FEATURE STORY Paul R.

DeMuro

7 strategies for success in governing an A C O

A successful ACO strategy starts with clearly articulating a patient- centered strategic plan that can guide ACO management and ensuring that the ACO's structure, leadership, technology, and allocation of resources support organizational goals.
AT A GLANCE
Strategies for success in governing an ACO include: > Clearly articulating a patient-centered strategic plan that can serve as the basis for ACO management > Capitalizing upon each partner's strengths > Ensuring that capital and resources are allocated consistently with the ACO's goals and objectives > Establishing effective leadership and engaging board members in governance > Developing legal and organizational structures that will best facilitate an integrated model > Employing the right technology in a way that best supports the ACO's niission

Finance professionals will play a pivotal role in the successful development of the next generation of integrated delivery systems: accountable care organizations (ACOs). In large part, that success will be determined by how well these professionals lead this effort and adapt to this new form of integrated care delivery. To ensure successful ACO governance, finance leaders should make sure the parties come together tb articulate a patient-centered strategic plan that includes clear management goals and henchmarks. The ACO participants should capitalize on their respective strengths while minimizing their weaknesses, and they should make sure that capital and resources are allocated consistently with the ACO's goals and objectives. A successful ACO requires not only effective leaders, but also board members who are engaged in the process of governance. The legal and organizational structures of the ACO should he designed to facilitate successful integration and the organization's patient-centered nature. The ACO's success also will depend on how effectively it employs technologyincluding electronic health records (EHRs), computerized provider order entry (CPOE), and e-prescribingand demonstrates interoperability of systems.

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The Strategic Steps to Ensure Success

The foregoing requirements constitute seven strategies that providers should consider to develop a successful ACO.
Clearly articulate a patient-centered strategic plan, with goals arid benchmarks that can serve as the basis for program management. All too often, the inte-

grated delivery systems (IDSs) of the past were hospital-centered. A hospital typically would purchase one or more medical groups and/or physician practicesoften for more money than these practices were worthproviding substantial guarantees without properly aligned incentives. Further, such a hospital often operated the physician practices as if they were part of the hospital, not in the context of a newly formed, patientcentered organization. Successful ACOs should articulate a strategic plan that is patient-centered and structured with input from all key stakeholders, whether these stakeholders have come together as part of an acquisition, merger, or other combination. In fact, this plan and the planning process should begin concurrently with the development of the ACO. Waiting until the ACO is formally organized to develop a strategic plan will impede the ACO's progress, because it will lack clear goals and benchmarks. The strategic plan therefore should stress the new organization's goals and benchmarks, which should not merely be a combination of the goals and benchmarks of the predecessor physician and hospital entities. The parties should chart the new entify's course in a way that focuses foremost on the best interests of patients by designing a patient-friendly, physician-integrated healthcare network in which qualify of care and cost-effectiveness are priorities. Physician workflowwill be an important component of such a plan. The parties also should understand the importance of articulating goals and objectives for the ACO that are clearly attainable and that further the IDS's development. Goals that could be a natural outgrowth of this strategic planning process

Both physicians and the hospital or health system should consider each party's strengths and capitalize on them to achieve the best outcomes for patients.
might include participating in value-based purchasing programs and/or state - sponsored dis - . ease management programs or offering bundled payments and/or case rate pricing, all within the context of a clinically integrated model linked to dynamic henchmarks.
Capitalize upon each partner's strengths. As ACOs

develop, participants will bring myriad resources to the process. For example, physicians are key stakeholders in the management of care. The hospital will add access to inpatient resources to this role for physicians. In this light, both physicians and the hospital or health system should consider each parfy's strengths and capitalize on them to achieve the best outcomes for patients. For example, physicians' strengths typically include the abilify to manage to a budget that ties compensation to practice success, while a hospital's strengths traditionally include an aptitude for implementing state-of-the-art budgeting techniques and managing budgets with a certain flexibilify. An ACO is more likely to flourish if physicians and hospitals can effectively combine these strengths in both planning and operating the organization. A particular strength of hospitals is that they typically have greater financial resources, including access to capital, than physicians. This relative strength has allowed thern to make greater investments ih technology and operating systems. Hospitals should draw on this strength, but recognize that they should temper it with an understanding of how best to employ it within the context of the new ACO.

