One of the main appeals of the accountable care organization model is the potential cost savings. So why did Palmetto Health System wait a year after launching its ACO to develop a shared savings program? For Palmetto, the ACO driver was physician alignment first and cost savings second. More than half of Palmetto's physicians joined its ACO in the first year—an enviable adoption rate that most healthcare leaders aspire to attain.
The board of directors at Palmetto Health, based in Columbia, SC, overwhelmingly approved an ACO in July 2010, named the Palmetto Health Quality Collaborative. But with nearly 1,000 employed physicians at the 1,138-bed, six-hospital system, getting physician buy-in had the potential to be a huge challenge. Which is why, from the onset, the Palmetto Health Quality Collaborative was designed to be physician-led. The primary goal was to develop best practices for clinical outcomes using evidence-based care. Over 500 physicians agreed to participate in the program.
The ultimate goal of the Quality Collaborative, says its executive medical director, Ellis "Mac" Knight, MD, MBA, senior vice president of physician and clinical integration, is to align independent, employed, and faculty physicians toward the reduction of unnecessary hospital admissions and preventable readmissions. That can be accomplished through clinical integration activities and by encouraging higher quality care through standardization, Knight says. The mission is not to reduce costs, though cost reductions invariably result from this pursuit, he notes.
"We've had very good engagement [by physicians]. That's not to say the discussions aren't sometimes difficult or that we've standardized everything yet," he says.
Knight credits much of the physician integration into the ACO to the program's governance. The Quality Collaborative created a 13-member board of managers consisting of physician leaders from Palmetto Health Baptist, Palmetto Health Richland, and the University of South Carolina School of Medicine as well as representatives from Carolina Care and Three Rivers Medical Associates, PA.
The board uses information gathered by the finance and analytics departments, as well as their clinical knowledge, to look for ways to improve outcomes using best-practice approaches. Financial leaders will be pleased to know that while cost reduction isn't the primary objective of the Quality Collaborative, it remains a strong undercurrent. The board sets targets for costs and utilization measurements. Then, to encourage physician performance and accountability, clinical data is captured on each participating member's individual physician practice and compared to the established targets. To corral outliers, evidence-based guidelines are used so doctors can see the variance and home on areas to improve.
Palmetto Health spent the first year configuring the program and assessing the organization's target areas. It wasn't until just three months ago that a shared savings program—an essential ingredient for an ACO—was added.
"There are so many sub-components that need to be looked at; there's supply chain and scheduling efficiency and others. We brought in an outside consultant to help us identify savings opportunities and to validate when those savings are achieved. And then we also worked with our finance and analytics teams to review our numbers and validate that these are true savings," Knight explains.
The delayed attention to shared savings allowed physicians and the organization time to create a formula for calculating and validating shared savings. The next step is testing it; a contract between Palmetto Health System and the Palmetto Health Quality Collaborative was signed in February, giving participating physicians 10% of any realized saving for the $10 million in targeted OR cost reduction. To further the success of this new objective, Palmetto Health advanced the Quality Collaborative approximately $100,000 (a tenth of the 10% of the potential savings) to use toward training and vendor consolidation efforts.
Physicians on the Quality Collaborative board have already identified one area of potential savings: the use of reprocessed equipment for the OR. In the past, all OR equipment and tools was disposed of. After Quality Collaborative physicians examined data on the risk of infection from reprocessed equipment, they decided to hire a vendor to sterilize and return equipment in "like new" condition.
"If this idea had been presented as a cost-reduction effort, I think it might have been met with resistance [by physicians]. But because physicians drove the process and were concerned with safety and quality outcomes, the other doctors quickly accepted it and everyone has been very cooperative," Knight says. (Cost savings data from this recent initiative is not yet available.)
Reviewing this type of cost-saving opportunities is time-consuming, which can be off-putting to busy physicians. To encourage participation, Quality Collaborative board members are paid an hourly rate to participate in the review process.
"We've taken the tack where we involve our physician in every manner of the decision-making process. We standardize the packs for the OR and we present it to the other physicians. Physicians are putting in the time, are involved in the process, and are giving their input to the hospital so we don't sacrifice quality for savings. And that takes up some time so you need to pay them to help make those decisions," Knight says.
ACOs, whether the Medicare model or a commercial approach, can improve care for patients at a lower cost while aligning and integrating physicians and hospitals. Palmetto Health's Quality Collaborative demonstrates that greater physician involvement can lead to greater cost savings.
Karen Minich-Pourshadi is a Senior Editor with HealthLeaders Media.
