The Essential Elements of an ACO

"Clinical transformation has less to do with technical capabilities and more with the ability to effect cultural change." –Gary Edmiston and David Wofford

As we’ve demonstrated in previous columns, there’s plenty of potential for primary care physicians who embrace the concept of the accountable care organization. But what characteristics and capabilities are critical to ensuring that the promise of ACOs is realized in real – and sustainable – organizations?

There are at least eight elements that are fundamental to the success of an ACO – and they should be part of every physician’s decision-making checklist when you consider forming or joining an ACO:

• A culture of teamwork. The most important element, yet the one most difficult for physicians to attain, is a team-oriented culture with a deeply held, shared commitment to reorganize care to achieve higher quality at lower cost.

Physician attitudes favor autonomy and individualism over collaboration. These attitudes are inculcated in clinical training and reinforced daily in care delivery. Physicians need to understand that the level of involvement needed to effect changes in quality and cost is much different than just banding together for contracting purposes.

Furthermore, physicians tend to be cynical about prior "next best things," such as HMOs, gatekeeping, and capitation, and they have little experience with, or time for, organizational-level strategic planning.

• Primary care physicians. As Harold Miller of the Center for Healthcare Quality and Payment Reform asserts, "It seems clear that in order to be accountable for the health and health care of a broad population of patients, an accountable care organization must have one or more primary care practices playing a central role." This need is logical when you examine the highest-impact targets identified for ACOs: prevention and wellness; chronic disease management; reduced hospitalizations; improved care transitions across the current fragmented system; and multispecialty comanagement of complex patients.

• Adequate administrative capabilities. There are three essential infrastructure functional capabilities: performance measurement; financial administration; and clinical direction.

For example, ACOs qualifying under the Medicare Shared Savings Program must have a leadership and management structure that includes clinical and administrative systems that align with the aims of the Shared Savings Program. The ACO must have an infrastructure capable of promoting evidence-based medicine and beneficiary engagement, reporting on quality and cost metrics, and coordinating care.

• Adequate financial incentives. Three tiers of financial income models are available to ACOs: upside-bonus-only shared savings; a hybrid of limited-upside and limited-downside shared savings and penalty; and full-upside and full-downside capitation.

Shared savings is emerging as the common initial preference of start-up ACOs. If quality and patient satisfaction are enhanced or maintained, and if there are savings relative to the predicted costs for the assigned patient population, then a portion (commonly 50%) of those savings is shared with the ACO.

To maximize incentives, the savings pool should be divided in proportion to the level of contribution of each ACO participant. If primary care has especially high medical home management responsibility, this responsibility may be accompanied by the addition of a flat per member/per month payment.

• Health information technology and data. ACO data are usually a combination of quality, efficiency, and patient-satisfaction measures. These data will usually have outcomes and process measures. Nationally accepted benchmarks are emerging. Three categories of data needs exist for an ACO: baseline data; performance measurement data; and data as a clinical tool. The ACO will need the capability to move data across the continuum of care in a meaningful way, often termed "health information exchange" capability.

• Best practices across the continuum of care. Another essential element of a successful ACO is the ability to translate evidence-based medical principles into best practices in actual clinical care.

According to the Advisory Board Company’s "Moving Toward Accountable Care" project, "The best bet for achieving returns from integration is to prioritize initiatives specifically targeting waste and inefficiency caused by fragmentation in today’s delivery system, unnecessary spending relating to substandard clinical coordination, aggravated with the complexity of navigating episodes of care, and unwanted variations in clinical outcomes driven by lack of adherence to best clinical practice."

• Patient engagement. Patient engagement is another essential element. Unfortunately, many of today’s health care consumers erroneously believe that more is better – especially when they are not "paying" for it, insurance is. It is difficult to accept a compensation model based on improved patient population health when that is dramatically affected by a variable outside of your control: patient adherence.

• Scale-sufficient patient population. It is okay, even desirable, to start small or "walk before you run." However, potential ACOs often overlook the requirement that there needs to be a minimal critical mass of patients to justify the time and infrastructure investment for the ACO. The Medicare Shared Savings Program, for example, requires that an ACO have a minimum of 5,000 beneficiaries assigned to the ACO.

Investing the time now to assess an organization’s ability to deliver on these eight elements will pay off later for primary care physicians who are ready to build or join an ACO.

For more information on the topics covered here, visit www.smithlaw.com/publications/ACOG.pdf.

Mr. Bobbitt is a senior partner and head of the Health Law Group at the Smith Anderson law firm in Raleigh, N.C. He has many years’ experience helping physicians form integrated delivery systems. He has spoken and written nationally to primary care physicians on the strategies and practicalities of forming or joining ACOs. This article is meant to be educational and does not constitute legal advice. For additional information, readers may contact Mr. Bobbitt at bbobbitt@smithlaw.com or at 919-821-6612.

