Mass exodus of Medicare ACOs is highly likely- because they were never designed to manage risk in the first place.

In 2011, I participated in a discussion group with several key opinion leaders about the survival likelihood of the ACO model intended under the ACA ("ObamaCare"). I had already designed and launched more than 300 IPAs, PHOs, MSOs and other clinically integrated models that could and did entertain risk sharing contracts in the 1990s during the growth phase of these entities under Clinton healthcare reform.

I went on record as the naysayer, and my contention was that you can call it whatever you want, the ACO models would not work, would not be sustainable, and would crumble under pressure if assigned more risk than their infrastructure and leadership could manage.

I not only went on record then, but I was confident enough in my assessment in 2011 to let my arguments be published by commercial publisher, CRC Press, a member of Taylor & Francis Group, and a subsidiary of internationally renowned publisher and conference organizer, informa, in my second commercially-published textbook on the topic.

It seems time has again proven me accurate on all accounts. That's nice, but... the expertise and accuracy of my prognosis in 2011 doesn't help them worth a damn at this point in time.

So if I want to be of service to my industry colleagues and potential clients, how can I help these ACOs if they want to remain in business, and not just exit the market and lose all they have worked for thus far? That's the money shot... for them and for me if they are ready to hire an expert. Frankly, for some, it may be too late for that.

They may have waited too long, or never really amassed enough cash to have a budget to hire help. The only way to afford help them to pivot to a slightly different model, rebrand, and execute on the strategy may be to call for a shareholder assessment to cover the costs of the consultant, the research, the strategy redesign, the necessary training, and the marketing and contracting assistance. Over the course of two years, the budget may be as low as $300K (spread out over 24 months). I am not saying that the consulting and training will cost that, but the whole project can easily cost that if the expert is an expert, and not some junior consultant of a big ticket firm. If they hire a big ticket firm who sends out a recent, inexperienced grad who answers to a senior project manager sitting in a central business district highrise with commensurate overheads from NY, LA, DC, Chicago, or other high-dollar markets, They may need over half a million dollars to right the ship.

___________

Want to receive occasional SMS notices when I post new content and training courses related to physician integration and alignment and shared risk contracting? SUBSCRIBE to my SMS notifications! To join, text PHYSINTEGRATION to 43506 today. Unsubscribe anytime by texting STOP.

__________

$300K over 24 months is $12,500 a month every month for 24 months. How many ACOs can afford this either by funds in reserve or by founder/shareholder assessments? Not many. I know this because I know the ACO market. And the fact that if they take risk they aren't prepared to manage, they will go down in flames. And if they don't accept risk, they are likely to lose contracts ...and go down in flames.

The original design flaw in ACOs wasn't the fault of the doctors. The design flaw was in the design specs in the ACA.

The original design flaw in ACOs wasn't the doctors' faults; it was the design specs in ObamaCare. It was designed around pay for reporting and pay for pushing paper. The changes in care delivery intended to be carried out by ACOs were all done to have something to report and measure; not to change care delivery for the sake of changing care delivery.

Bureaucrats made the standard "5000 Medicare patients". Bureaucrats made the "perfect world" assumption without understanding healthcare at the street level, that if you assign people blindly and don't tell anyone that they are responsible for the population health of these 5000 people, you'd get some fantasy world, non-Hawthorn effect (the alteration of behavior by the subjects of a study due to their awareness of being observed) national improvement - as if by magic. Then, the bureaucrats expected that with no instruction, no training, no new skills competency supplied - and new report generation requirements, that the report generation on this blindly-assigned, retroactively-assigned population would somehow change population health management behavior. Well, how'd that work out? Why would they assume that this plan could work and sustain?

And now that the goal inside the beltway is to do anything and everything to destroy anything to do with the ACA, intentionally, and to make it look as if causality is simply a result of the court of public opinion and the marketplace, and not by intention and actions at the direction of the current Administration. One way to do this is to "blame" medical providers and hold them responsible for missed savings goals. Were the savings goals realistic and widely achievable? Says who? Where's the proof?

Can more be done to trim and control costs given the perverse, special interest group and lobbyist-paid initiatives being announced that are little more than lip service about pharma prices, technology incentives and the costs associated with translational science and genomics startups with a goal to produce precision medicine products and outcomes and increase longevity?

There are 561 Medicare ACOs this year, 82% of which are in Track 1. They face transition to manage financial risk or extinction. That's not fair? Or is it? These were thinking adults - smart people who had the opportunity to redesign since 2012 or 2013. But who provided the training for them? No one. Instead, they kept hoping against hope, throwing more money, effort, time, and attempts to cope (and tender reports) to try to access the promised pot of gold at the end of the rainbow. A rainbow is a meteorological phenomenon that is caused by reflection, refraction and dispersion of light in water droplets resulting in a spectrum of light appearing in the sky. Unless there's alchemy, light refraction and water droplets really doesn't turn into a pot of gold. Perhaps that wasn't the science course credit these folks enrolled in to pass the MCAT?

For an ACO with 5000-7000 assigned lives, if they saved Medicare some money, and got 2-3 million dollars as their shared bonus for upside risk, that's about $58,000-62,500 for payouts the last 48 months or so. For all they spent to get that money each month (which doesn't cover overheads and staffing to produce the reports) I view them as already in the negative. What part of that was supposed to go back to the physicians who did the clinical side of the work?

