A glance at the headlines shows how badly healthcare needs to become more efficient. Healthcare spending in the United States rose 5.7 percent in 2009, to $2.5 trillion. It now commands 17.3 percent of the gross domestic product, up from 16.2 percent in 2008. That's the fastest one-year increase since 1960.
Our healthcare system is galloping away from us. We spend more than $7,000 per person on medical care, much more than any other country we compete with in the global market. China, for example, spends $600 a year. How can we as a nation keep this up? The economic burden of our healthcare system is simply unsustainable.
Enter the Accountable Care Organization
Hospitals need to become more efficient and control costs. I believe this can be done through accountable care organizations. ACOs will coordinate all the care a patient receives, both inside and outside the hospital, in a certain region. For example, an ACO in my part of Wisconsin might serve 800,000 to 1 million people. The ACO would bring together hospitals, physicians and other providers into coordinated systems that can be more efficient and safer, too.
If you're interested in organizing an ACO, begin planning now. Someone else in your region may already have started. Things are moving fast. These organizations need to be up and running by Jan. 1, 2012, when CMS, as directed by the Patient Protection and Affordable Care Act, will begin assigning Medicare beneficiaries to these organizations and allowing ACO providers to begin sharing any Medicare cost savings they achieve. Some private payors will quite likely use these same organizations for their own payments.
A physicians' group or any kind of hospital can build an ACO, but I believe the not-for-profit hospital is in the best position to do so. The not-for-profit hospital has links to the whole community through its board of trustees. It already deals with many providers who will participate in the ACO, such as social service agencies, mental health services, aging services and the public health department.
Physicians will be the ACO's key target group. The hospital will need to be fully aligned with doctors to function smoothly. With this goal in mind, Sacred Heart is offering an electronic medical record to independent doctors. We are also developing a web portal to connect with an existing EMR system at Marshfield Clinic, which has 775 physicians working at 48 locations in central and western Wisconsin. Aligning with doctors means getting their commitment to evidence-based measures for improving patient care, but this work is getting easier. The scientific evidence behind the care measures has become more convincing, and doctors are more comfortable using them.
ACOs will start slowly. CMS will continue making fee-for-service payments to each provider, supplementing ACOs showing high quality and efficiency with relatively small payments. But the new payments are likely to become more important over time and may well eclipse fee-for-service reimbursement. This new source of funding, covering the entire continuum of care, reminds me of capitation — the per-member, per-month payments to risk-bearing organizations that were the wave of the future 20 years ago. Capitation failed, but ACOs take a different tack. Members of the classic HMO were assigned to a gatekeeper, who controlled all their care. Although ACOs will assign patients to a "medical home" with a primary care physician, patients will have access to any physician they choose, without a referral. It will be up to the ACO to keep them happy and loyal.
Many details about ACOs still have to be worked out — by HHS in proposed rules and also by each ACO on its own, as it works out the specifics of its structure and approach. At Sacred Heart, we are planning three ACO pilot projects using different models of physician alignment. The first involves a small group of independent physicians in a medical home; the second, a larger medical group that has an infrastructure in place; and the third, physicians in a midsize group practice. We will then pick the most successful strategy and use that as a model.
One problem ACOs face is having sufficient numbers of physicians to make the system work. We don't have enough doctors in this country right now, much less when 32 million newly insured people enter the system under health reform. I believe we'll need to make it easier for mid-level providers, such as physician assistants and nurse practitioners, to step in for doctors where appropriate. This will involve changing state licensing requirements and increasing positions at professional schools. Right now, there are so few available slots for applicants at PA schools that it's as hard to get into these institutions as into some medical schools.
Obviously, the transition to this new world of healthcare won't be easy, but we have no choice — neither as a nation, trying to fix its broken healthcare system, nor as a single hospital, caught up in the tide of change. Each hospital and health system will have to transform itself, and it is up to each one of us to decide how that will be done.
Stephen F. Ronstrom has more than 25 years of hospital leadership experience, having served for the past 11 years as an executive in the Hospital Sisters Health System. He is currently president and CEO of the Hospital Sisters' Western Wisconsin division, which includes 344-bed Sacred Heart Hospital in Eau Claire, Wis. Learn more about Hospital Sisters Health System.
