Ready, Set…ACO?

Happy New Year, everyone!  2010 was certainly action-packed, and 2011 promises the same.

I hear a lot of thunder about getting ready for ACOs.

This isn’t a crystal ball forecast, but I see hospitals spending tons of capex on new HIT from old-fashioned “software-based” companies, and it seems like the EMR is the new “pavilion.”  I see hospitals buying medical practices using arrangements that are certain to require the hospital to subsidize doctor income.  [For another take: Paul Levy on ACO.]

These two major waves are explained by clients and prospects alike as “readiness for ACO.”

I have three thoughts:

  1. Don’t worry.  We at athenahealth will do our part.  If and when ACO payment models emerge, you won’t need to buy a new “module” from us in order to get payment.  We will go get you that money the same way we are getting you the “Meaningful Use” stimulus payments, the P4P money, and the plain old health care reimbursements that we have always delivered.  The changes to our technology and service needed to accomplish all that will be on us.
  2. Don’t turn blue holding your breath waiting for the big bonus opportunity.  The fundamental underlying principle of an ACO is that you will get a bonus in exchange for lower utilization.  If that bonus is bigger than what you’d get from the utilization, then why would Medicare pay it?  If that bonus is LESS than what you are getting now, why would you do it?
  3. I have met newly elected Republican lawmakers of late and few of them are thinking that money will be saved with this approach.  As with other aspects of health reform law, they appear to be eager to… well, let’s just say…scrutinize the mechanics closely.

None of this is certain and there will be exceptions to all the rules anyone tries to write.

This leaves one thing certain.

Do NOT make multi-year investments that depend upon ACO actually happening.

So as far as ACO goes, pay as you go.

With me?

Jonathan Bush co-founded athenahealth, a leading provider of internet-based business services to physicians since 1997.  He blogs regularly at THCB and at the athena blog where this post first appeared. Prior to joining athenahealth, he served as an EMT for the City of New Orleans, was trained as a medic in the U.S. Army, and worked as a management consultant with Booz Allen & Hamilton. He obtained a Bachelor of Arts in the College of Social Studies from Wesleyan University and an M.B.A. from Harvard Business School. He blogs regulary at the athena blog, where this post first appeared.

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19 replies »

  1. But the other assumption is that doctors will be provided incentive to work together on a given patient, which is not the case today. A patient may spend less time with any given doctor, but doctors may spend more time speaking with each other about the patient.
    Obviously the goal is to be more efficient in the delivery of care, so it would be expected that doctors may spend less physical time with each patient. But it also might mean having fewer visits with specialists at all, or more time spent emailing rather than having to come in to the office. And less time on the patient’s part coordinating documents and conversations with their various specialists. All of that makes the delivery process more efficient, thus allowing providers to treat more patients.
    I didn’t say ACOs would incent providers to spend more time with patients, I said it would incent them to TALK to patients and each other.

  2. Spike:
    ” I thought a big piece of ACOs was to create a system where your doctors would actually, you know, talk to each other and maybe even talk to you.”
    Actually, most new models of health care, such as ACOs and medical homes, are, if you read the fine print, based on the assumption that the doc will have a larger patient panel and spend less time with each patient.
    “Improving patient care isn’t going to be doing what is best by the patient regardless of the cost, but I do see employers pushing ACOs to get better so it reduces cost.”
    I don’t get your point. How can employers push ACOs to “get better” (better at what?) and reduce costs? Better care doesn’t necessarily mean lower costs.

  3. First, I never thought I’d ever say this, but I agree with Nate. Total utilization will always increase, but so will the number of people. Let’s reduce utilization and cost per person by getting rid of procedures that don’t add value.
    What blows me away is that doctors have created the most un-user-friendly system in the world and still think they should be insulated from suggestions on how to do it better. I thought a big piece of ACOs was to create a system where your doctors would actually, you know, talk to each other and maybe even talk to you.
    Doctors don’t like this because they think first about their paychecks and second about their patients.
    And then they wonder why the policy wonks have to come in and provide a framework for better service… but it’s because they clearly can’t do it on their own.
    Finally, why would Kaiser’s premiums be lower than other company’s? Price is set by the market, not by your costs. Maybe Kaiser is hiding profits and their costs are lower than they let on?

