Growth in an ACO World

Later this month, fellow AJC blogger Mark Reiboldt and I will be presenting to financial executives and other healthcare leadership at the Dixie Institute for the Healthcare Financial Management Association (HFMA) on February 23.  Our topic examines how healthcare reform is taking shape today, particularly around accountable care and the coordination of care.  Specifically, we examine growth and what caregivers must consider in order to remain competitive in an evolving marketplace.  For today’s post, I thought I would highlight some of those points and why leaders in the industry cannot just sit idly on the sidelines today.  Inaction will likely have a much larger detrimental effect than any misstep made along the way to an integrated system.

Accountable Care Organizations (ACOs) are the latest rage in healthcare.  You cannot attend a conference, seminar, or even inter-company meeting without hearing the muttering of those words when talking reform.  And for good reason, many would argue that healthcare reform can be broadly equated with accountable care.  Sure, there a number of provisions as a part of the Patient Protection and Affordable Care Act that emphasis access to care and the expansion of Medicaid to cover 32 million Americans currently uninsured.  The press and critics of the Affordable Care Act have targeted the “individual mandate,” questioning the constitutionality of the statute and its effectiveness to actually drive down costs.  However, for the majority of leadership working in a hospital or other healthcare entity, few are talking access; rather, most are talking about accountable care and the ability to transform a fee-for-service model (charging for every procedure) to a value-based system.

No matter how the politics of healthcare reform play out in the next year, whether as result of the presidential election or legality of the Affordable Care Act, several current trends will have staying power and fundamentally transform the healthcare system.  In its most basic form, healthcare reform is meant to “bend the cost curve” and lower costs across the system.  As frequently cited by economists, healthcare costs amount to 16% of our GDP.  Even before healthcare reform came about in 2010, the Center for Medicare and Medicaid Services (CMS) sought reform and setup a demonstration project (Medicare Physician Group Practice Demonstration) in 2005, which for all general purposes, served as a trial for ACOs [a great summary can be read at the New England Journal of Medicine].  That trial, along with similar private and public initiatives, have helped to shift thinking from volume to value in care (i.e. a focus on a population’s health rather than episodic care).  In systems that stress accountable care, providers are being partially compensated for the outcomes of their patients, rather than just if their physicians see them.

Why this matters is that hospitals are encouraged to see FEWER patients and do a better job in managing the care across all of their caregivers.  This action will ultimately lead to lower utilization of services (e.g. less revenue) and force physicians to care about quality and the outcomes of their patients in order to be fully compensated.  Physicians will no longer be isolated actors in a patent’s health but play an integral part of a more coordinated continuum of care.

This trend will not be dissipating any time soon.  It is not only the government seeking this type of reform; the private sector is making strides of its own to improve how care is delivered.  In a recent example in the pediatric world, Children’s Hospital of Boston negotiated a three-year contract in January 2012 with the insurance payor Blue Cross Blue Shield to receive global payments–meaning that they will receive a single payment for a patient rather than billing for each procedure and visit.

This will dramatically turn healthcare on its head.  No longer is it good business to get more patients in the door to perform an endless array of procedures.  In a new world where volume will decrease and providers must be efficient in how they deliver care, providers that want to survive will need to be smarter in how they grow.  The days of mega-mergers for hospitals may not be totally gone but more energy and resources will be paid in the outpatient world.  Ambulatory centers (urgent care centers, sleep labs, etc.) will become the most effective means for growth, where health systems will try to win business of commercially insured, wealthy neighborhoods away from their competitors.

The next years for healthcare will be turbulent, no more so than for hospitals and certain providers.  Growth is critical for any business to survive and, in today’s current environment, healthcare providers can’t lose sight of that.  Their long-term sustainability is largely contingent on what they do in the next five years.

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February 17th, 2012
10:52 am

If you need ready-to-use integration, a modular solution to fill in gaps across the care continuum or reports to keep-up with “moving target” of requirements, check out ACO Accelerator: Best Regards.