ACOs: Stuck in the Wrong Conversation?

There are a lot of discussions going on in the healthcare community that center around accountable care organizations. Executives are reacting to the recent CMS announcements of new regulations and ACO models, trying to understand the real costs and implications of pursuing Medicare or commercial ACO development, and evaluating the overall risks and rewards of ACO participation. 

It's clear that healthcare organizations need to be thinking about how the ACO framework intersects with their own. However, many of the C-level healthcare executives I have been talking to over the past few months feel that this is a time for extreme caution in their strategic approach to the ACO concept.

Some leaders are optimistic about ACO models' potential to achieve important goals, such as lowering costs and improving quality. Others are skeptical about whether ACOs — either Medicare or commercial — are anything more than a rehash of the HMO and managed care initiatives from the 1990s.

A shared concern has begun to emerge from ACO optimists and skeptics alike: that getting too deep into the conversations around ACOs may be more of a distraction than their organizations can afford.   

The Medicare ACO structure was designed to reward organizations that are effectively coordinating care, improving clinical quality, and significantly lowering costs for delivering care. But many top healthcare executives don't feel that their organization's current performance in these areas is sufficient to benefit from the incentives provided within an ACO structure. Nor are they sure that the investments necessary to create the new structure of an ACO will be a net benefit to their organization.

Even those hospitals and health systems that seem well-positioned to benefit from an ACO structure (organizations that are effectively managing patients across the care continuum, capturing the metrics that allow them to understand their costs of care, and managing their own health plans) are still working on evolving and improving these core capabilities. 

Healthcare executives are also acutely aware of a market-driven imperative for fundamental change to care delivery and payment structures — a movement from volume to value — and they must start making that transition while operating in a fee-for-service world. Most hospitals and health systems will need to reduce costs by about one-third in the future if they are going to survive, as many predict they will have to, on reimbursement rates that are no higher than Medicare rates.

So the question isn't whether healthcare organizations need to change, it's how to accomplish that change. As the pressures of healthcare reform mount, choices about how healthcare leaders spend their valuable resources of executive and organizational time and attention become more critical.

For most hospitals and health systems, there is a possibility that the opportunity cost of focusing on ACOs right now may not be worth the benefit that may accrue. Scarce organizational resources may be better used in making the fundamental kinds of improvements that our healthcare system so desperately needs — increasing quality and lowering costs.

The keys to long-term financial and operational success for hospitals and health systems are developing and sustaining a high-performing culture, making care more affordable, managing utilization, and making meaningful progress on improving quality and efficiency. Focusing on these fundamentals will help organizations serve their communities, meet their missions, and provide high quality care into the future — whether inside or outside an ACO framework.

Gordon J. Mountford is executive vice president of Chicago-based Huron Healthcare. He can be reached at gmountford@huronconsultinggroup.com.