4 Reasons to Wait on ACOs

Accountable care organizations are the latest craze in healthcare. Why? As usual, it's because the government, the dominant payer, is pushing them. And commercial insurers, some large hospitals, and hospital systems, see them as a promising opportunity to improve healthcare and cut costs at the same time.

But what is an ACO, really? Only the government's two strict and very selective plans offer a road map. But there are many ways to design accountable care. The government's version may ultimately prevail, but there are plenty of hospitals and health systems that wouldn't have designed it that way if they were in charge.

The beauty is, you can be in charge by designing structures with your commercial insurers or by fitting into a plan that the payers have created with your input. The point is, no one's really sure what the winning design will look like, but it costs a lot to develop your prototype.

Another choice: You could simply do nothing at all.

Let me repeat that: You could do nothing at all—for now.

As usual in business—and let's remember that healthcare ultimately is a business—organizations will take the path that they think will ultimately work over the long term. But "long-term" has different meanings to different people.

For a hospital seeking immediate strategic partners, for example, the ACO has to be on the back burner. A well-positioned hospital might legitimately take a wait-and-see attitude, looking for someone else to undertake the risk and expense, only to eye a partnership after that someone else has taken the early slings and arrows.

Now that I've convinced you that sitting back and waiting is an option, here are four reasons you might want to wait:

1.Working two different reimbursement systems at the same time
While bigger systems may be able to spread the risk, make the investments necessary, and handle losing money for a while to develop the system architecture that they think will ultimately prevail, smaller hospitals and systems can't afford to do that. Never mind that they'd be restructuring their business to cannibalize their own biggest profit stream.

"The fact is that unless we see some drastic change in the way [hospitals] do business, we're not setting the ACO concept up to succeed," says Wendy Whittington, MD, chief medical officer at Anthelio Health Solutions, a healthcare information technology company. "For the basic acute care hospital, and there's still a lot of them, their major revenue stream is still acute inpatient care. And when you still need to making a living on that while you figure out the ACO model, it's hard to work both."

Why? Well, for example, when you're the CEO of an independent community hospital, still working the DRG system and trying to keep your beds full, how can you justify spending scarce capital on keeping patients out of the hospital? You'd be spending capital to work against yourself, and given the modest margins most hospitals live with, that would be impossible. You might start looking seriously for a partner, however.

2. Handling, and paying for, the information
The other conundrum is in the handling of the data needed for ACOs to work efficiently.

Whittington and her team do a lot of work with IT departments surrounding their participation in health information exchange, or HIE, efforts, which are critical to sharing patient information among a variety of providers who may be using different IT architecture.

"And we see a lot of failure, mostly due to the lack of the financial sustainability from the HIE model," she says. "If I'm responsible for the ACO, and I know that there needs to be a smooth flow of information to all the pieces of care, how am I going to afford to keep that going, and why should I bother now, when it may allow me a box check on meaningful use, but there's not a lot left for me to create the structure."

3. You're not an innovator
Any long-term CEO is ultimately pragmatic. And if pragmatism dictates that for whatever reason, your organization can't be an innovator, it might be best to leave others to shake out the ultimate design that will succeed as an ACO.

Though we all talk about ACOs as an acronym that actually means something concrete, only in the CMS realm have the rules finally been put in place. The rest of the market, which will include the vast majority of hospitals, is free to play around with different constructs with their commercial payers, if they desire.
Or they can choose not to play. Of course, in negotiations with payers, the normal business rules still apply. You can choose to stay out of any ACO-like contracts, but that doesn't mean your reimbursement stream is safe.

In fact, Whittington wonders whether the best solutions will come from the government ACO constructs or hospitals or physician groups.

"By limiting [CMS] ACOs to hospital and physician provider groups, I wonder if we're doing ourselves a disservice," she says. "We're not necessarily very good innovators, but we're at such a crisis point that we really need innovation. We see quite a bit of hospital leadership treating this like it's another thing they have to do."

4. These are NOT mandates

There are certain changes that you have to make in your healthcare system to remain in business. You have to pursue ICD-10 readiness. You don't have to pursue an ACO construct. Ultimately, for you, it may be as simple as that.

"My general philosophy is that healthcare systems that work toward doing the right thing for patients and patient care will be the winners in the end," Whittington says. "If we put all our effort into complying with the exact rules of the ACO model, in the end, we're often working against ourselves internally..If we focus on what it's going to take to enter patient-centered care, that's probably a better path to take."

One of the good things about ACOs is that it forces a conversation about healthcare costs that needs to be had with a serious intent in this country, says Whittington. There will be opportunities, even if you don't dive into the ACO model right now, to bite off little chunks that make sense for your patients and business model now, and that will also make sense under an ACO model.

"We see these things as mandates. But they're really not," Whittington says. "Unless you really have the model worked out and you're sure you can make a margin, why jump in?"