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Will ACOs Fail?

February 26, 2013

The cHealth Blog is coming up on its 3rd anniversary and during that time I’ve taken my share of pot shots at organized medicine. Most implementations of connected health are in some way disruptive to the status quo, so I can’t help but point out those opportunities and barriers.

So I was surprised at my reaction to a recent editorial in the Wall Street Journal by Clayton Christensen and colleagues.  The main premise of the piece is that the concept of Accountable Care Organizations (ACOs) is misguided and that these organizations will be more likely to fail than not. I’ve been an admirer of Christensen’s work over the years and as you might expect, there is a lot to like in his WSJ piece.  However, as I watch healthcare providers in our integrated delivery system deal with the challenges of payment reform and accountable care, I am more optimistic than dismayed.  Let me go through the WSJ piece point by point and offer some thoughts.

For me, the first red flag is the assertion that ACOs are ‘latter day health maintenance organizations.’  The biggest difference in HMOs, as we experienced them, and ACOs are the locus of execution.  The HMO was a health plan-based organization.  With the exception of some of the early staff-model HMOs, these organizations were constructed to give providers financial guard rails without any tools for delivery reform.  The ACO is provider organization-centric.  I guess we can argue that this amounts to a ‘fox in the hen house’ situation, but as I see our own strategy unfold, I am optimistic. I see doctors saying things like, “This is how I always wanted to practice medicine.”  Giving provider organizations the financial risk is step one. They can use internal payment structures to motivate doctors to care for patients in more effective, but more efficient ways.  The IT tools at hand to facilitate this population-based payment management are breathtaking, from registries to data analytics to connected health. We’re using all of them at Partners and our goal is to transform care delivery.

The next logical misstep is saying that ACOs will not succeed without changing doctors’ behavior.  No argument with this premise on the surface. But I was puzzled by the lack of discussion of payment reform strategies (shared savings, bundled payments, full capitation) and how these will motivate changes in provider behavior.  It may surprise a number of people to learn that many of the doctors at Partners HealthCare (and elsewhere) are tired of the mouse’s wheel of fee-for-service reimbursement and welcoming of the opportunities to re-think care delivery.  I see MD thinking and behavior changing.  Whether it will change fast enough is still an open question.

Most ACOs are large organizations, and healthcare organizations are by nature conservative because we are overshadowed by our “do no harm” Hippocratic oath.  I’d love to speed up the process here at Partners, but I am comfortable that the process is well designed and will lead to the right changes in physician behavior.

Further along is the statement that we’ll not succeed without changing patient behavior.  This is where I find myself in resounding agreement with the WSJ authors.  If there is a flaw in the thinking of our government ACO architects, I’d say it’s here.  It’s not so much that we as providers can’t hold patients accountable for their health, though we can’t. But rather that the prevailing sentiment nationwide is that chronic illness is an accident that leaves patients as victims to be cared for and covered by insurance.  The most effective way to move patient/consumer accountability forward would be to acknowledge that lifestyle plays an enormous role in our most prevalent and costly illnesses.

Further, giving citizens healthcare premium rewards for evidence of improved health, and penalties for evidence of disregard for health would be a great step forward. Connected health tools enable that vision.  However, I don’t see any stomach for this in our politicians, so we will need to work within the current policy framework.  Some health plans are making progress in this arena.  And just because we don’t have this lever to pull, it does not mean we should abandon the whole concept.

As to the argument that ACOs will not save money, I think we have a chance.  At Partners there is a deliberate and sustained effort underway to make us more lean and efficient. I’m sure other providers are going through similar processes.  Is it enough? Probably not, but it’s a start and movement in the right direction.

I have to admit that were it not for my near complete agreement with the authors’ prescription for success, I probably would have ignored the piece and moved on. But the thinking articulated in the last half of the editorial is so compelling I had to write about it.

The first answer the authors propose is more use of tools such as retail clinics.  Couldn’t agree more.  The good news is that it appears this will happen with or without ACOs, because of consumer demand for simpler healthcare that is easy to access.  However, some provider organizations, notably the Geisinger Health System, are putting a big investment into the expansion of retail clinics.  I look forward to watching their results and in turn watching others adopt.

