8 Biggest Mistakes an ACO Can Make

Given the recent announcement of the first 27 CMS Medicare Shared Savings Program accountable care organizations, and with health insurance giants such as Cigna, United and Blue Cross Blue Shield touting accountable care models, it's safe to say the phenomenon is both public and private. And regardless of how the Supreme Court rules on the Patient Protection and Affordable Care Act, most healthcare leaders agree that accountable care in one form or another is here to stay.

As more hospitals, physicians and payors nationwide enter into integrated care models, the time is ripe for hospital leaders to consider issues ACOs will face during formation, in order to address the biggest mistakes they might make on the path to starting one. In the coming months, as more ACOs develop, there will likely be a clearer picture of all the issues an ACO could run up against. For now though, here's a list of some mistakes that could spell serious trouble for an up-and-coming ACO.

1. Lacking an appropriate governance structure where all constituents are at the table. Everyone in an accountable care organization needs to be on the same page. If one party is left out, integration is likely to fail. All partners need to have "the willingness to redesign the healthcare system," says Judy Rich, CEO of Tucson (Ariz.) Medical Center, one of the 27 new CMS ACOs. "Our physician partners are committed to the success of our ACO."

Neither a hospital nor physicians should dominate an ACO — it takes effort from both sides of that aisle says Bill Frack, vice president of global healthcare consulting firm L.E.K Consulting. In order to formally encourage input from all parties participating in the ACO, the ACO's governing board should include representatives from the hospital, physician groups, any other participating providers, such as post-acute care groups, and patient populations. "Because you have to have coordination, you need the major players all at the table in relatively equal capacity," Mr. Frack says. Maintaining a two-way street between hospital and physician groups partaking in an ACO is essential from day one, long before formation. Initial collaboration will lay the groundwork for the shared savings, quality of care measurements and collaboration models to follow.

"Physicians need to be actively involved and assume proactive leadership roles for ACO development from the very outset, rather than being asked to rubber stamp a hospital-driven process," Mr. Frack says.

2. Operating under existing economic incentives incompatible with the intent of an ACO. Accountable care relies on different payment models to achieve its end result. While CMS' new ACOs maintain aspects of a fee-for-service model, ACOs by definition seek to rid of a system that pays physicians solely for providing services. The purpose of an ACO is to ensure a patient is staying healthy and that the organization is cutting costs associated with caring for that patient. Physicians who work in an ACO and respond to that goal should be proportionally reimbursed for carrying their weight; it makes sense to offer physicians financial incentives to spur savings.

The purpose and challenge of integrated care is "to develop a payment system based on the value of work we do based on health outcomes of the patients," says John Toussaint, MD, with the ThedaCare Center for Healthcare Value in Appleton, Wisc. and author of Potent Medicine: The Collaborative Cure for Healthcare (2012). "We don't get paid much to prevent," says Dr. Toussaint. He says the fee-for-service payment model that has reigned supreme for some time is "fundamentally flawed right now."

An ACO could technically have all the measures in place that make it appear destined for success — integrated care, core measures to assess quality delivery, a competent information technology plan that allows for data sharing — but if the organization fails to revolutionize the way it pays physicians, it is in serious jeopardy. A shared savings model that provides physicians with an incentive to go beyond simply providing services for patients will provide an incentive to curb costs, and some form of capitated payment will eventually follow.

3. Failing to address antitrust issues. Potential legal barriers, including antitrust laws, could slow or halt the development of an ACO. Federal law, as well as laws in some states that address anticompetitive price fixing, has the potential to undermine ACOs. Many providers, including former competitors, may pool resources to create ACOs to improve quality of care potential, but doing so could spur an antitrust investigation.

It's a sort of Catch 22. "The components critical to the success of ACOs could make them impermissible under federal law and some state laws," writes the Coker Group in its new book The Healthcare Executive's Guide to ACO Strategy (2012).

In its joint statement on the matter, the Federal Trade Commission and Department of Justice in October 2011 said that "under certain conditions ACOs could reduce competition and harm consumers through higher prices or lower quality care."

Fortunately for ACOs, FTC and DOJ  have embraced so-called "antitrust safety zones" for CMS ACOs.  Independent ACO participants providing the same service and that provide no more than a combined 30 percent of those services in what is known as their primary service area — defined as the lowest number of postal zip codes from which the ACO draws 75 percent of its participants — are protected under the antitrust safety zone. They will not be investigated unless under extraordinary circumstances.

In addition, rural exceptions exist for ACO participants in areas with small populations where very few other practices likely to participate in an ACO. Other ACOs that fall outside the safety zone will not raise competitive concerns, so long as they do "not impede the functioning of a competitive market."

But there are ways an ACO could do just that. A few things the DOJ and FTC say will raise antitrust flags:
  • Collusion among competing ACOs for services that fall outside the ACO.
  • Preventing private payors from directing or incentivizing patients to choose providers that may fall outside the ACO, or "anti-steering" contractual clauses.
  • Tying sales of ACO services to private payor purchase of other services from providers outside the ACO, and vice versa, including providers affiliated with an ACO participant.
  • Contracting on an exclusive basis with ACO physicians, hospitals, ASCs or other providers and discouraging those providers from contracting with private payors outside the ACO.
  • Restricting a private payor's ability to make available to health plan enrollees performance information that will aid enrollees in evaluating providers in health plan, if the information is similar to measures used in Shared Savings Program.
There are other exceptions, and the FTC and DOJ will offer an expedited 90-day review for CMS ACOs to ensure they are not violating antitrust laws. To be sure though, providers looking to form an ACO should consult a competent healthcare lawyer versed in new legal issues surrounding accountable care.

