Mergers and Acquisitions: Is Bigger Better than the Personal in a Community-based ACO

We have seen a flurry of health care mergers and acquisitions in health care over the last few years.  Since the pattern of merging one organization with another has shown mixed results in the commercial world, why should the results be any different in health care?  For example, the retail market has watched the Sears/K Mart merger fail as two weak organizations joined to make a bigger weak organization.  The company is now in bankruptcy, struggling to survive in any form.  We are seeing larger urban hospitals gather up all the surrounding smaller community hospitals into a larger system to protect their geographic referral base.  While there are sometimes infusions of capital into the smaller hospitals to upgrade their patient care systems, a new level of control and culture uniformly follows.  The problem is that many of the new owners do not understand the local culture or resources.

The accountable care organization (ACO) implies an intimate understanding of the population under its care.  In fact, under the Medicare Shared Savings Program  (MSSP) model, that understanding was by necessity and design set up to produce better care at a lower cost.  Under the recently introduced Pathways to Success program from Medicare, where the ACO must now carry a heavier level of financial and clinical outcome risk sooner rather than later, the understanding of the population is now even more intensified.  A successful ACO is measured far beyond good intentions to include benchmarked financial goals alongside of real improvement in the clinical outcome metrics.  With increasing financial risk, poor performance not only means poorer patient outcomes but also financial penalties for lackluster operational results. 

Accountability implies knowing the details of each patient’s care in addition to understanding which doctors are performing to the new community standard that will produce the desired clinical outcomes and financial goals.  The ACO’s data analytics system is, more than ever, a key element in driving success.  On the other hand, knowing the providers, their locations, the patient population, and their office culture, may be the most important data elements that can help the ACO leadership guide their organizations toward success.   The elements of trust, confidence, and supportive professional relationships may trump size in getting the job done.

Recently a commercial software company launched a statewide ACO initiative to consolidate multiple ACOs under one brand.  While the economies of scale may be tempting, arrangements like this run the risk of commoditizing health care. To my seasoned understanding, health care is still local and still personal. Sharing data systems, IT support, and some back room operations can make sense, whereas imposing a new commercial culture on a community may end up counterproductive.  ACOs need a data analytics system which can be shared with multiple ACOs; however, the work gets done at the provider community peer-to-peer level.  Additionally, the work gets done at the bedside, across the desk, or in the examination room.

Getting bigger just to be bigger may not be the best choice, since the personal element may get lost in the size.  On the other hand, getting bigger to get a better information system, to share back room services, and to strengthen the commitment and service to your local community might just work. “Oh, hello, Ms. Jones.  I see that  your hemoglobin A1c is nicely in control.  By the way, our data system shows that your mammogram is due.  Let’s be sure we get that scheduled. How is Bill doing?”

Craigan Gray

About the Author

Craigan Gray, MD, MBA, JD

Dr. Craigan Gray, Salient Healthcare’s Chief Medical Officer, brings rich experience from private practice, hospital leadership, and governmental health-benefit programs. Prior to joining Salient, Dr. Gray was director of North Carolina’s $12 billion Medicaid program. His time as VPMA at Bon Secours Our Lady of Bellefonte Hospital in Kentucky was distinguished by moving the facility into the top-quality performance tier for Health Grades and CMS health quality indicators. Dr. Gray is a Stanford University trained Obstetrician/Gynecologist. In addition to an MD degree, Dr. Gray holds an MBA degree and a JD degree. He is a Certified Physician Executive and is published in various medical journals.

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