At the risk of having my telehealth colleagues throw rotten eggs and tomatoes at me, I’m going to suggest that the focus on interstate licensure as a barrier is overblown.  If you look at the market share penetration of telehealth and remote monitoring programs within any given state (patients managed in this way divided by total patients managed), I think you’ll see what I mean.  There is more than enough opportunity for expansion within a given state.  Of course, the ideal system would not be state based, but I don’t see this as a true barrier to telehealth adoption or to success of ACOs.

Last but by no means least is the nod that the authors give to the importance of connected health.  Of course, I agree with that!  Seriously, if we are going to use our current provider work force to care for the current patient base, plus the millions of new folks coming into the system due to access reform, we will have to expand our tool set beyond the tired old office visit.  Work at the Center for Connected Health has been building toward this vision for the last 10 years or so and we’ve managed to demonstrate better outcomes for chronic illness management, better patient engagement, and more efficient use of provider labor all with connected health. In fact, we were quite proud to see our work featured in a recent report from The Commonwealth Fund.

On balance, I congratulate the authors of the WSJ editorial for daring to buck the establishment.  And I suspect if we sat down over a cocktail, we’d agree far more than we’d disagree.  But in the end, I’m an optimist. I’m also pleased to see how our leadership and our providers are responding to the ACO call here at Partners, so I see greater chances of success than Christensen et al.

Where do you come down on this one?

44 Comments leave one →
  1. February 26, 2013 11:58 am

    Reblogged this on lava kafle kathmandu nepal.

  2. Jim Hutchinson MD permalink
    February 26, 2013 12:10 pm

    All change is difficult and especially so when it means “I” have to change. While much slower than many of us would desire my feeling is that great spped produces domino effects than we had not envisioned. We work in a complex and expense laden area and as you point out, physician response is changing.

    Patient response will also be slow, as is seen in our current national debates on finance. Human nature sees ones personal need as greater than another’s. Offering the carrot rather than the stick will be the model we should follow. That says, if you will do this then we can offer this added benefit to your care. We have seen this slow process work when we note the overall changes in smoking behavior within society, Joe, I concur with your optimistic view for the future.

  3. February 26, 2013 2:17 pm

    Thanks, Jim. Your comments are always insightful.

  4. Sam Finlayson permalink
    February 26, 2013 3:39 pm

    Nice response, Jim! (Please note, however, that if you sat down for cocktails with Clayton Christensen, you would not agree on whether or not to drink them. CC doesn’t drink!)

  5. February 26, 2013 3:40 pm

    I agree that financial incentives to change individual behavior are important for healthcare. These should be part of the ACO toolkit. However, early testing by payors of gift cards for behavior change have not yielded long term impact. More promising may be the work being done on the effectiveness of tying personal goals to treatment plans. Terrific study of patients recovering from hip/knee replacement surgery ( average age 68 ) demonstrated statistically better outcomes for individuals who had clear personal goals coupled with plans to overcome roadblocks ( pain, stiffness, etc.) than control group.

    Key question for us in healthcare is are we shooting for lower cost or lowest possible cost? I would ask whether ACOs lead us toward the first or second outcome.

  6. Sandra Peters permalink
    February 26, 2013 4:03 pm

    I agree with your analysis on all counts, Dr. Kvedar. Perhaps your Connected Health can take on the challenge of how to most successfully engage patients for the long term. I think the use of patient portals coming soon will give some insight.

  7. February 26, 2013 4:56 pm

    This is the essence of true healthcare reform, which is unfortunately mostly lost on the general public. Meaningful change will only occur if there are effective incentives for each stakeholder to actually change behaviors simultaneously in the same positive direction (payer, provider, med device/pharma MFG and patient). The ACO could be one of the better ideas in a sea of chaotic suggestions. Nice response, Dr. Kvedar.

