Been attending a terrific Health Evolution Partners conference.
One panel that really brought home the challenges of making a better system discussed whether providers would be able to bear risk successfully.
The assumptions of the Accountable Care model are that providers are going to want to take risk. At some level, you can gain share and the provider would see a bonus for better performance. At a deeper level, the provider may capitate or truly create a risk-bearing entity that enables it to truly win or lose based on the management of total costs.
A few things hit home:
- Providers (with a few exceptions) don’t know how to manage risk or even measure exposure. They’re used to cash being paid for services. Adding negative risk on already thin margins is likely to bring bankruptcy or bail out as soon as the first misteps or uneven catastrophic loss hits the balance sheet. Insurers have much more padded balance sheets for a reason. A strong reinsurance market that understands the risk to these risk-taking health entities will need to be created (which then limits the risk to providers)…making the scheme of providers bearing risk only partially relevant
- There is no objective metric for sharing risk. A “currency” type metric similar to Nielsen scores (television) or FICO scores (credit history) will need to be put in place to enable the providers and payers to trade appropriately (and at scale) on the basis of risk adjusted individuals or populations (and risk reduction through better care).
- Almost no new entity (not already very far down the path before the legislation) should want to become an ACO in the near future based on the current regs. The economics aren’t clear in a positive direction and there are too many requirements vs. projectable upside. I find this sad.
More to come soon.
Related articles
- Accountable Care Organizations (ACOs) (medpromgmt.wordpress.com)
- Accountable Care Organizations – What Do They Mean For the Average Citizen-Patient? (medcitynews.com)
Comments
Posted On
May 01, 2011Posted By
Greg JuddVijay, great post on a vital topic which has gotten too little attention in HCR circles.
I especially liked this:
“A strong reinsurance market that understands the risk to these risk-taking health entities will need to be created (which then limits the risk to providers)”
Its arguable that conventional reinsurance markets are so wedded to (relatively) simple retrospective financial models that they too are ill-suited – if not actively hostile – to the ACO model. If your financial assumptions essentially take health care methods as given – as the models of conventional reinsurers do (and what reinsurer is NOT conventional?), you are going to look askance at business models that propose to do health care differently.
In other words, ACOs will practically have to succeed in spite of conventional reinsurers; it’s doubtful, short of statutory mandates, ACO innovators can look to those reinsurers for help.
Posted On
May 01, 2011Posted By
Vijay Goel, MDGreg,
You’re dead on in highlighting that you need a new ecosystem of products and services to enable the ACO to happen, in addition to payment and regulatory reform.
There are some massive chicken/ egg implications around how you then get started.
Two solutions that we’ve seen from other industries would tend to suggest that a) a walled garden – one vertically integrated company — does it all to show the model; b) an open architecture of competitors develops to knit together pieces of the solution for/ by incumbent suppliers and disruptors at various points in the value chain.
I think the walled garden player is likely to have already figured out how to manage capitation without wanting to spending lots of money on hospitalization or cutting edge devices. I know a few players that look like this, but they aren’t the typical Academic Medical Center or Kaiser that people keep putting forward.