Remington’s Series On Accountable Care Organizations: Integration Of Post-Acute Services – Series 6 – T

By: Lisa Remington, Publisher, The Remington Report, President, Alliance For Integrated
Value-Driven Healthcare

The latest headlines about ACOs should have home care rethinking a “wait and see” position
about aligning with emerging health reform models. Many home care agencies are in a holding
pattern waiting to see if their health system will become an ACO.

First, whether your hospital or health system becomes an ACO or not, home care’s strategies to
align collaboratively should not be delayed. An ACO is a complicated legal structure. The
bottom-line is whether the hospital or health system becomes an ACO or not, rehospitalizations,
patient satisfaction, etc., or still going to affect their bottom lines. Secondly, the tie-in between
an ACO and non-ACO hospital/health system’s value-based purchasing program (Series 5 –
Hospital Value-Based Purchasing Program: Collaboration Between Hospitals and Home
Care) have
little differences in achievement of financial and clinical goals.

As a matter of fact, recent headlines are questioning how many hospitals/health systems will
ultimately embark upon becoming an ACO.

Three Recent Headlines:

Headline #1. Study: Cost Of Establishing An ACO Significant

The estimated start-up and first-year costs to establish and sustain the core competencies
necessary to manage the care of a defined population through an accountable care
organization are considerably higher – $11.6 to $26.1 million – than the $1.8 million estimate
made by the Centers for Medicare & Medicaid Services in its proposed rule, according to a new
study prepared for the American Hospital Association by McManis Consulting.

Based on four case studies of organizations that have taken steps to manage the care of a
defined population in a manner similar to an ACO, the study creates two hypothetical examples
to estimate the start-up and ongoing costs of establishing an ACO. The study was completed
prior to the release of the ACO proposed rule and therefore does not include estimates of the
costs of meeting the rule’s specific requirements. However, it identifies 23 different capabilities
that must be developed across four categories to achieve the desired transformation in care
delivery: network development and management; care coordination, quality improvement and
utilization management; clinical information systems; and data analytics.

Headline # 2. ACO Update: Big Groups Push Back

The American Medical Group Association (AMGA) notified CMS that 93 percent of its members
would not participate in the ACO demonstration project. Ten of the nation’s biggest
multi-specialty groups notified CMS administrator Don Berwick they will not take part in the ACO
program. Concerns noted by both groups:

• Financial risk: downside risk for shared savings compounded by high investment costs
required for ACO start-up and operation

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Remington’s Series On Accountable Care Organizations: Integration Of Post-Acute Services – Series 6 – T

• Severity adjustment for complex patients: limits on accounting for beneficiary acuity level
dilutive to savings and potentially compromising proper patient management

• Excessive quality measurement requirements: too many quality measures in the first year
(65 measures in five domains)

• Patient attribution: retrospective attribution will limit efforts to reduce costs

• Patient opt-out: an impractical opt-out system for Medicare beneficiaries

The same groups participated in the Physician Group Demonstration Project (circa 2005),
considered the predecessor to the ACO. Only two were able to attain better than a two percent
savings in the first year, and two were able to achieve the threshold after three years. Per CMS,
the minimum savings threshold ranges from 3.9 percent for an ACO managing 5,000 Medicare
fee-for-service (FFS) enrollees to two percent for an ACO with 60,000 enrollees.

Headline # 3. Mayo, Geisinger, Cleveland Clinic May Not Participate In ACOs

Officials at four health systems often cited as models for accountable care organizations have
doubts that they will participate in the ACO program, citing problems with the proposed rules for
ACOs.

Home care – keep your eye on the ball and don’t let the noise of health care reform be a
distraction in moving forward. The fundamentals of value-based purchasing are your road map,
not the legal structure of an ACO.

Copyright 2011

If you are interested in accelerating your agency’s alignment with health care reform, please see
our brochure on Remington’s Executive Academy On Health Care Reform.

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