Tag: Accountable Care Organizations

2011 Predictions: MU Goes Tactical, ACO Strategic

In the Healthcare IT (HIT) market, 2010 was the year of meaningful use (MU). Healthcare organizations (HCOs) of all sizes developed plans, began making IT modifications and began adopting the technology they needed to meet Stage One MU requirements and subsequently receive incentive payments, some of which began being disbursed in late 2010. As we move into 2011, we will continue to see an extreme amount of activity and turmoil in the HIT market with the biggest elephant in the room being what will actually happen to the healthcare reform bill that was passed at the beginning of 2010.

Against this backdrop, we once again have prepared our annual top ten (actually we have 11 for after all it is 2011) predictions for 2011 which are as follows:

1) MU Initiatives Move to Tactical. Meaningful use is no longer of great concern to the executive suite, well except for maybe the CIO and his counterpart, CMIO. It has moved to the tactical implementation stage for enterprises insuring that systems are in place, clinicians trained and MU requirements met to reap incentive payments.

2) C-Suite Strategy Focuses on New Payment Models. Despite the turmoil swirling around healthcare reform, one thing that is unlikely to change is the move to bundled payment models and the migration to Accountable Care Organizations (ACOs). The train has already left the station on this one and this train does not have reverse. The repercussions of these new payment models have the potential to make or break a HCO and the C-suite knows this thus are focusing all of their attention on what is the most appropriate strategy for their organization. Strategy service firms such as CSC, Dell, Deloitte, PWC, etc. are going to make out like bandits.

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ACOs and Community Hubs of Wellness & Health

Hospitals are going to change. What worked in the past will not work in the future. The passage of the federal health care reform law and the inevitable transition from fee for service to global payments is changing the rules of the hospital game. Hospitals will have to make do with less financial support from both government and private payers and at the same time deliver higher quality health care with measurably better outcomes. Hospitals will take care of fewer and fewer patients as care continues to migrate to the outpatient setting, the home, and wherever citizens live carrying their smart phones. The development of Accountable Care Organizations (ACOs) to receive and distribute these global payments will affect hospitals whether they decide to take a leadership role or a wait and see attitude. There will be winners and losers among hospitals; there will be fewer hospitals in America in ten years than there are today in 2011.

Hospitals that survive this transformation of the health care delivery and payment system will become the community hub of wellness and health (CHWH) that citizens turn to in a time of rapid and chaotic change. Becoming a CHWH will require hospitals to expand their services and expertise well beyond the traditional role of an acute care facility. It will also require hospitals to embrace social media and disruptive digital tools that are now available to help care for a defined population living in the community. Hospitals will have to forge a new culture or their ACOs will fail, no matter how sophisticated and expensive their legal structures and physician integration plans become.

Hospital leadership seems ill prepared for this transformation in mission. Robert Naldi, the CFO of Maimonides Hospital in Borough Park, Brooklyn, is not alone when he says, “I don’t spend a lot of time thinking about global issues. When I hear Medicare is being cut six billion dollars over the next ten years, Medicaid cut four billion dollars the next, that ten billion dollars doesn’t change what I do on a Thursday morning…. I don’t spend any energy forecasting the next three or four years, because I don’t think anyone can do that. We’re lucky if we forecast the next six months, things change so rapidly. I just don’t waste time on it.” (

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Putting the Patient First, Literally

Interoperability is front and center, again. Stage 1 of HITECH was about health records for doctors. Stage 2 is about interoperability. The President’s Council of Advisors on Science and Technology (PCAST) report is all about interoperability. At a recent state medical society meeting, the most animated questions by physicians to Dr. Blumenthal were about the lack of interoperability in electronic health records.

While HITECH is designed to regulate the behavior of technology vendors, it is struggling to encourage doctors to accept the result. Growing interest in ACOs may, at last, drive doctors to demand effective interoperability, and using the patient as a principal or intermediary can jump-start the clinical integration they seek.

For more than 5 years, interoperability has been approached from the perspective of doctors and hospitals. The results speak for themselves. As we process the innovations proposed by PCAST and consider the specifics of Stage 2 regulations, it’s time to put patients first and technology second by giving patients (and their designated agents) convenient access to their health records in their choice of electronic formats including Blue Button, CCR and CDA. Market forces will take care of the rest. Experience with Blue Button and the Direct Project shows that patient-centered and secure, directed exchange avoid the privacy and policy issues that delay technological approaches to interoperability.

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The Grinch that Stole Obamacare

Article 1, Section 8, Clause 3 of the Constitution, better known as the Commerce Clause, states that Congress has the power to “regulate Commerce…among the several States.”  To supporters of health reform, the Commerce Clause is the Grinch that stole Obamacare.  To opponents, the Commerce Clause might seem like a Sanity Clause (apologies to the Marx Brothers.)  One thing now seems certain.  Obamacare is on the fast track to the Supreme Court, where a ruling on the Commerce Clause could have far reaching implications for health reform and, frankly, for many other federal interventions into economic activity.

Virginia officials cited the Commerce Clause in arguing that the individual mandate was beyond the power of Congress.  U.S. District Judge Henry Hudson agreed with the centrality of the Commerce Clause:

While this case raises a host of complex constitutional issues, all seem to distill to the single question of whether or not Congress has the power to regulate and tax a citizen’s decision to participate in interstate commerce.

