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10 ACO Blunders You Can Avoid

 |  By Margaret@example.com  
   August 17, 2011

This  promises to be a big week for healthcare reform - no, not in the courts - but in the regulatory realm. All eyes are on the Centers for Medicare & Medicaid Services, which is poised to release the final rules on accountable care organizations,

And Friday marks the deadline for organizations to apply to be part of the Pioneer ACO program. That's the special designation CMS has set up for healthcare systems that are already experienced in providing coordinated patient care. CMS hopes to have 30 Pioneer ACOs in place by later this year, 'all on an accelerated track to participate in shared savings.


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According to the HealthLeaders Media Industry Survey 2011, more than half, (52%) of physicians surveyed said they expect to be part of an ACO within the next five years. That survey, however, was completed months before the proposed rules were released in April.

'With upfront costs reportedly running in the millions of dollars, uncertainty about how much control anyone will have over their patient population, and concerns about meeting anti-trust requirements it's no wonder that ACO participation is still a big question mark for a lot of organizations.

This has to be white-knuckle time in CMS administrator Don Berwick's office. If the Pioneer ACO program can't attract health systems that are experienced in care coordination, how can it expect other groups to sign on?

Stephen Shortell, PhD, dean of the School of Public Health at the University of California, Berkeley, recently co-authored a commentary about implementing ACOs for the Journal of the American Medical Association.

In an interview with HealthLeaders he noted that the big hurdle for many hospitals and physicians is that ACOs will require each of them to move from their comfort zones into new relationships with new responsibilities. Success will require adaptation and change. ACOs will need to become to become "learning organizations that can comprehend and expand what works and move to correct things that do not."

Shortell identifies 10 common mistakes made by organizations considering the formation of an ACO. He said he developed the list after speaking with stakeholders across the country.


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The blunders fall into two large categories--health systems overestimate their organizational capabilities and they underestimate the effort it takes to engage stakeholders.

On the organizational side, he said there's a tendency to underestimate risk and overestimate the capabilities of electronic health records. Looking at stakeholders, he said health systems underestimate the effort it will take to balance their needs with those of physicians and specialists, as well as the effort it will take to engage patients in care coordination.

'Shortell says the list below applies both to ACOs planned with CMS  and those planned with private payers, which are also known as "commercial ACOs".

1. Overestimating the ability to manage risk.
Shortell said this is especially true when rewards are at stake. The problem is that physicians and hospitals manage different types of risk. Physicians manage risk in ambulatory care settings while hospitals manage risk on inpatient care settings. The Medicare shared savings program requires the ACO to manage risk across the care continuum. That means hospitals and physicians must each give up some control and merge their risk-taking capabilities. That's not a step that comes naturally.

2. Overestimating the ability to use EHR.
The financial support of CMS definitely eases the pain but Shortell said the implementation of EHR can be very disruptive to a physician practice with the negative impact stretching out for six months to a year. He cautioned that a successful EHR launch requires the ongoing staff support of physician or nurse, software upgrades, and regular staff training. What's at stake is the ability to report on the cost and quality metrics required for shared savings success.

3. Overestimating the ability to report performance measures.
Even with EHRs it will be a challenge to collect, analyze, and report the 65 performance data measures that may be required of ACOs.

4. Overestimating the ability to implement standardized care management protocols.
The goal of disease protocols is to eliminate anything in the care delivery process that doesn't add value. For protocols to work, clinicians must be involved in their development, data must exist to assess the protocols, and the protocols must be able to be tailored to individual patients. Everyone in the ACO needs to use the protocols, which should be adjusted over time as more information becomes available. This process needs to be managed by someone and not just left to chance.

5. Failure to balance the interests of hospitals and physicians.
The jury is still out on whether new incentives like shared savings will mitigate or exacerbate the strain that usually exists between hospitals and physicians.

6. Failure to engage patients in care management.
Patients need to be a key part of the care team and educated to take responsibility for their health and healthcare. Unfortunately that's not a skill that seems to come naturally to either hospitals or physicians.

7. Failure to have contractual relationships with cost-effective specialists.
Specialists and patients will not be limited to a single ACO so referral relationships will be very important in terms of overall ACO performance. Shortell said PCPs may need to reexamine their entrenched relationships with high-cost specialists that don't produce the quality improvement measures necessary for a successful ACO.

8. Failure to navigate the new regulatory and legal environment.
Compliance with new regulatory requirements will require new levels of transparency and cooperation among hospitals, physician organizations, and payers.  Lawyers need to be involved.

9. Failure to integrate beyond the structural level.
Structural and contractual relationships may be in place on paper to provide more coordinated care, but if behavior doesn't change, then the structure is meaningless. Improvement will require engaging all of the healthcare professionals along the care continuum in the process.

10. Failure to recognize that everything is interrelated.
It's almost a domino effect. Overestimating the ability to manage risk will be exacerbated by the failure to implement EHRs, which will limit the ability to develop and report performance measures. That could make it more difficult to balance the interests among hospitals and physicians, which could lead to a failure to engage patients and a difficulty in developing contractual relationships with cost-effective specialists. And so on and so on.

That could mean your ACO would fail to reduce preventable hospital readmissions, eliminate admissions for asthma and diabetes, reduce inappropriate emergency department use, or improve the overall patient experience of care. And that could mean no shared savings.

What needs to happen, says Shortell, is that potential ACOs need to develop a strategy to address these possible mistakes. The best way is to develop a system of rapid feedback so that performance can be corrected along the way well before mistakes begin to affect the entire organization.

The key he says is to keep moving forward. "This isn't an overnight process. We're probably 10 years away from seeing a marked difference in how healthcare is delivered. This is just the beginning."

Margaret Dick Tocknell is a reporter/editor with HealthLeaders Media.
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