The Affordable Care Act's (ACA's) reforms are designed to achieve the triple aim — reduced cost, improved quality and better patient experience. The foundational underpinning for the transition to population care is the ACO — Accountable Care Organization.
These "new," legally recognized healthcare providers were established by the ACA. Their goal: facilitate coordination and cooperation among providers to improve the quality of care for Medicare fee-for-service (FFS) beneficiaries and reduce unnecessary costs. This goal requires an integrated network of providers and services.
CMS has set the benchmark cost for ACO enrollees. For this reason, the ACO assumes financial risk for medical cost. The plan is for CMS to share savings with ACOs based on both financial performance and 65 quality performance measures (which will drive 50–60 percent of shared savings).
Presently, there are 23 Pioneer ACOs. (Originally, there were 32. Two are exiting, and seven will shift to Medicare Shared Savings Program, which includes an additional 352 ACOs.)
Unfortunately, that's not very many ACOs to treat 80 million baby boomers.
According to the U.S. Census Bureau, the term "baby boomer" is used in both a demographic and cultural context to identify a massive increase in births following World War II. There are widely varying opinions on what constitutes a baby boomer, both technically and culturally. However, it appears that Boomers share a unique cultural heritage that continues to have a historical impact on this generation.
Baby boomers are normally associated with the redefinition of traditional values. In North America, boomers are widely associated with privilege, as many grew up in a time of widespread government subsidies in post-war VA housing, education and increasing affluence. As a group, they were seen as the wealthiest, most active and most physically fit generation up to that time. Additionally, most grew up genuinely expecting the world to improve with time.
Each generation has its own distinct set of values that are developed from the social environment in their early years. Different generations have different values and beliefs regarding family, career, the work/life balance, training and development, loyalty, gender roles, the work environment and expectations of leaders. Boomers tended to think of themselves as a special generation, very different from those that had come before. They were like John Wayne Toilet Paper: rough and tough and don't take (stuff) off nobody. But as a group, they also received higher education so they could not only spell episodic, they know what it means. They have grown accustomed to having "The Best" and will settle for nothing less.
They were also the generation that received peak levels of income. Therefore, they could reap the benefits of abundant levels of food, apparel and retirement programs. The consumerist tendencies of this generation have been sometimes criticized as excessive.
Baby boomers currently represent 29 percent of the US population. The first boomers reached the standard retirement age of 65 in 2011. In their youth, they were open-minded and rebellious but became more conservative in their 30s and 40s. Job status and social standing are important to this generation, who tend to be optimistic, ambitious, and loyal and believe that employment is for life. They created the concepts of "workaholic" and "superwoman," each having health risks, issues and long term effects.
Now in 2014, boomers are predominately in their 50s and 60s. They are well-established in their careers and hold positions of power and authority. Labor statistics indicate that nearly 80 million baby boomers will exit the workplace between 2011 and 2021. These employees are retiring at the rate of 8,000 per day or more than 300 per hour.
By 2030, about one in five Americans will be older than 65. As a nation, we are already seeing that the aging of this population is beginning to and will continue to place an ever increasing strain on our social welfare systems.
So the question is: How will this situation affect the healthcare industry?
Unfortunately, the aging population — and increasing demand for Medicare services — coincides with a trend toward fiscal austerity. The vast majority of healthcare industry growth will be Medicare patients. However, over the next six years, $146 billion in reduced Medicare payments are slated — plus another $104 billion in federal funding reductions from the American Taxpayer Relief Act of 2012. Given these realities, the pressure will be intense to deliver care more efficiently while meeting increasing quality standards.
ACOs will need to employ payment strategies that put physician fees at risk for meeting both quality and efficiency standards. Conceptually, the idea is simple. In a more transparent, competitive environment, better patient service and more efficient care translates into larger market share and a higher census.
However, due to its cost, higher inpatient census is no longer the key to hospital survival but rather more of a mooring (or as some say, "Concrete overboots"). Under the ACO model, hospitals are actually incentivized to deliver as much care as possible on an outpatient basis — all while eliminating waste through careful care coordination.
Cultural factors will also contribute to the impact of aging on the healthcare industry. Due to lifestyle factors, baby boomers suffer from high rates of chronic illness, including emphysema, diabetes, COPD, heart disease, stroke and substance abuse. In addition, they are accustomed to a reactive healthcare system that historically hasn't emphasized prevention and personal responsibility. All of that appears to be about to change under the ACO model.
The key for the healthcare industry to not only survive but thrive in the future is to educate baby boomers on their efficient use of the continuum of care. Never before has a fully functioning, efficient continuum of care been more important in the survival of a healthcare organization. Vertical integration of inpatient/outpatient services and proper alignment to include physicians, sub-acute and long-term care is paramount.
Some ACO pilot projects are already making progress toward this goal. Several ACO pilots are currently underway across the country involving commercial insurers as well as state Medicaid programs in New Jersey, Vermont, Colorado and elsewhere.
In addition, the Brookings-Dartmouth ACO collaborative is leading five ACO pilots that are working with commercial insurers. It also coordinates the ACO Learning Network with over 80 members from across the country. Recently, the network published a publicly available, comprehensive ACO implementation guide, the ACO Toolkit.
To date, the results for these pilot programs have been mixed: some organizations' efforts have yielded financial benefits, while others have experienced trouble balancing the costs of ACO implementation with the savings gained. Much work and innovation remains to be done.
Mr. Phelps, this is your mission should you chose to accept it.