ACOs are the future of health care. A five-step plan will prepare your organization for upcoming changes.
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| Brian J. Silverstein, M.D. | Michael J. Randall |
The recent federal health reform law has made it clear that hospital CEOs are going to be operating in a new world by Jan. 1, 2012. That's when the federal government begins shared-savings Medicare programs with accountable care organizations (ACOs), ventures between local health care organizations and related providers that can be held accountable for the cost and quality of care delivered to a population.
Such organizations are the future of the U.S. health care system, and they will lead to nothing less than sweeping, systemic change. Accountable care organizations upend some of the most basic operating principles for hospitals—from how they are paid to how they relate to physicians and measure success.
Accountable care organizations build on the managed care concept while eliminating some of its drawbacks. In an ACO model, an organization assumes responsibility for managing and coordinating the overall care of a population. By lowering costs beyond expected rates and demonstrating improved health outcomes, ACOs received a portion of the "shared savings" that are dispersed among the hospitals, physicians and other providers in the ACO. In other words, ACOs have an incentive to deliver results, unlike today's fee-for-service model that has driven up utilization and therefore costs. To an ACO, then, a hospital becomes an expensive cost center rather than a revenue center. (Click here for answers to common questions about ACOs.)
Faced with such fundamental changes, hospital chief executives need to act. CEOs must lead their organizations in developing the skills to be an ACO or in contracting with an ACO. Like other major undertakings, it will take a lot of time, effort and resources. For all of its very real challenges, the ACO model also offers hospital CEOs, especially those with the foresight to act now, tremendous opportunities for improving care and the overall health of the communities they serve. The model also helps capture market share and ensure long-term sustainability.
The following five-step process is an ACO action plan for CEOs:
Most providers carefully track their performance against key measures established by bond rating agencies, the Joint Commission, health plans, Medicare and other organizations. In the future, however, the value parameters of cost and quality for a population will become paramount.
To find out how your organization compares with competitors and the national average on global cost measures, the Dartmouth Atlas Project's Hospital Care Intensity Report documents variations in care and resource utilization by hospitals throughout the United States. In addition, The Robert Wood Johnson Foundation, in partnership with the University of Wisconsin, offers insight into the overall health of local communities through its County Health Rankings. And USA Today has created an interactive map based on patient outcomes data (e.g., mortality, morbidity and readmissions) compiled by the Centers for Medicare & Medicaid Services. These measures may not be perfect, but they will give you a picture of how others may be sizing up your costs and effectiveness.
To determine the pace at which your organization needs to move toward an ACO model, consider the following:
Value delivery. Hospitals with low rankings in both cost and quality outcomes risk the most, but they also have the most to gain from cost savings. Organizations that already are performing well could leverage their position to realize incremental bonus payments with the shared savings offered through the ACO model.
Competition and market dynamics. Hospitals will see new competitors emerge because ACOs can be formed by physician groups or joint ventures of other collaborations between physicians and hospitals. Imagine the scenario in which an independent physician group creates an ACO and drives care to a hospital competitor because it has lower costs and higher quality. Or perhaps a competing hospital creates an ACO first. Will this lead to a first-mover advantage enabling them to capture additional market share? You will need to quickly assess the options for collaboration and pursue partnerships across the continuum of care.
Financial situation and access to capital. The fiscal health of an organization and its ability to invest in information technology and other infrastructure will determine the pace with which an organization can move toward an ACO model. Clearly, hospitals that are struggling must first fix their finances. Hospitals in strong financial shape could move quickly and take advantage of being the first to be designated an ACO in 2012. The government-sanctioned ACO sites to be set up as part of the health reform law would gain invaluable experience operating under the new payment and care delivery system in advance of their competitors. Participation in pilot studies or initiatives with payers or employers may also yield early success for the leaders.
Information technology adoption. Accountable care organizations will need to share information in real time, measure clinical outcomes and monitor adherence to evidence-based care protocols. Organizations with fully functional electronic health records and data warehouses have a significant advantage. While they must put in place new management structures, care protocols and other infrastructure, the timeline for developing and rolling out those changes is much shorter than implementing the necessary IT platforms.
