ACOs: The Good, the Bad and the Ugly

By Ron Wince

Although Accountable Care Organizations (ACOs) have been discussed for years, health care reform has put them in the spotlight. Now, health care leaders are trying to determine the best way to move forward and transition to this new model of care. While the idea behind ACOs is to get the provider and payer chain working together to provide better-coordinated, more seamless care, the various definitions of an ACO are widely varied. From the perspective of a Medicare/Medicaid patient, there is a major attraction to the current perception of ACOs. In principle, patients should have a reasonable expectation of higher quality care delivered at a lower cost if they choose a provider enrolled in an ACO.

From the provider and insurance standpoint, the choice to form or join an ACO is not quite as clear cut. On the upside, any provider or insurer that is part of an ACO could see significant cost reductions, shared savings, and quality improvement, evident in both internal operations and the care they deliver to patients. Providers will also have a better ability to compete for the pool of Medicare/Medicaid patients, which will only continue to grow as more baby boomers reach retirement age. However, from what we do know, there are several positives and negatives that providers and payers must consider.

The most pervasive problem is that there is no blueprint that administrators can follow to point them in the right direction when creating an ACO. Even with the recent release of the final ruling, there remains much that is left to the organizations involved.  We do know that ACOs must:

–       Serve a minimum of 5,000 patients

–       Consent to be part of an ACO for at least three years

–       Follow either a one-sided or two-sided risk model

–       Measure and report over 65 metrics (up from only eight)

But even with these minimums the “how” to forming or participating in an ACO has yet to be answered for most organizations that may opt in.  For instance, hospital administrators could create an ACO by buying one or more physician practices while, conversely, group practices or networks of physician practices could take the lead, enrolling a hospital as a partner.

Supposing that administrators decide to form an ACO, the next hurdle is putting into place the required infrastructure. There are requirements for creating certain leadership and management structures that include both clinical and management personnel. Administrators will need to put into motion processes that demonstrate that they are practicing evidence-based medicine and coordinating care, as well as confirm that they are “patient centered,” another term for which there is no clear definition yet.

Even more challenging could be combining the cultures of the different groups. How people work together can be a bigger factor in determining the ultimate success or failure of an effort than what they do. Before organizations determine what their ACO will look like, they need to first determine how they are going to formulate the partnership. For instance, one aspect of contention is the negotiation of agreements about how decision making and potential savings will be shared across members of the ACO. One group may have a standard practice of buying whatever’s cheapest while another may have a “buying whatever each physician wants” policy. If these two groups coalesce within the same ACO, which guideline should take precedence?

Furthermore, staff and patient management strategies are different across the industry. Once organizations join together in an ACO, administrators will have to discuss managerial operations to ensure all employees and patients feel the benefits. Minor details, such as courtesy calls to patients or internal celebrations for staff, will have to be unified in order for the ACO to function as one seamless entity.

In addition to cultural changes, ACOs will drive a marriage of technology. It won’t be possible for a hospital and a physician group to work together under the ACO system if they are operating two completely different technology systems. How do you shift from one technology to another? Who will manage the overall process and future IT system? How will organizations share patient information while accommodating regulations? These are decisions administrators will have to make when forming an ACO, many of which will impact the overall efficiency of the organization.

From a process standpoint, ACOs have the potential to streamline many functions on an organizational level. Physician groups tend to have quicker billing practices because they depend on cash flow. Hospitals, on the other hand, often take weeks to make payments. With the joining of the two in an ACO, an improved billing process will be key to ensure physician practices aren’t losing cash flow because of poor process management.

Furthermore, administrators will need to become masters of business intelligence, including measuring what’s important, collecting and reporting data and using the data to improve their organizations, not just for compliance.  Given that unknowns and uncertainties are guaranteed, administrators must practice certain survival skills such as how to learn faster on the fly and collaborate at all levels. Agility will be an imperative skill for administrators as rules continue to change.

Looking at both sides of the argument, there is the potential for significant gains on both the cost and quality fronts, as well as the ability to maintain or grow a practice’s Medicare/Medicaid patient base against the need for putting in an enormous amount of work up front. ACOs were developed to help the patient and to ensure that our hospitals and physicians can continue to provide quality care, even as risks, such as an aging population, strain our health care system. In addition to a continued dedication to quality care, patients will see lower costs. ACOs will ensure that patients are receiving the care they need, rather than what helps the organization make more money.

Providers may also experience success in the new era of ACOs. It will help them successfully manage the influx of patients and transformation of patient care without having to worry about increasing costs. While it hasn’t been defined yet, there may be a future opportunity for providers to garner incentives when meeting the guidelines of ACOs. This will only better the care patients receive.

Whatever an organization’s view on ACOs is, they must accept that they will become part of the future of health care in this country, and must begin building or strengthening the skills and capabilities that will be needed to win on that new playing field.

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Ron Wince is President & CEO of Guidon Performance Solutions.