More so, ACOs are tasked with achieving this while avoiding unnecessary duplication of services and preventing medical errors. This creates a critical value proposition as ACOs hold the ability to coordinate care between a variety of organizations—hospitals, physician practices, and more.
Medicare ACOs are beginning to cover more lives today than ever before, chiefly as a result of America’s increasing senior population. While more and more organizations are adopting the ACO model, their investments remain misaligned. According to the Brookings Institute and the National Association for ACOs, operating budgets typically range between $1.5 and $2.5 million, but what’s more shocking is just how these investments are distributed. In some cases, as little as a quarter of a million is earmarked for non-personnel spending such as IT, technology and infrastructure, components that help drive efficiencies and lower cost.
The ACO Investment Landscape
A typical Medicare ACO’s position is to leave the responsibility of making investments in health technologies, actionable analytics, and process improvements to each individual entity. For example, hospitals, specialists, post-acute providers and management services organizations each develop their own technology strategies. It’s perfectly valid and often necessary for the entities of an ACO to have these individual liberties when it comes to spending, but this approach does not overcome the need for investments for coordination and interoperability, it in fact exacerbates it. Without the reliable ability for ACO members, i.e., hospitals to talk to each other, share EHRs, and aggregate clinical data and associated analytics across the entire ACO network, ACOs will fail to create a more seamless patient experience, improve health outcomes, and earn bonuses for when providers can keep health costs down. In the end, it’s this consistency that we hear so many patients cry for.
Since their inception around the time of the Affordable Care Act’s enactment, the lack of investment into coordination technology has created less-than-desirable outcomes for ACOs. In 2013, for example, the percentage of ACOs that generated savings above their minimum savings rate (MSR) was 26 percent. Two years later, that number only rose by five percentage points and 2015 saw a few more ACO’s earn savings. On the surface, it does not appear that the viability of ACOs can be justified; nearly 70 percent of organizations enrolled in cost sharing programs simply did not earn any shared savings.
The Impact of ACO Investments
If Medicare ACOs continue on their current path of investing almost exclusively in personnel, it’s unlikely they will positively influence Medicare beneficiary health outcomes or be financially viable. There is a severe lack of technology investment within ACOs, creating a detriment of insufficient savings, ineffective care, and zero progress in advancing the Medicare Shared Savings Program (MSSP) tracks.
When ACOs continue to delay widespread investments in technology and care, the current status quo remains—and ultimately undermines potential cost savings. This trickles down to the patient as sub-optimal technology and care coordination can only go so far in ensuring patient outcomes are meaningful and beneficial. Without robust coordination between ACO entities, patients run the risk of receiving redundant testing, extended wait periods, excessive out-of-pocket spending, and even conflicting medications. These problems extend beyond just patient inconveniences.
Many key ACO operations, from the development of quarterly program reports and benchmark calculations, to performance year reporting and sample beneficiary reporting, operate under beneficiary assignment. There are three financial models for this: Track 1 which is a one-sided risk model, and Tracks 2 and 3 which are two-sided. In the latter two tracks, the share of savings increases significantly.
This incentivizes ACOs to quickly learn the one-sided risk model of Track 1 and work towards Tracks 2 and 3. In the new Track 3 for instance, the final sharing rate increases up to 75 percent compared to 50 percent of a Track 1 model. The Centers for Medicare & Medicaid Services (CMS) holds the key to promoting ACOs from Track 1 to more financially sound Track 2 and 3 MSSPs and if ACOs can’t make investments to qualify for a transition, they will not be able to prove their viability.
The Future of ACOs
Given the complex symbiosis of an ACO, there is an overwhelming need to further investments in technology, actionable data analytics, and process improvements. The time has come to shift some budgets away from personnel and towards technology that can improve coordination across organizations, while reducing potential redundancies.
Currently, salaries for CEOs, medical directors, operations directors, care coordinators and compliance can make up most if not all of an ACO’s operating budget. If the last three to five years have taught us anything, it’s that there is a learning curve for ACOs—now is the time to either make the necessary investments into technology that can save the good-natured intentions of these organizations or dissolve them entirely.
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Rohan Kulkarni is the vice president of Strategy and Portfolio for Xerox Healthcare Business Group, where he designs and drives the identification and pursuit of strategic business opportunities within the healthcare market to drive profitable growth.
The views, opinions and positions expressed within these guest posts are those of the author alone and do not represent those of Becker’s Hospital Review/Becker’s Healthcare. The accuracy, completeness and validity of any statements made within this article are not guaranteed. We accept no liability for any errors, omissions or representations. The copyright of this content belongs to the author and any liability with regards to infringement of intellectual property rights remains with them.
