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 HMT Think Tank

Patrolling for dollars

How should your ACO gear up for ACA?

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   By Rick Dana Barlow, March 2014

Back in the 1990s during the Clinton Era of Healthcare Reform, just about every organization attempted to call themselves an integrated delivery network (IDN) because it was the in-thing to do and one way to insulate some semblance of sovereignty from the growing tide of consolidation and convergence.

Today, during the Obama Era of Healthcare Reform, the term IDN almost seems quaint as the industry huddles around this decade’s acronym du jour – ACO for Accountable Care Organization. 

Where IDNs could bleat contently around the marketing prospects of the term’s fuzzy definition, ACOs cannot. After all, “accountable” is part of the name and definition – it’s more acutely black and white than the gray interpretation of “integrated.” This means you have to own up to your performance in clinical, financial and operational areas, as well as generate high enough scores on subjective patient satisfaction surveys, all of which affect reimbursement under the Accountable Care Act guidelines and rules.

In short, ACOs seem to be shaping up as super-charged IDNs with expenses more tightly managed, revenues more closely and directly tied to outcomes, clinical decisions and procedures striving for higher quality, and charges/prices more transparent and “reasonable.” One caveat is that they also agree to be held “accountable” for clinical and financial outcomes, thereby closing the loop that IDNs discussed but really never put into practice.

On the surface, the ACO structure seems easier on paper to achieve than in practice, which tends to be one of the complaints cited for healthcare organizations switching out of the federal government’s byzantine ACO project into other less-daunting models that strive to achieve on-par results. Still, a recent CMS benchmark study showed that roughly 47 percent of 114 Shared Savings Program ACOs reduced their actual spending by $380 million, an amount more than was projected, but that roughly two-thirds of that smaller group generated enough savings to qualify to retain a portion of it as a reward.

To achieve such success, an ACO must surmount the complexities of developing a financial system that incorporates many – if not all – of the disparate fiscal and performance measures of an ACO’s participating member organizations. Health Management Technology asked a small group of information technology executives for tips on how an ACO might accomplish this.


 

HMT: What are some of the challenges ACOs face in trying to set up an integrated or interfaced financial system that links all of its “member” facilities – particularly if you feel they need to integrate or interface these financial systems?


Jim Lacy, CFO and General Counsel, ZirMed

Clearly, some level of integration needs to take place among participants to share info on claims and remit info and associate them with the episode of care, but there are several reasons that the dream of having care integrated for all patients is just a dream: 

ACOs need to provide care and submit claims and reconcile payments across multiple venues in real time, and financial systems don’t operate in real time. They operate retrospectively. 

ACOs are going to be a mix of entities that are owned and not owned but allied with different organizations in many cases. Forcing allies and partners to adopt a monolithic system with all other partners is impractical. 

The process of gathering together relevant claims within an episode of care, receiving a single lumped remittance and then breaking it up and distributing to owned and un-owned entities is beyond the scope of most financial systems. 

The underlying concept of an ACO and bundled payment model doesn’t comprehend a clear end to the episode of care. Subsequent readmission or other complications can happen after time has passed, claims have been submitted and remittance received. This process adds another layer of complexity to the reconciliation of payment beyond the historical nature of the healthcare financial system. 



 

David Janotha, Industry Vice President, Healthcare, Axiom EPM 

The myriad of organizations that can become involved in the ACO, including hospitals, physician practices and home health organizations, will undoubtedly have a wide range of financial systems that they use, with varying structures that would not be easy to combine. Additionally, combining data from the member organizations without some value-added structuring is likely to lead to divisive strategies and blame when costs are considered less than optimal. That being said, the nature of the ACO program dictates that it isn’t traditional financial data that really needs to be linked. The effectiveness of ACOs will depend on the ability to utilize a combination of financial and clinical data integrated in a meaningful way.

 


 

Steve Tolle, Chief Strategy Officer, Merge Healthcare

As a part of ACOs, specialties – such as imaging, cardiology, behavioral health, etc. – exist in disparate systems within a hospital, whether inherited or best of breed, at some point. There lies a challenge in integrating the systems and managing networks more tightly for one seamless interaction between the different departments; currently hospital systems are looking to make sense of it all. In the case of imaging, average referral leakage results in $20 million annually. It comes down to breakdowns in referral coordination and the cost of this process. 

Imaging is a large margin of any hospital organization, and hospitals are spending lots of money on their imaging solutions. Though not all have a consolidation piece, especially when it comes to storage. The use of storage is growing dramatically and will only become more expensive over time for this very reason. Managing these costs is key.

