Providers Perceptions: Accountable Care Organizations

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1 Accountable Care Organizations February 2012

2 Executive Summary As providers seek out information regarding ACO participation, they are simultaneously assessing their internal healthcare IT strategies. Accountable care has been a topic of conversation for some time now. Last year saw the phrase come into sharper focus when, on October 20, the Centers for Medicare & Medicaid Services (CMS) finalized rules for accountable care organizations (ACOs) under the Medicare Shared Savings Program, which officially started Jan. 1, In its summary of final rule provisions, the CMS defined ACOs as organizations that create incentives for health care providers to work together to treat an individual patient across care settings including doctors offices, hospitals and long-term care facilities. This definition does not differ much from that already generally accepted by the healthcare industry. It also closely matches that established by and Billian s HealthDATA for their recent study, : An ACO consists of providers who are jointly held accountable for achieving measured quality improvements for a defined population, and achieving reductions in the rate of spending growth. A spending target will be set for the defined population, and if the ACO meets the defined quality benchmarks and reduces its per-beneficiary spending below target, then participating providers will receive a share of the savings. 2 Key findings from the white paper include: While providers realize the importance of laying a solid IT foundation for a new, accountable care business model, they are struggling to balance the need to deliver quality patient care while reducing costs and enhancing revenue. Hospitals are by far the greatest drivers of ACO formation, with their main reason for participation cited as an opportunity to increase market share. Hospital-employed physicians will be key participants in ACOs. Coordination of care is one of the most important provider initiatives for improving the health of the patient population within an ACO model. Business intelligence and analytics technologies will be key tools in successfully laying a foundation for an ACO, as well as measuring its outcomes.

3 Table of Contents Providers Have Much to Consider When it Comes to ACO Participation Hospitals are Driving Interest in ACO Formation ACO Implementation Status Measuring Care Quality and Defining ACO Initiatives Sources of Funding and Revenue for ACOs Essential Technology for Successful ACOs Key Attributes of Preferred Technology Vendors Conclusion Methodology About Billian s HealthDATA and

4 Providers Have Much to Consider When Contemplating ACO Participation As providers continue to seek out information regarding participation in an ACO, they are also assessing their internal healthcare IT strategies. Before an ACO can be developed, providers typically must exhibit utilization of or participation in a majority of the following: electronic health record (EHR) acute care and ambulatory health information exchange (HIE) care coordination tools/processes business intelligence and analytics tools Though the final ACO rule, as it pertains to the Medicare Shared Savings Program, eliminated the proposed rule that 50-percent of primary care physicians must be meaningful users of EHRs by the start of their second performance year, it does weight Meaningful Use more highly than any other measure for quality-scoring purposes. Given the heightened sense of urgency this proposed rule may have created at some facilities hospitals or smaller physician practices it is not surprising that nearly 85-percent of survey respondents currently have a hospital EHR, with 65-percent currently using an ambulatory EHR. Just over a third currently participate in an HIE, with close to half planning to implement one. Nearly all respondents seem to realize the importance of laying a solid IT foundation for a new, accountable care business model. All are struggling to balance the need to deliver quality patient care while reducing costs and enhancing revenue a tricky achievement to accomplish, to say the least. Respondents cited several barriers to ACO participation that add to the complexity of this balancing act. It comes as no surprise that providers main barrier is the path being developed by the federal government, with concern over signing up organizations to participate, and clinical integration following closely behind. The overall perception is that the path developed by the federal government is too cumbersome. In addition to the five barriers displayed below, respondents noted a set of secondary barriers including challenges around financial implications, technical infrastructure, and reaching agreement with participants on quality and cost measures. ACOs participate in ACOs 4

