What Makes or Breaks A Successful ACO: Q&A With Dartmouth Brookings Pilot Participant Monarch Healthcare's COO Ray Chicoine

Ray Chicoine, COO of Monarch Healthcare, a 2,500-physician independent practice organization (IPA) in Orange County, Calif., discusses Monarch's efforts to develop an accountable care organization in Orange County as part of the ACO pilot project spearheaded by the Engelberg Center for Health Care Reform at the Brookings Institution and The Dartmouth Institute for Health Policy and Clinical Practice. Monarch is one of five participants in the pilot program and is currently working closely with HealthCare Partners, a Torrance, Calif.-based physician organization and Anthem Blue Cross on the project.

Q: What is the current status of the Monarch pilot?

Ray Chicoine: We are in the process of implementing a five-year pilot ACO through the Dartmouth Brookings national pilot slated to become effective Jan. 2011. Monarch was one of the five organizations chosen to participate. We are currently collaborating with Dartmouth/Brookings, HealthCare Partners and Anthem Blue Cross to determine a model that will effectively reduce the cost trajectory of healthcare while improving clinical outcomes. Initially the model will focus on shared savings but all parties agree that for the model to work, a greater degree of financial alignment such as global capitation will be necessary over time.   

Q: Why did Monarch apply to participate in the pilot?

RC: We as an organization strongly believe in the promise of accountable care, which is to deliver a higher quality product at a lower cost. The ACO pilot offers us the opportunity to do this for a broader patient population and ultimately will help keep health insurance more affordable for patients in the communities we serve.  

Q: In the Monarch pilot, a physician-owned organization is heading the ACO. However, it is likely many hospitals will develop ACOs in their communities. What is your stance on this?

RC: We strongly believe that in markets where physicians have aggregated and have the resources to invest in infrastructure to achieve the necessary level of integration, the ACO model should be physician-centric but be inclusive of collaborative hospital partners. In areas where a market has a single hospital or hospital system, other more hospital-centric models should be considered. Generally speaking, it is physicians that drive the cost of care by the things they order, where services are performed and how they interact with patients and family members in determining what options are most appropriate in treating a specific illness.   

The value system upon which an ACO is based is important and physician-led organizations have a number of distinct advantages. Physicians possess firsthand experience caring for people over extended periods of time across the entire continuum of care. They are the primary accountable parties when their patients suffer an acute illness and are the primary driver of how effectively longer-term chronic disease is managed. Experiences such as these provide the physician with a unique perspective when trying to balance the difficult choices that are routinely made in providing healthcare.

Q: In your opinion, what will make or break successful ACOs.?

RC: First, you need the engagement and support of the provider community. The ACO concept is unknown among many independent practicing physicians so an effective communication plan and ongoing education is critical.  

A second key element is effectively aligning financial incentives. Figuring out how to align incentives among the employer/payor, physicians, hospitals and other ancillary providers will pose significant challenges. We have a theoretical understanding that all stakeholders in the ACO will share in the expected savings, but ensuring that these savings are allocated equitably will be critical. Successful ACOs will need to reduce unnecessary utilization, which means there will be less overall dollars spent, and that waste has to come from somewhere. If a hospital within the ACO has less volume, they would want shared savings to help offset these volume losses. Employers may feel that the majority of the savings should go back to them in the form of reduced premiums. The physicians who are doing the majority of the work to produce these savings will look for that work to be valued appropriately. Finding the right balance will require a greater degree of transparency and collaboration among the various stakeholders than currently exists in most relationships. ACOs currently are largely a theoretical concept that must be transitioned to an effective organizational or contractual model that works in a transforming market.  

In conclusion, I believe the ultimate success of an ACO will be based upon the vision and values that it embodies. Some ACOs being created today will succeed while others will fail if they are not truly committed to the ACO principles. How an ACO fares will be determined by why its participants form it. There will be organizations who envision an ACO as their next high-margin revenue model, or as a new way to increase negotiating leverage. These ACOs will not be capable of fulfilling the ACO promise and thus will fail. On the other hand, providers and executives who understand to whom and for what they are accountable will design high-quality cost-efficient models for the communities they have committed to serve.    

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