Cornerstone: The Rise and Fall of a Health Care Experiment


But the confirmation proved premature. Within weeks of Ms. Burwell’s announcement, an exodus of doctors had begun at Cornerstone. In the months that followed, nearly 70 of its 228 doctors left, many attracted by the chance to make more money at area hospitals.

There were also dueling lawsuits, including one accusing the practice of gross mismanagement.

Over the next year and a half, Cornerstone was thrust into a financial crisis. Last May, unable to go it alone, Cornerstone was bought by Wake Forest Baptist Medical Center, a major hospital system in the area.

The practice now stands less as a shining example of what medicine can become and more as a cautionary tale.

Cornerstone’s experience illuminates just how tough it can be to overhaul the way medical care is delivered, even when the change is a priority for doctors and the government. As Cornerstone learned, hospitals and doctors frequently fight the changes, because they believe they can make the most money under a fee-for-service model.

It also suggests that while independent practices like Cornerstone’s may have more flexibility than big hospitals to test new business models, they may not have the capital or financial savvy to succeed. In hindsight, Cornerstone moved too fast, too soon. The group assumed the new model would naturally lead to changes in how it was paid, but it did not persuade enough insurers quickly enough to go along.

“It’s like trying to change the tire while the car is going 60 miles an hour,” said Dr. Grace E. Terrell, the former chief executive who helped form Cornerstone in 1995.

Cornerstone’s accountable care structure (the group is still using it, despite the new ownership) is one of several models being tested by Medicare and private insurers, part of an overall push away from the traditional piecemeal fee-for-service method. These organizations are supposed to be paid based on the value of care they deliver.

Sometimes under an accountable care organization (often referred to as an A.C.O.), a medical group is paid a lump sum for a patient. The group stands to profit if the patient is treated cost-effectively and meets certain quality standards. If, however, the patient gets unnecessary care or ends up in the hospital for a preventable condition, the medical group can lose money.

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Dr. Grace E. Terrell, the former chief executive who helped form Cornerstone in 1995, examining a patient.

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Mike Belleme for The New York Times

Prodded by Medicare, the number of accountable care organizations has soared to 630 in 2016 from roughly 75 in 2012, according to Oliver Wyman, a Chicago consulting firm. Most have the backing of a hospital system. But others, like Cornerstone’s rookie effort, are run by doctors. A small number are run by health insurers.

While the Trump administration may slow the government’s push in this direction, insurers and others said the shift to new models was unlikely to change.

“There is no Plan B,” Dr. Alan Muney, the chief medical officer for Cigna, a national insurer, said before the presidential election. “We have to drive to value-based care because the fee-for-service system is unsustainable.”

Under one version of an accountable care program set up by Medicare, groups are eligible for a portion of what they save in medical costs if they also meet certain quality goals. In 2014, most of the groups failed to deliver sufficient savings and quality improvements to earn extra money. Medicare has since adjusted its criteria, partly to allow for greater local variations.

Cornerstone stood out as an exception. It was one of fewer than 100 that received a portion of the savings, and its quality scores were among the highest. The practice was able to sharply reduce hospital admissions and emergency room visits by keeping better tabs on its sickest patients, making sure they regularly saw their doctors.

It offered walk-in clinics that were open evenings and weekends, so patients had better access to care, and offered special programs to help patients with the most complicated medical conditions.

Among its patients was Patricia Britt, 69, who was found to have multiple sclerosis at 40. She was also overweight and had diabetes and high cholesterol. In 2013, she had a stroke, leaving her bedridden, with her right side paralyzed, staring at the ceiling.

Then one day, Dr. Edgar Maldonado, a Cornerstone doctor, came to her house.

“Immediately, he talked to me and tried to get me to talk,” Ms. Britt said, recalling that she could barely respond because of all the medicine she was taking. “I didn’t say much to him, but I really couldn’t.”

Over the next several months, Dr. Maldonado visited as often as once a week, spending two hours sometimes, until Ms. Britt was well enough to travel to his office. The doctor cut her medicines to nine pills a day, from 28, and started her on an intensive physical therapy program.

