Healthcare at a Tipping Point

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Are ACOs the Way Forward?

Accountable care organizations (ACOs), included in the Patient Protection and Affordable Care Act as a new model for delivering services to patients, have received a great deal of attention. The model is intended to encourage primary care doctors, specialists, hospitals and other caregivers to provide better, more coordinated care for people with Medicare while cutting costs. But as with any change to patient care delivery, joining or forming an ACO is not an easy fix.

“ACOs offer a way for disparate providers to come together and act in a clinically integrated manner,” says Albert Tomchaney, M.D., senior vice president and chief medical officer of Franciscan Alliance in Mishawaka, Ind. “In most cases, care delivery hasn’t been set up this way. Patients have had to make sure themselves that all their medical activities are coordinated, but ACOs, by design, are supposed to be about administering and coordinating care across a care continuum.”

In recent years, the medical community has amassed more and more data about patient outcomes, and “it just doesn’t make any sense when we see incredible variation in care,” Tomchaney says. “That data has helped set a platform for the realization that we have a better way to move forward.” For some organizations, that better way is to form or join an ACO. Here’s what you need to know about them.

A Foundation for ACOs

The Affordable Care Act specifically mentioned ACOs and paved the way for hospitals and physicians to form accountable care organizations. In 2012, 32 leading healthcare organizations from across the country began participating in a new Pioneer ACO initiative, which was expected to save up to $1.1 billion over five years, according to Health and Human Services Secretary Kathleen Sebelius.

But ACOs are not an entirely new idea. “Models like this have been talked about for 10 years or more,” Tomchaney says. “The Mayo Clinic, the Cleveland Clinic and others have long been clinically integrated, where nothing happens in a silo, and Elliott Fisher wrote about such a model at Dartmouth years ago.”

In addition to the models in practice at some leading academic medical centers, the concept of clinical integration has even been attempted by Medicare before. Modern ACOs are linked to Medicare’s Physician Group Practice Demonstration (PGPD), which ran from 2005–2008, says Bill Woodson, senior vice president and national thought leader for Sg2, a healthcare intelligence and information services company based in Skokie, Ill. In that project, 10 large physician groups participated “in something that looked like an ACO,” Woodson continues. “In the end, they all achieved quality improvements, but they didn’t necessarily cut costs.”

However, much was learned from the PGPD that can inform the formation of ACOs, including “what tools to use and how to conduct outreach to a population,” Woodson says.

In addition to the lessons learned from past attempts, technology has been improved and widely distributed, which makes a new attempt at coordinated care more feasible. “The electronic era and information technology, while still working through some issues, are supportive of this model,” Tomchaney says.

At Franciscan Alliance, which is part of the Pioneer ACO, a common IT platform across ACO provider offices, as well as electronic medical records and other built-in tools, have allowed for better communication among providers. In addition, modern decision support software—incorporated across ACO providers—helps each entity provide the right care at the right time, he says. For instance, if a patient visits his primary care doctor, who has the ultimate responsibility for managing all his chronic conditions, the doctor’s computer system will tell him “what the patient has done to meet desired outcomes, as well as what he hasn’t done,” Tomchaney explains.

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Banking on Advantages

Updated technology and new processes have led to early successes for ACOs, highlighting the advantages that these models can bring to a community and to patients. For providers, “it’s about innovating in their service delivery area,” says Gunter Wessels, partner and healthcare practice principal at Total Innovation Group, Inc., which consults with ACOs on commercialization efforts. “The reason for an ACO is to create alignment, to do the same thing to the same sorts of patients every time, so that quality is achieved.”

For instance, currently there is a focus on doing more complex and more severe procedures, which cost more and do not necessarily yield better quality, Wessels says.

“A lot of people have back pain, for example. It may be just a fact of being human, but it can be treated with surgery. A lot of physicians end up doing a lot of procedures that create relief temporarily but in the long-term, the outcomes for those who have surgery and those who don’t have surgery are the same. Either way, the patient is convinced the doctor helped him or her—either by relieving the pain with surgery or by helping them deal with chronic pain. If we can get doctors on the same page to discuss what is the most conservative thing we can do to treat this common problem, the outcomes improve.”

