Monthly Archives: August 2011

Of the 10 Mistakes to avoid for ACOs, this is the most important one

Authors Sara Singer and Stephen M. Shortell provide a succinct and practical summary of ACO risks in their JAMA article “Implementing Accountable Care Organizations: Ten Potential Mistakes and How to Learn From Them“.  ACOs are “deja vu all over again” for anyone who has been in healthcare for more than 15 years.  I spent 14 years with Kaiser Permanente (KP) including some very turbulent years in the late 1990’s when they closed regions for the first time in their history.  KP can be considered the prototypical ACO.  The regions that failed could be considered failed ACO expansions and many of the problems that Singer and Shortell identified were in play in the failure of those regions.

If I were going to pick the single more important risk, it would be their factor number 1, “Overestimation of Ability to Manage Risk”.  This is an outcome measure which is dependent on successfully addressing multiple other potential points of failure as noted in the article.  This factor is critical because the most important test of the ability to manage risk is the compatibility and adaptability of the physician culture to the demands of today’s healthcare marketplace.  Culture is the most challenging aspect of organizational success.  And culture trumps even the best and most rational strategy.  To become good at managing risk today, there are several value shifts that individual physicians need to make and several negotiations organized provider groups (physicians and managers) need to make in order to create a culture of performance.  This is made more difficult by the fact that the reimbursement system is generally misaligned to the development of this culture.  However, even when the reimbursement system is aligned, as it is with KP, physician leadership and cultural adaptation is critical.

Managing risk today fundamentally means managing chronic diseases which generate roughly 75% of a population’s costs and managing that sickest 1% of the population which can generate up to 25% of costs.  Prevention and keeping people healthy is also important in the long-run but short-term risk management means efficiently managing the care of the chronic population while stabilizing their condition to prevent the morbidities and complications they are at high risk for.  Accomplishing this objective means you have to have a very different culture than the one that has existed in healthcare since the 1800’s and has been fattened by the fee-for-service reimbursement model today.  Our current care delivery model was created in the mid-1800’s when acute and infectious diseases were the primary reasons for seeing a doctor and average life expectancy was in the late 40’s (though primarily due to high infant mortality).  The medical practice culture was centered around treating urgent and acute problems that were resolved in short order or rapidly lead to death.  After leaving the medical office or the home visit, no news was good news.  A Fee-For-Service (FFS) payment was generally made by the patient directly to the doctor in cash or barter.

However, things changed dramatically in the US beginning in the 1960’s.  The third party payment system including employer-based health insurance and government Medicare and Medicaid programs injected steroids into the FFS payment system.  Physician payment changed from direct cash-based FFS payment to a FFS reimbursement system where third parties paid the doctor and the customer (the patient) was shielded from the real costs.  It didn’t take long for doctors and hospital managers to figure out that in addition to the basic demand for healthcare, that they could create their own incremental demand.  That incremental volume could mean big dollars.  The factory-type design (from the 1800’s) and the incentives for volume (FFS on steroids) created a medical practice environment of individualism, fragmented silos of care and high-stakes battles over turf.  In particular, the physician culture was one where autonomy and independence were highly valued.  Therefore, medical groups and organized systems of care were relatively rare in the 1960’s.

Unfortunately, with the growth in the prevalence of chronic conditions, the patient population and demand changed dramatically from that for which the current system was designed.  Chronic conditions cannot be fixed in one office visit and treatment means changing complex and life-long behaviors and habits.  Many of the conditions are without symptoms until a catastrophic event like a heart attack or stroke occurs.  Therefore, no news is not necessarily good news.  Surveillance and prevention becomes much more important.  Managing chronic conditions means checking with patients, outreaching and engaging them as noted in the authors failure point 6 “Failure to Sufficiently Engage Patients in Self-care Management and Self-determination”.  Population management and coordinating care to ensure patients do not “fall through the cracks” becomes critical.  The demands for improved quality has created time constraints on what and individual physician can realistically do to manage chronic and preventive care as well as take care of acute conditions for a typical population of patients.

Therefore, meeting the demands of the healthcare market today means that physicians have to shift their values to ones that will create more effective and efficient delivery models.  That includes less autonomy, practicing in groups, leading teams, delegating more activities to other clinical staff and working with colleagues in a more collaborative way.  It may also mean confronting colleagues when the needs of the patient or the group are playing second fiddle to the needs of an individual physician.  It will also mean doing more of what they already are doing such as delivering care over the telephone and through email, spending more time persuading patients to change habits, working with families to coordinate care, establishing group practices standards and holding themselves and colleagues accountable for practicing evidence-based medicine.  As noted in the article, measurement is critically important.  But it is necessary but not sufficient.  You also must have the culture of high performance that will respond and manage to new and higher levels of results.

The difficulty is that until the reimbursement system catches up, it may mean forgoing some income during this transition period.  An organization with a culture of high performance that establishes practice standards consistently followed and manages chronic conditions well will be a successful risk manager as an ACO.  Ironically if you are decreasing your FFS reimbursement, you are probably doing a better job of managing care and therefore positioning yourself to be a successful ACO.