5 Hospitals Are Driving Interest in ACO Formation Nearly half of survey respondents indicated that hospitals are by far the greatest drivers of ACO formation no surprise given their organizations are taking on the greatest share of the cost in providing care and therefore perceive the greatest risk. The top reasons for ACO participation included opportunity to increase market share, influence of the Medicare ACO provision and competition. Physicians and payers, however, should not be completely discounted as drivers. Competition as motivation amongst physicians and hospitals for ACO affiliation will likely increase over the coming year. As one respondent commented, Physicians perceive they will be shut out if not in an ACO. This perception is definitely being seen in the market, as hospital and physician alignment increase. Respondents considered employed physicians to be just as important as in-network hospitals when noting key ACO participants. As healthcare organizations continue to assess ACO avenues, where success will largely be determined by the depth of the healthcare consumer base the organization is able to attract, the importance of recruiting physicians with a broad patient following is clear. A recent Medical Group Management Association survey revealed a 75-percent increase in the number of active doctors employed by hospitals since

6 In "Hospitals' Race to Employ Physicians - The Logic behind a Money-Losing Proposition," The New England Journal of Medicine illustrated the value of the hospital-owned physician practice approach, stating, "If payment systems move toward population health management and risk-based reimbursement, then large outpatient networks will allow a system to shift patients away from higher-cost, hospital-based care and recapture lost revenues as shared savings or capitation surpluses." This approach has created a competitive landscape for physicians, with the lure of higher earning potential and greater lifestyle flexibility through fewer practice management burdens - making a strong case for hospital employment over private practice. With regard to payers, a recent HealthEdge market survey shows that more than 50-percent of payers plan to support new payment and healthcare models in the next three years. 6

7 ACO Implementation Status As of last November, nearly a third of survey respondents were currently in an informationgathering phase related to accountable care business models, with a similar number in the early planning and development phase. A very small percentage of respondents were currently in pilot programs. Just 2-percent of those surveyed have fully implemented an ACO program. A number of more pressing issues seem to be garnering providers full attention these days. Respondents cited Meaningful Use, physician alignment and financial considerations as being bigger priorities at the moment. 7

8 Measuring Care Quality and Defining ACO Initiatives Just as hospitals were considered by provider participants to be the biggest drivers in forming ACOs, so too are they considered to be the most influential entity when it comes to determining the key performance indicators an ACO will need to track to measure quality of care. Physicians were a close second, reiterating the fact that hospital/physician alignment will likely have a huge impact not only on the formation of ACOs, but on the development of performance indicators within each one. Measure sets cited as the top three influencers in the development of an ACO s performance measures today are CMS (31%), National Committee of Quality Assurance (23%) and National Quality Forum (24%). 8

9 The most important initiatives by providers for improving the health of the patient population within an ACO model were coordination of care (88%), aligning incentives to drive improved care at less cost (85%), renewing efforts to improve quality to reduce costly outcomes (82%), and disease management (82%), followed closely by patient accountability for compliance and overall health (81%), and patient engagement (80%). Other initiatives cited by respondents included a focus on preventative health and wellness, which ultimately will likely be incorporated into coordination of care initiatives; patient education; patient-centered medical homes; and recruiting primary care givers. Emphasis on the patient as it relates to specific, ACO-driven initiatives will likely increase as these types of programs mature. Payers will likely also have a part to play in bringing patient-centric initiatives to the forefront of healthcare systems to-do lists. Hospitals were noted once again as being the most likely party within an ACO to drive formation of key performance indicators that will measure cost and efficiency. 9

10 Cost/Efficiency Initiatives The most highly rated cost/efficiency initiatives focused around the delivery of care within the facility and included the elimination of inappropriate utilization of resources (88%), clinical reengineering (85%), and the review and standardization of processes (84%). Patient-focused initiatives followed, along with disease management (82%) and patient accountability (83%). Initiatives related to business intelligence and analytics (79%) and transparency/sharing of information (HIE) (78%) followed closely behind these patient-focused initiatives and will likely increase over the next few years, as many providers now realize these tools are essential to ACO assessment and deployment. Developing an ACO requires an integrated clinical, financial and administrative view of data across the provider enterprise and care settings to gain better clinical and business insight. Today, that data is dispersed across the continuum of care in silos - the challenge is meeting the analytical demands to support coordinated care models, such as ACOs. The only way to prepare for these emerging models is to have access to the full data set and a way to analyze it. It is this insight that will drive organizational response to healthcare transformation with foresight and leadership. 10

