The Journey to a Successful ACO

What is the key to a successful accountable care organization? Hospital leaders across the country are asking this question as they await the release of ACO regulations. Some say employing physicians, some electronic health records. The most likely answer, however, is that no one action or product can result in a successful ACO. Instead, leaders must look at a variety of elements that when implemented over time will lead to greater efficiency, savings and patient health.

Steve Geidt, CEO of Saddleback Memorial Medical Center in Laguna Hills and San Clemente, Calif., says developing an ACO is a journey. He says that a fundamental shift such as that from a fee-for-service model that rewards volume to a value-based model that rewards quality will be difficult and time consuming.

"This is not a change from 'A' to 'B.' New structures are required and the cultural issues are enormous," he says. He adds that one challenge is "balancing the need to change and shift with the political and cultural reality of getting there."

Physician leadership
One cultural issue that hospital leaders have to face is the role of physicians in leadership positions. In the current system hospitals and physicians generally operate in different spheres — primary care physicians manage outpatient services while the hospital manages inpatient care. ACOs, however, will require physicians and hospitals to be closely aligned across the care continuum.

Mr. Geidt, whose hospitals are part of MemorialCare Health System in Southern California, is a proponent of new physician/hospital alliances instead of either hospital-driven or physician-driven ACOs. He says, "We believe that since the successful models of the future will be those that produce more clinical quality and value, they will need to be heavily managed and governed by physician leaders. We need to create new partnerships, new care delivery models."

California may have to develop care delivery models that are different than not only the status quo, but also than the majority of the United States. Mr. Geidt says Saddleback Memorial Center and other California healthcare providers are at a disadvantage because of California's prohibition on the corporate practice of medicine, which prevents hospitals from employing physicians. As an alternative to direct physician employment, hospitals and health systems are increasingly implementing the medical foundation model, a legal arrangement in which a tax-exempt organization contracts with physician groups to create a non-profit foundation, allowing physicians and hospitals to work together on practice management and other elements of integrated care.

Mr. Geidt says that in California, "The biggest challenge now is many physicians want to be employed; they want the stability that a health system might provide them instead of going into private practice."

He contrasts California's situation to that of Seattle-based Virginia Mason Health System. "The Virginia Masons of the world have an edge in terms of being organized to better produce a healthcare delivery system of the future. The rest of us have work to do."

Models of integration

Mr. Geidt points to Danville, Pa.-based Geisinger Health System; Rochester, Minn.-based Mayo Clinic; Oakland, Calif.-based Kaiser Permanente; and Virginia Mason as examples of successful physician integration and ACO-like models. He explains that these organizations are health systems, not hospital systems. The success of these companies supports Mr. Geidt's opinion that ACOs require strong physician leadership. He says, "Larger multispecialty medical groups are more integrated than a network of independent medical groups and may be in a better position to manage the health of a defined population and other aspects of the Affordable Care Act, such as electronic health records. However, not every market has a Geisinger or a Mason Clinic in it."

Mr. Geidt says hospital leaders should focus on forming true partnerships with physicians, medical groups and other healthcare providers instead of creating a partnership only on paper. "I see the future organized around much more tightly knit medical groups and hospitals. I see them as integrated financially and not just contractually."

Mr. Geidt argues that successful physician integration requires healthcare systems to align incentives with their goals. In the past, hospitals were incentivized to produce the greatest volume and physicians were incentivized to enter procedurally oriented specialties. Healthcare reform legislation, however, rewards hospitals and physicians for quality and efficiency, which motivates physicians and hospitals to become more interdependent and less independent..

Change resilience
One of the underlying challenges to physician integration and forming ACOs is adapting to change, Mr. Geidt says. When Saddleback introduced electronic medical records, hospital employees participated in change resilience training, a program to help people adjust to the shift in managing care. In fact, Mr. Geidt says developing change resilience was one of the keys to the hospital's success in implementing EMRs. He suggests that the same principle can help healthcare providers shift to a more integrated model. "Going from where we are today to where we imagine being at some point requires some courage," says Mr. Geidt. "And that's really the key."

Hospitals and physicians also need courage to trust each other, another essential element for physician integration, according to Mr. Geidt. Building trust, however, takes time; developing strong relationships between hospitals and physicians requires consistent attention. "The evolution towards the healthcare delivery system of the future is one that will be littered with anxiety and challenges and a need for vision and communication," says Mr. Geidt.

Hospital leaders who consider these elements — physician leadership, models of integration and change resilience — will begin their journey to a successful ACO.

Saddleback Memorial is part of the non-profit MemorialCare Health System in Southern California, which includes five hospital facilities, 10,000 employees, 2,350 affiliated physicians, numerous outpatient facilities and a medical foundation. The MemorialCare Medical Foundation currently includes four physician group partners in Los Angeles and Orange counties representing 118 physicians and 750 employees caring for 250,000 patients. The foundation plans to add more physician groups in the near future. Learn more about Saddleback Memorial Medical Center.

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