Frontier Health Care
By Mike Bassett
For The Record
Vol. 25 No. 14 P. 14
The Pioneer ACO program has shed light on the tools necessary for success.
In July, the Centers for Medicare & Medicaid Services (CMS) announced that several Medicare accountable care organizations (ACOs) were leaving the Pioneer program. Seven told the CMS they were transitioning into the Medicare Shared Savings Program, while two others said they were abandoning Medicare accountable care completely.
According to the CMS, 18 of the 32 pioneers could lower costs for the Medicare patients they treated in 2012, but only 13 produced shared savings with the CMS, generating a gross savings of $87.6 million and saving Medicare $33 million. The agency also reported that 14 Pioneer ACOs generated losses, two of which had shared losses totaling $4 million.
Does the fact that some ACOs are abandoning the program suggest there is a problem with the model? “The pioneers were meant to be on the leading edge of this delivery model,” says Erik Johnson, a senior vice president with Avalere Health who focuses on HIT, hospital operations, and finance. “These were actors that had already made the investments and taken measures, and I think it’s conceivable that they got into the program and realized that they had achieved all the gains that they could achieve—that they were already operating at high efficiency and, as a result, there weren’t any savings to be shared with the CMS.”
In fact, one of the Pioneer ACOs, Atrius Health (which is continuing in the program), saw a financial loss during the first year of the program because, according to the organization, it already had adopted cost-control measures that left it without any easy avenue to achieve savings.
Johnson says the ACO model is premised on the idea that there are inefficiencies in the health care system that need to be eliminated. “But pioneers had already achieved a lot of those efficiency gains, and there wasn’t sufficient waste in the system to share savings and, as a result, they ended up bearing some of the loss,” he explains.
Another possible reason pioneers soured on the program is that “it’s just a hard model. This movement away from fee for service that everyone thinks is going to happen really fast is not going to happen really fast,” Johnson says.
While some industry experts have suggested that the Pioneer ACO program’s attrition rate represents a failure, the opposite could be true. According to a recent eClinicalWorks survey, 66% of respondents said their biggest motivation for considering becoming an ACO was to improve patient outcomes. According to the CMS, that’s just what the Pioneer program has been able to do. All 32 participants successfully reported quality measures and achieved the maximum reporting rate for the first year, with all earning incentive payments. Overall, Pioneer ACOs performed better than published rates in fee-for-service Medicare for all 15 clinical quality measures for which comparable data were available. In addition, several participants were able to earn sizeable amounts in shared savings.
Montefiore Medical Center in New York received about $14 million of the generated Medicare savings, attributing the windfall to increased patient engagement, care coordination, and preventive, patient-centered care efforts. Boston-based Partners Healthcare said that by slowing cost growth by 3%, it was able to achieve $14.4 million in shared savings.
But even programs that weren’t able to earn much in the way of shared savings are finding that the ACO model still works. “One can argue that the program is a failure because one-third dropped out,” Johnson says. “But two-thirds stayed because they see a real opportunity to improve care. And there are some that opted to stay in the program that aren’t generating savings but have decided that strategically this is the right model for them. These are folks who are much more comfortable with the risks they are facing and are finding that there is progress to be made on the utilization front.”
Even though some systems aren’t making money at the moment, Johnson says they remain participants because they understand that the ACO model is aligned with movements in their local market from a quality, cost, and utilization perspective.
Taking the Plunge
Bruce Eckert, a national practice director for the Strategic Advisory Group at Beacon Partners, says hospitals must determine whether they have the tools to become an ACO. They must define goals, ascertain their reasons for joining an ACO, determine how that meshes with organizational strategies, and analyze whether change management resources are in place to pull off the transition.
There must be cogent evidence to pursue the ACO model, says Johnson, who advises hospitals to think long and hard before taking the plunge. “We told one hospital client it really had no reason to do this right now,” he says. “The model and payers in his market didn’t need him to be an ACO, so he didn’t need to shift his model in a way that damaged his balance sheet or financial statement because the pressures weren’t there to do so.”
On the other hand, a Beacon Partners client within a well-defined community faced an “outmigration” problem: It was losing patients to other hospitals for some services. “We told them that if they executed their ACO well, they would be able to deliver an integrated set of services to their patients and coordinate their care better so that these patients would recognize the benefits of not going down the road to another hospital for services,” Eckert says. “And by stopping that outmigration, the hospital can come out ahead financially.”
According to Eckert, some hospitals have a hard time understanding the financial consequences of forming an ACO. He points out that in the Medicare Shared Savings Program, an ACO manages care in such a way that less of it is used, and the cost savings are shared with Medicare. “That sounds great except that the utilization you are saving used to be your revenue,” he says, suggesting that hospitals are losing revenue in order to reap reduced Medicare costs.
