44.

4 Smithson K, Baker S. Medical staff organizations: a persistent anomaly.Health Aff (Millwood). 2006;26(1):w76–9. DOI: 10.1377/hlthaff.26.1.w76.

5 Crosson FJ. 21st-century healthcarethe case for integrated delivery systems. N Engl J Med. 2009;361(14):1324–5.

6 National Committee for Quality As-surance. Supporting small practices:lessons for health reform [Internet].Washington (DC): NCQA; [cited2009 Aug17]. Availablefrom: http://www.ncqa.org/Portals/0/HEDISQM/CLAS/Briefing/Small_Practices_Report.pdf

7 Audet AM, Doty MM, Peugh MA,Shamasdin J, ZapertK, SchoenbaumMD. Information technologies:when will they make it into physi-

cians’

black bags? MedGenMed.2004;6(4).

8 DesRoches CM, Campbell EG, RaoSR, Donelan K, Ferris TG, Jha A,et al. Electronic health records inambulatory carea national survey of physicians. N Engl J Med. 2008;359(1):50–60.

9 Rittenhouse DR, Grumbach K,O’Neil E, Dower C, Bindman A.Physician organization and caremanagement in California: fromcottage to Kaiser. Health Aff (Mill-wood). 2004;23(6):51–62.

10 Casalino L, Gillies RR, Shortell SM,Schmittdiel JA, Bodenheimer T,Robinson JC, et al. External incen-

tives, information technology, andorganized processes to improvehealth care quality for patients withchronic diseases. JAMA. 2003;289(4):434–41.

11 Shortell SM, Schmittdiel J, WangMC, Li R, Gillies RR, Casalino LP,et al. An empirical assessment of high-performing medical groups:results from a national study. MedCare Res Rev. 2005;62(4):407–34.

12 Merry MD. Shifting sands for medical staffs. The Physician Exec-utive. 2008;May/Jun:20–5.

13 Medicare Payment Advisory Com-

mission. Aligning incentives inMedicare: statement by G.M.Hackbarth, chairman, MedicarePayment Advisory Commission, tes-timony before the Committee onEnergy and Commerce Subcommit-tee on Health, US House of Repre-sentatives. Washington (DC): Med-

PAC; 2010 Jun 23 [cited 2010 Dec 5].Available from http://energy commerce.house.gov/documents/20100618/Hackbarth.Testimony .06.23.2010.pdf

14 Williams SA, Wagner S, Kannan H,Bolge SC. The association betweenasthma control and health care uti-lization, work productivity loss andhealth-related quality of life. J OccupEnviron Med. 2009;51(7):780–5.

15 Gilmer TP, O’Connor PJ, ManningWG, Rush WA. The cost to healthplans of poor glycemic control. Dia-betes Care. 1997;20(12):1847–53.

16 AbarcaJ, Malone DC, Armstrong EP,Zachry WM. Angiotensin-convertingenzyme inhibitor therapy in patientswith heart failure enrolled in amanaged care organization: effecton costs and probability of hospi-talization. Pharmacotherapy.2004;24(3):251–7.

17 American Hospital Association.Statement of the American HospitalAssociation on the importance of clinical integration to the nation’shospitals and their patients [Inter-net]. Chicago: American HospitalAssociation; 2009 May 29 [cited2010 Dec 10]. Available from: http://www.aha.org/aha/testimony/2008/080529-tes-ftc.pdf

18 Federal Trade Commission. State-ments of antitrust enforcement pol-icy in health care [Internet]. Wash-ington (DC): US Department of Justice and Federal Trade Commis-sion; 1996 Aug [cited 2010 Dec 10].Available from: http://www.ftc.gov/bc/healthcare/industryguide/policy/hlth3s.pdf

19 Patel PH, Siemons D, Shields MC.Proven methods to achieve highpayment for performance. J MedPract Manage. 2007;23(1):5–11.

20 To access the Appendix, click on theAppendix link in the box to the rightof the article online.

21 Newhouse JP. A model of physician

pricing. South Econ J. 970;37(2):174–83.

22 Advocate Physician Partners. 2010value report [Internet]. Mt. Prospect(IL): Advocate Physician Partners;2010 [cited 2010 Dec 10]. Availablefrom: http://www.advocatehealth.com/valuereport

23 Agency for Healthcare Research andQuality [Internet]. Rockville (MD):AHRQ. Press release, 10-state projectto study methods to reduce centralline–associated bloodstream infec-tions in hospital ICUs; 2009 Feb 19[cited 2010 Jul 25]. Available from:

http://www.ahrq.gov/news/press/pr2009/clabsipr.htm

24 Centers for Disease Control andPrevention. Ventilator-associatedpneumonia (VAP) event [Internet].Atlanta (GA): CDC; 2009 Mar [up-dated 2010 Jul 26]; cited 2010 Dec10]. Available from: http://

www.cdc.gov/nhsn/PDFs/pscManual/6pscVAPcurrent.pdf

25 National Committee for Quality As-surance. The state of health carequality 2007 [Internet]. Washington(DC): NCQA; 2007 [cited 2008 Oct31]. Available from: http://www .ncqa.org/Portals/0/Publications/Resource%20Library/SOHC/SOHC_07.pdf

