Accountable Care and Academic Medicine: oil and water?

At first look an academic medical center might be the perfect setting for an accountable care organization. They have the physician specialties needed to manage the most complex of medical problems, they have a hospital, and they have training programs for many of the ancillary disciplines that can contribute to efficient care in the most appropriate settings. So does this mean that we have found the answer to the ACO development question? Hardly.


At present academic centers are certainly not examples of efficient care. Patients frequently have issues getting appointments with the subspecialty physicians they need to see, some physicians try and limit the number of uncomplicated cases, and lengths of stay often are longer as residents, fellows and attendings all try and participate in care.

Academic centers are often rich in clinical data systems but frequently few “talk” to each other. Research systems typically don’t mesh with the electronic health record and often the hospital data system has limited connectivity to the ambulatory one. Tracking the cost of care is frequently beyond the realm of possibility.

Does this mean that academic centers should give up and wait to see who might want to contract for selected services? Not if they want to remain viable. Patient care revenue now accounts for more than 70% of total funding for many centers and this is likely to increase as public and private funding sources are strained for cash. Academic centers need to address issues such as patient access, physician collaboration, and cost containment with or without ACOs. Any time spent now will simply better position the center for whatever opportunities develop in the near future.

One problem that may hinder academic centers from sponsoring an ACO is a limited community primary care base. Most have existing relationships with regional specialists but only limited contact with family physicians and general internists. This might be a great place to start. Building a network of affiliated physicians will not only strengthen the primary care teaching program but will allow the academic center to gather the magic 5,000 members should they decide to proceed with an ACO.

So what should be the first steps? Clearly a visioning session that includes leadership of the hospital and academic faculty to decide if they have the commitment to transform their care model is step one. If that goes well then they need to reach out to the community physicians. Once the academic center realizes that it needs community resources as much as the community needs them there will be a basis for further collaboration.

Maybe ACOs will just go away?

Although regulations related to the reform legislation, in proposed form, are expected to be released in the coming weeks it is unlikely that they will reach final format for months. It is also likely that the volume of comments generated by the proposed regulations will be substantial. Add to this the changing atmosphere in congress and we can be sure that we have no idea what the end product will look like.


Can we take a collective sigh of relief and turn our attention to other pressing matters? Hardly. The most controversial aspects of the reform law are mandated benefits, the impact of the rules on small business, and insurance premium controls. How we deliver care (called ACOs) isn’t really part of the debate. Whatever we decide to call this collaborative care model we shouldn’t expect it to go away since the future of Medicare Part B depends on it. Likewise employers will want to see some action on the reduction of their health benefit costs and employees are tired of the cost shifting of health insurance by their employers. All this means that we need to continue our focus on ways to deliver care in an efficient, high quality, cost conscious fashion.

Granted we don’t yet know what the government expects from the ACO or exactly how money will change hands but don’t for a minute think that hospitals, physicians, and others working in a collaborative environment with rich clinical and cost data availability won’t be in all our futures.

Don’t be the deer in the headlights. There is plenty of preliminary work that needs to be done regardless of what an ACO will look like or even what it will be called. Get started.

Don't Confuse Integration With Employment

A recent survey of senior healthcare leaders showed what might best be described as a shocking lack of understanding of what is meant by “integration”. While more than 60% of those responding indicated that reform will result in better hospital/physician alignment more than half said that they would be increasing the number of employed physicians. Signing a paycheck does not assure alignment.


While physician employment is a valuable strategic tool that hospitals need to use to assure adequate physician coverage and a growing number of physicians seek employment as private practice becomes less attractive don’t think that this will translate to cost-effective quality care in a shared-risk environment.

Many hospitals have made practice purchase decisions because the physicians had been loyal members of the medical staff that historically brought business to the hospital. Maybe too much business if we were to examine clinical need. A network based on these physicians may not achieve the desired results. What if the most efficient physicians actually want to remain private. Does that exclude them from integration?

Integration is all about building trust, developing a dialogue, developing a care environment solely based on the best approach to clinical care, and getting beyond egos and turf and creating a patient-centric model. Employment has nothing to do with this process although some of the key physician might be employees. Focus on starting the journey and not on generating more paychecks. Recognize employment for what is is, a strategic tool.

The Economics Of Accountable Care: not a pretty sight

Not many industries spend time thinking about how to shrink their business but that’s exactly what is required if we adopt accountable care. It appears that the consensus of those folks that have started down the path to clinical care reform feel that reductions of 10% to 15% in volume is a reasonable target. This means significant drops in imaging volume, ED visits, and bed days. It also means less revenue and less need for staff.


While primary care physicians would see their business grow dramatically nearly everyone else should begin to think about life in a leaner world.

Of course this decline in utilization will happen gradually over a few years but planners at least need to be aware that this delivery model will have a significant negative impact on some attractive revenue streams. We are, essentially, asking hospitals to invest a substantial amount of money to help develop a delivery model that will hurt them financially. Makes absolute sense!

But what of all the shared savings? ACOs promise to convert lower utilization into revenue. Money that would have been spent will be distributed as incentives. Great concept. Reality? Maybe not.

The first assumption is that utilization will actually be lowered. The financial projections of expected cost will be based on the actuarial projects on the ACO patient population. We question the ability to reliably project those costs on a population as small as 5,000 with folks, especially in the commercial market, enrolling and dis-enrolling from health plans as premiums and plan designs change. We will only have snapshots of historical utilization data on which to predict the future. Medicare data will be much better since individuals are covered for life once enrolled. This means the projected cost assumptions may not be a viable measure of program success but will be used nonetheless.