From an administrative cost perspective, hospitals pay on average $80 per call to verify insurance for a procedure (staff costs, physician time, etc.). Recent data shows our industry makes this call 122 million times per year, roughly a third of the images taken in a given year.

As an ACO, there needs to be a way to collaborate and reduce these costs across an organization. There will be a laser focus on images and finding ways to access and share images across networks, ultimately looking to reduce that $80 [call] to $10 per image.

 


 

Joe Damore, Vice President of Engagement and Delivery, Premier Inc.

In healthcare, we lack a way to zero in on data points that signify something meaningful. In addition, there is not a proven system that integrates claims data and clinical data. Many companies are working on developing this Holy Grail. And there are plenty of siloed approaches in healthcare to integrate data – EMRs are one. Providers (ACOs) are also building dashboards based on Triple Aim metrics in areas such as utilization, quality, per capita costs and patient satisfaction and engagement.

The challenge is integrating these disparate electronic medical record systems (clinical data). EMRs alone can’t help providers understand what’s happening across the entire continuum of care, parse all the inputs or point out predictive trends. Providers are spending a lot of time focusing on managing these data sets and separate technology infrastructures and not enough time using meaningful information that can help them understand what interventions need be made to improve patient care and further predict variances to improve the overall health of their populations.

Reform pushes providers toward population health management, yet few providers have the IT capabilities to make it reality.



 

Barry P. Chaiken, M.D., MPH, Chief Medical Information Officer, Infor

Unlike integrated delivery networks, ACOs in their fullest sense are truly an integrated care delivery entity that combines both care delivery, at every level of care, with financial risk. Therefore, ACOs must carefully manage care and costs across the entire spectrum of care: inpatient, ambulatory, and subacute care (e.g., rehabilitation, skilled nursing, etc.). First, an ACO must establish relationships across a broad field of care providers while implementing management tools to track quality of care, clinical outcomes and cost of care. If the ACO is at financial risk for the care provided – value-based/capitated reimbursement – the ACO must be sure that the affiliate organizations that provide care to the covered population do so in a manner that matches the clinical and financial goals of the ACO. 

ACOs must establish reliable links to the financial and clinical systems of each of their partners. These interfaces provide the raw data necessary to track actual costs and clinical results. The ACO must understand the true cost of providing various levels of care and link that back to the clinical outcomes. This task of linking systems and monitoring outcomes is not easy. Nevertheless, ACOs must focus on building these reliable links and then applying business intelligence techniques to monitor results on a frequent basis.



 

What are some of the steps they should take to overcome these challenges?

 

David Janotha, Industry Vice President, Healthcare, Axiom EPM 

ACO payments will be based on cost and quality, so understanding the drivers of those components will be important to the success of the ACO. An effective performance management system that allows seamless integration of data from various sources will be necessary to have access to the critical information needed.  The organization will need to be able to assess the activities contributed by the members and analyze variances across providers.  It is only with this information that opportunities to improve can be identified, addressed and monitored.

The key will be to understand the variable and direct cost drivers for each of the members and the impact of practice patterns on the total variable cost. That information will facilitate physician practice changes by quantifying their decisions and generating monetary impact values. It will also be important to be able to combine quality data so that decisions are not made on cost alone that could subsequently lower the quality of care.

The data must be integrated across providers but also consolidated by encounters and episodes of care. It will be important to analyze inpatient stays along with the related outpatient activity after discharge and any related re-admissions. The system utilized to integrate the cost data must also therefore support providing service line views that are inclusive of care provided across settings and events (i.e., inpatient stays and outpatient visits).



 

Jim Lacy, CFO and General Counsel, ZirMed

One of the first manifestations of ACO complexity for organizations is figuring out what patients, providers and care are going to be paid for as part of the ACO/bundled payment model. ACOs need to put in place "early warning" systems that will flag clinical encounters that may become part of a bundled payment as they progress. 

This issue is a great example of how ACOs need operational and financial procedures that are normalized across all internal and external participants. ACOs are going to need to align with partners that can handle the complexities of bundling/unbundling payments beyond the scope of core financial systems. Clearinghouses, banks and a wide range of services and technology partners can play a role in this support. 



 

Joe Damore, Vice President of Engagement and Delivery, Premier Inc.

Providers must invest in technology that can integrate, scale and evolve information across their entire system, instead of using disparate vendors and sources of data. They need technology that can interpret their information quickly and efficiently to provide a more complete picture of patient care and a better understanding of outcomes and total cost, including care delivered outside the hospital.

