ACOs and the Potential Impact on Your Medical Practice

July 28, 2012

If an ACO comes knocking on the door of your medical practice, here are some pointers to assess your potential new partners.

 Accountable care organizations (ACOs) represented less than two pages of the 2,000-page healthcare reform bill, but the concept of ACOs has gotten more attention than any other provision of the bill. Why? Because it stoked the fires of the imagination of the health system and physician leaders around the country as to how they could gain and control market share from their competitors through these integrated networks. But, in reality, there is more fallacy than fact and more legal fees than revenue being generated in the ACO space.

Response has been less than overwhelming to the ACO opportunity. CMS recently announced that only 65 ACOs have been approved, with another 150 applications under review. Why the low interest? Because once you get past the initial infatuation of control and total market share domination, the reality is that there are more questions than answers, and these are quite expensive answers to pursue with little promise of payback, control, or market share growth. Frankly, that’s a lot of work, not to mention hesitancy in investing millions of dollars and thousands of hours of time on a strategy that may ultimately be ruled unconstitutional.

Not only is it practical for your practice to be ready just in case someone wants you to join their ACO, it is smart to understand the implications of healthcare reform models and ACOs in general. Here are a few pointers:

• The importance of an EHR: ACOs and other forms of "systems of care" will require an EHR (electronic health record) for participation so that patient information can be exchanged across the organization. If you have not selected and implemented an EHR system by now, it is critical that you do so ASAP. If you have been waiting for your affiliated hospital to save you either by providing this EHR to you or buying your practice to save you from oblivion, that isn’t going to happen if it hasn’t happened by now.

• Alignment for payer contracting: While the value proposition of the Medicare ACO continues to be debated, while we wait for the Supreme Court ruling on the constitutionality of the health reform bill, and while we wait to see if anything changes with the November elections, understand that the commercial insurance industry is moving forward with its own flavor of "pay-for-performance" contract arrangements, some requiring clinical integration and some requiring financial integration. Under some payer contracts, you will still be able to hold directly with the payer, but with other contracts you will need to participate via an “upstream” entity (i.e., an IPA or PHO that should be clinically integrated and able to manage risk).

Your practice will need to participate and manage fee-for-service contracts, risk contracts, shared savings programs, global payments, bundled payments, episodic payments, commercial contracts, and governmental contracts; a significant change to the current payer contract landscape. Knowing both how your practice is ready to manage these agreements and knowing your upstream IPA/PHO alignment options and strategy are critical. Ask yourself this: Who can bring you the best value with the least amount of effort, cost and risk?

• The expansion of “midlevel providers” and other “allied health professionals” into the “care team”: Think now about your current and future state strategy for the evolution of “care teams” with new clinical members (i.e. midlevel providers) as well as non-clinical members (i.e. patient coaches, nurse navigators). The addition of these new team members will help drive patient “throughput” and support compliance with clinical protocols and patient engagement requirements. These two pieces of the care continuum, when combined with care coordination tools, are central to the concepts of "accountable care" or "Patient-Centered Medical Homes."

• The changing relationship with referral consultants: Specialists will be able to participate in multiple ACOs, but primary-care physicians can only participate in one ACO. So primary-care physicians need to know their options before signing up for any given ACO.

Establish your strategy early for maximizing relationships with your referring specialists; you will have higher expectations about consultant follow-up, care coordination, and other things you didn’t have to worry about before. For example, you will need to ensure that you and your referral consultants coordinate care “in network” and manage costs and payer quality metrics together. You also may be challenged in keeping track of which patients you can refer to which specialists, so scheduling and office work flow might be affected.

• Patient engagement: Patients may or may not like the idea of being in an ACO, so you will have to work with your ACO about patient communication strategies that previously had really been defined by you and your relationship with the patient. Additionally, you will find yourself having different kinds of conversations with patients, about things like preventive care, lifestyle choices, and the potential ramifications of “non-compliance.” You will be incentivized to pursue “patient engagement” or “patient activation” strategies with your patients and your patient population.

• Additional technology and work flow changes: Other technology tools also may be required in lieu of or in addition to EHRs (i.e. patient registries, other data exchange, and access platforms). ACO patients will certainly need to be managed differently than other patients, if only in referral and paperwork requirements of the ACO and/or affiliated payer.

• Defining your long-term strategy: If you feel like your "alignment" options are limited, and you do not want to be employed by a hospital or health system, consider merging with other physicians in your specialty. Recent market experience nationally has shown that large, single-specialty medical groups are the most successful model in the physician practice spectrum today and are more adaptable to the emerging payer contract models and administrative management requirements.

Your future success largely depends upon successful positioning in the industry as a whole and in your marketplace specifically. Successful positioning and long-term success begin with a good understanding of the forces driving this unprecedented transformation in the American health system and the industries it represents. Such understanding will help you develop, execute, and maintain the appropriate strategic plan in response.

Jim Watson and Chad Beste are Partners at SS&G Healthcare’s Chicago office, a consulting firm specializing in practice management and strategy. SS&G Healthcare Chicago works nationally with medical groups and health systems on physician alignment and ACO/Clinical Integration strategy development and implementation. Jim Watson can be reached here; Chad Beste here.