This clinical integration is the major selling point for ACOs. By working in concert to treat a community of patients, “care will shift to less costly settings and readmission rates will decrease,” Woodson says. “As a result, ACOs will improve the health status of the population they serve.”

In order to accomplish these results, ACOs realign the incentives of healthcare delivery, paying for treatment quality rather than treatment volume.

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Considering the Challenges

While ACOs sound promising, “making the required cultural transformation is very hard,” Woodson acknowledges. “And there are a lot of unknowns about whether they will work.”

For physicians and healthcare facilities, launching or joining an ACO usually means making significant investments of time and money to set up the systems and reconfigure their business models.

“Medical practices need to transform into medical home models, which incurs costs in finances and resources,” Tomchaney says. “Providers are being asked to retool and redesign their processes, and right now, the amount they need to spend and the amount they will get back from the payers is probably not a dollar-for-dollar exchange.”

In addition to fronting the capital to switch to an ACO system, physicians and healthcare facilities also must rethink their traditional methods of operating.

“Historically, we have been trained to do things in an opposite way,” Wessels says. “Physicians are having to change quickly, and healthcare organizations were originally set up based on a compensation model that is changing before their eyes.”

Participation and leadership from physicians is vital in making ACOs work, according to Woodson. But in many places, the deeper pockets of a local hospital or hospital group are required to finance the technology, staff and other upfront costs associated with launching an ACO. While hospitals may be needed to make an ACO work, they also can “become a cost center” when the model takes off, as the emphasis will be on treating patients in medical offices and keeping them out of the hospital to cut costs, Woodson says.

It can be challenging to undertake the prospect of an ACO while maintaining “the mindset of redefining value to everyone,” Tomchaney adds. “The goal has to be an outcome of better care at a much lower cost.”

Finally, ACOs just won’t work well in all areas. “Not every geographic location can be an ACO area,” Wessels says. “You can’t stack incentives in every place. The majority of the impact of ACOs will be in population centers.”

Moving Forward

For hospitals and physicians who are considering a move to an ACO or similar coordinated care model, it’s helpful to have a broad understanding of the cultural transformation risk. When Sg2 clients consider launching such a collaboration, “we caution them that going into this model is very risky,” Woodson says. “You need to understand what your financial exposure is going to be. And be deliberate about your timing: Don’t be reactive.”

To make an ACO work, advanced systems for transferring information are required. In many organizations, a switch to electronic medical records and the use of mobile devices such as smart phones and tablet computers may have set the groundwork for a successful ACO, Tomchaney says.

In addition to providing systems for various providers to communicate with each other about patient care, successful ACOs also utilize technology to get patients more involved in their own care.

“You have to have a transformation of the care management process that lets you reach out to patients in ways you haven’t before,” Tomchaney says. “For instance, at Franciscan Alliance we have a patient portal that allows patients to get online to see their lab results, make their own appointments and do other tasks. That helps empower the patient to be more accountable in their own care.”

While not every healthcare organization is rushing to form an ACO, there is widespread agreement that the future model of providing care will look different from today.

“Many of our clients see this as a transition model,” Woodson says. “It may not necessarily be the way we’ll end up, but it is a change that is moving us on the way to where we’re going.”

What will the end result look like? Nobody can be sure, but there is likely to be considerable variation, Woodson says. For instance, in some rural areas, ACOs may not be feasible. Academic medical centers may have relationships with ACOs but not be a part of one. Each facility and group of providers must consider the needs and resources of their local communities.

Even if forming an ACO is not the answer for your organization, it’s important to be asking questions and looking for the right solution.

“The current costs of healthcare are not sustainable,” Tomchaney says. “The country is aging. If we think we have issues today, think of what it will be like 10 years from now, with no more money and more people needing healthcare. We are clearly at a tipping point. This reality isn’t going to go away, no matter the outcome of the upcoming presidential election. The need for more coordinated care is here to stay, no matter what.”

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