Meet your newest and toughest customer

With the transition to MDS 3.0 and RUG-IV now complete, providers may be feeling relieved that they’re finally prepared for the newly established demands. But as the old saying goes, “There’s no rest for the weary,” as preparation for compliance with 2014 reform mandates presents a whole new set of challenges.

An increasingly competitive market environment that rewards data-driven clinical outcomes requires healthcare providers to undergo a rapid transformation to prepare for approaching requirements. A significant part of that includes providers meeting their newest and toughest customer-Accountable Care Organizations (ACOs).

In the new world of ACOs, providers who demonstrate the lowest re-admits to the hospital, highest quality outcomes, highest customer satisfaction ratings, and lowest costs will have a competitive advantage. And those with lackluster outcomes risk losing their stream of Medicare patients and potentially third-party payer patients because ACOs will seek to partner with providers that have superior clinical outcomes. Competition is absolutely unavoidable and the time to prepare is right now.

The impact of ACOs

ACOs are defined as a group of healthcare providers working together to manage and coordinate care for a defined population that shares in any savings achieved by reducing the total cost of care while maintaining or, better yet, improving patient outcomes. Today, providers are paid to provide a service but are not accountable for the outcomes or health of a patient. If the outcome is bad, often it results in a need for more service. ACOs are designed to hold a set of providers accountable for patient outcomes by providing the right service, at the right time, in the right setting and, in turn, rewarding them for reducing the cost of care.

Pam Selker Rak

As a result of being introduced as one of Medicare’s programs in the health reform law, ACOs have taken on an even greater significance in the healthcare industry. The ACO model is not just a change in reimbursements policy; it “establishes a benchmark based on expected spending.”


This increase in accountability for quality and cost across the care continuum means that providers must demonstrate decreased re-admits to the hospital, high-quality outcomes, and low operational costs to stay competitive and win more business. According to Loren Claypool, vice president and managing director of VCPI, “ACOs will not award business to providers whose historical outcomes create risk for re-admits for which hospitals will not be reimbursed.”

While this will increase pressure on providers to offer quality care at the lowest cost, it also (1) frees them to deliver the care they always wanted to, but may not have been able to provide in the past due to lack of coverage or reimbursement for certain services; and (2) provides a more cost-effective way to treat residents with chronic conditions. It will be important for providers to remember that if care isn’t delivered efficiently, it will result in increased cost so they will need to be creative in how they collaborate.

Working with ACOs will encourage providers to specialize in areas that they can best excel, enabling them to lower the cost of care while maintaining or improving clinical outcomes. And that will be a model for success in the reformed healthcare world.

Seven emerging reform themes

With the recent passage of reform, the time for debate, denial, and avoidance is over. Providers of all types must focus on transforming behavior to ensure future success. “As consumers and payers expect greater healthcare ‘value’-reduced costs while maintaining or improving patient outcomes-as part of ACOs and health reform, we see seven emerging themes for how the operating environment will be impacted by these changes,” says Nicole Fallon, healthcare manager of LarsonAllen, who presented core information at VCPI’s recent users’ meeting. “Providers must be aware of and familiar with these themes as they continue their preparation for the evolving reform landscape,” she explains.

1. Providers will be asked to accept greater financial risk for clinical outcomes. Provisions such as value-based purchasing, bundled payments for episodes of care, and increased penalties for excessive readmissions or admissions due to hospital-acquired conditions are aimed at reducing reimbursement or shifting it away from those with poor levels of quality.

2. Operational efficiency will be critical. To remain financially viable, it will be essential to continue to scrutinize current costs for waste, but it will be equally or more important to understand what it costs to provide care for certain diagnoses or episodes to be positioned to negotiate for adequate reimbursement under new payment models.

3. Collaboration among all providers will be required for survival. Increased cooperation through redesigned payment systems will most likely involve some form of bundled payment methodology, implementing shared best practices, and improving care transitions across sites of service.

4. Significant investments in technology will be necessary. Success will require technology to easily share critical clinical information among different provider types, along with other uses related to improving patient outcomes.

5. Increased quality expectations, reporting, and monitoring. Providers will not only have to report more information related to the quality they deliver, but increasingly they will be reimbursed based upon achieving certain quality benchmarks.

6. Elevated regulatory risk. Reform will focus on reducing fraud and increasing compliance with evidence-based care delivery as critical components in the overall cost reduction strategies, and providers should anticipate increased scrutiny.

7. Increased focus on community-based services and care. ACOs will be community-based and patient-centric by being attentive to the needs of the communities they serve.

