Standing Up the ACO: A View from Ground Zero

By Gregg A. Masters, MPH

The clock has been officially ticking for the more mature ACO Pioneer class and recently anointed, perhaps less sophisticated pool of market entrants, in the Advanced Payment Model or standard Medicare Shared Savings Program. Clearly, top of mind strategic questions du’ jour in many board rooms and standing committee conversations now includes how do we make it work this time? and what do we need do differently?

Let’s step back a bit and create context in which to frame the ACO ‘stand up’ challenge.

For the most part, all ACOs will emerge via a range of formal relationships, some are corporate and achieved via vertically integrated entities, i.e., where a hospital or system is the ‘member’ sponsor of the organizational effort and ‘owns’ the delivery system (including physicians direct or via contract in states with a corporate practice of medicine doctrine) in whole or part, while others will materialize virtually, i.e., via a variable tapestry of contractual arrangements.

For purposes of this post I will focus on the second group who present themselves as more ‘agile’ players at least from the point of view of provider network development and/or recruitment. As ‘untethered’ players to an institutional interest (hospital or otherwise), they are free to negotiate and enter into whatever inpatient, outpatient and ancillary service arrangements including downstream sub-acute care providers, e.g., home health, rehabilitation, SNFs, assisted living, etc., that make sense to it’s service area and primary market demographics.

Let’s assume the legal, and operational backbone have been laid, including the essential capital to enable the start-up glide-path, thus the key question becomes recruiting physician participation in the ACO. How can this be optimally achieved?

The answer most likely dwells in the macro issues specific the maturity and competitive landscape of the primary market area, i.e.,:

  • How many ‘ACOs’ whether anointed officially by CMS or not, are actively recruiting in the market?
  • Are the ACO ‘sponsors’ experienced in patient centered, and team based coordinated managed care?
  • Have they been participating in Medicare risk contracting or commercial risk contracting?
  • What is their track record (if any) dealing with clinical risk management?
  • What is the state of physician organizations in the market? e.g., are there IPAs, medical groups (primary and/or multi-specialty), or MSOs with core competencies in contracting, administration and provider network relationship management?
  • Bottom-line, does the ACO sponsor or have pre-existing relationship(s) in the market to leverage?

Markets with little to no competition and no history of successful operations in either the commercial or Medicare risk space should have an easier time selling the value proposition to primary care and key referrals specialists, but absent a clearly articulated population management strategy supported by a well staffed and competent network manager are at highest risk to fail.

Yet, generalizations in healthcare are rarely accurate. In some instances, particularly rural, i.e., less ‘sophisticated’ markets, with one hospital and for all intent and purposes a ‘captive’ medical staff and community may succeed simply on the basis of a handful of key relationships in critical positions. Generally the equation is: greater provider complexity = greater challenge to succeed.

At the end of the day, the ‘secret sauce’ driving the Advance Payment or institutionally untethered physician led ACO success will likely come down to the intangibles of physician culture, vetting provider selection, and effective recruitment into the ACO. Since Medicare utilization and even medical cost ratios (MCRs) may be in the public domain to profile target network recruitment objectives, failure to include such a review in the development glide-path will be an oversight in the due diligence process.


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