By Jonathan Gordon
On February 20th, I had the privilege of taking part in the 2015 MIT Bioinnovations conference. Dr. Neel Shah kicked off the conference, whose theme was “Redefining Value in Healthcare,” and I joined the panel on “Trends in Healthcare Payment Models: Accountable Care Organizations.” I joined population health leaders from Partners, McKesson, Putnam Associates and The Activity Exchange to discuss the current potential and future of accountable care organizations (ACOs). Over the course of the hour, a couple of key themes emerged:
- Health is much more than just what happens in the healthcare system. If we want to effectively manage the healthcare costs of a population, we will also need to address the social and environmental determinants of health that are not within the current capabilities of (and are not reimbursed by) our healthcare system. By virtue of their shared savings payment, ACOs begin to incentivize providers to address social determinants when possible – but not everything is in their control.
- While social determinants are a significant challenge, there is a big opportunity to reduce cost and improve care just by improving coordination of care across the continuum. There are huge costs in terms of duplicated tests, medical errors, and unnecessary ED visits and hospitalizations that result simply from a lack of communication between the different providers that a patient may visit over the course of their care. This is especially true of multiply co-morbid patients who typically have many interactions with the healthcare system throughout the year. New healthcare IT companies are emerging to help address the communication gap across the continuum, and early results do show promise.
- There is a significant difference between physician-led and hospital-led ACOs. Hospitals still need to preserve discharge volume to ensure their financial viability, while physician groups have no such constraints. As a result, successful physician groups have focused on reducing unnecessary hospitalizations, which can cost $10,000 or more – giving them a leg up on achieving shared savings. While hospitals certainly do not seek to hospitalize patients unnecessarily, they are more likely to turn elsewhere when seeking opportunities for achieving savings.
- Establishing the right incentives is essential to the success of an ACO. To get clinicians to change behavior and align with the goals of the ACO (quality improvement and cost reduction), it is essential to clearly articulate what the target performance is and the reasons for setting that target – in addition to providing regular and clear data as to how they are performing against that target. Financial incentives can then be used to encourage clinicians to achieve that target.
- ACOs are just one step in a much longer journey to transform our healthcare system. The Medicare Shared Savings Program (MSSP) ACO model is a way of layering population health incentives (the shared savings payment) onto an existing fee-for-service system, rather than completely changing financial mechanisms and significantly shifting utilization risk towards providers. Moving to a healthcare system that truly delivers on the triple aim of better care for individuals and populations at lower cost also requires cultural change across the entire system, and that will likely take decades to achieve. ACOs are, however, an important first step towards moving towards a truly value-driven healthcare system.
Jonathan Gordon, Member, Board of Directors, Costs of Care