Five ACO Pain Points…and How to Remedy Them

Barry C. Dorn, MD, Leonard J. Marcus, PhD, and Eric J. McNulty contributed to this post.

Accountable Care Organizations (ACOs), the latest attempt to control health care costs while ensuring quality, are set to become reality in just a few weeks. Supporters believe that they have at last found the formula that that can deliver both savings and better care. Detractors claim that the benefits are overstated and the potential pitfalls are significant. It will be some time before we see which camp is correct. However, based on our more than 20 years of work in conflict resolution in health care and research for Renegotiating Health Care, we can predict some likely pain points and offer time-tested solutions.

First, in case you’ve missed all of the talk about ACO’s here’s a brief primer: An ACO is a network of physicians and other providers, such as community hospitals and academic medical centers, that agrees to be held accountable for the cost and quality of the full continuum of care for a defined population. In some instances the ACO may receive a bonus based on the savings achieved; in others, the ACO may risk penalties for cost overruns in addition to having the possibility of bonuses. Under provisions of the Affordable Care Act, Medicare is launching an ACO initiative in April and several private efforts are also underway.

The goal of the ACO is to move away from the traditional fee-for-service model to one that rewards providers for cost-effective, quality care. One of the main differences between ACOs and, for example, health maintenance organizations (HMOs) is that the patient retains the ability to choose whichever providers he or she prefers: there is no line between in-network and out-of-network. This can be both a plus and a minus.

Quality is measured. Incentives are aligned to reduce costs. Patient choice is preserved. What’s not to like? We applaud the goal of better care for less money. We are encouraged that the designers require coordination and collaboration that encourage the health care system behave as a system rather than as a collection of component pieces.

We can also see numerous conflicts on the horizon. Here are five of the ones that could sting in the months ahead:

1. The Shifting Balance of Power between Physicians, Hospitals, and Payers

Any change to evaluation and incentive systems results in a power shift. Under current norms, hospitals are in business to grow and make money. They have beds to fill and expensive equipment that must be paid for. Academic medical centers are in business to provide care and teach the next generation of professionals. Physicians are in business to provide care and make a living. Insurers thrive by limiting what they consider to be unnecessary care so that they can earn a return for their shareholders. The ACO construct attempts to align interests but there are several fissures it may exacerbate.

Each of these stakeholders survives by extracting money from the system. They will now have to learn new rules and figure out how best to optimize their financial interests. Primary care physicians (PCPs) may try to provide more services rather than referring patients to more expensive specialists, for example. This would be a significant shift from the current “gate keeper” role played by many PCPs. Another example: Under the ACO framework, primary care physicians are incented to refer patients to a community hospital rather than a typically more expensive academic medical center. Yet without a regular flow of referrals, the academic hospital will neither remain financially viable nor will it be able to fulfill its educational mission. If academic medical centers don’t train future clinicians, who will? These changes may initially be good for the system but would disrupt the business models of many providers.

The second is that clinicians may feel they need complete clinical freedom to meet the specified quality standards while the administrators or insurers may want to limit that choice in order to cut costs. The allure of bonuses and the fear of penalties can make what is today a simmering issue one that boils over. The increased use of electronic medical records, another part of the Affordable Care Act, means that more people will have greater access to more and more data – data which can be used to second guess clinical decisions in the name of saving money.

Finally, the ACO framework does not address the issue of litigation which can drive expensive defensive medicine. It is the ACO that will be trying to save money while it is the individual physicians, practices, and hospitals in the ACO that will be targeted in litigation. This raises the question: Who exactly is accountable for what and to whom?

2.       Patients May not Understand the ACO

While those who designed the Medicare ACO quality standards clearly have patient satisfaction in mind, the typical patient has not been part of the design process. Medicare patients have had decades of experience with the “old” system and data shows that they are more satisfied with it than are patients in private health plans. That suggests that change may not be welcomed.

The ACO architects have anticipated this and hope to blunt it by preserving the freedom to choose providers.  No doubt notifications to patients will be filled with soothing language meant to assure them that only good can come from these changes. In fact, much will remain the same from the patient’s perspective.

However, with any new practice there will be speculation and differences of interpretation. Given the antipathy toward the Affordable Care Act by its vocal opponents – only to get more vitriolic given the pending Supreme Court case and impending election — one can anticipate that any change to the system will be met with derision that may generate suspicion among patients. Remember how simple conversations about end-of-life options became “death panels”? Rumors, distortions, and factual errors – whether intentional or not — may create fear, confusion, and trepidation.

3.       The Savings May be Harder to Achieve than Advertised

If the move to ACOs generates enough savings that all parties made as much or more money than before, there likely wouldn’t be resistance based on compensation. According to the Robert Woods Johnson Foundation, the Medicare Physician Group Practice demonstration project provides “the best systematic evidence about how the ACO model works.” Ten large medical groups participated in the five-year program. Only two received bonuses in all five years and three received no bonus at all. Thus bountiful bonuses are far from assured.

