The Real Money is in the ACO, Not Meaningful Use

John Moore from Chilmark Research offers this great insight for those of us in the healthcare IT and EHR industry:

The MU requirements have become little more than a “spec-sheet” for vendors, consultants and IT shops and departments. These requirements have nothing to do with innovation and have little to do with the dramatic changes that will occur in this industry in the next decade. Quoting that oft-used phrase, “follow the money” one can quickly see that the billions in funding for incentivizing providers to adopt EHRs under the HITECH Act is relative chump change to the dramatic fortunes that may be won or lost under the new value-based payment models that are proliferating throughout the industry – payment models that commonly fall under the rubric of ACO or PCMH. In each of these models, EHRs are important to a degree, they are part of the basic infrastructure. But it is what one does with the data that matters (collect, communicate, collaborate, synthesize, analyze, measure and improve). Therefore, if you want to see innovation look beyond today and the tactical push to effectively adopt and meaningfully use EHRs and towards the future of how that data will be used to drive quality improvements, better outcomes and lowering risk exposure.

As the title says, I translate this to mean: The Real Money is in the ACO (Accountable Care Organizations), Not Meaningful Use

Of course, his description of the current healthcare IT landscape also reminds me of two posts I did previously: EHR is the Database of Healthcare and Is Revenue Cycle Management Sexy?

Both of those posts highlight many of the the observations that John Moore makes. First, if the EHR is nothing more than a repository of data, then it has value (Oracle did pretty well as a database) but it’s limited. Those who can take the data stored in EHR and other healthcare data sources and do something amazing with it are going to be the big winners in healthcare IT. Could an EHR vendor be the one to do this? Possibly, but looking at other industries, I think this is unlikely. That’s why I describe EHR’s similar to databases.

The answer to the question posed in the second post linked above is “Yes, if you like money.” Sure, healthcare isn’t all about money, but money can be a tremendous driving force for doing good as well. It turns out that dealing with revenue cycle problems provides tremendous value to a clinic. However, many people for some reason look past it since they think it’s not “sexy.”

The ACO model that is fast approaching is also going to make this even more important. It’s still too early to describe exactly how it’s all going to play out, but many who don’t have a handle on the business side of their practice are going to miss out.

I’ve heard some describe meaningful use as a high bar to achieve. I disagree. Meaningful use is prescriptive and simple for EHR software to achieve. Sure, it takes some time and effort, but any one with time and effort can achieve it. I don’t think we’ll be able to say the same for ACOs. That’s why the value of the ACO is going to be much higher than meaningful use. It’s the traditional higher risk leads to higher reward.

About the author

John Lynn

John Lynn

John Lynn is the Founder of the HealthcareScene.com, a network of leading Healthcare IT resources. The flagship blog, Healthcare IT Today, contains over 13,000 articles with over half of the articles written by John. These EMR and Healthcare IT related articles have been viewed over 20 million times.

John manages Healthcare IT Central, the leading career Health IT job board. He also organizes the first of its kind conference and community focused on healthcare marketing, Healthcare and IT Marketing Conference, and a healthcare IT conference, EXPO.health, focused on practical healthcare IT innovation. John is an advisor to multiple healthcare IT companies. John is highly involved in social media, and in addition to his blogs can be found on Twitter: @techguy.

6 Comments

  • Great read – until the conclusion.

    Your comment about higher risk leading to higher reward applies in a free market, but healthcare has very little in common with a free market. Payments are artificially set according to budgetary demands, and the only relationship payments have to actual costs is that low payments are being used as a tool to flog producers into lowering their costs. Much is said about quality but, rhetoric aside, we pat less for government health care because we get less, at lower quality.

    This is the opposite of the way free markets work. In free markets, there is always a balance between the desire of the producer to sell more product (i.e. produce higher quality than the competitors) while simultaneously lowering costs (i.e. produce those products for less); the ideal point of profit maximization is reached when quality (and sales) goes up, while production efficiency simultaneously drives costs down. In healthcare, quality is dropping, sales are dropping, efficiency is dropping (due to ever increasing regulatory demands), prices are dropping, and profits are disappearing. In a price-constrained market in which costs are not equivalently constrained, there can be no expectation of profits, and thus no expectation of improved quality or efficiency.

    ACOs are one response, of doubtful effectiveness, to the issues of falling quality and efficiency, but they are even more inefficient than traditional medicine (as evidenced by the fact that they cannot even hope to exist without significant IT resources), and quality improvements, while much claimed and ballyhooed, cannot even be measured yet. And since they are by design intended to lower costs only so that payments can be lowered, they are destined to never reach the “sweet spot” of profit maximization which indicates the idealized attainment of improved quality and reduced cost.

    As always, government is the problem, not the solution.

  • “ACOs are one response, of doubtful effectiveness, to the issues of falling quality and efficiency, but they are even more inefficient than traditional medicine (as evidenced by the fact that they cannot even hope to exist without significant IT resources)”

    So, because technology is required, ACOs must be less efficient.

    If only the World War II codebreakers hadn’t developed computers to crack Nazi codes… they would have been so much more “efficient” on paper, unconstrained by tecnology.

  • A Davis,
    Interesting to throw in costs there. I was just talking from a revenue perspective since ACOs in my book are going to be High Risk High Reward systems. You may end up getting paid well, or nothing at all.

    I agree that government is the problem. Someone on Twitter asked what government could do to help healthcare (or something like that). I said they could get out of it.

    I still think ACO or at least value based payment models are coming down the track though. Technology will indeed be essential to doing it too.

  • Your point is interesting and I’d agree that the new care and payment model that an ACO will require will drive organizations to eliminate waste from their processes. Therein is a substantial opportunity for cost reduction and with the right payer relationship/agreement, a significant opportunity to increase revenue. Allina Hospitals & Clinics is one of the leading participants in the CMS Pioneer ACO program and is positioning itself for the success as the ACO model evolves.

    Dr. Burton, our CEO has spoken at length about the multiple sources of waste reduction. That is one of the many things he will cover in the Executive Healthcare Summit he is key noting in June.

  • I think you are missing the point. The meaningful use regulations are not meant to innovat and reform car in and of themselves. They are clear designed tô set a high bar for specialists to drive them into ACOs. Most specialists in small ndependent practice will have a very difficult time meeting the regulations and will experience the drop in Medicare revenue of 2%’in 2014. May not be much be combined with other things will be driving MDs in specialties into ACOs. 10 years ago 5% of orthopedists were employed by hospitals. For total joint surgeons that is now 50% on a recent survey. These organizations may not be an ACO now but justw wait a few years.

    The money is in the ACOs and they will be successful because of the MU regulations.

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