A CFO discusses how two competing health systems collaborated to form the first ACO of its kind.
In 2010, Methodist Health System and Nebraska Medical Center, both of Omaha, Neb., created the first accountable care organization (ACO) forged by competitive health systems. On Jan. 1, the ACO—called the Accountable Care Alliance—began managing the employee populations of both health systems. Lessons from that experience will help the ACO prepare for payment contracts with insurers and payers.
Linda Burt, CFO and vice president of finance at Methodist, talks about the challenges and opportunities of partnering with another health system.
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On the biggest challenge with the joint ACO. “Initially, we believed information technology would be our biggest challenge because Methodist and the Nebraska Medical Center are not on the same clinical platform. But our IT subcommittee talked to other health systems that had found ways to work together on different platforms, and learned about new technologies starting to emerge that aid in communicating from different systems. The subcommittee concluded that we could work together and build on the systems we have to create a more robust care management platform along with physician portals.
“In reality, communication, particularly with physicians, has been our biggest challenge so far. We need to help physicians understand where we are in the evolution of the ACO. In many cases, the doctors want answers to questions that we are still formulating, such as how any gainsharing pool would work. Also, some physicians do not understand what we are trying to accomplish and have a limited understanding of what an ACO is.
“To that end, we recently developed a communication plan and assigned an individual to work on communication with our physicians full time. Multiple evening meetings are being scheduled with primary care physicians over the next several weeks to provide them with additional information on the role and expectations of primary care providers in the ACO.”
On physician membership in the ACO. “The attitude we are taking in this first year is to be inclusive. We currently have a physician committee working on membership criteria for the ACO.
Access related tool: Physician Membership Criteria for Nebraska’s Accountable Care Alliance
“We originally called this ‘credentialing,’ but decided to move away from that label because membership is not just based on clinical competencies. Physicians also need to have financial competencies and a willingness to follow evidence-based protocols, which are being developed by our medical management committee.
“On the Methodist side, we have more than 1,000 providers (including 637 physicians) in our PHO who are eligible to join the ACO. The Medical Center has 990 physicians in its PHO who are eligible to join the ACO. The PHOs at both organizations include employed and independent providers. At Methodist, we currently have approximately 200 employed physicians (mostly primary care) in the PHO, and the other 400-plus are independent.”
On managing their first ACO patient population. “We started managing our first population on Jan 1, 2014. The population is comprised of our two employee groups, which includes 16,000 individuals combined. We recently purchased a population health management tool that will help us analyze claims data for our employee population.”
On her role in the ACO. “About five years ago, we started a collaborative purchasing initiative with the Nebraska Medical Center to purchase items that we do not buy through our separate group purchasing organizations (see the sidebar).
“Based on our success with the collaborative, we were interested in other ways we could work together. I had listened to a webinar on ACOs and thought that the model fit what we were trying to do. I passed the concept on to others, and the consensus was that an accountable care structure would help us manage our populations better and reduce costs while reducing variation.
“Since then, I have been setting up the ACO financial infrastructure and preparing the financial forecasts for the business plan. The initial business plan focused on the IT systems and resources required to manage a population. We worked with an outside consulting firm early on that helped quantify the potential reduction in utilization our combined health systems may experience if we did nothing. Although the initial push may have been to avoid deterioration in our financial health, we are looking forward to taking on risk in the future and developing the infrastructure and protocols to operate with a positive margin and share those gains with the physicians who contribute to the ACO’s success.
“I sit on the ACO’s governing board, which includes 12 people, six from each organization. Five of the six are physicians, and the sixth is the CFO from each health system.”
Advice for other CFOs collaborating with other health systems. CFOs at competing organizations may have more opportunities to collaborate as health systems form alliances to deliver value-based care in their regions. When collaborating with peers, it helps to keep an open mind, Burt says. “Recognize that you do the same thing and share the same goals even if your styles are different.”
Laura Ramos Hegwer is a freelance writer and editor based in Lake Bluff, Ill.
Interviewed for this article:
Linda Burt is vice president and CFO, Methodist Health System, Omaha, Neb., and a member of HFMA’s Nebraska Chapter.
This article is based in part on an interview from the Strata Decision Summit in Chicago in October 2013.
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Omaha, Neb. Health Systems Collaborate to Save on Major Purchases
At the end of 2009, Methodist Health System and Nebraska Medical Center started a collaborative purchasing initiative for services and products not obtained through their separate group purchasing organizations. To date, the two health systems have documented savings of $20.5 million.
Reducing the cost of blood products was a recent initiative. “Both Methodist and the Nebraska Medical Center use the same local vendor for blood products,” said Linda Burt, CFO and vice president of finance at Methodist. “So we sent a letter to the vendor informing them that we would issue a joint request for proposals [RFP] and make a joint decision (although we needed two contracts because we are separate entities). The local vendor realized we were serious about taking the business to another vendor and gave us a large price reduction, which amounts to a combined savings of $7 million over a five-year period.”
“We followed the same process for inpatient dialysis, which Methodist and the Medical Center outsourced to different vendors. We selected a single vendor and saved a total of $1.1 million in one year across both organizations.
“We recently completed an RFP for reference lab tests and should make a joint decision on that soon. We will likely conduct the same process on certain surgical implants and glucose meters.”
Publication Date: Wednesday, January 22, 2014