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Front: Fawn Lopez; Back (left to right): David Dawdy, Trent Green, Ralph P. Fargnoli, Jr., Ralph Johnson and Maria Ryan
Front: Fawn Lopez; Back (left to right): David Dawdy, Trent Green, Ralph P. Fargnoli, Jr., Ralph Johnson and Maria Ryan
As part of its implementation of the Patient Protection and Affordable Care Act, the federal government released a proposed rule March 31 about accountable care organizations (ACOs). Through the use of new care-delivery models, such as ACOs, the federal government is pushing healthcare providers to bear financial responsibility for managing their patients' health. To discuss the steps executives at hospitals and health systems should take to prepare for this new environment, Modern Healthcare and Beacon Partners hosted a roundtable discussion on May 4, 2011, at Modern Healthcare's Chicago headquarters. Fawn Lopez, vice president and publisher of Modern Healthcare, was the moderator. Download a PDF of "The Operational Journey to Meaningful Use: A Conversation with Beacon Partners"

Q: Where are each of your organizations in your analysis of the Patient Protection and Affordable Care Act and positioning for upcoming reform?

Maria Ryan - CEO - Cottage Hospital - Woodsville, NH
Maria Ryan CEO Cottage Hospital Woodsville, NH
Ryan: My hospital is in a pilot program for an ACO with another critical-access hospital, a federally qualified health center (FQHC), and a home health agency. In the proposed rules, FQHCs are excluded, but we are going to do what we have positioned ourselves to do: to deliver high-quality care in a cost-effective manner. We are working with the FQHC to make sure that every patient in our community has a primary-care physician. When patients present to the emergency department, and they do not have a primary-care physician, they leave with an appointment to see a primary-care physician for follow up. I am concerned that the financial dollars for this government overhaul will increase total spending by $2.6 trillion. To finance this new entitlement, the Patient Protection and Affordable Care Act will raise taxes by more than a half-trillion dollars over the next ten years and cut more than a half-trillion dollars from Medicare. This legislation will dramatically add to the already unsustainable rate of government-spending growth. This law relies on 10 years of tax increases to pay for six years of new spending. It double counts more than $520 billion as both spending cuts and payments to beneficiaries and ignores $208 billion needed to avert cuts to Medicare physicians. I am also concerned that the $115-billion for implementation is understated. Having said that, there are some solid concepts in the act, including an emphasis on: preventive medicine, patient accountability for lifestyle choices and for choosing a primary-care physician, quality outcomes, management of end-of-life issues, fraud prevention, and vendor contracts that do not exploit the healthcare industry.

Trent Green - VP of Strategy and Business Development - Legacy Health System - Portland, OR
Trent Green VP of Strategy and Business Development Legacy Health System Portland, OR
Green: At Legacy Health, we set up an internal steering group with key leaders from throughout our organization. They meet to talk about various elements of the healthcare reform law—whether it is around the use of an ACO or the impact on our self-insured population. We also have been looking hard at the investment required for us to perform well as an ACO as well as what we think the potential financial return might be for our organization. Oregon is pushing ahead to create ACO-modeled organizations for its Medicaid beneficiaries, so we are monitoring that as well. We have a head start because we are already leading the way with patient-centered medical homes.

Ralph Johnson - CIO - Franklin Community Health Network - Farmington, ME
Ralph Johnson CIO Franklin Community Health Network Farmington, ME
Johnson: We are in a small service area of probably about 40,000 lives. It puts us in a unique position because we can't be everything to all people in our community. We employ more than 40 physicians in twelve practices. We are focusing on the data.

Dawdy: Phelps County is a rural organization as well. We serve five rural counties. Our concern is the overall governance for the clinical and the financial sides. We have positioned ourselves fairly well in the electronic arena, and we feel we are currently in a strong position to take the next step, but as a small organization, moving from meaningful use into the ACO world is going to be a real test.

Q: Are healthcare organizations ready for ACOs? What is the business case for developing an ACO with your local physicians and area-wide providers?

Green: We have started to talk about this at our organization in terms of care-delivery transformation. We have put the ACO business case, if you will, in four categories. First, we are self-insured. We provide healthcare for about 16,000 people at a cost of about $70 million annually. That's why we are starting our care-delivery transformation with our own population. There is clearly a business case for us in that. Second, there is a lot of conversation about doing something similar to an ACO with the Medicaid population. For us, there is a business case because we are already the leading provider of care for Medicaid beneficiaries in the state of Oregon. Commercial insurance and Medicare versions are probably a bit further out.

Ryan: Healthcare organizations should be partnering with their local primary-care physicians, FQHCs, and home health agencies. If the shared goal is to give the right care at the right place, you will succeed in reducing costs.

Ralph P. Fargnoli, Jr. - President and CEO - Beacon Partners - Weymouth, MA
Ralph P. Fargnoli, Jr. President and CEO Beacon Partners Weymouth, MA
Fargnoli: With the individual mandate for health insurance in Massachusetts, free care has dropped for providers. Now that some 98 percent of Massachusetts residents have health insurance, many through the state-sponsored Health Connector program, we are still experiencing access problems and, along with that, reduced reimbursement rates for providers, particularly safety-net organizations. Stresses of volume and contribution margins remain around emergency and primary care.

