Hospital ACO Readiness Study Finds Widespread Unreadiness

Hospital ACO Readiness Study Finds Widespread Unreadiness

Few Moves Toward Shared Savings, Bundled Care or Other Risk-Based Payment Models

An analysis of the accountable care "readiness" of 59 health care delivery groups operating 88 different hospitals across the country has found that none were fully prepared in any of the six areas of change necessary to successfully convert themselves into ACOs.

Underwritten and just published by The Commonwealth Fund  the 11-month study conducted by the Premier Research Institute identified a framework of 154 specific operating activities involved in six core components of a traditional health delivery system's transformation into an accountable care organization.

The study team was headed by
Eugene Kroch, PhD, who is Vice
President of Premier, Inc., as well
as a University of Pennsylvania
Wharton School lecturer on eco-
nomics, and a Senior Fellow at
Penn's Leonard Davis Institute of
Health Economics (LDI).

Conducted between August 2010 and June 2011, the study targeted hospital organizations that had signed up to be part of a Premier Inc. program that assists providers in making the transition to accountable care. Premier is a national health care alliance with 2,700 member hospitals.

Led by Premier Vice President Eugene Kroch, PhD, a lecturer in economics at the University of Pennsylvania's Wharton School and a Senior Fellow at Penn's Leonard Davis Institute of Health Economics, the study was done by a 20-member research team and is unique in its focus.

"We very specifically looked at the core components of accountable care and the organizational capabilities that support them," said Kroch in a phone interview. "So, there's been no other study like this one."

Kroch and his co-authors report they discovered that "no (hospital) organization achieved full implementation of any core component, and it was common to find organizations that had not undertaken any of the activities associated with one or more of the framework's prescribed capabilities."

'Sobering' findings
"Our study sample suggests that the overall state of ACO readiness is modest," the authors wrote. "These findings are sobering, since the organizations self-selected to participate in the assessment."

"Entitled 'Measuring Progress To-
ward Accountable Care,' the Premier
Research Institute study assessed
the ACO readiness of 88 different
hospitals.

"This was not a random sampling," Kroch explained. "These organizations had made a very conscious decision to make an investment and try to move toward accountable care and they met the requirements established under the Affordable Care Act to be a true ACO. Given that evidence, it seems reasonable to presume the rest of the country is even further behind."

However, he also cautioned that the results should not be viewed as a final assessment or proof of failure. "We were measuring the early stages of these organizations' efforts to make the transition," he said. "We established a baseline from which we can now measure progress; one thing that baseline says is that we have a long way to go. Some of these organizations may decide this is not the route they want to pursue for reasons that are perfectly legitimate. Others have already moved forward and are now in the implementation phase."

The ACO is a central element of the Affordable Care Act's overall national reform strategy; the federal government is strongly encouraging health delivery systems, physician and insurers to adopt the concept. There are currently more than 300 ACOs operating in various pilot modes but only one has been accredited by the National Committee for Quality Assurance.

Shared savings, bundled care and other risk models
Under the accountable care concept, hospitals, primary care physicians, medical homes, specialist doctors, labs and other care facilities all become interconnected cogs in a regional network focused on the comprehensive management of patients' care and wellness needs, rather than independent silos focused on the delivery of isolated fee-for-service treatments. The individual doctor-patient relationship gives way to team-based care. The current reimbursement system is replaced with shared savings, bundled care and other risk-based models. New sorts of IT systems inter-operably connect patient data across all these venues.

Concept proponents believe that accountable care principles will ultimately produce higher quality and less expensive care that improves the overall health of populations.

But for large traditional health care systems, the changes in infrastructure, administrative logistics, payer-provider relationships and the overall clinical culture required to fully achieve an ACO reorganization can be as dramatic as they are disruptive.

"The challenges that these changes pose for large-scale organizations are enormous," said Kroch. "Essentially, everything has to change. But there is no exact blueprint for them to follow." The study report says that "little information exists to help providers understand the capabilities needed to create and participate in an effective model that can constrain health care costs while improving quality."

Most of the targeted hospitals received low scores for their medical home efforts, a fact researchers said reflects "the difficulty inherent in effecting the culture changes needed to produce a coordinated, collaborative relationship across inpatient and outpatient providers of acute, post-acute, and long-term care and payers that can induce these providers to work collaboratively."

Financial vs. clinical integration
Kroch said, "One of the themes that runs all through the measurement is about making the distinction between financial integration and clinical integration. What we found is that the clinical integration is the tough part and that if top executives are only worried about the payment structure they're not necessarily going to succeed -- because they don't have the mechanisms in place to support that payment structure and vice versa. The way that issue is being faced by most successful organizations is by saying 'Well, we can't worry that much about the financial part right now. We first need to get the clinical integration right."

Another problem that became obvious to researchers was that most of the health care organizations lacked top executives trained and experienced in implementing the highly disruptive changes that a transition to accountable care demands. "This requires a type of expertise that's very different from what we normally think of as 'hospital management'," said Kroch.

What mattered most
The Premier team's report concludes that the six attributes that matter MOST in a hospital's "ACO readiness" level are these:

  • Ownership of a health plan
  • Ongoing collaboration with other health systems
  • Operation of a medical home
  • Risk-based payment experience
  • Strong leadership focused on change-management
  • Advanced electronic records systems

The authors point out that, "Organizations that own health plans have experience reducing unnecessary services, hospitalizations, and emergency visits through utilization management and acute and critical care management strategies" -- all of which are fundamental requirements of ACOs.

What mattered least
Interestingly, the attributes that mattered LEAST in an organization's ACO readiness included having an ACO implementation plan; the number of physicians in the organization; the ownership of physician practices; and institution's "financial strength." On this last item, the report notes that "one of the highest scoring organizations is a public hospital with a relatively poor financial standing."

The authors stress the importance of information technology systems that go well beyond a basic electronic health records system. In fact, the "central nervous system" of a high-level ACO is an interoperable electronic matrix of IT systems that seamlessly connect institutions, patients, clinicians, administrators and payers across an entire region. That overall IT system facilitates the integration of data from all relevant sources, analysis of that data across patient populations, stratification of clinical and financial risk across those populations and use of scientific processes to analyze and measure what's going on throughout all areas of care.

The study report goes on to warn that "should leaders mistakenly believe that by simply implementing the appropriate legal structure their organization is ready to delve into accountable care, the potential outcome could be financially dire and could result in unintended consequences for patients, providers, and payers."

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Hoag Levins is Editor of Digital Publications at the University of Pennsylvania's Leonard Davis Institute of Health Economics (LDI).