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January 2, 2012

ACO Proves Major Political Turning Point For Boston Hospital Chain

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Transforming a hospital system into a fully-functioning ACO is a huge project, and one which requires a big commitment.  It’s hardly surprising that going through the process would change how its leaders think about their business.  But the following is the first case I’ve heard of in which a hospital system made a major break with its peers over its ACO status.

Apparently,  for-profit Steward Health Care System has just resigned from the Massachusetts Hospital Association, bringing its 10 hospitals (and 11 percent of the MHA’s revenues) with it.  Steward, which was created by the acquisition of six-hospital Caritas Christi Health Care Chain a year ago by VCs, has since picked up four hospitals and done a host of doctor deals.

Not surprisingly, Steward seems to have bruised some competitors’ feelings along the path to ACO-hood, which probably has something to do with its MHA departure, but Steward isn’t copping to that of course.

At this point in its evolution, Steward’s leaders say, the MHA’s positions on politics don’t represent its needs anymore. Particularly when it comes to health reform, Steward’s leaders feel it now has a different take than other members of the MHA, which has to advocate for shared positions across almost 100 hospitals with varied approaches.

As for me, I’m not sure what those differences are; in fact, I’d think that a “real” ACO would be an inspiration for, and partner to, other hospitals on the path to health reform.  In fact, this raises some questions as to how the growing ACO trend will affect hospital relationships this year:

* Are IDNs that work hard at building a true ACO going to upset their peers so much that it will create a drag on their business overall?

* Most healthcare business models have some detractors and some fans, but is this one of the few that can actually divide the industry?

*  Are ACOs a direction every IDN can take, or are there resource constraints (such as the size of a local market or number of unaffiliated doctors) that will prevent some from building one? Will the coming rush create ACO “haves” and “have nots”?

What do you think, folks?  Have you seen anything happening in your markets that might answer these questions?

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April 27, 2011

Big hospital chains have outlived their usefulness

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Regardless of what Community Health Systems execs may think, big, massive, overstuffed hospital mergers aren’t going to work in the next decade.  No amount of economies of scale will make up for the dollars health systems will lose if they decide to operate their business if it were Walmart.

Look at the history of the market.   Massive scaling up of hospital infrastructure — remember the grand Medicare-fueled building party in the 1960s? — has always been followed by financial weakness, overbedded markets and vicious regional competitions nobody can win.  Hospitals that try to reproduce this technique in multiple markets are only going to do worse.

In truth, I imagine CHS and other large hospital players are more focused on generating leverage with payers.  (They mostly have to scream “economies of scale” to satisfy Wall Street investors who wouldn’t know an ICU from an inside pitch.) After all, as reform washes over the land, the big health plans are going to see big upward jolts in their covered base.   And since the newly-insured aren’t likely to be cash cows, health plans are going to be more cost-conscious than ever when they negotiate.

“Massive scaling up of hospital infrastructure — remember the grand Medicare-fueled building party in the late 1960s? — has always been followed by financial weakness, overbedded markets and vicious regional competitions nobody can win.”

That being said, I don’t think creating hospital megaliths will tilt the scales back into balance.  Hospitals will always be on defensive when it comes to health plan contracts;  the brutal fact is that health plans have the money, and hospitals don’t. Hey, you can scream, we’re the best in the region, but let’s face it folks, health plans are more in the quantity than quality game.

So, what do hospitals do to cope with their vulnerability?  Careful, gradual acquisitions in key markets, strategically positioned to streamline the way they run key service lines across a region.  And integration, Lord yes,  but I’d argue creating your own health plan is a much better bet than buying medical practices willy-nilly.  (OK, you can do both, but I’d argue that putting a health plan in place should be the priority.)

By the way, I’d argue that the growth of the ACo concept suggests that I’m not alone — that just about every policymaker thinks that managed care-style medicine needs to be nurtured by providers.

Under these circumstances, big hospital mergers look even worse, as it’s pretty hard to build tight collaborative relationships when all orders have to come from the mothership in Nashville or Dubuque.

No, I say, a time comes for all industries when it’s time to think small, and this is it.  Tenet, HCA, Community Health, the big Catholic systems — now is the time to decentralize aggressively or pay the price. You’ve got three and a half years before reform goes full tilt. Tick tock, folks.

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July 10, 2010

Video: Accountable care organizations, the Steve Jobs way

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This video, by healthcare consultant Anthony Cirillo, offers a neat suggestion — why not sic Steve Jobs on the accountable care organization model?  As Cirillo sees it, Jobs is one of few execs out there who really understands how to build complex things in a lean, functional way.

“When we develop products, we’re about putting as many features into them as possible, and hospitals, as many services as possible,” Cirillo says. “But Steve Jobs…wouldn’t just build an accountable care organization, he’d build your accountable care organization, where you would get just the amount of care you needed at the right time in the right place.”   More below:

Don’t be distracted by the guitars hanging on the wall in the background — they’re just symbolic of Cirillo’s other passions, singing and songwriting.  What he has to say on this subject is definitely worth a listen.

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