  4. if I have 2-3 ACOs in my market and I am an employer coalition with 10,000 lives why would i settle for anything short of accountability?
    Employers, as long as they are allowed to manage healthcare, have a lot of power, now that healthcare is expensive they are exercising it.
    Improving patient care isn’t going to be doing what is best by the patient regardless of the cost, but I do see employers pushing ACOs to get better so it reduces cost.

  5. “Then they should be dictating the game and forming Medical Homes and ACOs”
    Nate, that would be the logical response, but I think any group of docs large enough to organize and capitalize competition for their local mega-hospital will be so tied up in anti-trust litigation from the word go that they’ll be paralyzed.
    Ms. Gur-Aire’s analysis seems quite accurate. Anyone who thinks ACOs will be primarily about improving patient care is being naive. The “Accountability” will be for preserving the revenue stream for large hospitals.

  6. I belong to the school of thought that says politicians can do little to alter the fundamental nature of society and a culture: all it can do is free up individual members of society to be more innovative and to do the right thing. I am not sure ACOs accomplishes these things. As always, I may be wrong but making independent physicians dependent of hospitals doesn’t strike me as the right thing to do.

  7. The unregulated experiments using HIT continue, trying to prove benefit for meaningfully dangerous medical devices in care delivery systems that endanger and kill patients.
    Medical care is rapidly detriorating, directly proportional to the penetration of HIT. Nero is fiddling while Rome burns.

  8. Nate, any way you twist and turn this, Mark’s initial comment still applies. The price we pay for care will have to go down, ergo somebody will be collecting less.
    The argument that efficiency will be the outcome from using ACO tools, which seem to strangely proliferate before ACOs are defined, and the assumption that those efficiencies will translate into lower consumer prices is debatable in view of the Kaiser example, which is the closest thing to an ACO I can think of, and yet their premiums are not lower than anybody else.
    More likely ACOs, if they realize any savings, will benefit payers. Hospitals will have to balance the “bonus” against lost revenue and supplement the difference by cutting payments to freshly “purchased” physicians. Physicians will indeed be incentivized to make sure that the ACO gets big bonuses in order to minimize their own pay cuts.
    I have no idea what will happen to independent (non-ACO) docs if this trend catches on.
    As to patients, I think Paul Levy’s post on this blog ( http://bit.ly/dWcnCz ) should give you an idea how concerned the “industry” is with patients…. So Accountable to whom? And how different is this from plain old capitation arrangements?

  9. “Do you think you can sell policies that severely restrict access to ABC and expensive specialists?”
    Sure do, its already happening. I have had very little push back from employers willing to give up the all inclusive PPO for one that is affordable. Not saying everyone is on board or ready to make the switch but enough that there is now a market for it.
    “underpaid PCPs who come out with the short end of the stick.”
    Then they should be dictating the game and forming Medical Homes and ACOs and not waiting for someone to tell them what their role and compensation will be.
    AS long as our population grows total healthcare expenditures will also continue to grow. I would say the role of ACOs is to control or reduce the cost of individuals healthcare while accepting that total healthcare cost will still increase.
    If ACOs reduce waste and lead to efficency then that should free time for providers or the ACO to treat more people. While their income per person might decrease their total income could stay the same or potentially even increase.

  10. The intention the creation of ACOs – improved quality – will likely be subsumed to the reality of operating ACOs: controlling reimbursement.
    Healthcare delivery in the US is a highly skewed marketplace. The ultimate customer – the patient – is tertiary in the command and control of the market. That status – there, but not first in line, or even second, when it comes to making decisions about how the market operates – has turned patients into what amounts to a toddler with mommy’s Visa card: demanding, liable to tantrums, and totally clueless about the real economic impact of their actions.
    We want everything – every test, every procedure, even to the point that we want dying to be optional. Paying for it? Isn’t that somebody else’s problem?
    Until that mindset changes, meaningful change will be impossible.

  11. I’m not sure what the future holds for the Accountable Care Organization that’s articulated in legislation, but I do know our health care system is RAPIDLY moving toward greater acountability. (What I’ll call an Accountable Delivery System.) As Mr. Ohrenstein correctly noted, that traiin has already left the station.
    In that new era of accountable health care, best guesses and good intentions won’t cut it. You can’t just try harder … you have to get smarter about how you take care of your patients.
    Sadly, the “typical” medical organization doesn’t currently have the tools or technology necessary to thrive in an era of accountability – an environment where value is rewarded over volume. That’s why it’s important for those groups to find and partner with companies that have built the tools and technology that will help them succeed.
    Jonathan’s advice is both right and wrong. You might not want to invest millions on the back of the “ACO”, but you better invest a lot of capital – financial and human capital – preparing for a tidal wave of accountability.