  8. February 26, 2013 5:01 pm

    Thanks for the thoughtful article and to others for responses. As to “doctors won’t change”: Doctors are changing. The WSJ article does not mention that many MDs are selling their practices to ACOs. I believe this began as a reaction to the fee for service mouse wheel on which they and the patients were, and largely still are, trapped.
    Turning to “patients won’t change”: Patients are being asked by those with the most at stake in wellness to change. Families who gain from imported quality of life and lower costs; employers who gain from greater productivity and lower costs; and taxpayers and CMS who gain from greater productivity and llower costs. These (families include patients) are and have always been the real payors for most healthcare costs, both monetary and social.
    Recognizing the need for change is often a first step toward meaningful change.
    Thanks for the opportunity to respond.

  9. February 26, 2013 5:04 pm

    Government initiatives and improving the healthcare delivery system won’t cure the problem. There is no magic wand but providing patients with fun, easy to use tools where they can surround themselves with their family and friends is a huge step in the right direction. dacadoo uses an integrated and holistic approach that takes who you are, how you feel and what you do and expresses it in a single number thats easy for the patient to understand; A Health Score. If you aren’t measuring it, how can you manage it. You can integrate just about any device imaginable and point it at dacadoo to derive some real meaning. You then share than with your medical professionals, nutritionists and fitness instructors who own the prescriptive component. Every discussion I have seen on the topic begins and ends with trying to boil the ocean. Its really pretty simple, if chronic conditions are created by lifestyle choices then provide fun tools that help people change their behavior. Its a myth that people won’t be responsible for their own health. There are now over 15,000 healthcare apps out there. They did not pop up over night because the health care delivery system, insurers or the government provided incentives. They appeared on the radar because people are way more interested in this than we give them credit for. We are seeing a confluence of industry need, technology and consumer behavior like never before. Smart ACO’s (and yes i do think they will succeed) will look for ways to better engage, influence and track their patients.

  10. Jettie permalink
    February 26, 2013 5:24 pm

    Thank you- this discussion is needed now- along with a sincere determination to stay patient centric.

  11. February 26, 2013 5:27 pm

    As so often Joe has prompted a thoughtful discussion and it’s especially worth noting that human nature may evolve along the lines that this string has developed. At certain stages a simple idea of incentives such as basic carrots and sticks bring less response so shifting to games that make health fun offers more health return for the dollar than simpler ideas such as co-pays. Yet for people who are struggling with survival issues or striving to get ahead, those basic incentives are highly effective as a variety of behavioral economics demonstrations make clear. When we think of incentives, we also need to think about the ability to improve health in groups as well as individuals. Many incentives operate most powerfully through social groups. ACOs may be poised to realize this power and so community needs assessment offer an important indicator of whether they outperform HMOs by moving past the individual medical focus to improved population health which is where the real economic gain will likely come.

  12. February 26, 2013 7:27 pm

    ACO’s will fail if they do not keep the health consumer satisfied. ACO’s surrounded by empowered consumers, health exchanges, and silos in healthcare coming together are a recipe for success. Times they are a changing….

  13. February 26, 2013 7:43 pm

    Dr. Joe, I couldn’t agree with you more. I made a similar case — with some health economics nuances — on Health Populi yesterday: My lens is shifting from “ACO” to “Accountable Care Communities” where a patient’s local health ecosystem (coupled with the kinds of tools you suggest, including telehealth where it’s cost-effective and useful) goes well beyond health “care” institutions. Thanks for your always-challenging posts! JSK

    • February 27, 2013 4:02 pm

      Thank you, Jane, for your thoughtful commentary. I like the idea of accountable care communities!

  14. February 26, 2013 10:15 pm

    It’s very simple: to have an ACO you need the patients to be accountable for their care. Organizations that don’t focus on patient education and training will fail.

    It all comes down to marketing at the end – how patients find expert doctors (or ideal wellness facilities)

    • February 27, 2013 11:39 am

      @ Dr. Sikorski, I would respectfully suggest that this is way bigger than a marketing challenge. Patients are actively demonstrating they are willing to be accountable. The fact that there are 15,000+ health care apps evidences this. ACO’s didn’t drive that but they can certainly benefit by seeking out tools that better engage, educate, influence and connect patients back to their organizations. I see technology as helping ACO’s extend their reach and keep them connected where it matters most. Most people have the most sophisticated tool we could imagine already and its in their pocket. Its called a smart phone. We founded dacadoo with a simple objective; help people get and stay healthy. I don’t suggest we are the only one but connecting that with your profession was the very reason we created the platform.

