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Accountable care organizations: cost-effective solutions or financial sinkholes?

Success depends on strategy

In one of the more disappointing news stories to break in recent months, the Centers for Medicare & Medicaid Services reported on the progress of 32 Pioneer ACOs, saying that all 32 were able to improve quality of care for its participants, but only 13 were able to lower the cost of that care enough to share in the savings.

In a July news release, CMS said that the Pioneer ACOs did great on achieving quality measures, with all of them earning incentive payments for their reporting accomplishments, and that 25 of the 32 ACOs were able to generate lower risk-adjusted hospital readmission rates, when compared to the benchmark rate for all Medicare fee-for-service beneficiaries.

[See also: Pioneer ACOs show savings.]

But although the costs of care for all the Pioneer ACOs grew by only 0.3 percent, compared to 0.8 percent for similar Medicare beneficiaries outside the program, the fact remains that only 13 generated shared savings. Seven of the Pioneer ACOs have decided to move to other pay for performance programs that involve less financial risk, and two of the participating organizations have decided to leave Medicare accountable care altogether.

Given the uneven financial performance of these pilot ACOs, C-suite executives are no doubt wondering: What secret sauce allows some ACOs to succeed while others fall short of their financial goals?

Any risk benefit analysis should keep in mind that ACOs come in many different sizes and shapes, and given that the Pioneer ACO model is riskier than the standard Medicare Shared Savings Program, it would not be fair to conclude that the ACO model is flawed, per se.

The senior executives at health systems Kathleen Jennison Goonan, MD, works with are looking at their own capabilities to take on the additional risks required to develop some form of accountable care structure. Goonan, an associate in health policy at Massachusetts General Hospital, is also CEO of Massachusetts-based Goonan Performance Strategies.

Whether they are considering a CMS-endorsed ACO or some private or public variant, all these organizations are looking at “the processes, the people, the programs, the infrastructure needed to manage population health,” said Goonan. Those who have the best shot at succeeding will:

  • Have absolute clarity among the executive team to build strategic destination, scope and market advantage.
  • Identify the way the organization is going to build a cohesive culture “to engage the workforce in very substantial change.” When this kind of change is put into effect in any company, cost cutting is often a part of the process and once staffers hear about that, they assume the worst: layoffs. Senior management needs to manage these issues proactively, she said.
  • Build measurement systems to evaluate key work processes across the continuum of care. If for instance, an organization is putting policies and procedures in place to reduce 30-day hospital readmission rates, processes and metrics to evaluate how the organization is changing patient care are needed. This management approach will require a new skill set for healthcare, Goonan said. In her estimation, the industry as a whole is largely “process illiterate.”

Bucking the “process illiterate” trend is New Jersey’s Barnabas Health ACO. Anthony Slonim, MD, the ACO’s executive vice president and chief medical officer, is fully aware that setting up an ACO is an investment in the future and is unlikely to generate an immediate return on investment. He also realizes that it will take time to figure out all of the processes and policies that will need to be in place to provide cost-effective coverage across the continuity of care.

[See also: Moving to value.]

Working in the ACO’s favor is how metrics savvy it is. Realizing that a small portion of the patient panel assigned to the organization will be using the most resources, the organization has stratified the population by a risk score to identify patients who are overusing resources and figure out how to manage them better, Slonim said.

For instance, his group is homing in on patients who use the emergency department as if it were a primary care provider. They’re educating these patients so that they’re aware of alternative places where care can be obtained, and they’re training clinicians to be more proactive with this patient subgroup, encouraging them to come into the office rather than the ED for sprained ankles and other less urgent problems.

Although many ACOs are looking to the future to see return on investment, Horizon Blue Cross Blue Shield of New Jersey has outcomes data to suggest the model of care is already working. 

According to Carl Rathjen, Horizon’s external affairs manager, and Joseph O-Hara, its director of ACO models, the payer has been experimenting with a variety of accountable care models in recent years, including a new partnership with Barnabas Health which was scheduled to begin in September.

[See also: New Jersey health system builds big ACO.]

Accompanying the improvements Horizon has seen for certain clinical outcomes was a 9 percent drop in the cost of caring for its diabetic population and increased use of preventive services.