Collaboration is king

Since there is not one universal formula for providers to prepare for reform, the first step is to be aware of what’s happening in the market and organize accordingly. The next step is to develop a plan that frames final results in terms of outcomes for quality, patient satisfaction, time efficiency, risk reduction, labor productivity, costs, business continuity, etc. Once a business case is created and a budget established, providers will need to obtain detailed information from technology and service partners to ensure they’re in sync with implementing solutions that will work best in the new environment.

The next step is to prepare the team for the upcoming changes. “In the new model, collaboration between providers, while important, isn’t the only focus,” says Mary Van de Kamp, senior vice president of clinical operations for Peoplefirst Rehabilitation based in Louisville. “There also needs to be more collaboration within the facilities themselves, as well as with technology and services providers. There’s much conjecture regarding how reform will change daily practices, but preliminary training reduces caregiver anxiety, provides opportunities to fine-tune the process, and positions facilities to provide continuous quality and realize appropriate reimbursement. Change can be daunting, but a strong technology or service provider will be a valuable partner to assist in successfully transitioning through the process.” A trained staff, backed by the support of vendors, will be ready to meet all of the demands ahead and facilitate collaboration with ACOs.

Technology for outcomes-based care

Technology is critical for the successful navigation of outcomes-based care and one of the crucial elements for all providers will be the Electronic Medical Record (EMR). The federal government seeks administrative accuracy and efficiency, and greater visibility when auditing records to assess fair payments from a Medicare or Medicaid perspective. Patients/residents should see better coordination of care and better detection of trends indicating earlier intervention, especially when multiple health disciplines are involved. Electronic Health Records (EHRs) will be used to aggregate health information from EMRs that can be shared among many healthcare providers.

These information exchanges will increase the security of sharing health information across providers. “Regardless of where providers are on the road to fully electronic operations, acceleration of EMRs will be important in driving the lowest total cost of ownership,” says Claypool. “Those that demonstrate superior outcomes to ACOs will enjoy a better reputation and higher census, and will win a disproportionate share of regional business.”

In addition to EMRs, providers have also implemented other technology solutions to increase accuracy and efficiency. Most providers already recognize that a medical record is only good if it is accurately documented, and some are using advanced technology like mobile computing and voice recognition to provide information and capture data at the point of care and provide better data, better monitoring, and better outcomes. According to Mary Evans, COO of Covenant Care headquartered in Aliso Viejo, California, “We’re naturally resistant to giving up our current paperwork systems and this shift requires a psychological change. In using voice, we’ve realized it is effectively changing the culture within our facilities, going well beyond ADL data capture and facilitating a new mind-set toward real-time data and having live remote access to that data. This is crucial as we continue to move toward the paperless requirements of 2014.”

Technology organizations are taking note of what’s occurring and are fine-tuning their operations to conform to the new paperless environment. “While it isn’t a current requirement of the long-term care industry, we’ve decided to preemptively change our business model to prepare for the ultimate demands of the market,” says Jim Rock, president of Pittsburgh-based Vocollect Healthcare Systems, Inc., providers of voice technology.

Education, information are key to outcomes

Education is the foundation of preparation for reform mandates, and some providers are a step ahead in providing education to change health behaviors and monitoring the impact that education has on clinical outcomes. Home Healthcare Partners, based in Dallas, not only understands what is needed to make a change, but it has done so with documented success.

Using a program that documents metrics used for lowering hospital re-admits, and using this information along with monitoring and health coaching to change behavior, hospital re-admits have been reduced by 66% of the national average. “Monitoring and changing behavior is at the core of reducing the number of residents that go back to the hospital,” says Wayne Bazzle, CEO of Home Healthcare Partners. “We believe a program that educates providers on how to make these changes will always be the most successful.”

Next steps

Pending reform means quality no longer means simply doing well on the annual survey. Essentially, post-acute healthcare providers will be ‘auditioning’ to work with ACOs, and this will require that they show value by providing the highest care at the lowest possible cost.

Investing in infrastructure will not only improve care while decreasing cost, it will also provide a new incentive for physicians to be more involved with facilities and residents. The time for working in silos is ending and the walls between providers are coming down. Providers must recognize what’s on the horizon and position themselves for success by planning how to best collaborate with ACOs, their newest and perhaps toughest, customer yet.

Pam Selker Rak is President of CommuniTech, LLC, an independent marketing and business consultant. She can be reached at (412) 221-4550 or


  1. The Dartmouth Institute for Health Policy & Clinical Practice (2009).Reforming Provider Payment: Moving Toward Accountability for Quality and Value. Retrieved from

Long-Term Living 2010 November;59(11):18-21

Topics: Accountable Care Organizations (ACOs) , Articles