Implementing ACOs: 10 mistakes and how to learn from them
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To succeed, organizations considering participating in ACOs must develop and improve organizational capabilities necessary to meet the requirements, according to Sara Singer, PhD, MBA, a professor in the department of health policy and management at Harvard School of Medicine, and Stephen M. Shortell, PhD, MPH, MBA, a professor in the division of health policy and management at University of California, Berkeley.
Also, hospitals and physician organizations need to create new relationships and take on new responsibilities. Success requires adaptation and change, learning quickly from mistakes and being able to transfer knowledge among participating entities. This will mean that ACOs become learning organizations that can comprehend and expand what works and move to correct things that do not.
Here are 10 potential mistakes organizations may make in becoming ACOs whether with Centers for Medicare & Medicaid Services (CMS) payment or working with private payors.
1. Overestimating the ability to manage risk. This lesson comes from experiments with capitated managed care in the 1990s. Organizations frequently overestimate their abilities, particularly when potential rewards are at stake. Some physician organizations are able to manage and measure ambulatory care and some hospitals are able to manage and measure inpatient care. But, the Medicare shared savings program and some private payor demonstrations require a single risk bearing entity, the ACO, to manage the entire care continuum. The challenge is merging hospital and physician capabilities, an exercise which most healthcare organizations have little experience doing. Estimates of the start-up cost of developing these capabilities vary widely from $1 million to $12 million per ACO.
2. Overestimating the ability to use EHRs. Implementation of EHRs will be challenging, despite financial support from CMS and others. Most clinicians are not adequately trained and supported in EHR use. EHR implementations can disrupt practices for six months or more. Incompatibility among hospital and physician information systems can be an impediment to achieving the goals of integration.
3. Overestimating the ability to report performance measures. Experience with pay-for-performance programs suggests a challenge in collecting, analyzing and reporting performance data. For most ACOs, reporting capabilities will evolve slowly even when technical assistance is provided.
4. Overestimating the ability to implement standardized care management protocols. The goal of protocols is to eliminate variations and complexities in care delivery when they do not add value. For protocols to work, clinicians must be substantially involved in their development; data must exist to assess protocol implementation and outcomes; and protocols must be tailored to individual patient needs and preferences. This takes time and there may be a temptation to shortchange the level of involvement needed.
5. Failure to balance the interests of hospitals, physicians and specialists in creating governance processes. Historically, relationships between hospitals and physicians have been strained. Whether new incentives will mitigate or exacerbate conflicts and whether sufficient managerial and clinical leadership exists to deal with the challenges are empirical questions. Participants may view ACOs simply as an opportunity to achieve greater market power rather than to improve the overall value of care delivered.
6. Failure to sufficiently engage patients in self-care management and self-determination. Patients and family members can provide considerable care particularly in managing multiple complex chronic conditions. Patients need to be considered a key part of the care team and educated about taking responsibility for their health and healthcare with support of friends and family. Many ACOs have little experience with this degree of patient engagement.
7. Failure to make contractual relationships with cost-effective specialists. Unlike primary care physicians, specialists are not required to limit their activity to a single ACO under the proposed rules. Nor are patients confined to a single ACO. Referrals are important to an ACO’s performance. The ACO needs to be broad enough to meet the needs of patient populations yet concentrated enough to promote mutual investment and use of the most cost-effective specialists. Entrenched relationships with high-cost specialists will be a stumbling block for some ACOs.
8. Failure to navigate the regulatory, legal environment. Understanding the “safety zone” for exemption from antitrust, Stark anti-kickback legislation and related regulatory and legal constraints to creating an ACO will be challenging. Compliance with new regulatory requirements requires unprecedented levels of transparency and cooperation among hospitals, physician organizations and payors.
9. Failure to integrate beyond the structural level. Structural and contractual mechanisms may be in place to provide more coordinated care, but ACOs may lack the change management and implementation skills required to improve care delivered to patients. Improvement will require engaging a wide spectrum of health professionals in the change-management process and aligning shared interests and rewards.
10. Failure to recognize the interdependencies culminates in “race to the bottom” of mistakes. Overestimating an organization's ability to manage risk (the first mistake) will be exacerbated by all other mistakes, particularly in failing to implement EHRs, which will affect the ability to develop and report performance measures, resulting in less learning from feedback.
These failures may result in a lack of reduced preventable hospital readmissions for sensitive conditions, such as asthma, diabetes, or failing to improve the overall patient experience.