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Both hospitals and physicians should be openminded in the evolution of the ACO and its operations. Too often, the parties ignore each other's weaknesses or move them to the background. Recognizing that they are in this new model together, however, can help both parties admit their weaknesses and be willing to search for common ground in developing the patient-centered organization. Indeed, the successful development and implementation of an ACO dictates that stakeholders must recognize weaknessesin themselves and in their partnersand keep them from adversely affecting the development and operations of the ACO. For example, in the preyious generation of IDS development, a hospital that acquired physician practices might have called upon a weak administrator with no experience in managing a physician practice division to oversee the physicians' effortswith disastrous results. Today's generation of ACOs can ill afford such mistakes.

resulted in the particular allocation of resources or capital. To allocate resources effectively for an ACO, key stakeholders must make sure that such decisions take into account the best interest of patients and the need to provide high-quality care and service. To this end, it is critical that both parties see themselves as members of an IDS with common goals, rather than as separate stakeholders with different needs.
Establish effective leadership. No organization, par-

ticularly a new one, can flourish without successful leadership. But an ACO's success will depend not only on choosing strong leaders from the start, but also on having in place an effective process for identifying, nurturing, and training future leaders.

Selecting leaders to guide a newly formed ACO is no easy task. Often, in their zeal to close the transaction to develop the ACO, the negotiating Ensure that allocation of capital and resources are con- parties may decide to offer individuals who could sistent with the new ACO's goals and objectives. obstruct the transaction positions they desire Throughout the strategic planning process and simply to gain their cooperation. Yet despite its going forward, parties should seek to allocate clearflaws,this approach may be necessary to capital and resources consistently with the ACO's close a transaction that makes sense in every goals and objectives. As noted above, an essential other way. When such a situation arises, it should goal should be to deliver high-cjuality care costbe made clear that the initial leadership structure effectively. ' is temporary, and that new leaders will be transitioned in over time. To this end, both physicians and provider organizations will contribute certain resources. For It is important to note that physicians generally example, a hospital might have purchased a prefer to be led by another physician. Often physida Vinci robot that has been underutilized and cians prefer that their physician leaders still pracnot employed cost-effectively, or it might have a tice medicine, even if it is only one day a week. proton accelerator on order that could take sevIgnoring this physician preference in the develop eral years to become cost-effective, if ever. The ment of an ACO is a mistake. Emerging ACOs that hospital may have purchased these technologies choose not to have someone with a medical degree out of a desire to be a market leader. Meanwhile, oversee physicians should have a plan in place for the physicians might own an ambulatory surgeiy demonstrating to rank-and-fe physicians why center or certain ancillary services that the hosthat person is the best person for the job. pital is not crazy ahout, but from which the physicians have profited substantially. In their Approaches for establishing effective leadership new partnership, both physicians and the hospiinclude: tal or health system should reconsider the > Creating physician practice divisions or a appropriateness of the decisions that have corporation led by a physician executive

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> Bifurcating the positions of CEO and president with a physician holding one of the positions > Having a physician as chair of the board of directors In some instances, there is no one in the wings of a newly developed AGO who is well-equipped to he the leader of this organization. In such instances, a national search may be appropriate. However, finding tbe right person to lead an ACO can be challenging, even in today's job market, because of the specialized skills required to support the development of an ACO. For this reason, organizations should not only endeavor to find the right leaders to guide the development of an ACO, but also should foster the development and training of leaders at lower levels and for succession.
Ensure that board members are engaged in gover-