If we are really able to reduce the cost of care for our ACO population (assumption number two) how long will we receive bonuses based on those historic costs? The ACO is intended to reduce costs so, at some point, our bonus pool may well shrink. We’ll be paid based on the new reality, lower utilization. This means lower revenue.

While the ACO concept may be entirely necessary to sustain our healthcare system it will not be an economic windfall for providers. The ACO model will lower revenue if we are successful and raise costs if we are not. Plan for it.

Accountable Care: opportunity or unnecessary risk?

Here’s a thought that would eliminate the federal deficit. The government needs to take over running the seminars on forming Accountable Care Organizations. With the number that are already scheduled the revenue would easily wipe out what we owe.


This raises a point. Do we all need to work toward being an ACO? This is not a subversive right wing plot to derail health reform. It’s a simple strategic question. Is accountable care in everyone’s best interests?

I recently had a conversation with a multi-hospital system that was both the dominant provider (sole in most of it) in their market and a low-cost provider. What would they gain from an ACO? Not much. Unless they miscalculated their cost position they really didn’t have much upside and it was unlikely that someone would come and construct new hospitals so there was little downside. My suggestion was to fully understand their current readiness but to wait and see what happens. Not a very profitable recommendation for a consultant but clearly the best for the client.

Let’s be clear. It is in everyone’s best interest to fully understand their readiness for the ACO model (whatever final form it may take) and quantify the investment that will be required to become an ACO. Moving beyond that point will depend on a few key factors: 1) market position- can someone else provide the same services as you in your market? If the answer is “no” then caution may be indicated, 2) are you truly a low cost provider- if this answer is “yes” what savings will you realize to offset the investment that will be required to become an ACO, and 3) do you have the financial resources to get from where you are to where you need to be- if this response is “no” then it might be best to identify a potential partner in the ACO environment and contract.

There is still a lot of uncertainty about what the required elements of an ACO will be. A recently released White Paper (AAFP, AAP, AOA, and ACOP) identifies the desired traits that would make up an accountable care environment. Really aggressive traits that will cost a lot to deliver. What if you start down that path and find that the government decides on a less aggressive model? Time, effort and money spent.

The point of all of this is to underscore the need to plan and to start that process now but also to fully understand the strategic environment before you move beyond that planning. Some organizations are already sponsoring seminars about how they became an ACO in an environment where there really aren’t any. You might want to skip that one and contribute the enrollment fee to reduce the deficit.

Don't Underestimate The Process

Accountable care will require hospitals and physicians to work collaboratively to improve the clinical process and make care more efficient (and less costly).  To accomplish this there will need to be shared leadership with, perhaps, more control in the hands of physicians.  Don't underestimate the huge paradigm shift this will require.

Hospitals will rely on their employed physician networks for the backbone of their ACO and very few of these networks have mature physician governance structures.  Add to this a mix of private practices with little or no formal management structures and you may well end up with a ship that can't sail.

How do you get from this problematic environment to Hakuna Matada ("no worries")?  Lots of trial and error.  Recently two clients started down the bonding road only to discover major potholes.  The process of ceding leadership to physicians almost derailed both.  One client decided to ignore the need for robust physician involvement and took on a risk contract without first addressing data issues, clinical process improvement, and cost of care analysis.  Are you shocked to learn that the outcome wasn't pretty?

Before you decide to begin developing your ACO take the time needed to work with the folks on the other side of the table (hospital or physician leadership) and work through control concerns and perceived threats.  Creating the vision is the easy part.  Making that vision a reality takes hard work.

Is Accountable Care Really Healthcare Reform?

Some years ago I taught a course called Financing Healthcare and I took great pleasure in shattering my idealistic students’ thoughts that there was some grand design behind the American health care system. By the end of the semester they were agreeing that what we had was a result of financial incentives. Form follows dollars. While I try not to live too much in the past this experience raises the question; “is accountable care really healthcare reform or payment reform”. My bias is for the latter.


Few will argue that we must address the issue of the cost of care. Workers are being asked to pay an ever-increasing share of their medical benefits, companies are struggling to even provide health benefits, and Medicare will be bankrupt in not too many more years unless something drastic is done. If we can’t shift more costs to works and employers are unable or unwilling to cover a larger share of the costs, and politicians are not prepared to cut the benefits promised to our seniors then what is the alternative? Make cuts look like a new approach to care.

Capitation is not new. It’s been around for decades and it works. Care gets managed. The problem is that for capitation to work there has to be rules that require patients to see certain doctors, limits on what services are covered, and penalties for those that don’t comply.

Accountable care is Global Capitation. A fixed amount is meant to cover all the care needed by a specific group. Unfortunately the models that are being considered allow patients to “leak” out of the program, like a PPO. This risks the very concept of managing care. Patients will always opt for freedom of choice (think about the popularity of gatekeeper HMOs).

Before you rush to create or join an Accountable Care organization consider the significant financial risks if your patient population can seek care outside the collaborative network and you then need to pay the bill. We need accountable care (or whatever you want to call it) if we want affordable care but we need to “get real” and understand that lower cost results from tighter control of the care process. Be vocal if you see model proposals that put all the risk on you.