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Optimizing Labor Management in Accountable Care Organizations

Published August 15, 2013 11:41 AM by Jill Hoffman

Editor's note: This blog was written by Chris Fox, CEO, Avantas.


Simply stated, accountable care organizations (ACOs) are intended to increase quality and reduce overall costs by improving the coordination of care for a population of patients. As you can imagine, implementing ACOs is proving difficult and producing the intended outcomes is not immediate.


It’s hard to argue with the merit of the intent; however, the amount of complexity inherent in building something so large and important without the benefit of an established blueprint all but ensured a bumpy start. What’s interesting is that the early returns show that achieving the cost savings objective is proving more difficult than accomplishing the other main goal of quality improvements.


In addition to the models in place at the more than 400 private payer ACOs across 49 states, has information on 20 ACO models, seven of which are run at the state level with another 13 dubbed as innovation models. Perhaps the most widely known innovation model is the Pioneer ACO model, which is in the middle of its second year.


In the news a lot lately for the recent exodus of nine of the original 32 participants, all in all, the first year of the program had decent results. CMS’ report revealed that all 32 Pioneers successfully reported quality measures, resulting in incentive payments. Twenty-five had success in reducing readmission rates and more than half realized modest savings. However, only thirteen Pioneers saved enough money to share their savings with Medicare.


The Pioneer group consists of large, sophisticated systems that were already lauded for their ability to deliver high quality, coordinated care. The fact that almost half did not meet their savings targets tells me that not enough attention is being paid to cost efficiencies and that labor optimization is not often even discussed as part of an ACO’s plan.


While emphasis on things like better revenue cycle management and more sophisticated approaches to coordinating care are good steps, attention must be paid to better coordinating care staff to meet demand if improvements are going to be at the levels necessary to make a dent in the $536 billion in Medicare spending last year. Care staff account for around 60% of a healthcare organization’s operating budget and closer to 30% for the average Medical Group, minus physician compensation. Increased efficiencies in this area have proven to provide cost savings in addition to increased staff morale and quality scores.


An interesting development in the formation of ACOs is that physician groups have overtaken hospital systems in their adoption of the various programs. This is an encouraging sign, as medical groups are fast becoming the driver of healthcare in its push for integrated care models. This necessitates that physician groups pay particular attention to areas typically not at the forefront of their thoughts, like optimizing labor.


The Penn State Hershey Medical Group is one such organization “pioneering” the switch to more sophisticated approaches of managing labor, namely implementing a variable staffing model and leveraging data, technologies, and best practice strategies to align the right resources with patient demand and other workload indicators. This involves the development and implementation of enterprise resource policies in addition to utilizing a flexible technology to provide accurate forecasts of demand in line with the evolving continuum of care.


The implementation of the labor strategies needed to bring about and sustain improvements is not something that happens overnight – for hospitals or medical groups. It relies as much, if not more on an organization’s culture and its willingness to change as it does on the technologies they install.


The point here is that this is not easy. ACOs will not be successful right away. The number and complexity of the pieces at play are immense (and I’m only referring to the provider side). Labor is a huge piece of the puzzle and one that has been largely untapped. Large organizations and those that have gone through consolidation are particularly at risk of amplifying the inefficiencies that commonly happen across the care delivery system that includes hospitals, physicians, post-acute facilities, and other providers. While that is certainly a possibility if the proper solutions and strategies are not utilized, larger organizations are in the best position to take advantage of economies of scale and can reap huge returns by implementing and faithfully adopting technologies and strategies that promote transparency.


The success of ACOs will require a methodical, multi-pronged approach that focuses as much on the business of healthcare as it does on coordinating the care of patients.


Editor's note: this is the final installment of the 3-part series on ‘Integrating Labor Across ACOs.'

November 13, 2013 2:00 PM

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