SENATE BILL REPORT

SB 6522

This analysis was prepared by non-partisan legislative staff for the use of legislative members in their deliberations. This analysis is not a part of the legislation nor does it constitute a statement of legislative intent.

Background: In recent years, health care innovations like medical home projects have sought to provide comprehensive, coordinated patient care using integrated services, health information technology, prevention, and specific ways to track patient health outcomes. Other innovations focus on paying providers based on how treatment is rendered instead of the number of patient visits. Such innovations include so-called bundled payments, where physician and hospital payments are lumped together. Rather than paying for a particular procedure, doctors and hospitals are paid for all services to a patient in an episode of care for a particular condition. Depending on how the project is structured, an episode could be defined in several ways; a period of hospitalization, hospital care plus a period of post acute care, a stretch of care for a chronic condition, or even all inpatient or out patient care.

The Accountable Care Organization (ACO) model establishes a spending benchmark for health care providers in an organization based on an expected level of spending. An ACO offers provider organizations, such as a medical home or a primary care practice, the opportunity to share savings from payers when savings are achieved through such practices as care coordination, wellness services, chronic care management , effective referral patterns, and other approaches that achieve quality outcomes at lower expense. The concept attempts to shift the emphasis from volume and intensity of services to incentives for efficiency and quality.

Currently Washington State health agencies lead two medical home pilot projects with 33 participating primary care practitioners.

Summary of Bill (Recommended Substitute): The Health Care Authority must appoint a lead organization by January 1, 2011, to support at least two accountable care organization pilot projects which will be implemented no later than January 1, 2012. The lead organization will contract with a reputable research organization with expertise in ACOs and payment systems. The designated lead organization will provide support for these pilots without using state funding; however, they may seek federal funds and solicit grants, donations, and other sources of funding. ACOs in these pilots are health care providers and systems that are accountable for improving quality and slowing spending. ACOs must use spending benchmarks and report health outcomes.

The lead organization must coordinate with medical home projects established in statute and report to the Legislature by January 1, 2013, on the progress of the ACOs with recommendations for expansion.

EFFECT OF CHANGES MADE BY HEALTH & LONG-TERM CARE COMMITTEE (Recommended Substitute): HCA is directed to appoint a lead organization to support the creation of two accountable care organization pilot projects. The lead organization will represent the health care payer and providers, have expertise in payment and practice reform and be able to support costs of it work without using state funding. HCA and the lead organization may seek federal funds or solicit grants, donations, or gifts to support implementation of the ACO pilots.

Implementation will be scaled to fit within resources.

Staff Summary of Public Testimony on Original Bill: PRO: The approach to primary care described in ACO is happening now, and it does improve patient outcomes and lower costs. If we are really going to reform health care, we need to reform both the delivery system and the payment system. Right now there is no incentive to reduce unnecessary care, inappropriate tests, and avoidable hospital admissions. ACOs promote treatment that focuses on performance measures and payment incentives that change current practice. We should expand any opportunity to do this and piloting ACOs is a step in the right direction. This bill could go further, but it is the right thing to do.