Clinicians should be clinically integrated in the AGO model, given incentives to meet and exceed certain benchmarks, and penalized for not doing so.
clinical care. Attributes such as the ahilify to function as part of a cohesive group also are critical. Care should be taken to ensure that the board reflects the cultural and gender diversify of tlie AGO's patient population also.
Develop legal and organizational structures that will best facilitate an integrated A CO model. Most hospi -

nance. Selecting an initial board to govern the new AGO will not be easy. It is important that the board not be too large to effectively govern the new organization. A lesson can be learned from IDSs of the 1990s that appointed 18-memher hoards for governance (often, nine hospital hoard members and nine representatives from the physician organization) to satisfy the political interests of both parties. The problem was that many of these individuals did not have the necessary skills for governance. Learning from history is an important component of ACO creation and development. In selecting board members, it is important to consider the ACO's goals and objectives and whether anyone who currently leads a board of a stakeholder organization would be well suited to serve on the new board. The parties should avoid appointing hospital-centric or physician-centric individuals to the board. Instead, they should consider a combination of individuals who have both governance skills and the diversify of interests, talents, and backgrounds with which to govern a patientcentered, value-focused organization. The complement of skills for board members should include skills in management and operations, finance and accounting, human resources, and

tais and physician groups will need to substantially reconfigure their organizational and corporate structure to develop a successful AGO. Those seeking to develop ACOs should have a viable and dynamic board committee structure that halances hospital and physician participation. At a minimum, the following committees should be establisbed: > An executive committee, responsible for overall management of the ACO, with a focus on patient-centered and physician-friendly activify > Afinance committee, responsible not only for traditional finance and accounting functions, but also for the integration of funds and other assets and the financial viahilify of components of the AGO > An IT committee, responsihle for technology for the system, the transition to EHRs, GPOE, electronic guidelines, and successful implementation of the infrastructure for clinical integration > A qualify assurance/utilization review committee, responsible for overall qualify assurance, utilization review, and clinical integration > A governance committee, responsible for ensuring tbat the most talented, complementary, ACO-oriented individuals are selected for hoard and committee positions

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> An audit and compliance committee, responsible for retaining and interfacing with the financial auditors and the myriad new compliance activities and functions necessary

CPOE, and e-prescrihingwithin the context of the interoperabilify of applicable systemsan ACO likely will be unable to achieve the qualify initiatives desired in the context of a cost-effective, patient-centered model.

Employ technology to fulfill the needs of a clinically integrated, patient-centered organization. Recall that one Clinicians shotild be clinically integrated in the

of the guiding goals and objectives of an ACO is to address value-based purchasing initiatives of health plans and government, in the context of the provision of high-qualify, patient-centered care, cost-effectively. Employing appropriate technology will be a key driver for ACO success in this area. Without technologies such as EHRs,

model, given incentives to meet and exceed certain benchmarks, and penalized for not doing so. They should practice colliiboratively with all physicians involved in a patient's care. Apatient should have a medical home to which he or she can turn as an initial point of care. The medical home should monitor the patient's care and conditions. Finally, such models should be dynamic, taking advantage of advances in evidence-based medicine and clinical practice parameters and protocols. The model should have certain aspects of biomdical informatics that might facilitate value-based purchasing in the context of providing high-q[ualify care cost-effectively in a patient-centered healthcare delivery system. Defining Attributes (or Success Unless physicians and hospitals already are working from a fully integrated healthcare delivery model with clinical integrationsuch as Advocate Health, Group Health, Kaiser Permanente, or other health systems similarly situatedit may behoove physicians and hospitals seeking to collaborate on an ACO to view it as a new venture. In this regard, they should adopt governance principles designed with a view of the ACO not as an acquisition to be integrated, but as a new healthcare business entify whose purpose is to provide high-qualify care in a cost-effective manner.

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About the author Paul R. DeMuro, JD, FHFMA, CHC, FACMPE, CPA,
is a partner, Latham & Watklns, LLP, San Francisco, and a graduate student in the masters of biomdical informatics program at the Oregon Health & Science University, School of Medicine, Department of Medical Informatics and Clinical Epidemiology (paul.demuro@lw.com).

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