      • February 28, 2013 1:13 pm

        I agree Kevin. HOWEVER, unless patients FIND the right doctor accountability cannot start to take shape.

        The problem with marketing is unethical advertising.

        For example, in the Empowered Doctor marketing program, I screen surgery centers and doctors for the very things they try to advertise. Unless the doctors are qualified, their reputations are in order, I don’t believe those centers should be advertising.

        One of the biggest mismatches out there today are Orthopedic Surgeons. A knee surgeon will not have any problems taking on a hand-surgery patient. I see a problem with that. And so do Empowered patients who can see through that.

        Patients want to be connected with experts. That is exactly the reason why a lot of surgery centers and doctors are seeing a decline in patient volumes.

        The challenge? The Experts are advertising themselves for things they do not have expertise in and lose all credibility. And a great example for another challenge are surgery centers… they advertise highly profitable procedures, but do they have the right experts to do those procedures?

        With patients Googling their doctors, the challenge is clear… doctors, ACOs, surgery centers better be prepared for patients running background checks on them.

    • February 27, 2013 4:03 pm

      Simple in concept, challenging in execution.

  15. Ron Anderson, MD permalink
    February 27, 2013 11:14 am

    As Clay pointed out ACOs don’t really address the magnitude of the problem. If ACOs are to be the solution to health care in America, they need provide coverage to an additional 50 million people at no additional cost. That is what is economically sustainable for the future of our country. The greatest increase in cost to health care in the last decade in large health care organizations is the cost of paying people. It’s simply not possible to be the answer to healthcare for America when large healthcare organizations pay their people ~25% above market rate with rich retirement benefits and then on top of that compete with each other to build the most attractive buildings while delivering 2nd tier results. If we have the discipline to confront the brutal facts of our reality and believe we have a moral obligation to provide care to the uninsured, we need a much more transformative breakthrough than ACOs and large healthcare organizations envision.

    • February 27, 2013 12:06 pm

      @ Dr. Anderson. While I could not agree with you more i think our biggest performance gain will be realized when the delivery system in partnership with insurers, retail pharmacy, MNOs and other key stakeholder turn their focus to helping people stay health. The entire “if broke-then fix” model ignores what drives obscene numbers to our doctors in the first place. To me, it all starts with behavior change and we have never had a better time than now to address this as an opportunity. We have the perfect confluence of industry need, technology and consumer curiosity creating an opportunity. I am no longer the least bit accepting of the the adage that people won’t be responsible. They are trying, we need to give them tools that educate, engage and connect to their trusted advisors.

      • February 28, 2013 1:03 pm

        Appreciate the post and reading through all the informed comments. I completely agree with any consumer-based solution to reduce costs and create more efficient systems. And towards this solution, yes, consumers (i.e. patients) need easy access to tools to increase engagement and eduction. However, as many of you reading this may be familiar with Dr. BJ Fogg’s behavior change research, maybe we need to also provide “behavioral triggers”. (If Behavior = Motivation + Ability + Trigger) Since we know we, as humans, act more off of emotion than rational thought, maybe we need to leverage this with facilitating positive emotive triggers? Any thoughts here??

    • February 27, 2013 4:05 pm

      I’ve argued that the most fundamental innovation will probably come from outside of traditional healthcare. in the meantime, though, traditional healthcare can’t sit on its hands. ACO is a step in the right direction.

      • February 28, 2013 1:09 pm

        @Fitbehavior: we know BJ’s work well and it is sound. the route to behavior change is complex and highly individualized, but these principles are important to integrated.

