Electronic Health Reporter

Guest post by Timothy “Dutch” Dwight, vice president of business development, Medullan, Inc.

Will today’s pioneer ACOs share the same demise as the HMOs of the 80s and 90s? It’s certainly starting to look that way.

Like HMOs, ACOs (Accountable Care Organizations) were created to reign in excessive fee-for-service arrangements and provide an incentive for capitating costs. The premise was that under the umbrella of an ACO, providers and payers would share in the responsibility for quality, cost and coordinated care for a defined population of patients.

If an ACO saved money for the payer without compromising quality, providers — defined as physician practices, hospitals, group practices, physician-hospital alliances and networks -–would share in the savings. And the savings were projected to be significant. Early forecasts from the Congressional Budget Office estimated that the 32 pioneer ACOs could save more than $1.1 billion in the first five years. On the other hand, if the ACO failed to meet capitation limits while providing care, the group shared in the losses.

To offset the risk and encourage membership, the early ACOs were supposed to receive multi-year compensation. However, that financial support disappeared after the first year and most provider groups did not have the business margins to carry them through a long-term investment approach. In addition, the ACO model requires a draw on scant resources from all parties to create another layer of program oversight – further cutting in to margin.

So where does the ACO model stand today? Nineteen of the 32 pioneer ACOs have left the program over the last two years, resulting in considerable wasted taxpayer dollars. As CMS moves towards the Next Generation program, can it succeed?

What will it take to save the ACO?

I believe ACOs can be saved, but significant changes must be enacted.

The fundamental problem with the pioneer ACO is that it manages the care of an unhealthy population without having sufficient oversight of that population. This leads a risk-adverse industry to hold their cash and cling to old processes.

Two years ago, Clayton Christensen rightly pointed out that the provider community must make major process and procedural changes in order for the ACO model to work. “No dent in costs is possible until the structure of healthcare is fundamentally changed.” I couldn’t agree more.

To survive, ACOs need to align with the Patient Centered Medical Home (PCMH) model, which is continuing to thrive and grow. PCMH is designed to align more holistic care management with a consumer incentive to prevent high-spend patients from seeking services from the more costly care centers such as emergency rooms. The payer, or insurance company, rewards the consumer for making smart choices by reducing deductibles and other fees if they use lower cost service centers such as primary care physicians, nurse practitioners, and urgent care centers. PCMH models use a combination of fee-for-service, value based payments to providers and align consumer incentives to reduce the cost of care. Comparatively, the ACOs capitated, “value based” payment model, intends only to lower the cost of care without having the proper procedures, tools and feedback loops in place to account how that care is provided. In other words, a visit to a PCP or ER makes no difference in the ACO model. On their own, ACOs do not have enough process control(s) and sufficient incentives to change patient behavior.

However, in combining the ACOs and PCMH model, the healthcare industry stands a much greater likelihood of meeting its goals — to improve the quality of care while containing or lowering the costs.

What needs to happen?

It starts with patient education – consumers need to be educated about their options and when and how to best use them. The next step is employing financial incentives. In short, money talks and will be key in changing old habits. When there is financial reward for going to one’s PCP or an urgent care center instead of an ER, consumers will make smarter choices. And ACOs will have an easier time capitating costs.

That’s not all

Change must also come from the provider community. As Chas Roades wrote earlier this year,

“The fee-for-service payment model contributes to a fragmented healthcare delivery system resulting in duplicative care, preventable utilization, escalation of care to higher-acuity settings, and ultimately, poorer patient outcomes.” While there are definite challenges with the fee for service model, it could work when balanced alongside other alternatives, such as a value-based payments and consumer incentives.

Providers need to evolve quickly to a consumer centric, value-based model. They need to take a more holistic view in how they see patients, treating the whole person instead of a specific condition. Currently, most hospital systems are set up to literally send a patient in multiple directions and departments (oncology, cardiac, orthopedic, etc.) depending on the ailment or condition at that point in time. Much needs to be done from both a provider process and technology support perspective to create a more effective treatment of the whole person.

Who and what will drive this change?

1. Alignment between ACOs and PCMH models must come from forward-thinking CEO’s and policy persuaders who embrace the opportunity to reduce the burden on the majority of the population created by a small segment of unhealthy people.

2. Hospital business and process models need to catch up to reality of today’s patients and meet their changing needs. This means being willing to tackle some historically hard areas like changing the work process rules for the unions, how hospitals are staffed, how many hours people are allowed to work, and so on.

3. It also requires cultural and mindset shifts among providers, redefining roles and responsibilities for doctors, nurses, and other clinicians. Physicians will also have to change some of their care protocols and develop new approaches to treating patients. And they will have to embrace ways of interacting and sharing with hospitals, insurance companies, and fellow doctors. Most of all, providers will have to educate and engage patients in this new model of care.

4. It requires payers to design and management populations and programs, which incent the caregiver, provider and consumer with solutions for where they are in their lives on a daily basis.

5. Technology can help these forward-thinkers better understand and develop programs/apps to help their consumers become enthusiastic participants in managing their own care.

Will it be easy?

No. We are talking about big issues like transforming old, ingrained behaviors and overcoming institutional and cultural barriers.

But, it can be done if the ACO’s align themselves with PCMH best practices.

For payers, policy persuaders and physicians who are serious about reaping the large-scale rewards promised by ACOs and becoming part of a smarter, better healthcare delivery system, this is the time to start.

For those tempted to dig in and maintain the status quo? Let the HMOs be a warning to you. Or as Yogi Berra would say, “lt’s like déjà vu all over again,” or ‘If you see a fork in the road, take it”.