One of the ongoing challenges to lowering costs in health care is that each dollar saved has to come out of someone’s pocket. While many complain that we in the U.S. spend 18% of our GDP on health care they forget that this represents the livelihoods of a lot of people. Individuals are often unwilling to give because it is unclear what they are going to get. Resisting any change is a logical, if not particularly enlightened, strategy from the book of “The Devil You Know…”

4.       Unblocking Information Sclerosis

Key to an integrated approach to accountable care is data and central to data collection, sharing, and aggregation is a robust electronic medical record (EMR) system. There are many reasons for the slow adoption of EMRs but at least one of them has long been consistent: they require investment by the provider but generate savings for the payer. The Affordable Care Act does provide incentives to help mitigate this situation and the shared savings model of the ACO should also help. Even with these two provisions there is no guarantee that the investment in EMRs will provide a net financial gain for the providers.

In addition to the financial investment is the requirement for time to create a seamless flow of information across an ACO: discovery, design, and deployment are each time-intensive endeavors in the development of an enterprise-level IT system. They are made more complicated by the involvement of multiple organizations, each with its own legacy systems, preferences, level of technical sophistication, and “must have” requirements.  Further level of complexity lie in the need for security and in that provision of the law that allows patients to restrict which information they are willing to share.

It the best of cases, achieving the free flow of information across a network is a challenge. More typical are many cries of financial and operational pain.

Still to be resolved is the optimal level of transparency of system data to patients. Should they know how much they “cost” the system? Will those with multiple maladies – cost drivers – fear that clinicians are holding back on treatments as they manage toward a cost mean?

5.       The Tension between “Health” and “Treatment” Remains

The traditional health care system has been geared more toward treating illnesses than preventing them yet the big reservoirs of savings and improvements in quality of life lie in keeping people well. One physician we interviewed for our book, Renegotiating Health Care, put it this way: the system has become expert at knee replacement but remains mediocre at helping people avoid the need for a new knee.

ACOs better coordinate the activities of the current configuration but do little to change the basic paradigm of the system. The challenge of moving from treatment to health may be asking the ACO to solve a problem it was not designed to address. Remuneration is still based on diagnosis and care of the sick albeit with hopes for greater efficiency and efficacy.

Insightful professionals will note that cost savings may be achieved through, for example, nutrition education but this is not an area in which all practices have expertise and even if it exists within the ACO, adding capacity will require investment. More difficult will be the need to change the mindset of many practitioners who are deeply wed to their role as “fixer” rather than “preventer.” They were trained to treat and have found success through those skills. Change may engender resistance, resentment, and perhaps outright hostility.

Negotiating a Solution

The challenges articulated above represent classic dilemmas in multi-dimensional problem solving: there are many stakeholders and each has a distinct definition of the “problem” and the ideal “solution.” Such situations often result in acrimony – but it does not have to be the case. We have found that complex challenges can yield to outcomes that satisfy many stakeholders when they, together, work through a structured, transparent interest-based negotiation.

What might this look like? One such structure that we have developed, the Walk in the Woods, uses four steps and has been effectively applied over the past 15 years in various settings from patient-doctor-insurer disputes to major health system mergers. It can be employed with or without professional negotiation support such a mediator. The four steps are:

–          Self-interests. Each party articulates its needs, challenges, and desires. These may include income, expenditures, punctuality, technology, standardized protocols, or many, many more. The intention is to have each party put their interests on the table and have them truly heard by the others so that they know not just what the other parties want, but also why it is important;

–          Enlarged-interests. Areas of agreement and disagreement are identified among the parties. In our experience, the parties almost always agree on more than they disagree – and certainly on more than they realized. In identifying overlapping interests, the parties begin to appreciate what they have in common and become more open to examining differences. Typically, no one involved in the process wants to put another party in a financially untenable situation, for example. All are likely to agree that it is in their interest for appointments to begin and end as scheduled. All desire high patient satisfaction. This sets the stage for the third step;

–          Enlightened-interests. With interests and agreements articulated, it becomes easier to seek solutions to differences that are mutually beneficial. Brainstorming enables parties to explore what each is willing to give in order to get what it sees as essential. We have often seen innovative ideas emerge that were on no party’s list of demands at the outset yet which help close the gaps between them. People realize that they can achieve more working together rather than battling each other; getting need not necessarily come at someone else’s expense when the problem is properly framed;

–          Aligned-interests. At this final stage, the parties agree on steps forward. While they may not have resolved all of their differences, the parties have taken the first steps in collaboration that sets the stage for tackling the remaining differences at another time.

Accountable care organizations are soon going to be part of health care reality for many physicians, patients, insurers, and others in the system. There will be some aspects of them that will work better than expected while others, as the test-runs have shown, will not play out exactly as planned. If the discord that rises can be resolved productively, ACOs may live up to their promise. If not, we may find ourselves back at the drawing board wondering why another attempt to boost quality and control costs has fallen short. Success or failure may depend as much on our ability to negotiate with each other as on the details of any structural change.

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