Johnson: I use the analogy that you are going down the river with two canoes with one foot in each canoe. As you move from one payment model to another, how do you stay balanced as you go down the river?

Q: How do you determine with whom to align, especially among those who are current or former competitors?

Green: We start with primary care, which we view as a foundational element. We are looking at a couple of things: A) Geography. If we are going to be accountable for some defined population, we believe we need to have sufficient geographic coverage to care for those patients. B) Value set. Which physician groups have a value set similar to ours? Which groups are willing to change care delivery in their practices? Which groups are interested in engaging with us around data sharing or around medical home concepts?

Dawdy: We have a physician advisory committee comprised not only of employed physicians but also doctors who are in private practice or who work at other clinics in our area. We want to get those people to steer us collaboratively in as finite a direction as possible.

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Q: When it comes to information systems, what parts of the Patient Protection and Affordable Care Act do you believe will be the most difficult for your organization to achieve?

David Dawdy - CIO - Phelps County Regional Medical Center - Rolla, MO
David Dawdy CIO Phelps County Regional Medical Center Rolla, MO
Dawdy: Systematically bringing together the disparate parts of the ACO concept through good communication and data sharing will be difficult. You need to manage the patient's episode of care from the physician's office, through the hospital, the skilled nursing facility, the home health agency and then back to the physician's office. There also is the possibility of readmission. You then have to figure out how to account for and share the savings or losses.

Johnson: We need to change workflows so we can get our arms around specific data. For example, we have five primary-care practices, and they were all charting PTs (prothrombin time) and INRs (international normalized ratio) for their Coumadin dosing differently. We got a group of nursing staff and physicians together as a team—and we called it the Coumadin Club. They worked out a standardized approach. That is a small example, but you need to take a SWAT-team approach to standardization of each of the data elements.

Dawdy: I think the interoperability picture is going to be a real challenge for all steps in the ACO process. Do we bump up one level and use information exchanges or do we use continuity-of-care documents? To give patients the option to manage their data, we have implemented Google Health, and we are going to move to Microsoft HealthVault.

Johnson: In Maine, we have a statewide health information exchange, called HealthInfoNet. There are 15 hospitals, including us, in that data set. They are now offering community-based physicians access to HealthInfoNet, so the physicians can see patient data from us as well as all of the large systems in the state.

Green: One of the biggest opportunities and biggest concerns in moving toward ACOs is information sharing and flow. We have become a vendor in response to that concern. We are making software from Epic Systems available to the private-practice community as we install it across our system. We are using the relaxation of the Stark law to donate a significant portion of the software-acquisition costs for private-practice physicians. We don't have any implemented at this point, but we are actively engaged in discussions with several physician practices. Our commitment to them is that the product we deliver will qualify for meaningful use, but they still have to utilize the product and, ultimately, attest. Epic is fast becoming the standard in our community, and it is our hope that this will ease information flow.

Ryan:: Cottage Hospital will attest to meeting meaningful use Stage 1. The most difficult part is fully integrating your electronic medical record with your local primary-care physicians. I want a system that is easy for clinicians to use. There are so many pressures on physicians today. They only have so much time to spend in the hospital. If they have to search for information on a computer, as opposed to an orderly paper chart, it makes progression more challenging. I would like to see more voice-recognition technology, so clinicians do not have to type.

Q: Let's talk about data security. How do you plan to deal with privacy and security issues?

Dawdy: We complete audits on a regular basis. We engage people to come in with a fresh pair of eyes and really take a look at our processes, our systems, and how we manage privacy. We give laptops to all of the physicians. They are totally encrypted, which makes using them very difficult. When we export data tapes for backup, they also are encrypted. We do things we feel that we have to do to provide confidentiality. An expanding challenge we have now is that new physicians want images and social networking sites on their BlackBerries or their iPhones, which are extensions of the office workstation. This introduces a new level of data protection. Physicians need information to care for patients, but we must provide it without endangering the patient's protected health information.

Ryan:: When I was in a 400-bed hospital, physicians and staff were given access to only those patients that they were directly caring for. At Cottage, we have given physicians access to all patient records because physicians in a rural community cross-cover so much. We have to be flexible.

Johnson: There are common-sense security measures that work in a metropolitan area—like de-identified population data—that do not work in a rural area. When you say it is "a 64-year-old woman from Strong, Maine with a bad hip," everyone knows who that is. We have to raise privacy to a different level.

Q: What will be the financial impact of healthcare reform on your organizations? How do you address the need to provide healthcare services more efficiently?

Green: That is the billion-dollar question for all of us. For us, we think about it two ways. We know we still have waste in the system. We need to get more efficient not only as an organization but as an industry. We think there are still ample opportunities to become more efficient. At the same time, we need to transform to a new clinical-delivery platform that rewards us for doing the right thing: getting patients the right care, at the right time and in the right venue. We have done a financial analysis on what the increase in the number of patients with insurance will mean for our organization. We have a fairly large uninsured burden in the Portland-Vancouver-Beaverton market. What we have concluded is that we are going to be paid for more customers, but the rate at which we are going to get paid is going to be lower. Again, that goes to why there has to be a big push on costs.

