Guest Post: Accountable Care Reflects Paradigm Shift from Volume to Value

Friday, March 29th, 2013
This post was written by Ally C. Evans

Ally C. Evans

Ally C. Evans is an industrial engineer specializing in process and system improvement in healthcare.

In this second in a three-post series on “Accountable Care: The Power of Partnerships,” guest blogger Ally C. Evans, healthcare consultant with Freed Associates, argues that the U.S. volume-based, fragmented healthcare system has to change.

So, volume is a bad thing? Try telling that to a hospital CFO and you’ll quickly realize it’s a hard pill to swallow. The United States’ volume-based, fragmented healthcare system has to change. To that effect, health reform legislation is driving us toward a substantial overhaul of the healthcare delivery system, part of which includes the advent of accountable care, a concept that demands a deliberate rethinking of the way we deliver, coordinate and manage healthcare.

The term ‘Accountable Care Organization’ (ACO) was coined in 2006 by Elliot Fisher of the Dartmouth Institute for Health Policy and Clinical Practice. His idea resonated with policy-makers and lead to the inclusion of ACO provisions in section 3022 of the Affordable Care Act, enacted in March 2010 with final rule in October 2011, under the Shared Savings Program umbrella.

Although the formal introduction of ACOs started with the Medicare-specific Shared Savings Program, the ACO construct provided a new focus for the private sector, which rapidly began experimenting with similar frameworks to constrain costs for commercially insured patients. Through this evolution, ACO has become one of the hottest acronyms in healthcare and most likely has a slightly different definition depending on whom you ask.

In a nutshell, ACOs are formalized, collaborative partnerships between various organizations that agree to be financially accountable for the quality and cost of care for a specific population of patients. This population of patients is typically designated by payor type.

ACOs focus on three core principles:

  1. Provider-led organizations with a strong base of primary care are collectively accountable for quality and total per capita costs across the full continuum of care for a population of patients;
  2. Payments are linked to quality improvements that also reduce overall costs;
  3. Reliable and progressively more sophisticated performance measurements are employed to support improvement and provide confidence that savings are achieved through advances in care.

ACOs have various structures, with most including some combination of physicians, other providers such as hospitals and post-acute services, and payors. Together they are responsible — and receive incentives — for enhancing processes and services across the full continuum of care. The ultimate goal is to change the cost-growth trajectory.

The philosophy of shifting from volume to value-driven care remains consistent across all ACO approaches, due to the shared-savings or shared-risk agreements that are integral to the model. These agreements align high performance (e.g., good outcomes) with financial rewards to encourage providers to maximize efficient utilization of healthcare resources, while providing the most appropriate care for the patient.

Smart ACOs will capitalize on the concept of 'sharing' beyond the financial rewards of success.

High-performing ACO providers will receive a designated percentage share of the cost savings based on performance relative to target thresholds. Smart ACOs will capitalize on this concept of ‘sharing’ beyond the financial rewards of success. ACOs that master the art of clinical and system integration will undoubtedly be able to see greater results more rapidly by leveraging sophisticated processes, systems, technologies and teams to coordinate optimal-quality care both vertically and horizontally within the continuum (See figure above.)

Integrated health systems, or ‘real’ ACOs (i.e. those where the provider partners have pre-existing affiliations) are at a clear advantage here, but what about the ‘virtual’ ACOs (i.e. those comprised of independent providers embarking on new partnerships)? These ACOs need more work on the front end relative to investments of time, energy, and money to design and deploy robust governance systems and infrastructures. This infrastructure is essential to allow for real-time and efficient sharing of patient-health information, information technology resources, decision-making, human resources, research and innovation development and data across all ACO partners.

ACOs that do not invest in this foundational work may struggle later on to implement solutions that rely on integration, and to monitor the impact of those solutions due to poor data systems. As with all projects, the costs incurred trying to fix implementation-gone-wrong will far outweigh any up-front costs involved with detailed set-up.

It’s worth noting that ACO partners may be part of multiple ACOs simultaneously, each focused on a unique population of patients and different participating partners. Some organizations are embarking on both commercial and Medicare-sponsored ACOs; others have multiple commercial ACOs in progress. Although this approach expands potential bandwidth by reaching a larger population of patients, it is likely to dilute their ability to maximize their ‘sharing’ potential within each ACO. Also, as ACO models continue to adapt, particularly in the private sector, each ACO may prescribe different metrics, goals, and therefore, solutions, to ensure success. Clear delineation of priorities across and within ACOs, and alignment of core tactics and timeframes with organization-wide strategy, will be core components of success.

Read Part 1: Why Accountable Care Organizations?

In the final post in the series, Ms. Evans will propose ACOs as a panacea.

Ally C. Evans is an industrial engineer specializing in process and system improvement in healthcare. Most recently, Ally has driven various initiatives in the Accountable Care arena, focusing on the design and implementation of ACO strategy and tactical interventions. She is a consultant with Freed Associates, a California-based healthcare consulting firm. Their work is to provide sustainable solutions that enable healthcare organization to improve patient care services reduce costs and increase operational efficiency.

HIN Disclaimer: The opinions, representations and statements made within this guest article are those of the author and not of the Healthcare Intelligence Network as a whole. Any copyright remains with the author and any liability with regard to infringement of intellectual property rights remain with them. The company accepts no liability for any errors, omissions or representations.

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