SummaryIn the Summer of 2011, Beacon Partners conducted this original research study to assess healthcare organizationsunderstanding of, and preparation for, Accountable Care Organization (ACO) development.This study, now the sixth of its kind by Beacon Partners, builds upon our previous efforts to understand industrychallenges related to EHR Adoption, Changing Economic Times, ARRA Preparedness and Sustainability, Health CareReform and a PPACA Scalable Solution. As part of our commitment to a series of thought leadership studies, includingsupport of a series of national trade associations and their learning series for individuals practicing in healthcare andprovocative roundtable panel discussions in a recognized trade journal, these research studies have formed the basisfor Beacon Partners’ brand of industry-leading views reflecting top-of-mind concerns for C-suite healthcare executives.More than 200 healthcare executives responded to this study, which was completed in the third quarter of 2011. Half ofthose respondents were from community hospitals, with critical access hospitals representing 21% of thoseparticipating.As one might guess, it is the CEO who is responsible for ACO development at many hospitals. Of our respondents,just under half related that this was the case at their organization. Surprisingly, only 15% of our respondents were“very familiar” with ACOs as they are currently proposed. Only 61% related they were “somewhat familiar” with thiscomponent of PPACA.In what would seem a contradiction given the above, more than 90% of respondents stated that they are in theplanning or development stages of an ACO, representing a jump from our second quarter survey where the numbercame in at 47%.
Summary Cont.Still, nearly half are unsure about how an ACO will affect their organization or whether it will improve patient care.Perhaps none of this should be surprising given that ARRA and PPACA regulations have challenged providers to moveforward without the benefit or clarification of final rules and regulations. Nor should it surprise that this confusion hasalso led to uncertainty about how to communicate ACO developments to their patients.In terms of budgeting for an ACO, even though the March 2011 Medicare Proposed Ruling estimated startup costs tobe $1.8 million, a full 45% of those surveyed have not committed money from their operating budgets to ACO planningefforts and 27% are unsure of their budget for these planning efforts. And yet, thanks to commitment by seniorleadership, operating budgets have increased when compared to last year.According to Modern Healthcare, capital expenditures for IT have been growing over the past three years and plans tocontinue increasing them are expected for most organizations. This may be a sign that many CIOs and COOs arebecoming optimistic regarding the potential benefits an ACO will provide to their organization.Still, most organizations have not yet created a department or executive role dedicated to ACO development. With a full53% falling into this category, it would be logical to wonder how the industry will be fully prepared for healthcarereform?Finally, with ICD-10 and 5010 requirements being top of mind for most providers these days, it’s not surprising thatmore than half of our respondents reported having an action plan in place to support those requirements and meetthose current federal timelines.We hope you find the following survey informative and useful. If you have any questions concerning its content, pleasecontact Beacon Partners at beaconpartners.com or (800) 4BEACON.Thank you.
Study Perspective: Respondent Title CIO CMO/CMIO/CNO CEO CFO COO General Management Other Management CPO 0% 5% 10% 15% 20% 25% 30% The majority of survey respondents were CIOs (28%) and Clinical ManagementExecutives (27%). With much of the work to operate ACOs residing with CIOs for network development and clinical leadership for practice protocols and electronic record documentation, the results are in line with industry views.
Study Perspective: Type of Organization Size of Net Patient Service Revenue Community hospital Less than $25 million Critical access hospital $25 million - $75 million Academic medical center $75 million - $150 million Ambulatory clinic $150 million - $500 millionMulti-specialty group practice Faculty-based practice plan Greater than $500 million Single specialty practice Unsure 0% 10% 20% 30% 40% 50% 60% 0% 5% 10% 15% 20% 25% 30% 51% of respondents are from community hospitals, the largest segment of the hospital industry according to the American Hospital Association. Critical access hospitals (CAHs) are second with 21%. Only 28% of respondents have a net patient service revenue (NPSR) of over $150 million.
