Accountable? Yes, But to Whom??

In this month's post, we discuss Accountable Care Organizations (ACOs) and their implications for owners of businesses in the health care and medical fields.

But first, we have good news to share for small business owners contemplating selling their businesses.   According to BizBuySell's Insight Reports for first quarter 2012, business-for-sale transactions jumped nearly 4% over Q1 2011.  Read the full report here.

We also see an improving market, albeit slowly.  If you have been thinking about selling your business, now is the time to plan for a successful transition.  We can assist you with an assessment of your current position, provide you with recommendations to create/improve value, and guide you through the sales process when you are ready.

Accountable Care Organizations (ACOs)

Healthcare, or rather its costs, is an ongoing and hotly debated topic likely to dominate much of this season’s Presidential debates.  And, it is an important concern as Medicare’s bank account becomes increasingly strained under rising healthcare costs coupled with an aging population.

Washington’s latest answer to solve this burgeoning spending crisis:   Accountable Care Organizations (ACOs). Although information about ACOs fills only seven pages of the massive 1,990 page health care law (2009), it has become one of the most discussed provisions and often touted as a possible solution to America’s health care woes. 

What is an ACO?  Accountable Care Organizations are groups of doctors, hospitals, and other health care providers who come together voluntarily to provide coordinated care to Medicare patients.  The goal is to ensure that patients, and especially the chronically ill, receive the correct care at the correct time, while avoiding unnecessary duplication of services while preventing medical errors. 

Under the current system, Medicare providers are paid a fee for services rendered.  Increased patient populations are given more tests leading to increased procedures driving rising Medicare costs.  Under an ACO environment, providers would be held jointly accountable for the health of their patients, giving them strong incentive to cooperate and save money by avoiding unnecessary tests and procedures.  ACOs that save money while also meeting quality targets would receive a portion of the savings while those missing the targets would be at risk for losing reimbursement dollars.  Yes, an ACO smells a lot like a re-branded HMO of the 1990s.  The notable difference is that an ACO patient is not required to stay in- network which mitigates the consumer backlash created by the in-network provider limitations of an HMO.

So who’s in charge?  Hospitals, doctors, and insurers are all vying to develop ACOs.  The smart bet is on the sector with the most available capital to finance an ACOs initial investment and maintain its ongoing operations:  large hospital systems and large health insurers.

As key players race to form ACOs, hospital mergers and provider consolidation will continue to proliferate and likely accelerate leaving fewer and fewer independent hospitals, health centers, and doctors.  Greater market share provides these mega health systems leverage in negotiations with insurers and suppliers further challenging the remaining independents’ operational profitability and perhaps, relevance.

Like it or not, agree with it or not, ACOs are here and growing and will likely create greater and greater impact on health care delivery systems -- especially true in more densely populated regions. The rise of ACOs may mean disruption and potentially, dissolution, for those medical groups unwilling or unable to adapt. That’s why physicians should not delay in beginning the process of understanding and accommodating the changes that ACOs will inevitably bring. Taking a proactive stance in dealing with the issues your practice will likely face will leave you far better positioned to weather the tumultuous times ahead.  

So who’s accountable?  You are:  to yourself, your family, your practice, and the patients you serve.  The choices are to: 1) remain independent and hope for the best, 2) to expand, 3) to merge, or 4) to be acquired.  Other than those clinging to the first choice, opportunities exist and the professional business advisors at CI Harvest are poised to assist in helping capture those opportunities, beginning with deeply incisive strategic practice and market analysis based on your personal situation and goals, all the way through to its successful implementation. 

There’s a saying around the Firm, “you don’t know what you don’t know”… and that could be quite costly.  We know, let us help you find out…

  by Glenn Molin, Senior Business Intermediary

Dr. Glenn Molin is a doctor of chiropractic who also holds an executive MBA. He has been involved in the healthcare sector throughout his 20 year career and as Senior Business Intermediary for Harvest Associates specializes in business transactions in the healthcare and medical fields.