11 Sources of Funding and Revenue for ACOs The Medicare Shared Savings Program (31%), followed by commercial payers (29%) and shared investment by ACO partner organizations (19%) were noted as the top sources of funding for ACOs. Sustainability, an issue that has HIEs in the spotlight right now, must also be considered. Will providers ultimately be able to survive? How will physicians fare? These are uncertainties that may ultimately lead ACOs to reach out to private, third-party investors. Retail may even have a part to play, as companies like Walgreens and CVS take a greater interest in healthcare. 11

12 Respondents noted that hospitals likely will have the most influence when it comes to establishing an ACO s budget and payment models, followed by physicians and payers. Overwhelmingly, the metrics that mattered most to participants regarding incentive model considerations were quality-centered (85%), patient-centered (80%) and cost-centered (73%). It will be interesting to see if, over the next three years, as Medicare, private and commercial ACOs get into full swing, more emphasis is placed on forming a hybrid system of shared savings. Revenue apportionment amongst ACO participants was overwhelmingly tied to meeting clinical performance standards (95%), followed by meeting financial performance standards (83%). Interestingly, only a third of the participants believe that revenue apportionment amongst ACO participants should be based on ownership (30%) or volume (26%). 12

13 Essential Technology for a Successful ACO In order for providers to reliably and consistently achieve ACO goals, the various tools, e.g. EHRs, HIEs, care coordination software, etc., must coordinate effectively within the workflow of the provider. Providers will simply not tolerate disjointed and poorly integrated solutions. Therefore, the HIT industry will need to step up to this new challenge. Rodney Hamilton, CMIO and Managing Director of Product Strategy, PointClear Solutions While taking a team approach to patient care seems likely to lead to care that is better coordinated, less costly and resulting in better outcomes, it is not an easy model to build from scratch. Solid IT systems need to be in place, workflows must be considered and integrated plans of care developed. Revenue cycle management must play its part, and stakeholders must be on the same page. Overwhelmingly, all respondents felt that even current technology needed improvement an interesting statement considering that over half of respondents are already utilizing a hospital or ambulatory EHR; over a third are currently participating in a HIE, and more than half plan to implement one. 13

14 Acute and ambulatory EHR technology, along with clinical analytics, was considered by respondents to be the most critical technologies to the success of an ACO, followed by analytics/business intelligence and HIE technologies. Even though the final rule around ACOs under the Medicare Shared Savings Program no longer requires EHR utilization, respondents would likely rate EHR technology today in a similar fashion, due to the heavier weight the CMS gives to Meaningful Use of these types of technologies. As ACOs mature and their patient populations become more closely defined, greater weight will likely be given to the critical role populationmanagement technology and disease registries will play in ACOs. Healthcare IT professionals will need to be pulled from this population, and thus human capital will likely take on greater importance, as providers and vendors struggle to keep up with demand for these types of ACO-related implementations and their human capital requirements for care management, clinical integration and EHR deployments. Providers will need to stratify the patient population into registries that help clinicians focus on the highest risk patients, Todd Cozzens, CEO of Accountable Care Services at Optum, stated in a recent Hospitals & Healthnetworks article. Population analytics will enable providers to uncover clinical care patterns and disease trends. By defining the patient population and disease outliers up front, hospitals and health networks can predict costs, budget more accurately, understand facility requirements and offer services that are tailored specifically to each population. 14

