By Nancy Ham

August 2010 – New contracting models, spiraling costs, and healthcare reform are pushing everyone in healthcare to look at alternative solutions to the status quo.  Accountable Care Organization (ACO) is a term originally defined in the Medicare realm, but has now become the most popular watchword for a model that could make a difference in bending the cost curve while improving health outcomes.  The premise of the ACO model is that a provider-led entity bears direct risk for quality and cost.   While ACO is a good catch-all label, there are many different flavors of risk taking emerging, ranging from simple Pay for Performance to full global capitation.  Most organizations are looking at models “in between,” either episodes of care or population bundles.

It is anticipated that a successful ACO will be able to:

  • Create a collaborative exchange between healthcare constituents resulting in better efficiencies and increased quality of care delivery
  • Transition from rewarding quantity (fee for service) to rewarding quality and utilization
  • Understand physician performance and identify actionable areas for improvement
  • Promulgate adoption of evidence-based care and best practice methodologies
  • Develop active dialog with patients that engages them in their own care – educated and nurtured patients will lower care costs

For organizations setting out on the path to becoming an ACO, there is a lot to think about.  The key is to conduct a readiness assessment looking at major areas such as culture of quality, physician alignment and infrastructure, continuum of care capabilities, IT infrastructure (and in particular performance dashboards and reporting capabilities) and of course, payment methodology and incentives.

While it can seem overwhelming, the key is to start the process now and chart the path forward.  A good consultant can be a key partner in this phase of your project.

Observations from the field

The good news is that there are a number of working models from which to learn.  Leading provider organizations have been taking risk for many years, under a variety of labels, including such varied organizations as CareGroup (Boston) and Kaiser Permanente (California).   

CareGroup Healthcare System, for example, created the CareGroup Provider Service Network (PSN) to manage an integrated, at-risk network of over 3,500 physicians, eight hospitals, 450,000 patients, and almost $1 billion in at-risk (full capitation) contracts.  They aligned with the Massachusetts healthcare community of payers and providers, including Blue Cross Blue Shield of Massachusetts, Tufts, Harvard Pilgrim, academic faculty, community-based physicians, and others to build community-based quality initiatives and implement some of the nation’s first incentive (P4P) programs.

Some of the lessons learned from this initial foray into ‘accountable care’ include:

  • Understanding and respecting the physician workflow and clinical judgment: if you want providers to bear risk you must understand their workflow, provide flexible options for them to participate, and leverage their knowledge and their team’s knowledge at the point-of-care.
  • Implementing tools and technology to facilitate collaboration: the underlying technology must be accessible, easy-to-use, and flexible for your entire healthcare continuum – the system needs to create operational efficiencies and provide validated and clinically accepted methodologies with drill-down detail in real-time.
  • Taking data from “there it is” to “here it is:” it is not just about accumulating data, it is about being able to really assess that data and provide actionable information.
  • Engaging patients and populations: so you have a platform for the organization and you have actionable data, now what?  You need the ability to proactively reach out to patients (or groups of patients) from the same system in a way that will engage them, individually or as a population – and everyone responds differently, so be creative (e.g., telephonic; letter; email; text message; pager). The tools you use need to be efficient for users (physician and staff) to do the outreach and to provide simple, clear communication to receivers (patients) via one complete status report,  not separate notifications, for different care needs.

The result – consistently high scores on national quality rankings, proactive care, and lower costs than comparative health systems.  For example, the PSN was recognized as one of the top five national best practices for prescription drug cost control by the US Department of Health & Human Services.  The PSN achieved pharmacy savings of more than $100 million since it began its pharmacy risk management program in 1998 through the integration of clinical and financial accountability for outpatient pharmaceutical care.

Surveying your landscape

Here is some food for thought as you evaluate if becoming an ACO makes sense for your organization:

  • What type of organization are you today? (IPA, PHO, specialty group, IDN or health system)
  • Does your current structure need to change in order to become an ACO?
  • Who in your healthcare community do you or should you partner with?
  • Are you currently at-risk in some form?  Will risk be financially rewarding for you?
  • What tools and technology will support your new collaborative environment – accounting for disparate workflows (hi-tech to low-tech) and being inclusive of the entire care staff?
  • Who is the right coach to help you traverse the complexities?

The ACO model provides a strong blueprint for improving quality and reducing costs.  However, to be truly successful each healthcare community should evaluate and build to suit the uniqueness of their environs, not just replicate what another group has done.  Understanding the approach and composition of other organizations that have gone before will help you cut through the noise and confusion to determine the steps you need for your ACO journey.  

About the Author

Nancy J. Ham, President & CEO of MedVentive Inc., has a proven track record of innovative and high-energy leadership in establishing, developing, growing, and operating both private and public healthcare information technology companies. She is responsible for the overall performance and strategic direction of the company, as well as managing MedVentive’s day-to-day business operations. Most recently, she served as president of Sentillion, Inc., a leading innovator of identity and access management solutions for more than 350,000 caregivers practicing at over 500 hospitals. Prior to Sentillion, she was president of ProxyMed, Inc., the industry’s second-largest independent medical claims clearinghouse with connectivity to more than 450,000 providers, 30,000 pharmacies, 500 laboratories, and more than 1,500 payers. Before ProxyMed, she was responsible for managing more than $50 million in revenue as general manager of institutional and connectivity service Healtheon/WebMD Corporation. Additionally, she served as SVP, Business Development and CFO at ActaMed Corporation and spent five years in leveraged finance at GE Capital.

MedVentive was founded by practicing physicians in 1997 as an MSO. The company grew out of the CareGroup Healthcare System mentioned above.  The business and clinical intelligence platform was purpose-built to address CareGroup’s needs to improve collaboration and patient care while simultaneously keeping costs under control. MedVentive was spun off as a fully independent entity in early 2005 and currently provides a comprehensive, flexible platform to IPAs, PHOs, health systems, and health plans across the country.  The company helps clients with solutions to support Clinical Integration and risk-based contracts, ranging from Pay for Performance to full capitation (ACOs).   

Nancy Ham can be reached at (781) 290-2500 or email her directly at


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