South Florida Hospital News
Sunday August 25, 2019

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August 2011 - Volume 8 - Issue 2




Is Your Hospital Creating an ACO?

If so, what do you need now to be successful long term?
Accountable Care clearly appears to be the future of U.S. healthcare delivery and finance. Almost every hospital system with upwards of 400 beds seems to be considering forming an ACO or applying to CMS as a Pioneer ACO. At the recent CMS Sponsored ACO Accelerated Learning Group meeting in Minneapolis, more than 200 hospital, insurance company executives and Medical Directors attended, with another 136 on-line attendees. Much of the discussion and nearly 400 pages of materials provided identified what leading hospital organizations were doing to build ACOs and the tools available to: (a) develop and implement ACOs, and (b) generate the high return on investment expected by successfully implemented ACOs.
ACO Financing
Much of the success of the ACOs is predicated on shifting healthcare financing from discounted-Fee-For- Service models to prepaid, capitated and bundled payments by episodes of care. While the financial incentives and cash flow issues encountered on previous attempts at provider capitation were not well accepted on the East coast, the model has been very successful in California where hospitals are not allowed to purchase or employ physician practices as part of their integrated delivery model. Hence, large, well-managed, capitated IPAs such as Monarch Healthcare and Healthcare Partners have become extremely successful.
ACO Tools Available
There are very few companies with the experience and patient volume to offer hospitals the capitation management expertise and electronic physician friendly medical management required to be a successful ACO. Under the Medicare’s Shared Savings model, Managed Medicaid and Percentage of Premium commercial ACO models driving hospitals into ACO arrangements, (1) Capitation Management, (2) Predictive Modeling, (3) Population Outcomes Management, (4) Bundled Payment Management and (5) Advanced Clinical Decision Support technologies under the proposed rules for EMR Meaningful Use Stages 2 and 3, will be vital to the successful implementation of a hospital, IPA and MSO based ACO.
Companies such as MZI Healthcare, which provides much of the ACO infrastructure for the Monarch Healthcare ACO pilot and provides capitation management for over 20 million patients nationally, recognize that the key to developing a successful ACO right now is in the contracting rate with CMS and Commercial Insurance Partners. Companies, like MZI, are developing the key technology building blocks and tools that are vital to operating and managing top performing ACO healthcare organizations.
A critical component for any ACO’s success is the need for a solid foundation based upon a clear understanding of past and future clinical, operational and financial performance. Even more important is the ability to pinpoint areas for improvements that will allow an ACO to achieve sustained savings. To do this requires sophisticated tools that measure and report on key performance indicators central to each ACO’s objectives for long term shared savings based upon continuous performance improvements.
Hospitals, IPAs and MSOs desiring to be ACOs are typically at a disadvantage in negotiating these contracts. Unless the hospital owns and manages a Medicare Advantage or commercial HMO, the hospital does not typically have the actuarial expertise to accurately evaluate and predict the risk of an ACO when participating in an ACO contract.
To apply for these contracts, the hospital must take 3 years of claims data, apply the required weight averages and accurately predict: (1) the 3 year weighted average forecasted trend line; (2) the rate or percentage of premium at which CMS or a commercial carrier should contract with the hospital sponsored ACO, and; (3) the approximate shared savings which can be generated over the 3 years of the initial ACO project, preferably down to the individual physician level by expected episode of care, expected outcomes, and z-scores for identifying areas of physician practice improvement while simultaneously profiling the attributed ACO patients for their risk.
While CMS is offering to provide the profiling information on attributed Medicare FFS members, it would be wise for a hospital/health system that will bear risk under the Shared Savings Model to be able to: (1) forecast its own ACO risk; (2) identify areas for practice improvement by participating ACO professionals to maximize both ACO savings and Quality of Care, and; (3) be able to manage the ACO program to these benchmarks on a daily basis.
Large accounting and actuarial firms typically charge extremely high fees for this kind of work. Yet, there are contracting and management tools available that will provide all this functionality for ACOs at a very low cost and extremely high Return on Investment. MZI Healthcare, for example, has identified many of these vital tools to protect hospitals and health systems when contracting with CMS and highly experienced commercial insurers. With technology partners providing proven technologies that drive improved performance, ACO’s are ideally positioned to identify and leverage best practices to achieve necessary and sustained clinical and fiscal improvements.
For more information about ACO formation, structure and advanced clinical decision systems which integrate with the hospital EMR at Point of Order, contact Dr. Steven Gerst, Dean and Department Chair, Healthcare Informatics, BryanUniversity, at (404) 441-5885 or
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