      • Ron Anderson MD permalink
        February 28, 2013 11:30 pm

        @jkvedar Agree that it’s a step in the right direction. But it’s a puny step compared to transformative breakthrough our nation desperately needs to care for another 50 million people at the same cost. Even fully integrated healthcare organizations with enormous purchasing power and decades of experience fostering collaborative culture (everything an ACO is supposed to be) have more than doubled their prices in the past decade.

  16. Rashid Bashshur permalink
    February 27, 2013 12:03 pm

    You have treated us to another thoughtful comment, this time on the future of ACOs. Will they have the same fate as Regional Medical Programs (RMP) and HMOs. Probably yes,but for the wrong reasons. To be sure,ACOs are not reincarnations of HMOs, andi it is so for the reasons you cited. They constitute a step in the right direction, but their ultimate success will depend on factors beyond their control.

    At the risk of oversimplifying issues as I approach the question from a somewhat different angle, I offer the following remarks. An individual or population health status – as you correctly indicate – is the result of biology, life style, environment and medical care. Biology used to be immutable,but advances in genomics have changed things,and it is now open to various interventions. All the other factors are mutable, The central question about ACOs is what they are held “accountable’ for? their own actions or everything connected to health outcomes (status) of their clients. Surely, their share of responsibility for health outcomes is rather small, yet not negligible or costly. You are certainly on target by focusing on life style,and in figuring out interventions that would lead to improvement in life style. Much to your credit, this is a recurrent theme in your writings. I find it admirable that a physician is carrying the banner for public health, specifically the field of health behavior and health education!

    Most, if not all, large academic medical centers have assumed the new mantle of “health systems” claiming a domain much larger and more complex than medical care. Now the ACO concept presents them with a new challenge to be true to their calling as health systems. But we are still at some distance in linking medical interventions to life style and other health risk factors. Thus, it is good if we are at the beginning of a more rational and more comprehensive approach to health reform. I am afraid our history does not support optimism. We subverted RMPs and HMOs, and we will find a way subvert ACOs. I just read the long expose in Time magazine, not a hotbed of radical reporting, on the excesses of health systems. It portrays a system based on greed, or unbridled capitalism at its worst.

    • February 27, 2013 4:07 pm

      Thanks Rashid, for your commentary. it strengthens the site to have folks like you participating. I appreciate it.

  17. Lynne VanArsdale permalink
    February 27, 2013 4:44 pm

    The key to avoiding “fox in the hen house” is price transparency and competition. There is a rural community in Colorado where one hospital system is buying up all of the (good) providers, leaving no competition and no incentive to deliver quality or low cost care. The community is suffering greatly.

  18. February 28, 2013 1:03 am

    Thanks for another thoughtful post. Appreciate the clarity between the HMO model and ACOs (always a bit irritating that they are used interchangeably). Wish I shared your optimism of ACOs. Since coined, it has seemed more an idea than a practice – particularly on the patient side of the equation. Much like the “medical home” is a common terminology for providers and public health, few patients or consumers know what it is, or how to benefit from it. The challenges may be even greater for smaller community hospitals or rural facilities that aren’t part of larger network structures. As of now, ACOs aren’t well built to suit the needs of pediatric patients either. One might argue HMOs were doomed to fail…and maybe should have. ACOs shouldn’t suffer that same fate. They are the right idea at the right time. Perhaps with clearer definition around what accountable means – for providers AND for patients, it can start to become a standard for care delivery that works in a world of evolving reimbursement.

    • February 28, 2013 7:43 am

      Your point about lack of patient/consumer awareness is a good one. The architects of the ACO model are at least partly to blame. All of us who are in ACOs cannot advertise them as such to our patients. We are under a gag order of sorts.

  19. February 28, 2013 10:27 am

    I hesitated to write at first because I disagree so fundamentally with the premise that the authors’ suggested actions are an alternative to, or better than Accountable Care. Rather, they are actions that will be taken naturally, as a byproduct to the Accountable Care strategy. In fact, the central goal of Accountable Care Organizations (ACOs) – getting better outcomes at lower cost with greater patient satisfaction and efficiencies (including less “overtreatment” and preventable hospitalizations) – is consistent with the authors’ recommendations. I doubt that anyone believes in one silver bullet that will rapidly “fix” health care’s widespread cost and quality dilemmas. The more significant question is whether ACOs will move the nation in the right direction, aligning with activities that reduce cost, improve patient care and care outcomes, and speed worthy reforms.