Even hospitals that measure up well on such risks as IT usage and finances still need a clear understanding of what it will take to move toward an ACO. A detailed assessment of current capabilities, competencies, infrastructure and resources is a prerequisite to building an ACO strategy and implementation plan. The gap analysis should cover:
Whether they are moving toward an ACO immediately or to an interim model (e.g., bundled payment, pay-for-performance, clinical integration), hospital CEOs cannot succeed without strong physician involvement. In fact, physicians need to own the vision and lead the organization toward a model where care decisions are evidence-based. Hospitals that already have strong collaborative relationships with their physicians and existing contractual alignment can leverage these arrangements to create structural and governance models that meet the federal requirements for an ACO.
There are a variety of ways to build closer ties to physicians, including:
Employment. In the employment model, physicians are fully integrated with a hospital. The employment contract creates financial incentives for physicians to reduce costs and improve quality. In addition, for contracting purposes, organizations can benefit from having a large group. In certain states, physician employment by hospitals is prohibited. Physician employment can also be a costly alternative if it's not effectively managed.
Physician co-management. Co-management arrangements create a shared responsibility between a hospital and physicians to manage the operations of a service line. In a co-management model, physicians are paid for the administrative components of nonpatient care operations. Incentives can be built into the financial arrangements to reward improved efficiency and reduced costs.
Physician Hospital Organization. In a PHO, a hospital and physicians are brought together as a single entity for contracting purposes. Through shared incentives and joint contracting, a PHO can be a precursor to an ACO structure.
Medical Services Organization. In the MSO model, a private company, a hospital, a physician-hospital joint venture or a group of physicians creates an organization to provide administrative services to physicians. Examples of these services include: billing, coding, collections, recruitment, marketing, human resources, practice management, information technology and clinical integration tools.
Independent Physician Association. In an IPA, a group of independent physicians come together to assume a risk-based contract with an HMO or managed care organization to manage the care of patients on a per capita basis. These organizations are often highly effective at promoting quality and reducing costs through disease and utilization management.
Medical foundation. A medical foundation focuses on physician practices and supports a "seamless" system to measure and improve quality and cost throughout the care continuum. This model enables joint payer contracting by the hospital and a wholly owned entity (usually a nonprofit).
Clinical integration. Organizations that are clinically integrated have established systems and processes to measure and improve quality and cost across a continuum (e.g., hospital, physicians, pharmacy, outpatient services). Participation is selective, and physicians must be willing to comply with set protocols and outcomes measures. A clinically integrated organization pursues new models of clinical care delivery to enhance the management of chronic disease and coordination of care overall.
Identifying the right physician model for your organization will be part of an ACO strategy.
Structure and governance can impact how investment decisions are made and value-based bonus payments are dispersed. In addition, an ACO needs to align with providers, including long-term care and home health agencies.
Whether your organization is pursuing a full-fledged ACO, an initiative focused on the medical home model, or a value-based payment model with private payers and employers, it is critical to make concrete plans and act. Establish work groups and develop action plans that address the identified competency, infrastructure and resource needs of the gap analysis. Then begin executing. (Click here for a CEO action plan.)
While all hospital CEOs need to develop a road map to transition their organizations to deliver care in a value-based environment, they must continue to operate in the traditional fee-for-service model, which will persist in parallel for some years to come. With an initiative that will trigger fundamental changes in how everyone in the organization and beyond does their work, success hinges on the direct and visible involvement of the CEO. The amount of effort your organization will put into converting to a value-based payment world will be in direct proportion to the amount of urgency and gravitas the CEO brings to this undertaking. If it is your priority, it will become your organization's priority as well.
Brian Silverstein, M.D., is a senior vice president and Michael Randall is a manager of The Camden Group in Chicago.
This article 1st appeared on July 12, 2010 in HHN Magazine online site.
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