[December 14, 2012]

Market Share, Physician Employment, Financial Strength Not Essential to Successful ACO Implementation

Contrary to previous assumptions, dominant market share, employed physicians and financial strength are not essential requirements for a health system to successfully implement an accountable care organization (ACO), according to a new paper from The Commonwealth Fund and the Premier healthcare alliance.

These findings are based on an in-depth analysis of 59 health systems of various sizes, characteristics and regional locations. All organizations were assessed during in-person site visits upon joining Premier's Partnership for Care Transformation (PACT™) Readiness Collaborative, which was launched in June 2010 to help organizations transition to accountable care.

According to lead author Eugene A. Kroch, PhD, Premier vice president and chief scientist, "Although much has been written about the potential merits of ACOs, little information exists to help providers understand the capabilities needed to create and participate in an effective model that can constrain healthcare costs while improving quality."

To address the lack of data evaluating the readiness of providers to implement ACOs, Premier developed a "capabilities framework" tool to assess health system progress toward meeting the requirements of this complex delivery and payment model. Premier's framework includes six core components:

• Patient-centered foundation (greater patient involvement in clinical decisions);
• Health home (a primary care medical home);
• High-value network (a set of providers that deliver quality care at an efficient price);
• Payor partnership (ACO providers working with payors to create financial incentives consistent with providing high-value care);
• Population health data management (collecting, analyzing and reporting data covering the ACO's patient population); and
• ACO leadership (systematic ACO governance and administration).

Ten of the health systems appearing most frequently among the highest and lowest scorers were selected for further analysis. Using information from ACO readiness assessments, the following attributes are among those that did not appear to differentiate high-scoring from low-scoring roviders:

• Market share dominance - Despite industry speculation, the data show that market dominance may not translate into greater confidence for health systems exploring ACO formation. In some cases, health systems controlling a relatively small local market share were moving toward accountable care early to get ahead of market-dominant systems.
• Number of employed physicians - Some of the highest performers had the lowest proportion of employed physicians, contradicting the belief that physician employment is necessary for ACO formation.
• Financial strength - ACO readiness was not correlated with greater operating margins or financial reserves, with one of the highest scoring organizations a public hospital with a relatively poor financial standing.

Health systems that appeared most ready to form ACOs were strongly patient-centered and had a focus on building the capacity to deliver advanced primary care.

"There are many assumptions regarding the requirements of successful ACO implementation, but little data to support them," said Premier President and CEO Susan DeVore, one of the paper's authors. "This is the first such analysis, based on data from a large scale of diverse health systems. What it ultimately shows is there are different paths toward successful implementation of this model."

Characteristics associated with greater ACO maturity included full or partial ownership of a health plan, being part of a system or having an existing collaboration with other health systems, and positive relationships with physicians and non-acute providers in the market. Organizations further along in ACO development also had existing risk-based contracts with payors, including bundled payments or pay-for-performance arrangements. Few of the health systems at the time of assessment had developed any sort of partnerships with commercial or government payors, and most reported poorly developed relationships with their payors.

An ACO is a shared savings arrangement under which a set of healthcare providers - principally physicians and hospitals - assume some financial risk for the cost and quality of care delivered to a defined population of patients. If, collectively, an ACO's participating providers are able to improve quality, enhance patients' care experience and limit per capita costs, they are rewarded with a share of the savings.

Premier created PACT to identify and address the gaps and inequities in the quality of care delivered nationwide. Members of the PACT Readiness Collaborative currently include 46 systems in 58 markets representing 201 hospitals covering 30 states.

An August 2012 paper from The Commonwealth Fund focuses on lessons learned from Premier's PACT Implementation Collaborative, which consists of 23 heath systems, including 70 hospitals, that are further along in the process of creating integrated provider networks accountable for cost, quality, experience and population health. These providers deliver care across 20 states and cover urban, rural and suburban populations.

About The Commonwealth Fund

The Commonwealth Fund is a private foundation supporting independent research on health policy reform and a high-performance health system.

About the Premier healthcare alliance, Malcolm Baldrige National Quality Award recipient

Premier is a performance improvement alliance of more than 2,700 U.S. hospitals and 90,000 other sites using the power of collaboration and technology to lead the transformation to coordinated, high-quality, cost-effective care. Owned by hospitals, health systems and other providers, Premier operates a leading healthcare purchasing network with more than $4 billion in annual savings. Premier also maintains the nation's largest clinical, financial and outcomes database with information on 1 in 4 patient discharges. A world leader in delivering measurable improvements in care, Premier works with the Centers for Medicare & Medicaid Services. Headquartered in Charlotte, N.C., Premier also has an office in Washington. https://www.premierinc.com. Stay connected with Premier on Facebook, Twitter and YouTube.

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