The shift toward the accountable care organization model is requiring hospital administrators to reexamine how they collaborate with their health care partners to treat illness while focusing on long-term patient wellness. And because future reimbursement models likely will gauge overall patient health rather than individual services, hospitals also must improve efficiency while reducing cost.


The ACO blueprint for success in a given market may vary based on the populations that providers are serving, hospital size and other local factors. That said, we have outlined four key considerations for effective clinical integration that hospital leaders must address:

  • linking care measures to reimbursements
  • sharing patient data
  • engaging with physicians
  • aligning with payers

Linking Care Measures to Reimbursements

Many hospital care measures have been tracked independently of one another. The Joint Commission's benchmarks for patient safety, for example, gauge patient infection rates and related measures. However, the methods for rating patient care are shifting under the Obama administration's health care reform legislation.

The Centers for Medicare & Medicaid Services are moving toward a more holistic view of patient care with the Hospital Value-Based Purchasing Program, which will provide reimbursement incentives to hospitals that demonstrate a high level of patient care (or that can quantify care improvements). As another example, provider quality measures such as the Healthcare Effectiveness Data and Information Set underpin the majority of metrics used to develop Medicare Advantage plan star quality ratings — which, in turn, directly impact Medicare Advantage plan payments (and subsequent provider reimbursement).

The coming connection between quality, outcomes and reimbursement is encouraging hospital leaders to track quality and cost metrics among multiple patient populations, and to make improvements that will affect their revenues.

Sharing Patient Data


Our research shows that payers and providers routinely do not share data that is used for the care of patients — including patient encounters and outcomes. Sharing this data will be critical for ACO success, as virtually every ACO will require payer collaboration with hospitals and physicians.

Unfortunately, there is a fair amount of mistrust between payers and providers. Both parties use patient data to their advantage during annual contract negotiations. This negotiation process can net tens of millions of dollars annually for one side or the other, but not both. For an ACO to be successful, all parties will have to establish a new form of collaboration that features agreed-upon care metrics — as well as shared financial gains and exposure to risk of financial losses.

Engaging with Physicians

Because CMS and other payers are focused on reducing hospital readmissions, future reimbursements partially will be linked to a hospital's ability to reduce patient readmissions. This requires physicians to improve care transitions and accountability for care outside the hospital with better post-discharge planning and coordination.

Aligning with Payers

Payers, by virtue of their longstanding ability to assess and deal with insurance risk, could advise ACOs on managing this risk (likely for a fee); payers also could sell stop-loss coverage to ACOs. Payers often have vastly superior data systems with respect to capturing the information required to manage risk, which typically includes extensive patient claims information. They know more about the utilization patterns and associated patient costs than do their contracted provider organizations.

Additionally, based on ACO provider considerations for clinical integration, coordination and contracting, ACOs in most markets will partner out of necessity with a single payer as they develop and implement their risk management strategy. In making this partnership choice, however, an ACO risks alienating its other payers.

Simply stated, if Health Plan A drives 25 percent of a health care system's revenue, Health Plan B drives 19 percent, Health Plan C drives 17 percent, etc., selection of the health system's ACO partnering payer may result in loss of members from payers who are not the selected ACO payer partner. The health plans not selected as the ACO's (payer) partner might decide to steer members to competing health systems, which could affect the ACO's initial sustainability. This does not imply that it is a mistake for a health system to partner with one payer for an ACO, but rather that the health system should consider the ramifications on its broader payer relationships and develop appropriate strategies to mitigate those risks.

Next Steps

Hospitals, providers and insurers need to revisit the way they work together while transitioning to coordinated care models. Although hospitals are often the logical “center” for ACO management and coordination, all ACO constituents will need to have an active voice in how ACO guidelines are established for care coordination, data integration and other key program parameters.

To help build consensus on critical governance issues, ACOs also may consider enlisting outside parties to provide independent recommendations for these key issues and use this counsel to accelerate consensus by the ACO participants. Within these agreed-upon guidelines, physicians and other care professionals will be empowered (and motivated) to take a more active role in improving overall patient health.

Martin Graf is a vice president in the health care services practice of L.E.K. Consulting's office in New York City. Milton Schachter is an executive in residence at L.E.K. Consulting.