"Clinical transformation has less to do with technical capabilities and more with the ability to effect cultural change." –Gary Edmiston and David Wofford

As we’ve demonstrated in previous columns, there’s plenty of potential for primary care physicians who embrace the concept of the accountable care organization. But what characteristics and capabilities are critical to ensuring that the promise of ACOs is realized in real – and sustainable – organizations?

There are at least eight elements that are fundamental to the success of an ACO – and they should be part of every physician’s decision-making checklist when you consider forming or joining an ACO:

• A culture of teamwork. The most important element, yet the one most difficult for physicians to attain, is a team-oriented culture with a deeply held, shared commitment to reorganize care to achieve higher quality at lower cost.

Physician attitudes favor autonomy and individualism over collaboration. These attitudes are inculcated in clinical training and reinforced daily in care delivery. Physicians need to understand that the level of involvement needed to effect changes in quality and cost is much different than just banding together for contracting purposes.

Furthermore, physicians tend to be cynical about prior "next best things," such as HMOs, gatekeeping, and capitation, and they have little experience with, or time for, organizational-level strategic planning.

• Primary care physicians. As Harold Miller of the Center for Healthcare Quality and Payment Reform asserts, "It seems clear that in order to be accountable for the health and health care of a broad population of patients, an accountable care organization must have one or more primary care practices playing a central role." This need is logical when you examine the highest-impact targets identified for ACOs: prevention and wellness; chronic disease management; reduced hospitalizations; improved care transitions across the current fragmented system; and multispecialty comanagement of complex patients.

• Adequate administrative capabilities. There are three essential infrastructure functional capabilities: performance measurement; financial administration; and clinical direction.

For example, ACOs qualifying under the Medicare Shared Savings Program must have a leadership and management structure that includes clinical and administrative systems that align with the aims of the Shared Savings Program. The ACO must have an infrastructure capable of promoting evidence-based medicine and beneficiary engagement, reporting on quality and cost metrics, and coordinating care.

• Adequate financial incentives. Three tiers of financial income models are available to ACOs: upside-bonus-only shared savings; a hybrid of limited-upside and limited-downside shared savings and penalty; and full-upside and full-downside capitation.

Shared savings is emerging as the common initial preference of start-up ACOs. If quality and patient satisfaction are enhanced or maintained, and if there are savings relative to the predicted costs for the assigned patient population, then a portion (commonly 50%) of those savings is shared with the ACO.

To maximize incentives, the savings pool should be divided in proportion to the level of contribution of each ACO participant. If primary care has especially high medical home management responsibility, this responsibility may be accompanied by the addition of a flat per member/per month payment.

• Health information technology and data. ACO data are usually a combination of quality, efficiency, and patient-satisfaction measures. These data will usually have outcomes and process measures. Nationally accepted benchmarks are emerging. Three categories of data needs exist for an ACO: baseline data; performance measurement data; and data as a clinical tool. The ACO will need the capability to move data across the continuum of care in a meaningful way, often termed "health information exchange" capability.

• Best practices across the continuum of care. Another essential element of a successful ACO is the ability to translate evidence-based medical principles into best practices in actual clinical care.

According to the Advisory Board Company’s "Moving Toward Accountable Care" project, "The best bet for achieving returns from integration is to prioritize initiatives specifically targeting waste and inefficiency caused by fragmentation in today’s delivery system, unnecessary spending relating to substandard clinical coordination, aggravated with the complexity of navigating episodes of care, and unwanted variations in clinical outcomes driven by lack of adherence to best clinical practice."

• Patient engagement. Patient engagement is another essential element. Unfortunately, many of today’s health care consumers erroneously believe that more is better – especially when they are not "paying" for it, insurance is. It is difficult to accept a compensation model based on improved patient population health when that is dramatically affected by a variable outside of your control: patient adherence.

• Scale-sufficient patient population. It is okay, even desirable, to start small or "walk before you run." However, potential ACOs often overlook the requirement that there needs to be a minimal critical mass of patients to justify the time and infrastructure investment for the ACO. The Medicare Shared Savings Program, for example, requires that an ACO have a minimum of 5,000 beneficiaries assigned to the ACO.

Investing the time now to assess an organization’s ability to deliver on these eight elements will pay off later for primary care physicians who are ready to build or join an ACO.

For more information on the topics covered here, visit www.smithlaw.com/publications/ACOG.pdf.

Mr. Bobbitt is a senior partner and head of the Health Law Group at the Smith Anderson law firm in Raleigh, N.C. He has many years’ experience helping physicians form integrated delivery systems. He has spoken and written nationally to primary care physicians on the strategies and practicalities of forming or joining ACOs. This article is meant to be educational and does not constitute legal advice. For additional information, readers may contact Mr. Bobbitt at bbobbitt@smithlaw.com or at 919-821-6612.

