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4 Points to Assess the Success of a Pilot ACO

Written by Molly Gamble (Twitter | Google+)  | February 22, 2012

Hospitals should focus on four numbers to predict the success of their pilot accountable care organization, according to a new white paper from Thomson Reuters.

According to "Will Your ACO Pilot Succeed? Predict Success With Just Four Numbers," hospitals should analyze the following key points:

1. Number of attributed members. ACOs will want to attract enough members to justify the required spending and investments in new care processes and programs. Also, the breakdown of patients should justify changes physicians make in their systems of care. For instance, if each physician is only caring for a handful of diabetic patients, such as 550 within a 10,000-member ACO, that justification might be difficult.

2. Current ACO member in-network and out-of-network utilization and payments.
A successful pilot ACO needs to conduct a thorough analysis to identify any "leakage" of payments to non-network providers. A recent analysis of Medicare data for a proposed Pioneer ACO identified a significant number of services and associated payments leaked out to non-network providers, according to the white paper. If these patterns come up, hospitals may need to reconfigure the ACO provider network.

3. Opportunities to reduce utilization and service unit costs. Cost saving potential is not the same for all ACO populations. ACOs with higher Medicare populations are likely to have different cost reduction opportunities than an ACO with a young, employed and commercial population. "Although readmissions for a Medicare population will undoubtedly be greater than for a commercial population, it's not necessarily true that the proportion that can be avoided with better care coordination is the same," according to the white paper. Hospitals should also evaluate the short-term loss in fee-for-service revenue for chronic illness treatments.

4. The ACO baseline and payors' financial terms. The success of an ACO pilot may rest on the method used to establish the original baseline and readjust this baseline as savings are achieved. These "rebasing" methods should reset targets while also preserving incentives to control the rate of cost increases. The success may also depend on the willingness of the payor to provide incentives to its members to seek care from ACO providers. These baselines will be crucial for payors, as they determine whether they want to award immediate shared savings to efficient ACOs or provide less efficient networks with an incentive to improve performance.

Related Articles on ACOs:

Survey: Majority of Healthcare Organizations Don't Intend to Become Medicare ACOs
10 Evolving Issues for Hospitals, Health Systems, Physicians & ACOs
NEJM: How Will ACOs "Keep Score" of Physicians' Pay?


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