Continuing downward pressure on reimbursements has threatened the sustainability of hospitals, and some within the industry see a significant need for providers to respond differently than they have in the past. "Significant shake out will play out in different ways from market to market, but providers will have to think pretty differently about how they manage organizations," says Dave Terry, a principal with The Chartis Group, where he is a leader in the firm's Alignment and Accountable Care Practice.
Mr. Terry warns, however, that one type of ACO does not fit all markets. "Providers have to take a scan of their market and competitors to understand their role and position themselves in the environment," he says. Here Mr. Terry examines the emerging accountable care environment across the country and offers six main considerations for providers, regardless of their market characteristics.
1. Basic unit cost management. Only a third of all health systems across the country make money on Medicare business, and Mr. Terry expects providers could see commercial rates come down to current Medicare rates under a bundled or capital payment system. To keep up, providers will have to reduce unit cost, he says. Providers should work to benchmark themselves, approach the situation head-on and work to be more efficient.
2. Alignment with physicians and partners. When partnering with physicians in an ACO, the most important consideration is ensuring physician contracts, including their compensation structures (whether employed or not), align with how the health system itself gets paid from the payors. Incentives need to be aligned so all parties benefit similarly, says Mr. Terry. "This is much easier said than done, but in transition from one system to another, we may even begin to see hybrid systems as partnerships develop", he adds.
3. Size to appropriate capacity. ACOs must also consider the best way to organize a system to meet its community's needs given the providers' capacity. "If you have a certain population you're serving, you must make sure there are the right number of tertiary and quaternary care beds appropriate to the population and the services the community requires," says Mr. Terry. Instead of following the recent trend of dragging patients into high cost city facilities, ACOs will need to lower costs and provide patients with primary care doctors in their own community."
4. Find a way to differentiate your ACO. In a competitive market, ACOs need to find a niche and build market share. Mr. Terry suggests providers decide how to distinguish themselves. "Work towards a premier brand, a tertiary provider, best service, value, etc., that can set you apart from the competition," he says. "Consumers are making more choices, and a distinctive niche will attract a lot of business."
5. Use clinical and claims data. Providers have access to a wealth of information from EMR systems, patient charts, hospital information and other information that comes from partnering with homecare providers. "There is so much rich data that hasn't been mined as effectively as it has in other industries, such as banking. Finding new and different ways for providers to use clinical and accessing data will allow providers to better manage utilization and services," says Mr. Terry.
6. Experiment in the risk environment. Whether its Medicare bundled payments or managed care contracts, Mr. Terry argues that there's no substitute for providers entering into the risk environment as soon as possible. "They will learn ahead of the market and been seen by others as ahead of the curve and attractive for future partnerships," he says.
This is a real opportunity that isn't overly risky for providers to get ahead.
Learn more about The Chartis Group.
Mr. Terry warns, however, that one type of ACO does not fit all markets. "Providers have to take a scan of their market and competitors to understand their role and position themselves in the environment," he says. Here Mr. Terry examines the emerging accountable care environment across the country and offers six main considerations for providers, regardless of their market characteristics.
1. Basic unit cost management. Only a third of all health systems across the country make money on Medicare business, and Mr. Terry expects providers could see commercial rates come down to current Medicare rates under a bundled or capital payment system. To keep up, providers will have to reduce unit cost, he says. Providers should work to benchmark themselves, approach the situation head-on and work to be more efficient.
2. Alignment with physicians and partners. When partnering with physicians in an ACO, the most important consideration is ensuring physician contracts, including their compensation structures (whether employed or not), align with how the health system itself gets paid from the payors. Incentives need to be aligned so all parties benefit similarly, says Mr. Terry. "This is much easier said than done, but in transition from one system to another, we may even begin to see hybrid systems as partnerships develop", he adds.
3. Size to appropriate capacity. ACOs must also consider the best way to organize a system to meet its community's needs given the providers' capacity. "If you have a certain population you're serving, you must make sure there are the right number of tertiary and quaternary care beds appropriate to the population and the services the community requires," says Mr. Terry. Instead of following the recent trend of dragging patients into high cost city facilities, ACOs will need to lower costs and provide patients with primary care doctors in their own community."
4. Find a way to differentiate your ACO. In a competitive market, ACOs need to find a niche and build market share. Mr. Terry suggests providers decide how to distinguish themselves. "Work towards a premier brand, a tertiary provider, best service, value, etc., that can set you apart from the competition," he says. "Consumers are making more choices, and a distinctive niche will attract a lot of business."
5. Use clinical and claims data. Providers have access to a wealth of information from EMR systems, patient charts, hospital information and other information that comes from partnering with homecare providers. "There is so much rich data that hasn't been mined as effectively as it has in other industries, such as banking. Finding new and different ways for providers to use clinical and accessing data will allow providers to better manage utilization and services," says Mr. Terry.
6. Experiment in the risk environment. Whether its Medicare bundled payments or managed care contracts, Mr. Terry argues that there's no substitute for providers entering into the risk environment as soon as possible. "They will learn ahead of the market and been seen by others as ahead of the curve and attractive for future partnerships," he says.
This is a real opportunity that isn't overly risky for providers to get ahead.
Learn more about The Chartis Group.