  12. In all walks of life, we know that accountability normally drives improved performance. That’s why we all want our employees to have meaningful objectives and we tie performance to those objectives. The same is true for physicians – we should demand (as consumers) that they are accountable.
    Similarly, as consumers, we get annoyed if we type in our account number on the phone and then the customer service reps asks us for it. “Why did I bother typing it in if they are going to ask me for it”. In short, as consumers we demand certain level of service.
    Accountable care brings the medical field closer to what we all expect in every other field. If we make physicians accountable, reward them for doing so and give them the business and clinical intelligence they need to succeed, we will have better financial and clinical outcomes. We have proven this and so have others.
    Yes, taking waste out of the system, reducing unnecessary tests, eliminating re-admissions might mean ‘less revenue’ for some but the time has come to bring the efficiency to health care that exists elsewhere otherwise we will we be bankrupt With the baby boomer demographics, there will be plenty of care needed in this country and plenty of opportunity for every part of the system to be successful – we have to strive for the right care by the right provider at the right time.
    Accountable care is a great way to achieve these goals.
    The question you have to ask is: are you ready to play in the new environment because the train has left the station?

  13. Interesting to read a majority of comments about ACO’s as though their primary function was to change reimbursement. Even if ACO’s had no effect on reimbursement don’t ACO’s represent an opportunity to increase value by improved quality through “more effective, engaged and convenient care to patients”? Regardless of legislation or models for reimbursement, aren’t patients best served by effective “care delivery innovation”? Instead of ACO’s won’t work or their effect on providers and payers, from a patient’s point of view this discussion should be about ACO’s as a part of a change in delivery of care. Then we might see the energy and lightning and not just hear the thunder.

  14. Isn’t reducing the size of the pie not just a premise but the whole point of ACOs?

  15. An underlying premise of ACOs is that they will reduce healthcare costs. While this remains to be seen, at the very least and as others have touched on, compensation to providers is being repackaged and redistributed. This will lead, for better or worse, to winners and losers.
    However, let’s not have the discussion about ACOs entirely focused on redistributing the existing “income pie”. Let’s look at using ACOs to increase the size of “pie” while delivering more effective, engaging, and convenient care to patients.
    Within an ACO, the utilization of telehealth software creates an opportunity for providers to deliver their respective areas of expertise to their patients in new, more value-based ways and create new revenue streams. Care delivery innovation needs to have a seat at the ACO table for all stakeholder’s objectives to be achieved.

  16. “keeping my members out of higher cost ABC hospital”
    but ABC is higher priced because of market share, university affiliation, nicer billboards, and prettier fountains in the lobbies.
    “The specialist might not be happy but no one likes then anyways.”
    Except the patients who expect unlimited access to any specialist and procedure.
    Do you think you can sell policies that severely restrict access to ABC and expensive specialists?
    “some overpaid people are going to make a lot less”
    Maybe. But the way ACOs seem to be shaping up, it looks like it will be the already underpaid PCPs who come out with the short end of the stick.

  17. it goes back to who’s utilization you are cutting. If a primary care doc can cut my specialists cost 20% I have no problem paying him for that. The specialist might not be happy but no one likes then anyways.
    If XYZ ACO can cut my hospital cost by keeping my members out of higher cost ABC hospital across the street then again I dont have any problem paying them more then they were getting in the past.
    There is plenty of opportunity for people to make more then they made before, some overpaid people are going to make a lot less.

  18. “The fundamental underlying principle of an ACO is that you will get a bonus in exchange for lower utilization. If that bonus is bigger than what you’d get from the utilization, then why would Medicare pay it? If that bonus is LESS than what you are getting now, why would you do it?”
    And this applies to hospitals as well as docs. If the “bonus is LESS” for them, they’ll just cut the docs’ pay even more.

  19. Your second point seems to highlight the fundamental problem that I see with ACOs.
    In order for ACOs to reduce costs, the total paid for services (including “bonuses”) will have to be lower than current payments. This means lower reimbursements to doctors.
    So how do we get doctors to accept lower payments? … ? tell them it’s a bonus? … I don’t think they are that stupid.