Our healthcare system is galloping away from us. We spend more than $7,000 per person on medical care, much more than any other country we compete with in the global market. China, for example, spends $600 a year. How can we as a nation keep this up? The economic burden of our healthcare system is simply unsustainable.
Enter the Accountable Care Organization
Hospitals need to become more efficient and control costs. I believe this can be done through accountable care organizations. ACOs will coordinate all the care a patient receives, both inside and outside the hospital, in a certain region. For example, an ACO in my part of Wisconsin might serve 800,000 to 1 million people. The ACO would bring together hospitals, physicians and other providers into coordinated systems that can be more efficient and safer, too.
If you're interested in organizing an ACO, begin planning now. Someone else in your region may already have started. Things are moving fast. These organizations need to be up and running by Jan. 1, 2012, when CMS, as directed by the Patient Protection and Affordable Care Act, will begin assigning Medicare beneficiaries to these organizations and allowing ACO providers to begin sharing any Medicare cost savings they achieve. Some private payors will quite likely use these same organizations for their own payments.
A physicians' group or any kind of hospital can build an ACO, but I believe the not-for-profit hospital is in the best position to do so. The not-for-profit hospital has links to the whole community through its board of trustees. It already deals with many providers who will participate in the ACO, such as social service agencies, mental health services, aging services and the public health department.
Physicians will be the ACO's key target group. The hospital will need to be fully aligned with doctors to function smoothly. With this goal in mind, Sacred Heart is offering an electronic medical record to independent doctors. We are also developing a web portal to connect with an existing EMR system at Marshfield Clinic, which has 775 physicians working at 48 locations in central and western Wisconsin. Aligning with doctors means getting their commitment to evidence-based measures for improving patient care, but this work is getting easier. The scientific evidence behind the care measures has become more convincing, and doctors are more comfortable using them.
ACOs will start slowly. CMS will continue making fee-for-service payments to each provider, supplementing ACOs showing high quality and efficiency with relatively small payments. But the new payments are likely to become more important over time and may well eclipse fee-for-service reimbursement. This new source of funding, covering the entire continuum of care, reminds me of capitation — the per-member, per-month payments to risk-bearing organizations that were the wave of the future 20 years ago. Capitation failed, but ACOs take a different tack. Members of the classic HMO were assigned to a gatekeeper, who controlled all their care. Although ACOs will assign patients to a "medical home" with a primary care physician, patients will have access to any physician they choose, without a referral. It will be up to the ACO to keep them happy and loyal.
Many details about ACOs still have to be worked out — by HHS in proposed rules and also by each ACO on its own, as it works out the specifics of its structure and approach. At Sacred Heart, we are planning three ACO pilot projects using different models of physician alignment. The first involves a small group of independent physicians in a medical home; the second, a larger medical group that has an infrastructure in place; and the third, physicians in a midsize group practice. We will then pick the most successful strategy and use that as a model.
One problem ACOs face is having sufficient numbers of physicians to make the system work. We don't have enough doctors in this country right now, much less when 32 million newly insured people enter the system under health reform. I believe we'll need to make it easier for mid-level providers, such as physician assistants and nurse practitioners, to step in for doctors where appropriate. This will involve changing state licensing requirements and increasing positions at professional schools. Right now, there are so few available slots for applicants at PA schools that it's as hard to get into these institutions as into some medical schools.
Obviously, the transition to this new world of healthcare won't be easy, but we have no choice — neither as a nation, trying to fix its broken healthcare system, nor as a single hospital, caught up in the tide of change. Each hospital and health system will have to transform itself, and it is up to each one of us to decide how that will be done.
Stephen F. Ronstrom has more than 25 years of hospital leadership experience, having served for the past 11 years as an executive in the Hospital Sisters Health System. He is currently president and CEO of the Hospital Sisters' Western Wisconsin division, which includes 344-bed Sacred Heart Hospital in Eau Claire, Wis. Learn more about Hospital Sisters Health System.