This is an excerpt from the HealthLeaders’ book The Healthcare Executive’s Guide to ACO Strategy.
You have read about the ACO requirements and anticipated changes. Now, for the difficult decision—do you want to join an ACO? Hospital administrators, physicians, practice managers, and other healthcare professionals can face this question. One of the first steps is to conduct a self-analysis to determine if you and/or your organization support the ACO philosophies. Would this be a good fit for you? What is the level of your current information technology (IT) infrastructure, technology adoption levels, and data collection capability? What is your current alignment of integration with a hospital; and if you are a hospital, with physicians?
Organizational Assessment
An organizational assessment can be determined by evaluating six key areas:
- The organizational and accountability level and culture
- Clinical results
- Infrastructure
- Leadership: ability to embrace the ACO philosophy and lead a team into a patient-centered environment
- Coordination and information-sharing abilities
- Costs: what are actual costs at the diagnosis-related group (DRG) and current procedural terminology (CPT) level?
These categories must be assessed, and some level of competency is required before an organization should begin forming an ACO on its own. While an organization is assessing its capabilities, it should pay particular attention to:
- The operating data of the hospital
- The information regarding healthcare services in its area
- The availability for information sharing and coordination of care
- The relative acceptance level on the part of physicians and providers to participate in an ACO
- Current cost containment program
Physicians and physician groups need to assess the following:
- Current physician/hospital alignment
- IT infrastructure
- Cost at a CPT level
- Culture and philosophy
- Market (Medicare population, primary care physicians [PCP], and specialists in the area)
While conducting an assessment, an organization may choose to use surveys, focus groups, workshops, and one-on-one interviews as well as third-party objective groups who can come in to an organization and provide experience and a second opinion of the capabilities of an organization. As part of this assessment, organizations may find areas they can make improvements on right away, with or without the formation of an ACO.
As an organization begins to prepare for the ACO model to be launched by the Centers for Medicare & Medicaid Services (CMS), many executives are struggling with how to provide their administrative team, board members, and medical staff with accurate and relevant information that will help guide strategic decision-making, as well as information to evaluate the gaps as they relate to ACO development and implementation.
What is most notable here is that there is a shared recognition between hospitals and groups that they need to partner together to form ACOs and deliver accountable care. At the same time, however, a sorting out is underway that is very much geography-specific, differing from locality to locality.
The first key to a successful ACO is a strong alignment model with a hospital and other providers. If you currently have a well-established alignment with matching objectives and coordinated cultures, you may be a good candidate to participate in an ACO entity. Teamwork is essential in an ACO, and collaboration is mentioned throughout the ACO regulations. If you are not currently aligned, then perhaps you need to review that as a strategy.
Technology is another critical factor. The exchange of patient information between ACO participants is essential to meet the requirements of an ACO. Additionally, CMS has indicated that electronic connections with patients and their caregivers will be important as part of the delivery of care and customer service to the beneficiaries. Are you currently using an electronic health records (EHR) system that has been approved under Meaningful Use? If not, do you plan to implement one in 2012? Automation of data for patient records is significant and the ability to share the data within the ACO is a requirement.
Who are the appropriate players and leaders?
When forming an ACO, start by assessing the appropriate players:
- Your leadership
- What is his or her vision?
- Does he or she have the ability to successfully grasp all aspects of the ACO requirements and lead the group in this endeavor?
- Does your leadership have the ability to create a team environment of full collaboration?
- Does the participating hospital have the ability to:
- Deliver high-quality patient care?
- Contain costs?
- Be patient centered?
- Collaborate with physicians and other healthcare providers?
- For physicians
- Do they have the ability to work with competitors and become team members?
- Do they have a reputation for delivering high-quality patient care?
- Do they have the ability to control costs?
- Can they be patient focused?
- Other providers
- Do they have the ability to control costs?
- Do they have a reputation for high-quality patient care?
- Can they work together to be patient centered?
Financing—Startup and Ongoing Expenses
ACOs will require up-front costs. Among the most obvious is IT that will report and store data. Because all providers in an ACO will be jointly accountable for quality and cost measures, IT will have to be compatible for multiple providers to allow them to share information. Due to the high costs of IT, potential participants, such as small physician groups and solo practitioners, should assess whether joining an ACO is realistic.
An ACO must have an IT infrastructure that enables it to collect, analyze, and share data among providers/suppliers in the ACO organization to support clinical decisions, as well as support CMS reporting. And the up-front costs may be greater than expected. Most early clinically integrated networks, which are precursors to ACOs, took longer than was anticipated to put in place and had greater than expected startup cost and staff requirements. Original ACO pilots were somewhat amazed at the high costs and extensive time required to build their IT infrastructure. Recently organized physician groups may also lack the history needed for benchmarking costs that would be required for a private ACO.
In addition to up-front costs, ACOs will require continuing expenses relating to reporting. These expenses will involve personnel, IT maintenance, governance, and continual coordination among the different members in an ACO. In an effort to assist providers with the upfront costs of creating a CMS ACO, the government has created a program called the Advance Payment Model. This model allows for three different payment options:
- Upfront single fixed payment
- Upfront, variable payment based on number of historically assigned beneficiaries
- Monthly varying amount depending on number of historically assigned beneficiaries
These advance payments will be recovered from future savings distributed to the ACO—this is a loan, not a grant. Only two types of organizations will be eligible for the Advance Payment program. An ACO cannot include any inpatient facility and also must have less than $50 million in total annual revenue.
The second type of ACO entity that could apply for financial assistance is one that does include inpatient facilities that are critical access hospitals and/or Medicare low-volume rural hospitals and has less than $80 million in total annual revenue. This program specifically excludes ACOs that are co-owned by a health plan, even if they fall into either of the above-mentioned categories. Also, only those ACOs that begin the ACO program in 2012 will be eligible to participate in the Advance Payment Model.
Organizations must make every effort to perform a detailed financial plan to establish capital requirements, milestones, and timing to include the following:
- Financial performance
- Cash flow analysis and coverage
- Cost analysis
- Future cash flow sustainability
- Projections: level of growth, improvements, staffing, costs, cash flow, etc.
- Market characteristics/fundamentals
- Capital requirements (Significant capital will be required to successfully transform any organization into a medical home or ACO. Organizations must have a detailed financial plan to secure sufficient capital at the most favorable terms.)
- Project panel size insurance coverage (The organization must ensure that it has appropriate levels of malpractice insurance because it will be treating chronically ill Medicare patients.)
Editor's Note: This is an excerpt from the HealthLeaders’ book The Healthcare Executive’s Guide to ACO Strategy. In the wake of healthcare reform, ACOs continue to emerge as the care delivery and reimbursement model of the future. Get the book that provides specifics on incorporating accountable care structure and strategy into your organization, including analysis of the CMS final regulations, so you can enter the ACO era prepared and positioned to succeed.
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