PinnacleHealth, a not-for-profit health system serving a population of approximately 580,000 people in Harrisburg, Pa., is making strides in the transformation to an affordable care organization (ACO) model. In this essay, Bill Pugh, CFO of PinnacleHealth, addresses the challenges and opportunities the health system experienced and offers some “lessons learned” for other health systems moving towards the accountable care model.
Even before the passage of the Affordable Care Act (ACA), PinnacleHealth was focused on delivering high-quality, low-cost healthcare for the community we serve. We had implemented best practices around managing length of stay (LOS), readmissions and hospital-acquired conditions that lead to higher costs. For us, the ACA was viewed as a strategic opportunity to take advantage of and extend our existing strengths, across four campuses, three hospitals and medical group staffed by 220 primary care and specialty physicians.
Pursuant to the principles embedded in the ACA, we began conversations with our payers to create formal financial relationships for accountable care. We developed a strategy for value–driven care and population health management in 2012, and we continue to develop and refine that strategy.
There is a risk-reward component associated with ACOs. We strongly believe that as the leading healthcare organization in our region, we have a responsibility to be more accountable for the quality and cost of care we provide. Implementing an ACO strategy is the right thing to do in order to reduce unnecessary and avoidable costs and improve quality. We expect PinnacleHealth to be successful, but more importantly the communities we serve will realize the ultimate pay-off through the decreased cost of care and the improved health of the population.
This is especially true as the PinnacleHealth network gains a better understanding of high-cost, chronic diseases and proactively manages our population as effectively as possible across the care continuum. The risk is that top-line revenue will decrease as a result of fewer inpatient admissions -- both readmissions and avoided admissions resulting from better management of chronic conditions and a healthier population. The overhead in facilities and people needed for the old outdated and disintegrated systems of care will need to be eliminated or redeployed to remain financially viable.
Executive support and clinical leadership
The decision to move forward with an ACO strategy was strongly supported by our Board. The PinnacleHealth Board believes it is the right thing to do and they have confidence in our executive leadership’s s ability to execute the plan. The Board and executive leadership also recognize a parallel growth strategy designed to attract more individuals to the PinnacleHealth network to extend the improvements in the cost and quality of care and leverage the required investments across a larger population.
It was also important to have the right leaders who could successfully execute the ACO strategy. With Board and executive support, the next step was to attract proven clinical and operational leaders to develop the tactical initiatives and implement the new systems of care.
In 2013, we hired a very experienced chief clinical officer with a depth of experience from a highly managed market to head the ACO. Having an experienced executive allowed us to direct our investments toward a number of third-party resources and partnerships. Those investments enhanced our internal competencies in data management, care coordination and other clinical and operational changes. We collaborated with Accountable Care Solutions (ACS) from Aetna, and directly with other payers to assist us in many aspects of our decision-making around ACO strategy.
Initially, our primary focus was on improving systems and the process of care without the need for new technology. We saw payback on that investment very early on through various payment arrangements tied to quality and clinical outcomes. Both the hospital and the medical group have benefited from alternative payment arrangements with commercial payers and Medicare value-driven payment structures.
Now we have invested in analytics and technology by outsourcing for the first two years of this process, and we are still evolving. We continue to refine our systems of care to meet our patient’s needs most effectively at the appropriate cost.
Challenges
PinnacleHealth has multiple alternative payment programs in place including the Medicare Shared Savings Program, CMS Bundled Payments for Care Improvement and commercial plans. Overall, the biggest challenge for us was defining the patient populations attributed to our system and receiving timely, actionable information. We are working collaboratively with payers to ensure we have the same kind of data collection tools and minimal variation in quality metrics.
Looking across the medical group, we want to ensure our primary care physicians are at the leading edge of delivering more coordinated care. It is important for our care teams to practice at the top of their licenses and provide the best care at the right time, in the right setting for the right patients.
Best practices – lessons learned
Based on our experience transitioning to an ACO model, we learned several lessons and made note of several key issues every health system will want to focus on initially. When initiating the transformation, develop your organization’s internal plan, know what your investment is going to be, and then commit to that investment.
A major part of this commitment is bringing in the experienced executives who understand the cost of care and know how to manage care. Those leaders must work with physicians and other ambulatory, acute and post- acute providers to coordinate all components of the cost of care for the ACO to be successful. To fully commit, all players and care providers within the ACO must understand the cost and quality drivers, and, eliminate inefficiencies in the systems of care.
The technology component of investing in an ACO is critical. We chose to outsource many of our IT systems to expert partners for the first two years. As we gain greater internal competency, we will bring those IT systems in-house. Since the IT investments are crucial to success, it made sense to leverage partners at first and make transitions slowly and thoughtfully.
At PinnacleHealth, we are fully committed to accountable care. We are working collaboratively with our payers and those relationships continue to evolve over time. The investment in an ACO model drives shared savings, operating cost improvements and new market growth – enabling a new level of long-term economic sustainability.