Finding the Savings in an ACO: Real-Life Lessons From 2 Healthcare Leaders

At the Becker's Hospital Review Annual Meeting in Chicago on May 10, William Bithony, MD, of Bithony and Associates ACO Group, and Bob Edmondson, chief strategy officer with Carroll Hospital Center in Westminster, Md., discussed their observations and experiences with  accountable care organizations and population health.

Mr. Edmondson began the presentation by noting what hospitals need to focus on as their shift their strategy to population health. He said providers should focus on mastering their competencies and building infrastructure in these three areas: health information technology, patient-centered medical homes, and chronic disease management.

"The epic fail — this is what we're trying to avoid — [is] if patients get readmitted, there will be more and more penalties [for hospitals]. The idea is to make sure you're intervening with patients after discharge to make sure they don't get readmitted," said Mr. Edmondson.

He also said improved access to care is a huge component of this. Resources like 24-hour call centers allow patients to call a professional to determine whether they should visit the ED, an urgent care center, their primary care physician or another care setting for a specific health concern.

Mr. Edmondson also discussed the repercussions of ACOs down the line, and how they will likely demand change to hospitals' strategic thinking. "What you're seeing now is payors encouraging primary care physicians and ACOs to manage utilization. We talk a lot about primary care, and in a way, you want primary care to provide access because that is the least-expensive care. So where are [hospitals] going?"

Mr. Edmondson forecasted continued consolidation among healthcare providers with a more pointed focus on collaboration and coordination between care settings. He's also observed a more visible and prominent role for physicians. "What we're really seeing is very successful, large physician-driven models taking the lead. If physicians can organize themselves, this is a big threat to the hospital."

Dr. Bithony continued the presentation by discussing his experience with an ACO when he served as CMO, COO and CEO of a hospital in Springfield, Mass. When he began working at the hospital in 2007, it had a Medicare Advantage program that was full-risk and full-capitation. "That program was one of 10 in western Massachusetts," he said. "Nine went bankrupt. This system was losing money every year and was about to close. We decided the only way we'd survive is if we built up an ACO as big as we could."

Dr. Bithony said the system was in an ideal position because it already had a continuum of care with psychiatric hospital, rehab hospital, home health services, hospice and several nursing homes. The system was left with $63 million in Medicare reimbursement for a 51,000 patient group, excluding payors' administrative costs.

The system decided to partner with an IPA and split the shared savings 50-50 between the hospital system and the physicians. Through this arrangement, the system had affiliations with 600 specialists and 147 primary care physicians, none of whom were employed.  

Over time, Dr. Bithony and his team found 3 percent of ACO patients incurred 49 percent of the costs. "We knew if we focused on them, we had a chance of [saving] a lot of money right away and could use those savings down the road for primary care," he said.

Reducing the incurred costs for that population from 49 percent to 43 percent saved the system $5 million per year. The ACO also strengthened its home care services and deployed robust home training for disease self-management to reduce readmissions. The system went from having 65,000 home visits in 2008 to 80,000 in 2009.

More Articles on Hospitals and ACOs:

Health Plan Survey: ACOs to be Most Widespread Value-Based Model
Pay-for-Performance Arrangement Development Tips
ACOs, PHOs and Shared Savings Agreements: Too Risky of a Business?


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