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Survey: Few ACOs Ready For Financial Risk

By Jenny Gold

August 17th, 2012, 6:06 AM

Few hospitals interested in becoming accountable care organizations are ready to take on financial risk, according to a survey released Friday from The Commonwealth Fund.

“We’re really still at the very beginning of the adoption curve of the ACO model,” says lead author Anne-Marie Audet, who researches health system quality and efficiency at Commonwealth. “The challenge is that hospitals are still not ready to assume financial risk.”

ACOs are networks of doctors and hospitals that take financial responsibility for managing the health care of a specific group of patients. If the networks lower the overall health care costs of their patients while also improving the quality of their care, they can receive financial rewards.  For example, an ACO might focus on making sure that patients with chronic conditions like diabetes and high blood pressure get the preventive care they need to stay out of the hospital.

There are already 154 ACOs serving nearly 2.4 million Medicare beneficiaries, and dozens more ACOs are involved in partnerships with private insurers. But so far, the majority of ACOs are pursuing models that allow them to share in any savings they achieve without losing money if they fail to cut costs. In other words, there’s a lot of carrot but not much stick.

The Commonwealth Fund report suggests that’s likely to continue, though hospitals are making advances in how they manage patient care. The nationwide survey of nearly 1,700 hospitals measured hospitals’ readiness to participate in ACOs. It was conducted in September 2011, before the federal government released final rules for the Medicare Shared Savings Program. The survey had a response rate of 34 percent.

Thirteen percent of respondents reported that they were either already participating in an ACO, or planning to participate in the next year. Of these, almost three-quarters reported sharing clinical information between care settings, such as the hospital and primary care practices. More than half reported calling patients within 72 hours after discharge to follow up. And nearly 85 percent have information systems to track how patients use health care services.

But only one in five hospitals pursuing an ACO model reported that they were using data to predict which patients were most likely to be in poor health and need more services—a significant gap in their ability to manage risk, says Audet.

“If you want to be able to manage financial risk, you have to be able to determine who in your high-risk population who will need more care-management,” Audet says.

Audet says there might be an upside to the relatively slow start ACOs are having. “In the ’90s, one of the factors that led to the failure of the HMO model was that a lot of organizations were forced to assume financial risks when they weren’t ready,” says Audet.   “That’s an area where we still see gaps, and we need to pay attention to that.”

4 Responses to “Survey: Few ACOs Ready For Financial Risk”

  1. There is, short term until reimbursement rates are adjusted, a fortune to be made for ACOs. Peer reviewed studies indicate that at least 40% of delivered health care goods and services are not medically necessary. If an ACO can get paid a small discount (off MSA Medicare costs) for managing a large population, millions in profit (or, for non-profit organizations, millions in “retained earnings”) will be generated – IF – effective managed care processes are put in place. If an ACO is not capable of pressuring providers to practice quality medicine using evidence-based medicine the ACO will need a team of bankruptcy lawyers. Want to learn more about the crisis in our medical-industrial complex and how to fix it? Read my book, “Discovering the Cause and the Cure for the American Health Care Crisis.”

  2. Denise says:

    What about hospital exec’s who pressure physicians to up their patient volume to increase revenue? How do physicians handle this situation and the effect it will have on patients? Or am I off base on how physicians make the ultimate decision on how to care for their patients? Perhaps I just need to educate myself on how hospitals are managed. Thanks

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  4. Robert Trinka says:

    The failure of capitated risk to hospitals in the 80s – 90s was their disregard for a fundamental principle of managing healthcare finanical risk, that is, you must have both the authority and the capability to manage the risk. Too many hospitals were capitated but their risk was controlled by a physician group, PHO, IPA, MCO, etc. The hospitals either had no authority to manage or that authority was muddled in a physician-hospital organization. Physician Groups and IPAs had the authority to manage the risk, but the problem with many of those organizations was their inability or lack of experience in managing healthcare financial risk. Very little has changed with the ACO, except as the author states, they do not take on full risk and have downside protection built into the agreement. But, ACOs will still need to be able to manage the risk to be successful. The one model that might work is the hospital that employs the physicians/clinic, hires an experienced healthcare risk manager, and gives that manager the authority to run the show, including firing doctors who don’t manage. Otherwise, ACOs will likely go the way of all the preceding physician-hospital combination risk entities. Nice idea, but lacking in the organizational structure and professional expertise needed to successfully manage the risk.