To Be an ACO or Not to Be an ACO, That Is the Question
Okay, so this isn’t a direct quote from Shakespeare, but it is the question on the tip of the tongue of almost every health care provider these days. However, often providers don’t exactly know what an Accountable Care Organization (ACO) is or why they want to become one or be part of one.
To refresh everyone’s memory, an ACO is a group of health care providers working together to manage and coordinate care for a defined population, that share in the risk and reward relative to the total cost of care and patient outcomes. Fundamentally, the goal is to improve the quality of care and reduce the cost.
While I and my colleagues frequently encourage providers to begin preparing now for the payment reform initiatives (e.g., bundled payments, etc.) included in the Patient Protection and Affordable Care Act (PPACA), we don’t typically advise clients to pursue significant new strategic directions without some data and information analysis and careful planning.
Deciding whether or not it would be prudent to establish an ACO or join an ACO really requires a strategic discussion. The final answer will vary greatly among provider types, geography, local health care environment, and organizational preparedness.
Currently, it is difficult to fully assess those risks and rewards when so many unknowns remain about ACOs. For public programs, the Centers for Medicare and Medicaid Services haven’t even issued the rules and guidance around the Medicare Shared Savings program yet (the release is expected in mid-January 2011). If the rules are too prescriptive about what ACOs can and can’t do, or they don’t provide enough relief from current regulatory restrictions (e.g. Stark laws
), it may make the program untenable for providers.
One of the lessons learned from organizations that have tested the ACO concept is that to be successful, ACO providers need to make certain upfront infrastructure investments. So providers will need to analyze the return on investment, and determine how much they need to invest in things like electronic health records, tracking and monitoring quality outcomes, and reporting in comparison to what they can earn. Under the Medicare Shared Savings program, it is expected that ACO providers will continue to be paid fee-for-service with the potential to get a bonus if they are able to meet quality and cost savings targets. Do you think you will be able to achieve enough savings to offset your initial investment? What if CMS requires ACO providers to accept more of the risk, as MedPAC has suggested?
In the private sector, some providers are testing the ACO concept as part of arrangements between provider groups and commercial payers (e.g., Fairview Health System in Minnesota ). ACOs in the private sector may have different financial payment arrangements where providers share more of the downside risk. Those considering the ACO concept must figure out how much risk the organization is willing and able to take.
These are just some of the things that providers need to think about before deciding whether or not they want to be an ACO, but there are many more issues as well.
Important first step: relationships
Providers can take an important step toward becoming an ACO while conducting an analysis of whether the transition is right for their organizations. Start building relationships with other providers in the community across the continuum. Many health reform initiatives, including becoming an ACO, require providers to come together to meet many of the challenges posed by our current health system (e.g., hospital readmissions, improved quality, etc.) as well as taking advantage of the opportunities to achieve financial success presented under health reform. Therefore, the best first step in positioning your organization to become an ACO is to start building relationships with other community providers at the C-suite level. Learn what other leaders are thinking about. Find opportunities to work together today—not just in preparation for becoming an ACO, but to improve quality for consumers. Exploring partnerships for bundled payments and care transition improvements will benefit your organizations as well as the communities you serve.
Just because everyone is talking about being an ACO, doesn’t mean it’s the right direction for your organization. Take the time for careful analysis. Talk to others in the industry. Share your concerns. If you are currently pursuing this path, what is the primary reason you chose this direction?