Behaving Like Other Industries

In late April, the Department of Health and Human Services released the much anticipated details on Accountable Care Organizations (ACOs).  In particular, the proposed regulations spell out the Medicare Shared Savings program. 

For those new to the topic, an ACO is a component of the Patient Protection and Affordable Care Act of 2010 and defined as an integrated health care delivery system that relies on primary care physicians, hospital(s), and subspecialists to provide care to a defined patient population.   Under the model, hospital and physician networks are responsible for the care delivered to patients and incentivized to work together to treat Medicaid patients across care settings to lower growth in costs while meeting performance standards on quality of care (note:  a pediatric ACO demonstration project is also included for Medicaid patients, to begin in January 1, 2012).  A recent Wall Street Journal article nicely summed up some pros and cons of an ACO. 

For those not new to the topic, you know that ACOs are among the most talked about topics in health care today.   Whether you may work as a provider, a health care lawyer or financier, or simply an informed patient, this is likely not the first word that you have heard about it.  Experts everywhere seem to be pontificating on what it will mean for the industry and the future of patient care (Atlanta’s King & Spalding, most recently, spent the majority of their Health Law and Policy Forum in March fixated on the topic). 

Of the many issues that may raise the blood pressure of Republicans and Democrats about health care reform (whether you support it or you don’t), ACOs do not appear to be on the list.  First, everyone can agree that tremendous waste exists in our health delivery system and real and significant measures must be taken to curb it.  Second, any solution whatever it may be must improve the coordination among the multitude of physicians a Medicare patient typically sees in the span of year and deliver care that is based on wellness and not episodically-driven.  ACOs may be a great start. 

Ignoring for now of how patient care will change in an ACO, there will be major implications for the business of health care.   Most evidently, it is easy to see that acquisitions, mergers, consolidations, joint ventures, partnerships, and formal affiliations will be a necessity for any provider seeking to create a viable model.  ACOs are predicated on a system of integrated care where information is readily shared, doctors actually communicate with one another, and systems share costs.  Although the exact form may not be clear today, most providers recognize they are not positioned to deliver a truly integrated solution to their Medicare patients and real work needs to be done to fill in those gaps.  Loosely translated for many, how do we align ourselves to build the capacity for a total solution? 

Is this talk a bad thing?  Absolutely not.  Such thinking is long overdue for health care; other industries have long ago taken steps to consolidate and sought out efficiencies through vertical integration.  Financial processing, for example, has successfully built shared platforms that deliver a full spectrum of services to customers even in the fiercely competitive and regulated environment of financial services.  Who can argue that, of all industries where the services are critical to our population’s well-being, health care should not be as tightly integrated. 

It is time that health care behaved like other industries, and ideas like ACOs should be part of the formula to do it.

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