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ACO High Priority for Healthcare Leaders, Survey Says

Philip Betbeze, for HealthLeaders Media, February 18, 2011

It's only February, but I nominate the acronym "ACO" as the most popular yet least understood shorthand of 2011.

We're not even completely sure what an accountable care organization is (they're still the domain of demonstration projects), yet that doesn't keep healthcare CEOs from saying overwhelmingly that they plan action to bring their organization up to the standards. In fact, 74% of hospital chief executives surveyed say they either already have the components in place to be considered an accountable care organization or that they will within the next five years.

Clearly, they're using the guidelines in the demonstration projects as their measuring stick. That's just one of the interesting nuggets of information available in our annual HealthLeaders Media Industry Survey.

While the concept is top of mind for today's hospital and health system chief executives, the rules need to be well understood before embarking on an undertaking this big. And a lot of those rules are still up in the air. So how do you prepare for something that's just at the experimental stage at this point?

Good question. It's worthwhile to note how the 74% mentioned above breaks down. Turns out, only 16% believe they have the necessary components now, while 60% expect to have them within five years. That seems to reflect the uncertainty of the venture. And make no mistake, it will be a venture in addition to being an ad-venture, for most of these leaders. By that, I mean significant investments must be made at most hospitals and health systems to achieve ACO status, even by the extremely limited information available at this point about how best to form one.

A Deloitte study illustrates four risks involved with forming ACOs. The National Institute of Healthcare Reform has its four as well.

Most of them boil down to the significant investment required for an uncertain return. While many hospitals and health systems are used to that kind of backwards engineering thanks to the fact that somewhere near half their revenue comes from government sources, this time making those calls about spending and culture change can be especially risky.

Risk. Isn't that what ACOs are ultimately going to be about? Who's going to step up and take the risk involved in capitating spending for certain diagnoses in the hopes that the actuaries have actually gotten it right, and that a margin can be made? Health plans have failed at this trick. Are healthcare provider organizations going to figure out how to get it right?

The jury's still out on this question and a host of other difficult managerial challenges outlined our survey this year. But you can get a great sense of what the decision-makers of the industry are thinking regarding a multitude of challenges.

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