Judge Hudson sided with Virginia, stating that “no specifically articulated constitutional authority exists to mandate the purchase of health insurance.”

Judge Hudson does not reject health reform in its entirety.  Although he speculates as to whether the bill would have been enacted without the exchange, he notes that the record in the case is insufficient for a final determination and thus he “severs (the individual mandate) with circumspection,” leaving the rest of the bill intact.  In doing so he provides a road map to others attempting to strike down the entire legislation, provided they can find some evidence that votes hinged on the inclusion of the exchange.

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Analysis: Aetna Jumps into HIE Market Acquiring Medicity

First it was United Health Group’s (UHG) Ingenix Division’s acquisition of leading HIE vendor (and top competitor to Medicity) Axolotl. Then this morning Aetna counters by acquiring Medicity. In just a few short months these two payers have completely changed the landscape of the HIE market by acquiring the two leading HIE vendors in the market today. Now that both of these vendors are in the hands of payers what are the implications both to the HIE market and more broadly the healthcare sector? Following is our assessment based on our continuing research of the HIE market and a number of interviews today, not only with the Aetna and Medicity, but also several other active participants in the HIE market.

The Deal:
Aetna acquired Medicity for a King’s ransom of $500M, a handsome multiple of Medicity’s 2010 gross revenue. Medicity will operate as a separate entity under the Aetna brand maintaining its current headquarters in Utah. According to Medicity, initial conversations began in late October/early November and quickly accelerated to the deal announced today. Aetna plans to close the deal before the end of year. As part of the deal, the senior management team of Medicity has agreed to stay in place for the next few years.

The Motivation:
While some may argue that Aetna was simply looking to counter the move by UHG or Aetna’s new CEO was looking to make a mark, Chilmark sees a more thoughtful and strategic move at play here which in the end may justify the price paid.

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Have We Found the Magic Acronym?

Sometimes, reality just delivers – this morning in the form of some funny Google search results.

Aghast at the fluidity of my acronymic spew in an email exchange with a colleague (“ACOs can be MSOs instead of PHOs because Stark now safe-harbors EMRs for IPAs, so the PPMs and hospitals can share IT to TPA the risk piece, and…”), I decide to brush up on these new-fangled entities in the health reform law called “ACOs,” or Accountable Care Organizations.

In case you’re still stuck back on page 689 of the law, the ACO is This Year’s Model – the TLA (Three Letter Acronym) with Big Mo.  An ACO is a contracting entity, codified in the health reform law, through which a group of physicians and a hospital or several hospitals work together to share in the financial risks and rewards associated with patient care.  Sound eerily familiar? To me, the concept sounds like a bad movie I once saw – a really long and dreary drama with nothing close to a Hollywood ending.  Or maybe it was a bad waking dream I had while dozing at a population risk management conference in 1998, thanks to a slight fever, two Sudafed, and half a bottle of Robitussin.  Or maybe it was something I read that same year.

Hospital and physician integration has become ‘thinkable’ now, if only because physicians and hospitals finally recognize that they will sink or swim together, thrown as they have been into the same turbulent, unforgiving waters of a self-correcting marketplace. As a reaction to the cost crises of the 1980s and early 1990s, government and private purchasers – directly and through MCOs [managed care organizations] – have blamed both hospitals’ and physicians’ self-serving clinical behaviors, inefficient practices, and excess capacity as the main driver of their own health care spending woes.  This is precisely why the purchasers turned the MCOs on them in the first place.  This is why MCOs have been positioned as the enemy of both types of providers.  And the enemy of my enemy is my friend, or so the thinking goes.

OMG, that was some big thinking! So the purpose of the 1998 vintage ACOs was to punch the MCOs (i.e., the 1998 vintage HMOs/EPOs/PPOs/POSPs/MOUSEs) in the nose. OK!  But more on this little artifact in a moment.

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What’s Your Platform?

We’ve done some heavy dipping into the world of policy recently. In mid-September, I spent a day in Washington, D.C., with friend and advisor Tom Scully meeting researchers, senators, and a congressman.  We heard from “ONCHIT” that “CCHIT”—which, as you know is an “ATCB”—granted us Stage 1 MU!  This is great news for me, mostly because some competitors didn’t get it!  (How’s that for starting a policy blog with some serious ABCs?!)

I met with some amazingly smart and engaged reporters who now (I think, get called “researchers,” since their newspapers can no longer afford them) work for the Henry J. Kaiser Family Foundation or NPR.  They’re the real deal.  They needed much less initial grounding in the problems we try to solve than most of the journalists we meet.  They had taken on board the assumption that the move toward ACOs means less waste (which it could for some) and can get everybody in the clinical supply chain on one system (which has been seen to work at times).

But none of them appears to have considered the idea that there is a relationship between a healthy integrated health information ecosystem and a health information exchange marketplace.  It’s still surprising to me, but precious few people correlate sustainability of any social good with the existence of a healthy marketplace with enough room for flexibility to allow innovation over time.  It’s like the single economic condition responsible for ALMOST ALL of the social progress of this nation since inception, but in health care it’s still kind of a new idea.

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