Industry Expert: A Balanced View on ACOs

The initial Pioneer grants came out a few years ago, and the health systems that ended up more successful were the ones that had significant experience managing risk or capitation, which is a different payment model. With the track record that the Pioneers have, and with the track record physician groups are getting with Medicare Advantage, I believe that the industry is smarter than ever as they have learned that they need to organize themselves and operate very differently if they will succeed under new payment models. I see providers as much more educated and unlikely to make rash decisions. It was a hunch a few years ago, now it will be much more informed decisions. Are we truly ready? Are doctors ready? Do we have infrastructure and informatics in place? A much more deliberate decision-making process has come from this.

We have also realized that less is more, meaning several of the analytic and informatics approaches of the last few years have tended to “boil the ocean,” attempting to analyze every single piece of data without a real scientific approach. There has been great work, but a lot of the good work is lost. People can be easily confused by data, metrics, and information.

Simple concepts such as avoidable costs and unexplained variations in care help with this. For variation— why did physician X do this, when everyone else did that? That’s what we mean. And avoidable costs are avoidable readmissions and avoidable emergency room (ER) visits—so less is more. These are the magic concepts and this is where change emanates from. I do believe the analytics and systems are being put in place to adequately address analysis of avoidable costs and unexplained variation, and that’s good to get the conversation started with hospital officials. It’s not rocket science, and it boils down to a focus.

How can ACOs revamp their strategies to be more effective going forward?

First, they need to commit to having a critical mass of patients and employees for whom the ACO will be paid differently and delivered cared differently. So if a medical group or health system only has 5 percent of its population under an ACO payment model or delivery model, it won’t make a huge difference. But if they have 40 percent under that model, it will make a big difference. If we’re going to get serious about a new way of payment and delivery, providers will have to commit to taking care of more lives through this model.

Secondly, and this doesn’t get talked about a lot, providers and payers, along with patients and employers, need to benchmark where the risks are, where the value comes from, and who gets paid what. That’s a lot of stuff to try and figure out. But we need more transparency around who pays for what, who bears the risk, and who delivers the value. And lot of healthcare companies are working on that right now. A key success factor to navigating healthcare reform is figuring out where the money is going and where the risk is at, and balancing that much more effectively.

And lastly, physician behavior change and patient behavior need to change. That means the sickest patients, and it’s the doctors who care for them. The behavior change aspect is something we’re a long ways from—we’re in a piloting mode with that.

Overall though, your outlook is still optimistic?

Accountable healthcare is definitely still realistic. Going back to reform, it was a 10-year plan to incorporate the playbook that Medicare has laid out. It’s sort of a blessing, to be able to “crystal ball it.” When you can do that, the likelihood of succeeding under the new rules will increase. There are a lot of smart people here, and that is what keeps me optimistic. It is incredibly difficult work, though—change will happen, but it won’t happen overnight.