    I find it hard to argue that Accountable Care (a huge umbrella under which fall myriad new incentives for efficiencies, resource maximization and quality improvements) won’t stimulate the very changes which the authors suggest as superior avenues for reform. Certainly, no one intervention, or even broad agenda, will change the behavior of all or most physicians and all or most patients instantaneously. There was a time when this kind of magical thinking led us to believe that public reporting, lean training, pay for performance, new technologies, and even electronic health data would, by themselves, transform care. Thankfully, we are now a more sober and mature nation. Changing healthcare delivery and physician and patient behaviors is a journey and the problems require multiple solutions.

    Indeed, Accountable Care thinking has already led large health systems to adopt many of the authors’ solutions. There are large health systems in which the payment and delivery reforms subsumed under ACOs are already a given; consequently, they are rapidly changing care behaviors and delivery structures. They are operating their own urgi-care centers and minute clinics; they are assigning new roles and creating new positions for care managers, behavioral health specialists, community health workers, and medical assistants to do tasks that do not require the nurse or physician, but that advance care outcomes. Such outcomes will increase the pressure for legislative scope of practice reforms. Further, aspiring ACOs are building their capacity to apply data management systems analytics for medication reconciliation, palliative care referrals, and patient engagement.

    In line with the changes necessitated or encouraged under ACOs, leaders in medical education are already introducing reforms. One need only look at the ACGME’s Next Accreditation Standards for residency, particularly the 6th competency (systems based practice), to know that we are preparing a new generation of physicians to manage high performing systems.

    At its core, Accountable Care thinking is more disruptive than a series of smaller, individual disruptions—many of which will occur anyway as rational responses to improving flawed systems of care. So, contrary to the authors’ claim, the evidence suggests that Accountable Care thinking has already moved systems, doctors and even patients to adopt new strategies, behaviors and performance-based structures.

    • February 28, 2013 1:07 pm

      Thanks so much for your thoughtful reply. I’m going to assume by “authors” you mean the authors of the original WSJ piece. if you disagree so strongly with my post, let me know so we can have an offline discussion.

  20. February 28, 2013 1:54 pm

    Interesting that no one has brought up Steven Brill’s highlighting of the outsized expenses in healthcare – c-suite salaries, technology, charge master issues. Might there be more money to be saved here than with anyone’s behavior? Can ACO’s impact these?

    • February 28, 2013 9:15 pm

      I’m not going to stand up in defense of c-suite salaries, but in truth they are a small part of the overall healthcare spend.

  21. March 13, 2013 1:39 pm

    I think ACOs can have a major impact. How major? Hard to say.

    • Jim Hutchinson MD permalink
      March 13, 2013 2:57 pm

      All change causes disruptions and the domino effect is seldom well predicted in advance, although often now clearly visible when viewed via the retrospectroscope. Mid course corrections will be needed and that means we must retain the ability to make them without undue restriction often caused by higher ups more concerned with how this flexibility may impact their career than with a view to positive outcomes for the patients we serve, as well as for providers.

  22. Andre Taylor permalink
    March 31, 2013 11:43 pm

    How do you define success for ACOs? How do you define failure of ACOs? More importantly, how is it measured? Have not had a chance to read Clayton Christensen et al Wall St. Journal article, but during my research to understand the concept of ACOs, I have not seen a good definition of either nor have I come across good methods to evaluate these organizations.

  23. August 8, 2014 9:03 am

    When I originally commented I clicked the “Notify me when new comments are added” checkbox and now each time a comment is
    added I get three e-mails with the same comment. Is there any way you can remove me from that service?
    Appreciate it!

    • August 8, 2014 10:15 am

      Top opt out, you should see “Manage Subscriptions” & “Unsubscribe” links at the bottom of the email, which you can use to unsubscribe or change your settings.


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