Accountable Care Organizations: Part 1

A major ongoing debate in the healthcare industry is regarding the expected transition of the sector to accountable care organizations (ACOs). Two aspects of this transition yield interest and apprehension alike. One is the process of care delivery, with the need for an extensive network of providers that must closely cooperate and coordinate during the care process to realize and share any savings. The second area of interest (and apprehension) pertains to the physical infrastructure, or built space.

What’s next?
What range and type of facilities will provide care in the future, and, hence, be needed for physical infrastructure growth? What will happen to the traditional acute care hospital? In essence, both areas in question are interrelated. Clarity on the first area will greatly enhance decision-making in the second. One fundamental question pertains to the future of acute care hospitals. What will be their role, and how significant will they be in the new ACO model?

There is a feeling in some circles that the role of the traditional acute care hospital will shrink, as will the need for built-up space—thereby drastically reversing the unprecedented boom in new and replacement acute care facilities witnessed over the past decade. There is some logic supporting this line of argument, and it is inherent to the way ACOs are expected to work.

For the population insured by Medicare, care delivery through ACOs represents a radical change in the way services will be rendered/reimbursed and revenue will be generated. Experts from the Advisory Board Co. have developed a series of detailed documents on this topic, and the intention here is not to elaborate on the entire topic or replicate their work, rather, readers interested in the topic should visit the Advisory Board website (www.advisoryboardcompany.com) for more information.

Collaborative healthcare providers
One facet of the change is that the collaborative group of providers, under the new stipulations, will experience more savings by keeping their customers healthy as opposed to treating them for acute sickness. That translates to less hospital care, fewer visits to the emergency department, more preventive care outside of the acute care hospital setting, and promoting health as opposed to treating illness, to realize a better savings to be shared among all involved. This is the predicted future state of healthcare delivery.

Considering the percentage of the population insured by Medicare, this scenario affects a significant portion of the care delivered by a typical hospital. Moreover, if this system proves to be successful at improving health and reducing the cost of elder care, it will certainly be noticed by private insurers. So, the argument goes, acute care beds may eventually go unused as an increasing proportion of care (and health promotion and maintenance) is conducted in other settings.
Demographic forecasts, however, suggest otherwise.

The December 29, 2010, issue of The Economist magazine reports that the number of people enrolled in Medicare will increase from 47 million (2010) to 80 million in two decades (1.65 million new entrants every year, for 20 years). In addition, the new healthcare bill is predicted to add 32 million new customers to the system. The expansion of the population base served and the number of retirees entering the system will be so huge that the possibility of unused acute care beds is slim.