Fargnoli: This has played out in Massachusetts. More people have more access to physicians and hospitals. The free care has dropped because now they have insurance through the Health Connector. But people are still going to the emergency departments; therefore the volume has stayed the same. Patients continue to do what they have always done because we have not educated them about the value of regular appointments with a primary-care physician.

Ryan:: Although there may be more covered lives, the overall reimbursement will be less. How will health care reform impact the tax payer and the federal deficit?

We have developed a culture where we continually look at how we are delivering care. For instance, asking a patient to come in 60 to 90 minutes before a procedure. You should have the provider obtain consent when the patient is in the office and send to your facility, do a pre-registration over the phone, have a nurse go over everything and let the patient know how important it is that he/she be on time. The patient should come in, information confirmed, prepped and ready to go into the procedure room. This will lessen your front end time. We did not have 100% utilization of our ICU beds, yet our medical surgical unit would fill up and as a result, we did not have a place to put patients. We added three variable acuity rooms to our medical surgical unit that could be used for ICU or Med/Surg patients and our utilization has dramatically increased.

Q: How will short-term reimbursement based on fee-for-service be blended in the future into global payments? Have you thought of any strategies to manage this transition?

Green: If you look at the proposed rule, it is all about shared savings. We are still going to be in a traditional fee-for-service system for a big part of our business for some time. The question then becomes: At what point does that payment system flip completely to a global payment arrangement? How do we build a transitional IT platform that can manage all of those disparate payment models at the same time? Do we manage differently, depending on which model is relevant to a given population? How can we pursue marketing efforts to bring in fee-for-service patients and, at the same time, develop strategies to keep ACO patients out of the hospital? Johnson: Your point is a good one, Trent. The traditional contract management systems that we have in place today are totally insufficient.

Fargnoli: Are we saying that by insisting on medical homes, ACOs and global payments, the government is driving physicians to be employed? To me, that is what the market looks like. If the physicians are not employed, there will be debates about global payments and distribution among the caregivers. Unless there is a common mission among the stakeholders, this is going to be a very difficult debate to have.

Green: I think most organizations are unprepared to accept global payments. Those organizations with a provider-sponsored health plan and captive physicians might be in a better position to do that. For organizations that are pure delivery systems, it is very challenging. If you don't have all the necessary people or services, you have to negotiate risk sharing and payment sharing. We are talking to several physician groups and several payers around some per-procedure ideas, but we have yet to formalize anything.

Fargnoli: Many organizations don't even know how to get started. They say, "I will just wait until someone or a piece of legislation tells me what to do." I don't think any organization should just sit back and wait for Congress or anyone else. This is a great opportunity to look inward. It is a great time to say, "Can I read about some of these ideas for reform and create something within our own organization that might work well?"

Q: Given the uncertainty surrounding the implementation of new payment methodologies, how do you develop long-range strategic plans?

Ryan:: I no longer do five-year plans. I do them yearly but reevaluate them monthly. The goal is to increase quality and lower costs. If a patient can be managed at home, the physicians who have privileges at Cottage would prefer to do that. I anticipated a drop in acute patients and strategically went after swing patients. I was able to save jobs and fill my hospital beds with a service that was needed for my community.

Green: There is so much short-term uncertainty that we have taken a different tact. We have extended our planning horizon, although we have gotten far more disciplined about continually refreshing our financial plan. The metric that we are starting to migrate to—in addition to quality and patient-safety measures—is the number of lives touched and not just the unique market share. We think that is a metric that looks at improving the health of the population that we serve. Market share is such an episodic thing.

Fargnoli: We often hear clients ask us: "What is the right thing to do?" My recommendation is to ask yourself, "What does success look like?" The goal is always to continue the mission and to be around to provide care in the future.

Q: What does the end game look like?

Ryan:: We are going to experience lower reimbursement. One needs to look at their revenue cycle and become an expert in it. You have to be creative and astute to the ever-changing environment.

Green: I believe we will have a nearly fully integrated physician-employment model. If we don't end up with global payments for populations, we will have global payments for certain procedures or categories of disease. I think we will see systems get larger. Finally, I think there will be new life breathed into vertical integration. I think one big gap we all have is around post-acute care. We don't have to own all of these pieces, but we do have to establish partnerships.

Johnson: The next big change in quality is going to come by engaging the patients. There has to be more patient involvement in managing their own health.

Steps hospitals should take now to prepare for the advent of ACOs and new payment structures:

  • Examine your cost structure and become more efficient.
  • Engage in discussions with your physicians about how to put together an ACO.
  • Be innovative and take measured risks because you may find a new way to contain costs or improve workflow.
  • Implement new care-delivery models now. Do not wait for clear direction from the federal government.
  • If you want to learn more about how to prepare for healthcare reform, visit Beacon Partners' website at To secure a free 2-hour consultation session on this topic, call Beacon Partners at 781-982-8400 ext. 7431.



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