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NJ Officially Welcomes First Three Accountable Care Organizations

New Jersey on Tuesday saw the official launch of three Medicare accountable care organizations: regional consortiums that team doctors and hospitals to improve patient healthcare and reduce wasteful spending -- and share in any savings realized by the federal government if the ACO succeeds at those goals.

The federal Centers for Medicare and Medicaid Services (CMS) approved the Atlantic Health System ACO, whose members include 1,300 physicians, and five hospitals of the Atlantic Health System and Valley Hospital; Hackensack Physician-Hospital Alliance, which includes 735 physicians and advanced practice nurses and the Hackensack University Medical Center; and Optimus Health Care Partners of Summit, whose members include 500 physicians and Atlantic Health.

Allison DeBlois, chief of staff of the New Jersey Health Care Quality Institute, said the ACO approvals are an important step for New Jersey. "There was a period of time when the hospitals were not sure this was something they wanted to do, and we are really glad they are moving forward and taking these quality initiatives. This is where health reform is going."

New Jersey has the dubious distinction of spending more on healthcare than the results warrant, and the ACOs hold the promise of changing that, according to Dr. David Shulkin, president of Morristown Medical Center, vice president of Atlantic Health, and administrator of the Atlantic ACO.

Shulkin said that in New Jersey "We are providing care [to similar] patient populations at upwards of 20 percent higher [cost] than other regions of the country. Quite frankly, there is not a great reason why we can't do what they are doing." He said that the greater efficiency in other areas may reflect the greater number of physicians working in large group practices, or as employees of hospitals and clinics.

"The Atlantic ACO is working with doctors who, frankly, have not worked as closely with hospitals as you see in other parts of the country that have lower costs," Shulkin continued.

"That lack of coordination, the fragmented care that we see in New Jersey, where doctors and hospitals have by tradition worked independently, without an overriding system of care -- I think that begins to explain some of the quality and the cost results," Shulkin added. "And if you believe that healthcare is so complex it needs to operate in a system of care -- which is the ACO model -- I think that we can make those fundamental improvements."

Shulkin believes that as New Jersey moves from fragmented care to the ACO model, "the national spotlight is going to be on us."

The Atlantic ACO will start out with about 48,000 Medicare patients, Shulkin said. By the summer he hopes to bring commercial payers onboard and raise the patient census to about 200,000.

Dr. Richard Lucanie is chair of the Valley region of the Atlantic ACO, which brings 230 physicians to the organization. "We are going to pool our knowledge with colleagues at Atlantic to develop a new model of care, which we have the privilege of building from the ground up," he said. "There will be more emphasis on patient care, especially preventive care." He said the goal is to minimize wasteful duplications of diagnostic tests, pay more attention to patients with chronic illnesses, and avoid preventable hospitalizations.

The ACOs will split equally any savings that Medicare realizes, with the government calculating how much it would have spent if the ACO were not available. The money is distributed to both the physicians and the hospitals. None of the New Jersey ACOs are taking any financial risk; they will share in the profit if CMS saves money, but won't lose money if efficiencies fails to materialize. Elsewhere in the country, ACOs are opting to take some risk in exchange for a higher share in the profit.

Healthcare providers are virtually unanimous in agreeing that there is considerable waste in the system; a successful ACO should have fewer hospital admissions, fewer emergency room visits, fewer readmissions, and fewer procedures overall. That means less revenue for doctors and hospitals, but by giving the providers half of the revenue saved, the government eases the financial impact of the shift to an ACO.

"The entire medical center team is thrilled that our application has been accepted," by CMS, said Robert C. Garrett, president and chief executive officer of Hackensack UMC. "Coordination of care and efficient use of resources have been a focal point for our medical center, and we look forward to continuing this commitment through our newly formed ACO."

Dr. Thomas Kloos, chief executive of Optimus Healthcare Partners, said he expects to start out with 27,000 Medicare patients and then hopes to enroll commercial payers and increase the patient population to about 100,000 by year end. The ACO will have 500 physicians, including about 100 primary care practices. These will be given help to become patient-centered medical homes, which seek to improve patient outcomes by coordinating care. Atlantic Health is a minority investor in Optimus. In addition to working with the Atlantic's hospitals -- Morristown, Overlook and Newton -- the ACO will work with Somerset Medical Center, St. Barnabas Medical Center, and Warren Hospital.

Kloos said he estimates that the ACO could achieve a 5 percent savings off what Medicare would spend absent the ACO "by improving care and being more collaborative in how we work."

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