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Private Sector ACO Models Rooted in Rugged Individualism

Philip Betbeze, for HealthLeaders Media, September 13, 2011
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A private-sector model

The development of private-sector accountable care models may vary, but expect innovation to be a common characteristic. Methodist Medical Center, a Peoria, IL-based 300-staffed-bed hospital, recently announced it will team up with Iowa Health System in a “strategic affiliation.” The agreement will make Methodist the eighth senior affiliate of IHS, which bills itself as the sixth-largest nondenominational health system in the United States, with annual revenues of $2.3 billion and 20,000 employees.

Methodist CEO Michael Bryant, who will resign Sept. 30 to take over as CEO at Lynchburg, VA–based Centra Health, says the affiliation helps Methodist with a better platform and infrastructure to integrate with physician practices in the Peoria area. “That’s one of the things wrong with the healthcare system,” he says, adding that “the shrinking acute care pie is a driver for a lot of communities looking to align with bigger systems.”

Another thing wrong with healthcare, he concedes, is the lack of accountability, which he contends won’t be solved by any government-led initiative such as Medicare ACOs, even though governments pay for as much as 50% of healthcare costs.

“Private sector will lead ACO development,” he says.

One of the ways that will happen is through innovative partnerships with employers, such as Methodist’s payer contracts with its biggest local employer, industrial equipment giant Caterpillar Inc., which is headquartered in Peoria.

“In our market, Cat’s contract is a value-based contract,” says Bryant. That means the system’s contract with the company is no longer indexed to inflation. Rather, the two entities have negotiated benchmarks in a long-term contract that will reward the system with higher reimbursement down the line if certain coordination of care, quality, and readmissions targets are met.

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