However, financial incentives can come in other forms, Eckert says. For example, some organizations may assume that the revenue in question is disappearing anyway. “They can’t operate under the assumption that everything is just fine, and they can’t keep doing what they’ve been doing for the last five years and nothing will change,” he says. “The external environment will impose change on them, so they can be ahead of the curve and implement change.”
Some organizations view ACOs as a tool to create a competitive advantage. “So if they are able to leverage their success as an ACO into increased patient volume, then the math works out,” Eckert says.
Or a hospital could find itself in a situation where a competing ACO is being established. “Someone else is reducing the utilization so [the hospital] might as well get the [Medicare] bonus back or the competing ACO will look at it as a volume grab and the nonparticipating hospital will lose,” Eckert says.
What steps should hospitals take before joining an ACO? Considering the following:
First, the organization must ensure that that it has a solid and scalable stable of primary care physicians who are either employed or affiliated with the hospital. “Primary care physician shortages are an age-old problem for the hospital,” Johnson says. “A critical mass of primary care physicians is not going to be available in every market.” A hospital that “doesn’t have a good foothold on primary care will be at a big disadvantage in the ACO world,” Eckert adds.
ACOs in the Medicare program also need to be well aligned with post-acute care providers. Because this historically has not been of concern to hospitals, Johnson says this presents new problems for executives. “Their goal has been to discharge patients and free up beds,” he says, but now the risk-bearing component of the ACO model requires hospitals to care about what is happening outside of their facilities. “The question of alignment happens upstream with your primary care physicians and downstream with post-acute care providers.”
Hospitals must ensure they have the infrastructure in place to coordinate care, Eckert says. Care managers should have access to information that allows them to effectively manage care and, if necessary, reach into other organizations and make changes and direct care.
Having a strong IT infrastructure in place—particularly one built around EHRs—is critical, but it even must go beyond that capability, Johnson says. “Even more important is having a really strong ability to take that data out of the EHR and do some really robust analytics on the data to understand what your patterns of care are and how they represent opportunities for change,” he notes.
Johnson points out that health systems always have lagged behind in their ability to build data warehouses and use them in meaningful ways. “While they are making strides and getting better at it, they aren’t up to par with the Bank of America and United Airlines of the world, who are terrific at it,” he says.
In the eClinicalWorks survey, 95% of the respondents believed that EHR integration is important for attaining quality patient outcomes. Also, 89% rated risk-assessment tools and predictive analytics as important. “When you talk about improved outcomes, if you don’t have a mechanism to measure where you are, you won’t be able to know whether you’ve been able to achieve positive outcomes,” says Sameer Bhat, vice president of sales and cofounder of eClinicalWorks. “The ability to come out with measurement mechanisms has been one of the biggest challenges [facing organizations considering ACO participation]. And then once you’ve made the measurement, how do you analyze it and make it actionable at the point of care?”
Bhat also points out that better patient care management tools are desired by organizations mulling over ACO participation. “These organizations want a 360-degree view of the patient so they can define a care plan to effectively manage a population that’s at high risk,” he says. “Care planning tools are at the top of the list.”
Developing better patient engagement tools is a challenge in the ACO world, Bhat says. “If a hospital identifies a patient with congestive heart failure, it will want him to provide statistical data back to a care manager, such as weight, salt intake, and exercise,” he says, adding that organizations are hopeful of using technology to make that process more efficient.
An Accountant’s View
Hospitals must have a solid understanding of their costs, says Johnson, who notes most fail in this regard. If a hospital is going to be a risk-bearing entity at any level, he says it needs to “understand what its cost basis is in order to negotiate for a bundle or a global cap, and hospitals historically haven’t had to care what their cost-accounting systems generate.”
A technological and organizational investment can help, Johnson says, because it will enable a hospital to understand precise costs. For example, it can measure the average cost of treating heart failure patients over a 60-day period in terms of labor, supplies, and overhead “because no one has a really good idea of how those costs get allocated.”
If a hospital takes the leap into an ACO environment, executive leadership needs to be in full-stop agreement, which is no easy task, according to Johnson.
For private-paying ACOs, he says hospitals should develop detailed, explicit agreements with payers and ensure that community physicians are on board with the plan. If the ACO is through the Medicare program, support relationships with postcare providers must be established. Governance should be formalized with a management board that exists parallel but apart from the hospital’s internal structure.
Going the ACO route can “be daring,” Johnson says. “But my experience with hospital executives is that they have a really good and nuanced understanding of their markets. If they decide this is a model they want to pursue, then they’ve done a precise inventory of what their markets have in place and if they can’t take advantage of it now, they’ll eventually be able to prosper under that model.”
— Mike Bassett is a freelance writer based in Holliston, Massachusetts.