26 National Committee for Quality As-surance. The state of health carequality: reform, the quality agenda,and resource use [Internet]. Wash-ington (DC): NCQA; 2010 [cited2010 Dec 10]. Available from: http://www.ncqa.org/Portals/0/State%20of%20Health%20Care/2010/SOHC%202010%20-%20Full2.pdf

27 Kaiser Family Foundation. What’s inthe stars? Quality ratings of Medi-care Advantage plans, 2010 [Inter-net]. Menlo Park (CA): Kaiser Family Foundation; 2009 Dec [cited 2010Dec 10]. Issue Brief. Available from:http://www.kff.org/medicare/upload/8025.pdf

28 National Heart, Lung, and BloodInstitute (US). Expert Panel Report3: guidelines for the diagnosis andmanagement of asthma. Rev. ed.Bethesda (MD): NHLBI, Health In-formation Center; 2007 (NIH Pub.

No.: 7-4051).29 Peters SP, Jones CA, Haselkorn T,

Mink DR, Valacer DJ,Weiss ST. Real-world evaluation of asthma controland treatment (REACT): findingsfrom a national web-based survey. JAllergy Clin Immunol. 2007;119(6):1454–61.

30 Investor Relations, ExpressScripts.com [Internet]. St. Louis (MO):ExpressScripts; c2010. Press release,genericdrugs first formillions; 2006May 24 [cited 2010 Dec 14]. Avail-able from: http://phx.corporate-ir .net/phoenix.zhtml?c=69641&p=irol-news

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33 Names of insurers are withheld be-cause of proprietary information.

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ABOUT THE AUTHORS: MARK C. SHIELDS, PANKAJ H. PATEL,

MARTIN MANNING & LEE SACKS

Mark C. Shields isvice president formedicalmanagement ofAdvocate HealthCare and seniormedical director ofAdvocate PhysicianPartners.

Mark Shields, Pankaj Patel, MartinManning, and Lee Sacks make thecase that accountable careorganizations (ACOs) need notnecessarily be large, integratedsystems that employ physicians,and they draw on their ownexperience to explain why. All areprincipals in Advocate PhysicianPartnersa managed care jointventure between Advocate HealthCare and 3,600 physicians.

The authors teamed to “analyzeall aspects of the AdvocatePhysician Partners model,including contracting, governanceand improvement of quality, safety and cost-effectiveness,” saysShields. The authors contend theAdvocate model may be a morereplicable template in a health care

system still largely dominated by independent practitioners. “We andothers will make lots of mistakes,”says Sacks, “but the successfulorganizations will learn from their mistakes, make mid-coursecorrections, and continue toenhance the value of the care they provide.”

Shields is vice president for medical management of Advocate

Health Care and senior medicaldirector of Advocate PhysicianPartners, in Mt. Prospect, Illinois.He has more than twenty-fiveyears’ experience in managing

medical groups, insurancecompanies, and hospitals. He alsohas extensive experience inoperations, strategic planning,market analysis, and finance andhas been on the boards of directorsof several organizations, includingthe Alliance of IndependentAcademic Medical Centers and theMedical Group ManagementAssociation. Board certified ininternal medicine, he is a graduateof Harvard Medical School and has

a master of businessadministration degree from theUniversity of Chicago.

Pankaj H. Patel ismedical director ofqualityimprovement andchair of the QI andCredentialingCommittee forAdvocate Physician

Partners.

Patel is the medical director of quality improvement and chair of the QI and CredentialingCommittee for Advocate PhysicianPartners. He is known for developing quality improvementprograms for physician groups over the past twenty years. He is alsoboard certified in internal medicineand received his medical degree

from Kasturba Medical College, inManipal, India.

Martin Manning ispresident ofAdvocate PhysicianPartners.

Manning is president of AdvocatePhysician Partners and isresponsible for the managementservices organization and payer-contracting activities for allAdvocate physician-hospitalorganizations, covering 230,000capitated lives and more than $1.7billion in managed care revenue for Advocate’s physician-hospitalorganizations and hospitals. He isa founding member of the AdvocatePhysician Partners board of directors and previously served asvice president of financeoperations and regional vicepresident of finance for AdvocateHealth Care. He holds a master of

management degree from the J.L.Kellogg School of Management,Northwestern University.







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Lee Sacks isexecutive vicepresident and chiefmedical officer ofAdvocate HealthCare and chiefexecutive officer of

Advocate PhysicianPartners.

Sacks has been president, andnow is CEO, of Advocate PhysicianPartners, as well as executive vicepresident and chief medical officer of Advocate Health Care. Amonghis responsibilities are clinicalsupport services, informationsystems, research, and managedcare contracting. He completed his

family practice residency atLutheran General Hospital in ParkRidge, Illinois, and he received hisdoctor of medicine from theUniversity of Illinois.

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