Health care in the United States is changing at a pace not seen since the launch of Medicare. The changes are largely a response to runaway medical costs in our health care delivery system.

Our nation spends nearly twice as much per person on health care services than most industrialized countries. Yet, by almost any recognized standard, quality is lacking. The U.S. scored lowest overall in quality, access, efficiency, equity, and healthy lives when compared with six other nations, according to a 2010 Commonwealth Fund report. We also lagged behind in chronic care management, care coordination and safety, and the use of information technology.

The Supreme Court’s decision in June to largely uphold the constitutionality of the Patient Protection and Affordable Care Act (ACA) will mean that health reform implementation will proceed at a rapid pace.  The Congressional Budget Office projects that as many as 23 million more people will have insurance by 2022. Coverage expansion, along with multiple other ACA-funded initiatives, is intensifying hospital systems’ interest in meaningful reforms. Further, new Federal financial opportunities — including the Medicare Shared Savings Program, dual-eligible demonstrations, Pioneer Accountable Care Organizations, Bundled Payments, and numerous primary care initiatives — are setting the stage to reward health care providers for patient care that is higher quality, more efficient, and more effective overall.

Five years from now, the health care landscape will likely look radically different than it does today. Today, we have fee-for-service payment models that reward physicians and hospitals based on the volume of services rather than the quality and overall value of the care. Physicians struggle with fragmented and limited information about the patient. Many health care teams are disconnected and not incented to work together. Patients have limited information about health care cost and quality, and aren’t actively engaged in their health. Many efforts are taking shape to address these problems so that everyone has the information, tools, and financial incentive to make health care better.

Health care providers and insurers understand that doing business as usual is not an option. New strategies are underway in boardrooms and around conference tables, answering the call for significant and fundamental changes to the way we provide care and coverage. A world dominated by pilot programs seems to have changed almost overnight into one in which major decisions must be made immediately. Should health care providers jump in — or risk waiting to see what succeeds and what fails?

To Be Or Not To Be An ACO

An Accountable Care Organization (ACO) is a collection of health care providers and care management professionals working together to manage and coordinate care for a defined population. The goal is to reduce overall costs and improve quality and outcomes. If the ACO is successful, providers are rewarded with a percentage of shared savings or bonus payments based on savings benchmarks and quality measures.

One major decision is whether to participate in the various ACO or shared savings programs with CMS. Last year, CMS announced partnerships with 32 Pioneer ACOs — health care organizations and providers experienced in care coordination across health care settings. These ACOs will move quickly from a shared-savings model to a population-based payment model. In a shared-savings model, the ACOs are paid on a fee-for-service basis and share savings or losses on a set of patients. When they move to a population-based model, they receive payments in advance each month for each beneficiary they serve rather than fee-for-service payments. This type of arrangement gives the participating ACO the flexibility to offer services not normally reimbursable under Medicare (such as phone consultations.)

CMS is currently accepting applications for the Medicare Shared Savings Program, which is open to health care providers and networks that have established or could establish an accountable care organization (ACO). The ACO would enter into a contract to share savings (and potential losses) with Medicare. To participate in the three-year program, an ACO must serve at least 5,000 Medicare fee-for-service beneficiaries. Applicants must demonstrate compliance with governance, leadership and legal requirements, as well as document their care management resources and adequate health IT support.

In April 2012, CMS announced the first 27 Medicare Shared Savings Program ACOs, and in July, approved another 89 ACOs. The next opportunity to apply is August 1 through September 6 for operations to begin January 1, 2013.

The ACO Investment: The Right Steps And Resources

Addressing the care management, payment reform and IT components to become an ACO can be a massive undertaking. Many health care providers and hospitals do not have the risk management experience, expertise in care management and total population health management, or the necessary health IT in place that will be needed. Conversely, health plans and disease management companies have limited knowledge of the clinical workflows that occur within care delivery settings, yet have knowledge that is essential in setting up an ACO. Success will require creating new partnerships to collectively share knowledge and capabilities.

In this quickly evolving environment, providers are faced with the imperative to commit to a course and invest to ensure relevance and viability in the market. What does an organization need to do now to thrive? Some early steps to consider are:

  • Frankly assess whether your organization has or can develop a culture open to innovation in its service, processes and technologies.
  • Conduct an honest evaluation of current capabilities and any gaps that may exist in managing the health of a defined population. Can your organization meet the requirements for accountable care programs? What effort or expense will be required?  How do you stack up against local, regional, or national best-in-class benchmarks?
  • Identify and reach out to organizations that offer complementary services and share your mutual vision of improved patient care and value.
  • Align public and commercial care delivery efforts, including contracting, services, and measurement.
  • Integrate care across the entire network or continuum. Why invest in a dramatic change to only realize value in a siloed program or with a segment of the population?

The Bigger Picture

From technologies to payment programs, the ingredients necessary to transform health care are available now. Programs such as the Medicare Shared Savings Program can now be combined with private insurance contracts offering similar rewards and incentives.  The day of transformed care delivery and quality, reduced costs, and improved care through broader multi-payer programs has never been closer.

Many in the private market have already begun adopting the tenets of accountable care. Collaboration between payers and health care providers is replacing the tension and contention of the past. New partnerships are forming, reflecting the market’s willingness to explore more integrated solutions.

Alternatively, some are choosing a slower, wait-and-see type of approach. Their leaders may decide that being a fast follower—learning from others’ mistakes—might offer superior results. This strategy could pose risks. For example, as competing delivery systems become more efficient, the market’s need for hospital beds may be reduced. So in markets where there are multiple competing delivery systems, the organizations that start earlier may enjoy a first-mover advantage by establishing their reputation for quality and value.

Regardless of where an organization is in its readiness, striving for better quality and better outcomes at lower cost is the right thing to do. We all deserve a better (and more accountable) health care system. Now is the time to make it a reality.