In general, accountable care organization models are thought to carry too many variables and financial risks. Executives at smaller organizations balk because they see no structural model surrounding participation in ACOs that seems replicable.
Nearly half of hospital and health system executives have no plans to implement an accountable care organization or ACO-like model in the near future. Instead, they're waiting for ACOs to become more stable and secure.
If and when that happens, it may be too late.
Specifically, hospital executives find ACO models to be unstable and financially risky. That's one reason 46% of hospital chief executives in a recent survey reported no plans to participate in an ACO or ACO-like model in the near future.
The survey, conducted in October 2013 by Purdue Healthcare Advisors, a nonprofit consulting firm, showed that CEOs feel that either their hospital or healthcare organization is too small for an ACO-like structure (49%) or that there are too many unknowns and inconsistencies surrounding the models to take the risk of participating (52%).
Financial concerns, not surprisingly, surround the chief reasons top executives are unwilling to consider bringing the ACO model to their organizations.
Many Unknowns
According to executives with PHA, the survey results confirmed what they had been hearing anecdotally from CEOs with whom they have consulting relationships. "There are all these unknowns as far as the model, reimbursement, what's the right mix of services in inpatient and outpatient and population health and how you pull all that together and remain fiscally viable," says Mary Anne Sloan, director of PHA.
Randy Hountz, director of PHA's Purdue Regional Extension Center, says the fact that many executives thought their organization too small to participate was not surprising, given that respondent profile shows that roughly 30% of respondents headed 100–249-bed hospitals and 40% headed organizations with 99 or fewer beds.
"Larger systems tend to have a better infrastructure to support some of these initiatives," he says. "They have more [physician] practices, which ACO models are dependent upon. Also, not all of these smaller systems have employed physicians. It's extraordinarily more complex if you don't.
Too Small to Participate?
The "too small" complaint is likely shorthand for the fact that there is no architectural, financial, or IT model surrounding participation in ACOs that seems replicable, Hountz says.
Couple that with the fact that best practices, even if they are known, are generally not shared among organizations that see such "secret sauce" as a competitive advantage.
"There's a lot of competition, so if you do find a secret sauce, I don't know if that's for sale or borrow—as much as we as healthcare consumers would like to think that knowledge will be readily shared."
There is some good news about accountable care progress, even if these organizations aren't readily adapting to ACO models, Hountz says.
"Even those not becoming one are still working on medical home-like models, which still requires a change in thinking and significant culture change for a hospital to implement," says Hountz. "If you're a physician practice or health plan, it's a lot more natural projection to do these because you're focused on outpatient and preventive care anyway. With a hospital, it's somewhat counterintuitive."
Cost Cutting is Top Priority
Further, 89% of survey respondents agree that cost pressures are significant generally, and that reducing waste and inefficiency is their number one strategy—not ACO participation. However, only 15% said that improving quality of care was their primary strategy for reducing costs. That's troubling, says Hountz.
"In many industries, improving quality is the way to become world-class in cost and customer value and perception," he says. "It doesn't seem like that's penetrated the healthcare market. [There are] tons of measures, so they don't ignore it, but it's not their primary strategy."
Instead, many, if not most healthcare organizations view cost reduction through a supply chain lens instead of a quality of care one, primarily because reimbursement, unlike in other industries, comes most often from a third-party payer, not from the patient or healthcare consumer.
Sloan says that line of thinking is flawed, and not only because patients are having to provide increasing levels of out-of-pocket funds for their own care. They are becoming more "customer-like" if you will. She says many healthcare organizations still view quality as only a clinical issue. While with cost efficiency, executives are thinking more around the supply chain. She argues that the two are not necessarily mutually exclusive. CEOs and other top executives still seem to think, says Sloan, that improving quality costs money.
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"In reality that's not the case," Sloan says. "That is our biggest challenge in the healthcare industry, recognizing how those intersect and are dependent upon each other."
Sloan hopes that despite the risk they have to take to adapt to billing, IT, and quality reform tasks, smaller organizations don't sell themselves short.
"There are smaller organizations that may be able to very successfully implement these types of programs because of local relationships," she says. "They may actually do better because of their relationships or geographic location than some larger players. Larger systems do tend to have infrastructure capability, especially around the data required and physician employment models. It's complex. Certainly, larger systems could have more opportunity and resources. But I would hope the smaller organizations don't sell themselves short because they may have more resources than they know."
But even if they buy into the notion that improving quality pays dividends that don't easily show up on an income statement, not many top leaders are currently willing to take that kind of risk when it's uncertain that higher quality will pay off in the long run. Some of those concerns are justified, as many feel they can't count on staying viable long enough to make such investments pay off over a long time frame.
"The bottom line CEOs and CFOs are asking is how can we do this in an efficient way and meet all of these initiatives that we have to meet and remain financially sound?" says Sloan. "I was at an event recently with a couple of hospital CFOs. Their biggest concern was the immediate uncertainty of inpatient volume and whether health exchanges will increase the number of insured while they simultaneously see a rise in their charity cases and bad debt. That's hard to predict for CFOs. When you get uncertainty like that, you can only take so much risk."
Philip Betbeze is the senior leadership editor at HealthLeaders.