Investing in one IT platform/solution that has total cost of care capabilities, which providers can use to integrate trusted data across their health system, is one step. Technology like this can integrate population- and claims-based data, as well as technologies from all types of vendors. The new population health/ACO financial systems will require a much deeper understanding of the "production costs" of care across many different care settings (ambulatory, acute, post-acute) and the ability to allocate funds (per-member per-month or shared savings) across both in-and out-of-network providers. These systems have not traditionally existed in the provider world. 



 

Barry P. Chaiken, M.D., MPH, Chief Medical Information Officer, Infor

Here are a few steps an ACO can take to overcome the challenges:

  • Choose partners carefully to be sure they have the systems in place to collect the data for monitoring of clinical and financial outcomes.
  • Ensure that the partnering entities are capable of providing clinical care up to the standards of the ACO.
  • Check that the partnering entities are able to proceed with clinical transformation as needed.
  • Be sure the entities provide patient-centered care and their systems support patient-centered workflow.
  • Ensure that the ACO and the partnering entities utilize a reliable interface engine among financial and clinical systems to easily transfer data to provide efficient care, while offering data for ongoing monitoring of clinical and financial outcomes. This also allows for more efficient administrative activities.
  • Ensure that proper human capital management systems exist so that the right people are assigned to the right tasks to generate the best outcomes.



 

Steve Tolle, Chief Strategy Officer, Merge Healthcare

ACOs won’t be able to survive and have shared savings or bundled payment programs – or take risk on member lives – without the right data strategy. First, the appropriate health information exchange (HIE) must be incorporated for all data tied to patient care (administrative and clinical) for an episode of patient care to proactively move forward with treatment. Taking this risk with a patient requires an HIE. 

Typically, imaging takes a back seat, but just looking at the raw cost data on imaging and the large piece of the pie it has within a hospital, it needs to move up in priority. Along with putting an HIE in place, an imaging strategy must be incorporated. A vendor-neutral archive for image sharing and exchange checks this off the list. Not only from a cost perspective, but imaging is highly valued from a patient care perspective for providers.


 

What are some of the myths about “ideal” ACO financial systems that should be “busted” and why?


Joe Damore, Vice President of Engagement and Delivery, Premier Inc.

One myth is that there is one system that will meet all the needs of an ACO. It will take an integrated EMR connected to a claims management system and a care management system. This will require interface tools such as an HIE and interface engine.

A Commonwealth Fund and Premier Inc. analysis based on data from 59 diverse health systems also suggests that some existing assumptions about needed ACO capabilities may be misleading. 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.

Some myths include market share dominance, number of employed physicians and financial strength. 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. In addition, some of the highest performers in the study had the lowest proportion of employed physicians, contradicting the belief that physician employment is necessary for ACO formation. And 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.

 


 

Jim Lacy, CFO and General Counsel, ZirMed

The big myth about the idea of an ideal financial system for ACOs is that a financial system can model and execute on the reality of day-to-day ACO operations. Since the concept is based on a risk-based model, the ACO has to figure out its costs for providing care in totally different ways and model the risk it’s taking on in a bundled payment or capitated payment approach. Today’s healthcare financial systems are set up to support fee for service, and this risk-based approach is a completely alien notion as is the concept of what it costs for a healthcare organization to provide a certain episode of care. 


 

David Janotha, Industry Vice President, Healthcare, Axiom EPM 

A myth that needs to be debunked is the idea that only chargeable services should be included in variable and/or direct care. The cost of departments that are traditionally considered overhead or indirect should be included in the direct cost analysis, including laundry services, medical records (or health information management) and registration.


 

Barry P. Chaiken, M.D., MPH, Chief Medical Information Officer, Infor

One myth about "ideal" ACO financial systems that should be busted is that financial systems can function without a linkage to clinical data. This is false because financial and clinical data must be linked and analyzed together to truly understand how care is provided.

Another myth is that current cost accounting systems will satisfy the requirements of value-based reimbursement, the conditions that ACOs will work under. Costing systems must more accurately record staffing costs and better leverage clinical data from EMRs, as reimbursement is no longer tied solely to volume. Without accurately measuring costs, ACOs will be unable to manage care so that they remain viable entities. Losses in one clinical area can no longer be “made up” through profits (e.g., increased volume) in another area. The cost for each clinical area must be accurate and tied to the pricing (e.g., capitation rate) set for the population.


 

Steve Tolle, Chief Strategy Officer, Merge Healthcare

Myth: ACOs will be prepared for the future if they incorporate a value-based purchasing methodology behind their operations. Most ACOs are building financial systems with too short a view in mind. They must keep in mind patient engagement strategies and self-pay responsibility for the long term. This may be on their radar, but ACOs need to be much savvier and faster on population health and patient engagement strategies for creating longitudal records on patients that include financial and clinical aspects. 





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