15 Accordingly, respondents noted that ACO-related technology investments should be made in acute care EHRs (84%), ambulatory EHRs (81%), clinical analytics and decision support (71%), and clinical quality benchmarking tools (68%), followed by investments in care coordination (65%), HIE (62%) and enterprise dashboards across disparate data source technologies (61%). Providers as a whole do not believe their current technology investments below will support ACOs in the following areas with the majority 75-percent or greater believing that the following areas will require improvement to support an ACO model, in turn providing opportunity for further market development. 15

16 Key Attributes of Preferred Technology Vendors Respondents noted there is currently no single vendor that addresses all of the technology needs and investments providers perceive they need to make when it comes to accountable care. Given that, respondents noted that vendors should possess the following attributes when it comes to ACO technologies and services: ACO subject matter expertise; proven ROI and experience in healthcare; and experience working with clinical data. Within the next three to five years, expects to see the importance given to changemanagement experience, data-security expertise and experience working with commercial payers grow significantly. 16

17 Overall, there is uncertainty in the market with providers as to which vendors are best positioned to meet an ACO s technology needs. Out of the 19 vendors considered, participants deemed core HIS vendors including Epic, McKesson, AllScripts, Cerner, Meditech and Siemens as being the best positioned to meet an ACO s technology needs. Other vendors mentioned: Axolotl Dimensional Insights MedeAnalytics Medicity Midas Optum Insight Quadramed SaaS SPSS 17

18 Conclusion Authors As ACO deadlines come and go in the coming months, providers, payers and other stakeholders will likely move from their current wait-and-see approach to more active investigation if not actual formation of this new type of business model. Though many believe that it will take as long as five to 10 years for anyone involved to start reaping the benefits of participation, it is likely that even more believe the concept behind accountable care is here to stay. As Brad Boyd, Vice President of Sales and Marketing at Culbert Healthcare Solutions recently stated, ACOs together with other similar initiatives like patient-centered medical homes, bundled payments and outcomes-based reimbursement will become the foundation for delivering high-quality, cost-effective patient care for everyone. Ultimately, it doesn t really matter whether the ACO moniker stays or goes. The concept of clinically integrated accountable care is here to stay. Jennifer Dennard Social Marketing Director Billian s HealthDATA/ 2100 RiverEdge Pkwy Suite 2100 Atlanta, GA Allison Norfleet Vice President/Business Development 2100 RiverEdge Parkway Suite 2100 Atlanta, GA

19 Methodology and Billian s HealthDATA fielded a primary market research program aimed at understanding healthcare providers perceptions regarding accountable care organizations. Web-based survey designed by Fielded November 2011 Select titles targeted and pulled from Billian s HealthDATA s database of hospital decision-makers Participants represent predominantly acute-care hospitals and healthcare systems, ranging in size from single-facility organizations to organizations with more than 20 hospitals. The majority of participants haled from the South (37%), followed by the Midwest (26%), Northeast (22%) and West (15%) Respondents were typically at a C- or director-level within their organization About Billian s HealthDATA Billian s HealthDATA a part of Billian Inc. - is the leading provider of comprehensive market intelligence on the healthcare industry, covering facilities across the continuum of care from hospitals and their affiliated physicians to long-term care. Billian s dedication to providing high-quality data via products like the online Portal, coupled with partner company s custom market research services, provides customers with healthcare business intelligence about multiple markets in scaleable formats. About a part of Billian Inc. - is a marketing, research and consulting company that helps clients become high-performance businesses within their industries by delivering actionable market intelligence and research insight. Over the past 20 years, Porter s research team has conducted over 150,000 interviews with executives in a variety of industry verticals: banking/financial services; consumer goods; high tech; healthcare; life sciences; retail; and utilities. Porter has significant experience in the healthcare vertical technology, provider, payer and life sciences stemming from the depth of knowledge resident within Porter s leadership team with Fortune 500 healthcare clients and emerging ventures. For more information about our solutions and services, please contact the authors referenced above, send an to or visit our websites at and To receive alerts when new content is published by and Billian's HealthDATA, sign up for the Healthcare Intelligence Hub e-letter at Billian, Inc. 19

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