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Financial strength not key to starting a successful ACO

A new report issued by the Commonwealth Fund (CWF) finds that, contrary to previous assumptions, dominant market share, employed physicians and financial strength are not essential requirements for a health system to successfully implement an accountable care organization (ACO).

[Also: Taking a close look at an ACO]

According to CWF, the findings are based on an in-depth analysis of 59 health systems of various sizes, characteristics and regional locations. All organizations were assessed during in-person site visits upon joining Premier's Partnership for Care Transformation (PACT) Readiness Collaborative, which was launched in June 2010 to help organizations transition to accountable care.
"Although much has been written about the potential merits of ACOs, little information exists to help providers understand the capabilities needed to create and participate in an effective model that can constrain healthcare costs while improving quality," said Eugene Kroch, lead author of the report and Premier vice president and chief scientist.
To address the lack of data evaluating the readiness of providers to implement ACOs, Premier developed a "capabilities framework" tool to assess health system progress toward meeting the requirements of this complex delivery and payment model.

According to Kroch, Premier's framework includes six core components, including:

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  • Patient-centered foundation (greater patient involvement in clinical decisions);
  • Health home (a primary care medical home);
  • High-value network (a set of providers that deliver quality care at an efficient price);
  • Payer partnership (ACO providers working with payers to create financial incentives consistent with providing high-value care);
  • Population health data management (collecting, analyzing and reporting data covering the ACO's patient population); and
  • ACO leadership (systematic ACO governance and administration).

[Also: CMS names 27 to shared savings ACO program]

Ten of the health systems appearing most frequently among the highest and lowest scorers were selected for further analysis. Using information from ACO readiness assessments, the following attributes are among those that did not appear to differentiate high-scoring from low-scoring providers:

  • Market share dominance. Despite industry speculation, the data show that market dominance may not translate into greater confidence for health systems exploring ACO formation. In some cases, health systems controlling a relatively small local market share were moving toward accountable care early to get ahead of market-dominant systems.
  • Number of employed physicians. Some of the highest performers had the lowest proportion of employed physicians, contradicting the belief that physician employment is necessary for ACO formation.
  • Financial strength. ACO readiness was not correlated with greater operating margins or financial reserves, with one of the highest scoring organizations a public hospital with a relatively poor financial standing.
  • Health systems that appeared most ready to form ACOs were strongly patient-centered and had a focus on building the capacity to deliver advanced primary care, according to the study.

"There are many assumptions regarding the requirements of successful ACO implementation, but little data to support them," said Premier President and CEO Susan DeVore, one of the paper's authors. "This is the first such analysis, based on data from a large scale of diverse health systems. What it ultimately shows is there are different paths toward successful implementation of this model."
Characteristics associated with greater ACO maturity included full or partial ownership of a health plan, being part of a system or having an existing collaboration with other health systems, and positive relationships with physicians and non-acute providers in the market. Organizations further along in ACO development also had existing risk-based contracts with payers, including bundled payments or pay-for-performance arrangements. 
Few of the health systems at the time of assessment had developed any sort of partnerships with commercial or government payers, and most reported poorly developed relationships with their payers.

[Also: Everett Clinic, Group Health to launch Medicare ACO]