And if these doctors leave the Medicare Shared Savings Program and they don't have enough Medicare patients on their own to take part in the Merit-based Incentive Payment System created under MACRA, they won't be part of any value-based care initiative -- at least not one that is arranged and operated by CMS. They become immediately marginalized. And that's probably what is going to happen with about 400 of the 562 Track 1 ACOs unless they decide to change their direction.

They have a few ways to continue without MIPS and MACRA, but that takes an entire strategic redesign, training, and market opportunity from the sand trap where their ball has landed after 5 years of struggle.

Designing a new strategy with CMS as a part of the picture is risky. Lobbyists have more money to spend to monkey with CMS rules making conditions for ACOs and unaffiliated physicians very unpredictable. The financial projects are at best, a crapshoot. There isn't money to buy reinsurance, there isn't money to capitalize a reinsurance captive, hire a strategist and fund the change management that needs to occur to be able to do something different. Add to this the fact that before an ACO can take on risk, it must document to the CMS that it has the means to pay the penalty for missing savings goals.And that's either a line of credit that someone will have to sign a note to pay back, personally, or reinsurance - commercial or captive, where the premium is the property of the founders of the fund.

Patients who are now Medicare beneficiaries are of a different mindset and buyer persona than they were 5 years ago.

Patients who are now Medicare beneficiaries are of a different mindset and buyer persona than they were 5 years ago. I see this in my own elder family members. They are not afraid to color outside the lines. They are not afraid to speak up either. But often, rather than choose to speak up, they just beat feet.

If they can't find a doctor they feel they can trust or relate to, they drive (or fly) to another option and have the new provider request their records. Patients seek out price and value transparency, freedom of choice, customer service and want to engage with their doctors. They want to be looked in the eye when recommendations are given.

Instead, the trend towards market consolidation is not delivering much of any of that. It is reducing choice and competitiveness. This ilk for competitiveness has been largely ignored by medical providers who have no real perception of how to define, differentiate and execute a brand promise - either as an individual or as an ACO in terms that are relevant to the customer.

So part of the new strategy must be the training to understand branding, brand promise, differentiation, and a new way of contracting with third party payors. And maybe even sidestepping or "disintermediating" from both PBMs and HMOs and PPOs and ASOs and TPAs and contracting directly with self-funded employer groups for what both parties what and need, rather than to produce reports and try to wrap care delivery around paper reports.

But I can promise you that to do this with a group of physicians on a different trajectory such as a CMS affiliated ACO will be as difficult as herding cats, and expensive and time consuming, assuming you have unanimous agreement to head in a new direction, together. That's because the physician mindset has not changed and the fee-for-service medicine that's still widely represented on the commercial side is not going to go away soon. The shared risk contracting with Medicare and Medicaid under the current financial models will require the doctors and their support staff to have to practice medicine in to opposing systems. They can't, no matter how much they want to.

Given the opportunity to do something different at this juncture:

• Some cats are going to go the way of hospital employment and chuck the whole physician entrepreneurial bit (Sorry, Arlen Meyers and SOPE)
• Some cats will go the way of concierge medicine and direct pay medicine
• Some cats will go the way of a new model called an "umbrella group" or "supergroup". On a side note, I just won my first contract with a developer of this interesting concept model. I expect to win more consulting engagements to help these physicians design, plan, build and launch.
• Some cats will retire early and are smart enough to go do something else and reinvent themselves.
• Some cats may decide that they'll take their business fate into their own hands and cherry-pick the patients and third-party payer entities and the contracting terms and conditions they would like to do business with, even if it isn't CMS or currently marketed managed care plans.

But will the abandonment of all the progress that has been made to date be lost if they exit? I don't think so. If it is that easy to abandon, it was not real to begin with. Change in care delivery and population health management runs deeper than the corporate infrastructure of an ACO. It doesn't happen by the ACO; real change happens at a grassroots level - one physician at a time. It is a mindset, an approach, a philosophical change to how to engage in the business of healthcare and the practice of medicine. For those that never really changed (and don't plan to methods, mindset and need the outer shell of an ACO to "manipulate" them) one could say they were never going to survive in the first place.

Let's talk about it

I'm delighted to announce that the projects in the USA and abroad that I have committed my time and am under retainer to are going to take most of my time between now and September. These projects will continue to require my involvement to a lesser extent through May of 2019, but that will give you time to decide what you believe you may want to do next. Talk among yourselves and then, if you'd like, let's talk about options for your ACO going forward, or for a remaining group of physicians after a shutdown, I'm open to a brief complimentary call to discuss what you may have in mind and determine if I am the right expert to help you. If not, I may know someone else that I trust to guide you and refer you out. Call me at 800.727.4160. Phones are staffed around the clock due to the international clientele I serve. I will agree to schedule these calls after hours and early morning if that's what works for you and your group.

And to stay up to date, you can connect with me via my Twitter or Facebook pages, my website (mariatodd.com) and also follow my LinkedIn page for my latest articles. I also manage several LinkedIn groups that you may find interesting and helpful.