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Thoughts on Reform: When ACOs, Vectors, and Spin Collide

By Michael Silver, PhD, Vice President, Sg2, for HealthLeaders Media  
   June 16, 2011

Health care reform has passed the point of no return. One way or another (or more likely, multiple different ways), it will evolve dramatically over this decade, although the final script probably has yet to be written. Reform will continue to follow two separate but "attached-at-the-hip" paths—payment reform and care delivery redesign. The former is largely driven by national and state politics and commercial interests, while the latter will be determined largely by provider organizations in response to various quality, smart growth, Systems of CARE (Clinical Alignment and Resource Effectiveness) and cost reduction initiatives. The sad reality is that you can't cut your way to greatness. Unless care delivery redesign advances management significantly, we face a decade of payment cuts and inefficient health care delivery.


ROUNDS: The Real Value of ACOs
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Where: hosted by Norton Healthcare
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Personally, I view health care reform as a complex vector process in which a wide range of local, regional and national forces act on the players in the health care drama—consumers, employers, providers and payers. Some of these major vectors include population demographics, the economy, new technologies, diseases and payment models. It's more than a coincidence that these are the same health care modeling vectors that Sg2 has employed for almost a decade to drive its forecasting engine. These vectors will interact nationally and regionally to produce different outcomes. They also comprise various sub-vectors such as bundled payment and accountable care organizations (ACOs).

ACOs on the Road
We discussed many of these change drivers with a few hundred attendees when we took the EDGE ACO presentation on the road to Boston, Nashville, Dallas, Denver and San Diego. Based on what we heard, I have little doubt that bundled payment will emerge as a major vector during this decade. I expect that when bundled payment and episode of care models are implemented by the Centers for Medicare & Medicaid Services (CMS), United Healthcare, Blue Cross and Blue Shield and other payers, they will serve to immediately drive major changes in care delivery, provider behavior and cost structures across the entire health care marketplace.

So where does that leave that overhyped reform buzzword, the ACO? During discussions with attendees at the "ACO road show," we heard almost universal hesitation or downright rejection around participation in the Medicare Shared Savings Program as outlined in the Patient Protection and Affordable Care Act, due to its multiple unknowns and financial uncertainties.

Since CMS published its Shared Savings Program governance draft, market skepticism has clearly grown and become more vocal. In light of this, the following messages emerged from our "road show" presentations.

  • Hospitals do not need to become ACOs, but every provider organization will be expected to become more accountable for their care delivery and decisions—there was almost universal acceptance for this notion in post-meeting surveys.
  • Management and care redesign aimed at significantly reducing costs while improving quality will be essential for the health and growth of every provider organization.
  • Since the ACO concept does not include comprehensive disease-focused strategies by market, successful health systems will need to work on becoming well-integrated, high-performance, accountable Systems of CARE.
  • Robust performance and outcomes data and the ability to effectively mine and integrate that data into care decisions will be essential for dealing with payers and regulators.
  • Physician integration and alignment will be essential hospital values; however, alignment and management of those relationships will be more valuable than merely employing physicians.
  • Over the next 5 years, the most important management innovations will be found in hospital systems' ability to implement and manage pilot programs, exploring new payment and care delivery models.

What Pilots Can Do
The archetypal accountable care model was initially developed as a physician-centric, outcome-based incentive payment model based on a high degree of provider integration, developed by academicians and policy makers to control Medicare costs. Since then, it has evolved into a diverse mix of different pilot programs. In the academic world, when one wishes to explore a model, it has become fashionable to establish a virtual collaboration to maximize the number of participants, resources, experience, outcomes data and potential solutions. That's exactly what we are seeing in the ACO world of 2010 to 2012. Early adopter provider, academic and payer organizations have banded together to accelerate the ACO learning curve. As vectors of change, these early pilots serve many valuable functions.


ROUNDS: The Real Value of ACOs
When: August 16, 12:00–3:00 pm ET
Where: hosted by Norton Healthcare
Register today
for this live event and webcast


Most obviously, they validate underlying assumptions vs real world experience. Second, early pilots will help to identify which of their elements need to change to improve performance in their 2014 or 2016 iterations (if they survive). Third, they keep the spotlight on the physician as an often reluctant, but critical participant in health care redesign. Finally, pilots, especially well-publicized ACO pilots, will help focus and shape national awareness and dialogue on the rapid transformation of health care payment, delivery and accountability, including patient accountability.

These first 2 pilot functions will likely produce more clarity around how to implement a more accountable, more integrated provider organization. At the same time, other emerging payment models such as bundled payment will likely overshadow the singular market focus and fascination with the "ACO as a destination." Market-validated ACO values such as tighter physician integration and standardized care protocols will likely be adopted by most hospital-centric Systems of CARE. ACOs must continuously be seen by the health care marketplace as important drivers of positive benefits and outcomes. To that end, they exist in the health care "spin zone" and influence reform dialogue.


ROUNDS: The Real Value of ACOs
When: August 16, 12:00–3:00 pm ET
Where: hosted by Norton Healthcare
Register today
for this live event and webcast


For example, on May 17, 2011, CMS announced the ACO Pioneer Program to facilitate the evolution of 30 Medicare Shared Savings Program participants into a broader population health management organization. The ACO Pioneer Program has targeted a potential health care savings of $430 million over 3 years, although during that same time frame, US health care expenditures will likely approach $8 trillion. Value-based purchasing metrics and other quality initiatives will also drive improved financial and clinical outcomes, with ACOs ultimately only a piece of the solution.

What's Next?
So where does this leave ACOs over the next few years? The definition of an ACO will broaden to include a wide range of commercial insurance pilots based on narrow scope and provider integration. Some of these pilots will focus on improved ordering processes; others will focus on bundled payment or outlier management. New payment models will drive dramatic changes across their markets, including a focus on smart growth strategies, appropriateness, more effective management and care redesign across Systems of CARE. I suspect that many ACO lessons, coupled with other drivers, will continue to push market consolidations.


ROUNDS: The Real Value of ACOs
When: August 16, 12:00–3:00 pm ET
Where: hosted by Norton Healthcare
Register today
for this live event and webcast


I am skeptical about whether we will be discussing ACO implementations in 5 years and I have little doubt that, at the least, the ACO (Version 3.0) of 2016 will have a very different structure than today's model. In 2016, I surmise that ACOs will be viewed as an important change agent from earlier in the decade that helped shape the evolution of hospital Systems of CARE. They will be viewed as a message that helped craft a new care delivery model rather than being the model itself, creating improved performance and more consolidated care integration, as the national health care dialogue evolved to a new level, shaped by these vectors of change.

 

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