Surprisingly, 15% of respondents are ‘very familiar’ with ACOs as currently proposed Very familiar Somewhat familiar Not familiar 0% 14% 28% 42% 56% 70%Given the strong representation by C-suite respondents, we were surprised that only 15% are ‘very familiar’ with ACO federal regulations as currently proposed. While 61% were ‘somewhat familiar’ with ACOs, a shocking 1 out of 4 answered ‘not familiar’ with this aspect of the Patient Protection and Affordable Care Act (PPACA).
In most organizations the CEO is responsible for developing an ACO CEO Other, please specify COO Unsure CMO CFO CNO CIO CMIO 0% 10% 20% 30% 40% 50%Far and away, the top respondents (49%) named the CEO as the person responsible for ACO development. CEOs are forward-looking, visionary leaders tasked with balancingday-to-day operational needs with physician alignment strategies based upon community healthcare needs. ACOs intersect these position responsibilities directly.
Still, most respondents are currently developing ACOs In development Operational Pre-planning Unsure No current plans underway 0% 10% 20% 30% 40% 50%92% of respondents underway with planning/development of an ACO, a jump from 47%in our 2Q2011 survey. Now, 49% are currently in development of an ACO, with another 30% already operational.
Zero respondents anticipate paying penalties in outer years of ARRA Less Than $25 million $25 million - $75 million Pre-planning $75 million - $150 million $150 million - $500 million Greater than $500 million In development Unsure Operational Unsure No Current plans 0% 10% 20% 30% 40% 50% 60% While part of the economic stimulus package, Meaningful Use (MU) stages are tied to ACO participation. It is encouraging to note a shift nationally to attaining MU. 54% oforganizations with a net patient service revenue of greater than $500 million are already operational in attaining Stage 1 objectives.
More than half of respondents have developed an action plan to support ICD-10 and 5010 requirements Yes, with our hospital and sponsored/affiliated practices Not yet, in preliminary planning phase Yes, within our affiliated healthcare system Unsure No, none planned Other 0% 10% 20% 30% 40% These project plans and operational changes come with important headlines and deadlines. On pace to meet those measures, 56% of respondents have already developed an action plan with their hospital and sponsored/affiliated system (33%), orwithin their affiliated healthcare system (23%) to support ICD-10 and 5010 requirements within the current federal timelines.
Many believe certain components of ACOs will have a positive impact on their organization Positive impact Negative impact Neutral impact Unsure Per member/per month Primary care capacity Clinical quality reporting Healthcare connector contracting Medical staff allignment Continuum of care transitions Interoperable IT systems 0% 10% 20% 30% 40% 50%Over 39% of respondents believe that clinical quality reporting, medical staff alignment and continuum of care transitions components will have a positive impact on their organization. Others are unsure on certain components such as interoperable IT systems and healthcare connector contracting. From our 2Q2011 survey, which poseda similar question, we note a prioritization for interoperable IT systems now viewed as a positive impact (37%).
Still, most organizations have not yet created a department or executive role to develop an ACO Yes No Unsure 0% 10% 20% 30% 40% 50% 60%With the magnitude of the PPACA changes, and the development of an ACO being just apiece of necessary organizational-wide efforts, we find it short-sighted that only about 1/3 of responding healthcare organizations have created a department or executive role todevelop an ACO. And, with 53% not having done so yet, one could logically wonder how the industry will be fully prepared for healthcare reform.
And only 1/3 of organizations plan to hire or reallocate existing personnel to develop an ACO No, we have no plans to hire We are reallocating existing personnel Unsure Yes, we have plans to hire 0% 10% 20% 30% 40% 50% Fiscal budgeting cycles are in full swing for most organizations and now would be thetime to plan for support to develop reform related roles. However, 44% of organizationshave no plans to hire personnel to handle ACO development, and another 25% plan to reallocate existing personnel.