She can now get around with the help of a brace, has lost nearly 60 pounds and is no longer a diabetic. While she sees the doctor less frequently these days, she said the office is in constant communication.

“If I’m not calling them,” she said, “they’re calling me.”

Her case is exactly how an accountable care organization is supposed to work. Cornerstone’s finances, though, have been another matter.

The push to change to an accountable care business model was led by the hard-charging Dr. Terrell, a general internist and native of North Carolina. By 2000, she was Cornerstone’s chief executive.

Although the business thrived in the years after she took over, she became convinced that overall health care costs remained too high, and she pushed the group to find ways of delivering high-quality care for less money. In 2011, the group voted to formally adopt the new business model.

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High Point Regional Medical Center, a community hospital, was bought by UNC Health Care, a large health system, in early 2013. UNC had the resources to lure highly paid specialists like cardiologists and orthopedists away from Cornerstone.

Credit
Mike Belleme for The New York Times

But the practice would eventually struggle. For one thing, the new model required capital investment, for things like more sophisticated computer systems, and Cornerstone was unable to find an outside partner to provide the capital. The practice relied on a $20 million loan from the local bank, some of which the doctors had to personally guarantee.

Then in early 2013, High Point Regional, the community hospital here, was bought by UNC Health Care, a large health system. In the years that followed, UNC had the resources to recruit highly paid specialists like cardiologists and orthopedists. Specialists at Cornerstone began to leave.

“Many of them went to other hospital systems and practices where they have more of a fee-for-service world,” said Dr. James Anderson, a pediatrician who served as Cornerstone’s chairman of the board.

Then the legal battles began. In one case involving more than a dozen doctors, Cornerstone was accused of being “so grossly mismanaged and overextended that it became fundamentally unprofitable, and was able to pay its business debts only by arbitrarily reducing the compensation of certain disfavored physicians,” according to the lawsuit. Lorin Lapidus, a lawyer representing the doctors, declined to comment further. Cornerstone also declined to comment.

With fewer doctors generating revenue, and bills piling up, the practice defaulted on its loan. Cornerstone administrators found themselves with no choice but to sell the practice to Wake Forest Baptist.

“The old-fashioned notion of autonomy didn’t make sense any more,” Dr. Terrell said.

Wake Forest Baptist said it wanted to continue Cornerstone’s efforts to improve quality and reduce costs, but “the model has to change,” said Terry Williams, Wake Forest Baptist’s chief strategy officer. In addition to Cornerstone’s medical practice, Wake Forest Baptist also has a major stake in the practice’s consulting business, which helps other groups become accountable care organizations.

It remains to be seen whether Cornerstone’s model will thrive — or even survive — after the acquisition. The practice has fewer specialists, so many patients have to seek outside services, often at a higher cost. It has also had layoffs at the consulting business. Its accountable care model is now part of an organization that includes other medical groups. It did not receive any performance-based payments in 2015 but is being included in the next generation of models that are paid under Medicare.

Some are skeptical about Cornerstone’s ability to keep costs low while joined to a hospital system that depends on a steady flow of patients.

“If history is a guide, the acquisition of Cornerstone will result in higher unit costs,” Dr. Muney of Cigna said.

But Wake Forest Baptist said it is committed to lowering costs. Dr. Terrell, who now serves as the founder and strategist at the consulting business, agreed. “We’re about more value, for real,” she said.

And it helps that Wake Forest Baptist has the capital Cornerstone desperately needs. The practice was responsible for nearly $10 million in operating losses during the 2016 fiscal quarter ending June 30, followed by $7 million in losses in the most recent quarter, which ended Sept. 30. Cornerstone can now share the cost of investments with Wake Forest Baptist.

It may be that Dr. Terrell and the Cornerstone accountable care model were simply ahead of their time. Dr. Brian Caveney, the chief medical officer for the Blue Cross plan in North Carolina, said being out front came at a cost.

“It’s more complicated than flipping a switch,” Dr. Caveney said.

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