Three Reasons Your ACO Will Likely Fail

by Gregg A. Masters, MPH

I’ve seen this before, and many times at that, see: 6 Reasons Your ACO Will Fail (A Series), Any One Will Do.

While some continue to debate and attempt to repeal the Affordable Care Act, the underlying market dynamics on which the vision of ‘Accountable Care‘, the triple aim or a sustainable healthcare ecosystem has risen continues to spawn innovation and remains remarkably intact.

Yet ACO’s are the workhorse in the mix of this triple aim enabling ACA magic and will remain so (until and unless the Medicare Advantage special interests prevail in their advocacy of an ‘end-run’ from ACOs direct to ‘MA’s’ aka global risk bearing HMOs).

But back to my premise…

Reason One Your ACO Will Likely Fail

The first impulse is to put ‘form’ (vs. function or culture) at the top of the agenda. I like to call this the ‘O,G & E‘ (organization, governance and equity) card. Just vision a typical process which plays out over and over again. An entity (usually a hospital or hospital system with access to capital) retains ‘advisers’ presumptively qualified to educate and guide local leadership into focused consideration of a ‘journey’ away from if not antagonistic to their core operations and culture.

First up are the lawyers, then accountants and consultants who address the business risk profile, regulatory environment, competitive landscape and outline structural models or options of organizing and participating in this new line of business consistent the mission, objectives and tax status of the ‘host’ enterprise.

Right from the outset the focus becomes the form of the organization and not it’s vision nor underlying or enabling culture per se. While these considerations may be part of the mix, breathing life into this sensitivity and operational awareness is usually seen in the designation of one or more hospital or health system friendly physicians to represent the balance (ergo interests) of the medical staff tribe. We’ve seen this in PHO formation, or the underlying management services organizations (MSOs), JV’s, etc., to support their operations. But make no mistake the ‘deliverable’ is a timeline, top down, check the box type strategy where the meter is running and things need get done whether they’re layered on quicksand or ‘terra firma’ so to speak.

Reason Two Your ACO Will Likely Fail

It’s about the right kind of ‘leadership’. More often than not the DNA guiding these conversations and shortlist of implementation decisions are principally healthcare leadership typically sourced from ‘institutional’ (hospital, health system or more recently IDN circles) vs. physician leaders who ‘see the [arbitrage] light‘, i.e., principally those trained in leadership (whether at the level of MBA’s or a scheduled participation via off-site Estes Park like medical staff/administration co-management team building efforts), have historically participated in managed care v1.0 et sequelae, AND actively value the transformation imperative under consideration.

Add this to the fact that the most appropriate physician leaders in this volume-to-value transformation are primary care physicians, yet the true power brokers in the institutional setting are the cash cow volume based specialties including cardiology, orthopedics, and neurosurgery, and fill in the blank proceduralists. PCPs have for the most part been carved out of inpatient culture and stay relatively focused on the ambulatory or outpatient side of medicine. A trend that began a while ago as the credentialing process assured a growing economic turf war as to who got to do what in the hospital, and was sealed by the industry move to the ‘hospitalist’ as the go-to inpatient specialist.

Reason Three Your ACO Will likely Fail

Rick Scott the former CEO of the disgraced Columbia/HCA hospital system (and now sitting Governor of the State of Florida) who earned that system a record $1.7 billion fine and with whom I routinely and vehemently disagree with, best framed the volume-to-value shift as follows:rick scott quote

While this quote may be another carefully crafted (some may say devious) calculus as Scott continues to oppose the ACA and Medicaid expansion in the ‘Sunshine State’ (see: ‘Gov. Rick Scott officially convenes commission on hospital spending‘ ), it none-the-less accurately reflects why institutional leadership will neither proactively nor aggressively pursue a revenue cannibalization strategy. Disruption as he noted must come from ‘outside’, however in this case outside comes in the form of hospital asset untethered ACOs driven by prudent resource allocation, access and quality in their service area.

Until hospitals become ‘cost centers‘ (as in Kaiser Permanente) vs. the traditional revenue plays they’ve no doubt perfected while hospital based care drives the cost of healthcare UP, this is mostly rhetoric to buy time and sometimes exit packages of oft overcompensated senior executives both in the 501(c)3 sector as well as their more transparent though similarly for-profit oriented health system operators.

So don’t hold your breath until the Kaiser Permanente model becomes the defacto clinical integration and financing standard in the U.S., but do watch what former ONC Director for Health Information Technology evangelist turn healthcare disruptor and entrepreneur at Aledade (a physician led ACO management company (MSO) – see ‘Waiting For ACOcor) Farzad Mostashari MD is up to. That Venrock and Bob Kocher in particular are rallying behind this model says a lot to me.

Bottom Line

Your ACO will fail if it’s of the institutionally led, top down, corporate check the box variety, and not imbued with the full court press commitment (so eloquently espoused by Don Berwick) of the required culture of health values to achieve the triple aim. Your ACO’s DNA must truly be truly disruptive from the bottoms up AND willing to can·ni·bal·ize  traditional hospital cash cow revenue streams.

That’s a lot to ask. Building that bridge in a quarterly earnings per share mindset maybe a bridge too far. Just ask Greg Samitt, see; Eating Glass?’: A DaVita Healthcare Partners Hiccup or Impending Physician Integration ImplosionHe tried to bring that bridge forged at Dean Clinic (scaled movement from production to value) at Healthcare Partners (Da Vita) but for reasons unclear to me was prematurely asked to leave.

For some of my experience on this journey, see ‘Some Context and Perspective on Standing Up The ACO‘.


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