Operating budgets for ACO development remain low… Less than $1 million $1 million - $3 million More than $3 million None is the budget at this time Unsure 0% 10% 20% 30% 40% 50% In the Proposed Rule published 3/31/2011, Medicare estimated that start-up costs forACOs would be $1.8M. Yet, 45% of organizations have not committed money from their operating budgets towards resources that support ACO planning efforts, and another 27% are unsure what their current budget is for planning efforts.
but thanks to senior leadership commitment, IT investmentand systems operating budgets have increased somewhat compared to last year. Stayed the same as previous years Increased as a result of senior leadership commitment Unsure Increased as a result of medical staff involvement Stayed the same as a result of merger Decreased 0% 10% 20% 30% 40% 50% Consistent with our 1Q2011 and 2Q2011 surveys, as well as Modern Healthcare’s 21stannual IT survey, capital expenditures for IT have been growing the past 3 years and are planned to increase over the next several years for most organizations. With 30% claiming budget increases as a result of senior leadership commitment and another 6%increase as a result of medical staff involvement, the support of their C-suite colleagues should assist CIO efforts overall.
Even though nearly half of respondents are unsure how an ACO will affect their organization Unsure how it will affect our organization Will improve patient outcomes Positive move for our organization This is an unnecessary expenditure Unnecessary burden on our personnel resources Will have a negative effect on patient outcomes 0% 10% 20% 30% 40% 50%46% believe an ACO is a positive move for their organization or will improvepatient outcomes. Patient protection and affordable care were the dual policy goals of the PPACA.
CIOs and COOs are showing glimpses of optimism regarding an ACO’s effect on their organization CEO COO CFO CIO This is an unnecessary expenditure CMO/CMIO/CNO This is a positive move for our organization Unnecessary burden on personnel resources Will improve patient outcomes Will have a negative effect on our patient outcomes Unsure how this will affect our organization 0% 14% 28% 42% 56% 70% Showing that ACOs, while focused on payment reform, are truly rooted in patient carecontinuum, only 8% of CFOs and 6% of CMOs believe ACOs will have a negative effect on patient outcomes. No other respondent categories believe patient outcomes will be negatively affected.
Plans to communicate the development of an ACO to patients are still undecided or unplanned Unsure/Don’t know We have no plans to do so Via a patient portal Direct mail campaign Posters and notices inside our facility Email campaign We’ll rely upon the Federal Gov’t 0% 10% 20% 30% 40% 50% With uncertainty surrounding ACO rules and regulations in general, it has become apparent that respondents are even more unsure of how to communicate ongoingdevelopments to patients, while 22% don’t plan to communicate these changes at all.
Undefined rules and confusion of ACO structure remains to be the top concern in the market Undefined rules/confusion of ACO structure High start-up costs/not enough capital to support ACOs Regulatory issues Unsure Physician and staff alignment Other, please specify I don’t have any concerns Not enough IT systems to support ACOs 0% 10% 20% 30% 40%ARRA and PPACA regulations, to name just two, have challenged organizations to move forward without clarity of final rules or regulations. The term used most often is“directionally correct.” Here, 31% of respondents listed undefined rules and confusion of ACO structure as their top concern in the market, followed by high start-up costs (17%) and regulatory issues (14%). Clearly, progress still needs to be made.
Single-vendor solutions are the preference for patient demographics, business/operating systems, clinical and health record needs. Single-vendor solution Best-of-breed Unsure For inpatients For ambulatory areas For physician practices 0% 12% 24% 36% 48% 60% Single-vendor solutions remain the choice of respondents for inpatients 59% of the time,for ambulatory areas 53% of the time, and for physician practices 47% of the time. These longitudinal results are consistent with our 1Q2011 and 2Q2011 surveys. As a settled area, while we will likely de-emphasize this aspect of our research over time, organizations do not have that luxury as they begin to wrestle with support of disparate systems resulting from increased mergers and acquisitions.
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