When it comes to participation in an ACO, hospitals need to take the long view. “It’s not like flipping the lights on in a house. It takes time, it takes effort, and it takes culture change,” says Katherine Schneider, Delaware Valley ACO president and CEO.
When the Delaware Valley ACO (DVACO) launched in 2013, it had modest plans. The hope was to get a toe in the water of the Medicare Shared Savings Plan (MSSP) run by CMS and attract at least the 5,000-member minimum needed to participate. Instead, it began 2014 with more than 33,000 members and, since then, has added covered lives at a rapid pace. On April 1, when it launched its latest accountable care contracts with private payers Aetna and United HealthCare, the total number of covered lives exceeded 200,000.
Suffice it to say, with such rapid growth and coming off a successful 2014—which saw DVACO earn one of the 10 largest MSSP payouts of $6.5 million—the ACO is already starting to return the $12 million in investments made to date by its partners, which include Main Line Health, Thomas Jefferson University Hospital, Holy Redeemer Health System, Doylestown Health, and Magee Rehabilitation Hospital.
As DVACO is effectively coordinating care across a broad population, its member hospitals now need to adjust to a care—and revenue—model designed to reduce volume. “Reduced hospital utilization is just one area that generates savings in the total cost of care for the population,” said Katherine Schneider, MD, president and CEO of DVACO. “Now I think many of our hospital CFOs feel like that is the only place we get savings out of, but in fact, only about 30 percent of the spend in the Medicare population is on hospital care. We have large opportunities in our ACO for smarter spending on post-acute care, specialist visits, and other areas as well.”
Changing Care Model Requires a Changing Mindset
As the healthcare industry transitions to new care models that emphasize lower utilization, hospital CFOs must adopt a new mindset that includes not just costs and revenues but also cost savings. “I think hospitals need a couple of years to understand a system that focuses on total cost of care. Right now, a typical hospital CFO looks at cost in a totally different way—from the front door to the back door of an episode in the hospital,” said Schneider.
See related tool: ACO Shared Savings Calculator
One revenue stream—or penalty avoided—via improved patient management within an ACO that benefits hospitals significantly is avoidable hospital readmissions. Participation in an ACO essentially extends a hospital’s care team to others in the system who can better manage patients post discharge. This is in direct contrast to the old care model. “It is really hard to manage readmissions, if your capabilities end at the back door of your hospital,” said Schneider.
An example of how one of DVACO’s member hospitals is changing its thinking and approach to delivering cost-effective cares comes from Jefferson Hospital, which earlier in the year opened the first 24/7 urgent care center in the region just one block to the entrance of the emergency department of their main hospital. The center, staffed with board-certified emergency physicians, is intended to reduce utilization of the more expensive hospital emergency department. “If that doesn’t signal a change in thinking in what hospitals need to be delivering in their community, I don’t know what does,” Schneider said.
Being Patient About Returns
When it comes to participation in an ACO, hospitals need to take the long view. Incorporating a new care model is not akin to opening a new service line that will drive a positive cash flow in the first year. “It’s not like flipping the lights on in a house,” Schneider said. “It takes time, it takes effort, and it takes culture change.”
A good place for hospitals to start is with their own employee population, Schneider noted, “because you are already at full risk for them” and can effectively monitor the cost of care. To better manage these costs, a hospital will likely add IT infrastructure for population health management tools, care coordinators, and ways to work more closely with primary care physicians in the area.
“Hospitals should also be open to entering upside contracts with payers to further their understanding of population health. “These are great learning opportunities, as hospitals can get access to all kinds of data, and entering into upside contracts allows hospitals to begin to understand where there may be opportunities on the Medicare side, and also with local employers.”
That said, Schneider believes healthcare organizations need to embrace these changes sooner, rather than later as moving to a value-based system is inevitable. “If they don’t do it, someone else is going to. And do they want to be at the table figuring this stuff out with a financial upside, or do they want to become someone else’s commodity and only see the downside and someone else’s upside?” Schneider said.
Recognizing the Value of New Payment Models
While participation in new payment models may not yield cash flow in the same ways as contracts in the past, Schneider also believes that once healthcare organizations dig into what is available for incentives in the market, both from Medicare through MSSP and from private payers, they will have enough evidence to move aggressively. “When they look at what they may be leaving on the table when it comes to value-based incentives, those numbers start to get to be really big very quickly—perhaps even bigger than their margins.”
Chris Anderson is a freelance writer who covers payers, new care models, healthcare IT, and precision medicine.
Interviewed for this article: Katherine Schneider, MD, is president and CEO of Delaware Valley ACO, Villanova, Pa.