"Clinical transformation has less to do with technical capabilities and more with the ability to effect cultural change." –Gary Edmiston and David Wofford

As we’ve demonstrated in previous columns, there’s plenty of potential for primary care physicians who embrace the concept of the accountable care organization. But what characteristics and capabilities are critical to ensuring that the promise of ACOs is realized in real – and sustainable – organizations?

There are at least eight elements that are fundamental to the success of an ACO – and they should be part of every physician’s decision-making checklist when you consider forming or joining an ACO:

• A culture of teamwork. The most important element, yet the one most difficult for physicians to attain, is a team-oriented culture with a deeply held, shared commitment to reorganize care to achieve higher quality at lower cost.

Physician attitudes favor autonomy and individualism over collaboration. These attitudes are inculcated in clinical training and reinforced daily in care delivery. Physicians need to understand that the level of involvement needed to effect changes in quality and cost is much different than just banding together for contracting purposes.

Furthermore, physicians tend to be cynical about prior "next best things," such as HMOs, gatekeeping, and capitation, and they have little experience with, or time for, organizational-level strategic planning.

• Primary care physicians. As Harold Miller of the Center for Healthcare Quality and Payment Reform asserts, "It seems clear that in order to be accountable for the health and health care of a broad population of patients, an accountable care organization must have one or more primary care practices playing a central role." This need is logical when you examine the highest-impact targets identified for ACOs: prevention and wellness; chronic disease management; reduced hospitalizations; improved care transitions across the current fragmented system; and multispecialty comanagement of complex patients.

• Adequate administrative capabilities. There are three essential infrastructure functional capabilities: performance measurement; financial administration; and clinical direction.

For example, ACOs qualifying under the Medicare Shared Savings Program must have a leadership and management structure that includes clinical and administrative systems that align with the aims of the Shared Savings Program. The ACO must have an infrastructure capable of promoting evidence-based medicine and beneficiary engagement, reporting on quality and cost metrics, and coordinating care.

• Adequate financial incentives. Three tiers of financial income models are available to ACOs: upside-bonus-only shared savings; a hybrid of limited-upside and limited-downside shared savings and penalty; and full-upside and full-downside capitation.

Shared savings is emerging as the common initial preference of start-up ACOs. If quality and patient satisfaction are enhanced or maintained, and if there are savings relative to the predicted costs for the assigned patient population, then a portion (commonly 50%) of those savings is shared with the ACO.

To maximize incentives, the savings pool should be divided in proportion to the level of contribution of each ACO participant. If primary care has especially high medical home management responsibility, this responsibility may be accompanied by the addition of a flat per member/per month payment.

• Health information technology and data. ACO data are usually a combination of quality, efficiency, and patient-satisfaction measures. These data will usually have outcomes and process measures. Nationally accepted benchmarks are emerging. Three categories of data needs exist for an ACO: baseline data; performance measurement data; and data as a clinical tool. The ACO will need the capability to move data across the continuum of care in a meaningful way, often termed "health information exchange" capability.

• Best practices across the continuum of care. Another essential element of a successful ACO is the ability to translate evidence-based medical principles into best practices in actual clinical care.

According to the Advisory Board Company’s "Moving Toward Accountable Care" project, "The best bet for achieving returns from integration is to prioritize initiatives specifically targeting waste and inefficiency caused by fragmentation in today’s delivery system, unnecessary spending relating to substandard clinical coordination, aggravated with the complexity of navigating episodes of care, and unwanted variations in clinical outcomes driven by lack of adherence to best clinical practice."

• Patient engagement. Patient engagement is another essential element. Unfortunately, many of today’s health care consumers erroneously believe that more is better – especially when they are not "paying" for it, insurance is. It is difficult to accept a compensation model based on improved patient population health when that is dramatically affected by a variable outside of your control: patient adherence.

• Scale-sufficient patient population. It is okay, even desirable, to start small or "walk before you run." However, potential ACOs often overlook the requirement that there needs to be a minimal critical mass of patients to justify the time and infrastructure investment for the ACO. The Medicare Shared Savings Program, for example, requires that an ACO have a minimum of 5,000 beneficiaries assigned to the ACO.

Investing the time now to assess an organization’s ability to deliver on these eight elements will pay off later for primary care physicians who are ready to build or join an ACO.

For more information on the topics covered here, visit www.smithlaw.com/publications/ACOG.pdf.

Mr. Bobbitt is a senior partner and head of the Health Law Group at the Smith Anderson law firm in Raleigh, N.C. He has many years’ experience helping physicians form integrated delivery systems. He has spoken and written nationally to primary care physicians on the strategies and practicalities of forming or joining ACOs. This article is meant to be educational and does not constitute legal advice. For additional information, readers may contact Mr. Bobbitt at bbobbitt@smithlaw.com or at 919-821-6612.