Rich Umbdenstock, American Hospital Association president and CEO, explores how hospitals are preparing for a promising new business model, and analyzes the challenges and concerns they will have to overcome to be successful in a new era of accountability. With the launch of the Medicare shared savings and Pioneer ACO programs this month, along with a slew of private partnerships between hospitals and other health care players, accountable care has officially arrived.

Interviewed by Haydn Bush

Where is the typical hospital in terms of readiness for accountable care?

Umbdenstock:Hospitals are in very different places depending upon what their experience has been to date, and what the situation is in their market. But there is no question that everybody has been working hard to improve their quality, safety and efficiency. The question about accountable care is, what are the actual organizational and process configurations that are necessary to get to a new level of performance and accountability? That's where some organizations have invested significantly in connecting parts of the continuum, in working closely with physicians. Other organizations, for market reasons or resource reasons, may not be as far along. So pulling it all together is where I think that variation comes in. There's no question that the overall themes of greater integration, the ability to handle financial risk and more accountability for performance, more public recording and so on are going to be applicable for everybody.

What are some of the potential bumps in the road?

This month marks the start of CMS's accountable care organization experiment, in addition to the many private partnerships hospitals are forging using the ACO model. AHA President Rich Umbdenstock talks to H&HN senior online editor Haydn Bush about the challenges and opportunities hospitals face in the new era of accountability. Running Time: 10:32.

Umbdenstock:Some of the usual ones: resources, what types of investments are going to be required, where is the capital going to come from, who will be partners and contributors. Then there are the legal questions of what can be done with the (Centers for Medicare & Medicaid Services') programs under the Affordable Care Act. There have been some clarifications, but we don't yet have that same degree of clarification out in the regular markets and in the relationships with commercial payers. There are also a lot of internal issues — teamwork, coordination, communication and infrastructure — that have to be worked out. This is something we've never done before on a grand scale; while we're moving in this direction, we're still trying to take care of patients under the current system. So there will be a lot of challenges.

How is the hospital-physician relationship evolving?

Umbdenstock:In the last five years, we have seen a dramatic increase in the speed with which hospitals and physicians are coming together. Unlike the 1990s, when hospitals intentionally went out to try to acquire practices, it's really the physicians who are driving a lot of this. They're saying they want to be part of a larger organization, or maybe they want to get out of the business of care and focus on the provision of care. For whatever reason, physicians seem to be much more willing to work with hospitals. And hospitals, I think, are much more realistic about how to try to bring that together in a way that works for physicians as well. So we've seen a lot more employment, we've seen a lot more other forms of engagement and that's only going to increase. Young, recent graduates are much more inclined to join a large group or a hospital.

The role of the physician is also transforming.

Umbdenstock:There's been a movement from the physician as captain of the ship to leader of the team. It's a very different orientation, from a hierarchical relationship to more of a leader, motivator and coordinator. That's very important for the coordination of care. In addition, physicians are just not going to be there in the numbers that we've had before. With a lack of physicians, we're going to have to figure out the highest and best use of their talents and how to supplement that with other members of the team. All of that is going to take time, but it's happening.

That sounds as though it's going to involve more flexibility than physicians are accustomed to.

Umbdenstock:Yes, and probably in the sense that it is less of a craft where I go and do my job and more of a coordination effort. Here's the broader job that has to be done to get the patient outcome that we need, and what can I do best, what shouldn't I be doing and what could somebody else do and still get the results and maintain the patient satisfaction. It's a broader look and I think much more of a leadership role for physicians in the future.

Many hospital executives feel they are balancing their institutions right now between volume-based and the value-based reimbursement models. Where is the tipping point?

Umbdenstock:You'll know when the present system is no longer viable, and so, literally, you get to that tipping point where you say, "Let's move forward into this and eliminate the schizophrenia." What people are worried about is getting from here to there. What happens to the cash flow as we decrease utilization and improve the efficiency of the system while we're still getting paid on a utilization-based platform? I don't know that we will be able to predict the time. Some people say it's the percentage of revenue. You'll listen to the noise of managers and clinicians and even the payers, who also will potentially be living in multiple realms. I think we'll know when we're getting close and people start to say, "It's got to be better over there."

Smaller and rural hospitals face a unique set of challenges going forward. What sorts of accountable care partnerships should they be considering?

Umbdenstock:It's going to be a team effort across regions, and so a lot of rural hospitals have built relationships with larger urban centers or referral centers, some with academic centers. Those are both real and virtual relationships. Some of them are organizational and legal in nature. Some of them are tele-health IT connections. But I don't think there will be any escaping, whatever the design is, the notion of connectivity, coordination and organization. I think every organization will know when it's right to move from virtual relationships to legal and structural. That will be different in each market. But there's no escaping the notion that, for the patient's sake and in order to deliver the cost and quality kinds of results that we will be held accountable for, it's going to take a lot more of a tight relationship between the rural areas and the rest of the system.