Latest ACO metrics show cost savings yet to materialize

The upward trend in accountable care organizations (ACOs) will continue because the ACO model is driving improvements in care coordination and a decline in hospital readmissions. However, the cost savings expected from the ACO model have yet to materialize. This is revealed in new data compiled by the Healthcare Intelligence Network (HIN).

ACO activity has doubled in the last year, according to the study, 2012 Healthcare Benchmarks: Accountable Care Organizations, which gathered data from 200 healthcare organizations about ACOs, including new activity, reimbursement models, and the impact and early successes of accountable care.

Here to stay: Two-thirds of responding healthcare organizations say ACOs will continue, no matter what happens to healthcare reform legislation. Almost a third of this year's respondents (31%) participate in an ACO, up from 14% of respondents in 2011. What’s more, one-third of remaining respondents say they will move to an ACO, a further indicator of the durability of the ACO model.

Out of the 200 organizations surveyed, 117 identified their organization type: hospitals or health systems (19%); health plans (14%); multi-specialty physician groups (8%); disease management groups (8%); and “other” (37%).

ROI and costs: Nine percent of respondents in ACOs report ROI between 2:1 and 3:1 from accountable care initiatives. But 88% say they either don’t know the ROI yet or it’s too early to tell. In terms of costs, the vast majority of those responding to the question about how the ACO setup has affected cost metrics, 83% say they cannot tell yet whether there is any impact on operating costs. Similar percentages say it’s too early to see any impact on utilization or pharmacy costs (89% and 83%, respectively).

Cost savings from the ACO model stem from putting a certain amount of financial responsibility on providers to trigger improved care management and cutting unnecessary expenditures. The model uses the pay-for-performance concept to induce providers to better coordinate care to improve patient outcomes, thus reducing the utilization of acute care services.

What to do: Healthcare organizations are now at a point where they have to focus on specific areas of ACOs to reduce cost and benefit patients, according to Jim Fox, director and senior CFO consultant of Warbird Consulting Partners. He told Healthcare Finance News that there are five focus areas within ACOs that can help save money and benefit patients.

1. Implementation of practice. Providers should provide care that's actually needed versus care that isn't.
2. Chronic care management. Providers should reach out to the people in their communities and start to help them manage their health issues. "It's imperative to eliminating acute care episodes through prevention," said Fox.
3. Reduce administrative processes. Within ACOs, providers can work with primary payers on getting goals aligned, eliminating unnecessary care, managing chronic care and reducing use of resources to the benefit of both parties. The focus should be on patient outcomes, not getting the best rate.
4. Improve access. Some providers are now offering incentives to physicians who work both in-person and through “e-visits” over the Internet. "And rather than having 'simple' stuff done by physicians, organizations can supplement with a nurse practitioner,” Fox noted.
5. All-care focus. The HIN survey noted that 100% of ACOs polled use EHRs. That’s because information becomes available across the board thereby reducing unnecessary care and duplication. This enables the focus to be on the care and the experience of the patient, and it's effectively done at lower costs and more convenience to the patients.