4. Not making information technology a top priority. ACO data needs to be delivered at the point of care and should be organized in a way that proves outcomes and cost reduction.

"Without the ability to share and exchange information at the point of care, achieving the objectives of an ACO would be extremely limited, if not impossible," writes the Coker Group.

An efficient IT sharing system could be in place, but it also needs physicians trained to input data into it. Elliot Fisher, MD, and Stephen Shortell, PhD, say, in an article for the Commonwealth Fund, that quality of care information is essential for measuring how well an ACO is working.

While they acknowledge the "release of provider- and plan-specific pricing information raises issues of contractual commitment and competitive advantages on one hand and antitrust on the other," the authors also weigh in on the importance of tracking data over the course of an ACO's history. "Without at least some common information on the quality of care, resource use and relative pricing on the part of ACOs, it will be impossible to assess their performance," Mr. Fisher and Mr. Shortell write. "And without community-level aggregation, we will be hard-pressed to know whether new payment model is having an impact on what matters: the quality and affordability of care and health of our communities."

Therefore, information technology and data maintenance is important not only for an individual ACO but for the future of accountable care organizations as a whole. If each ACO pulls its weight and implements robust, sweeping IT solutions that allow it to effectively measure quality of care, that can then be used by physicians, hospitals, payors and policy makers to make an assessment. They'll know what is and isn't saving money and what is and isn't improving the health of the patient who is supposed to be in the center of accountable care.

5. Not establishing a meaningful set of quality measures to rate ACO success. How does your ACO analytically measure its success beyond cost reductions? CMS reduced its list of ACO quality measures from 65 to 33 in an effort to appeal to more providers, sensitive to concerns over administrative burdens. But without thorough quality measurements in place, it will be extremely difficult to gauge how successful an ACO is at accomplishing what it seeks to provide.

In order to facilitate quality measurements, ACOs will need to have in place a system available to all parties involved in patient care, and that allows for efficient tracking of patient outcomes. It's in the best interest of the individual ACO and the new organization model as a whole.  

"Much will be gained by forging agreement on a set of measures for a core set of ACO capabilities," write Mr. Fisher and Mr. Shortell. "Without this, it will be difficult if not impossible to compare findings across studies and cumulative knowledge will be seriously compromised."

6. Failing to involve payors. Mr. Frack says research shows payors and providers don't often share data used in negotiations between the two. They sometimes quell information sharing out of a lack of trust for one another. Providers, for instance, concerned that data will be used against them, may hesitate to paint payors a full picture. But for an ACO to be successful, payor collaboration with hospitals and physicians will be crucial, Mr. Frack says.

"Payors have a tremendous amount of sophistication in terms of risk management and data," he says. "They have a more longitudinal view of a patient's record."

For ACOs to be successful, all parties will need to agree upon care metrics and be willing to both share in financial gains and assume financial risks.

7. Failing to realize the patient is at the center of care in an ACO. Ms. Rich, the CEO of Tucson Medical Center, says the goal and expectations of everybody involved with an ACO needs to be very clearly spelled out, and the focus must be on the patient, not the hospital. A hospital could be incredibly efficient at gathering patient data and entering it into organized, controlled databases — but if it doesn't consider data a means to an end — that end being patient care — data is a moot point.

"We will fail if we misinterpret the role of the patient," she says. Technology is intended to empower care providers, not replace them. As stated above, a strong IT system is an essential element of an ACO, but it leads to the health of a person: the patient. It's not just about showing patient improvement through data, though better data will inevitably help ACOs track progress made. Dr. Toussaint calls it a revolutionary change in the delivery model. He says integrated care "turns the industry on its side. What we're focused on is the patients experience and not on our own experience as a provider."

8. Underestimating the time it takes to form an ACO. Mr. Frack says this is a glaring issue he observes when consulting with hospital leaders, physicians and others in healthcare looking to start an ACO. He notices administrators and physician group representatives will begin to brainstorm and discover how many elements go into an ACO — structure of the organization, metrics, reimbursement models, electronic medical records and payor contracts to name a few. And then, six months into ACO discussions, the leaders will be addressing the same issues, but with a list of concerns that has doubled. Mr. Frack says at that point, the ACO decision makers are looking at value-added topics such as the future organization's ability to manage post-acute transitions or it's ability to not only integrate systems but actually coordinate care effectively.  

Max Reiboldt, CEO of the Coker Group, agrees with Mr. Frack's assessment that executives and physicians looking to start an ACO underestimate the time and financial commitment involved in form one. "We are asking everybody to take a dramatic step, make a dramatic change," Mr. Reiboldt says. "There has to be a lot of educational opportunities to pull this together."

Mr. Frack notes that more than half of all groups who explore an ACO fail to develop one. That being said, he expects to see — and he is by no means alone — many more accountable care organizations sprout up in the near future — he predicts more than 500 will form in the next five to 10 years. Those that avoid common mistakes made during formation will become models that work in the long run.

More Articles on ACOs:
80 Accountable Care Organizations to Know
CMS Names First 27 Medicare ACOs
5 New ACOs Announced This Year; What Does the Future Hold for Accountable Care?

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