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For ACOs, No Magic Wand: Leadership Needed

by Amy Edmondson, Novartis Professor of Leadership and Management, Harvard Business School

The July 16, 2013 Wall Street Journal article reporting one-year results for 32 pilot accountable care organizations (ACOs) is disappointing in more ways than one. The headlines proclaim, “Mixed results in health pilot plan,” followed by the provocative subheading: “Program members raise quality of care but struggle to lower costs.” In support of this claim, Melinda Beck, the WSJ reporter, laments that “only” 18 of the 32 managed to lower costs, even though cost was “a major goal of the effort.”

Never mind that the glimmer of good news (quality improved for all!) is glossed over. What’s more puzzling is the article’s lack of attention to why costs might improve, or fail to improve. Perhaps the Journal and the participating health care systems thought that simply joining the Pioneer ACO program would lead to lower costs. Let’s call this the magic wand theory of health care transformation.

As I’ve described before in this forum, Richard J. Gilfillan, M.D., who heads up the Centers for Medicare and Medicaid Services (CMS) Innovation Center, launched the ACO pilot program in 2011. Dr. Gilfillan recruited organizations willing to test the model, accepting advance monthly payments instead of fee for services. The recent news relates to the first-year report card of this three-year experiment. As the WSJ put it:

All of the 32 health systems in the so-called Pioneer Accountable Care Organization program improved patient care on quality measures such as cancer screenings and controlling blood pressure, according to data to be released Tuesday by the Centers for Medicare and Medicaid Services. But only 18 of the 32 managed to lower costs for the Medicare patients they treated — a major goal of the effort.

Let’s start with the rather impressive news that all (yes, all) of the participating health systems improved care quality. This result, which deserves both celebration and explanation, receives little of either in the article. For explanation, I would surmise that participating in the risk-based payment approach — receiving monthly payments rather than fees for services — heightened providers’ and management’s awareness of the value of such health-promoting activities as cancer screenings and blood pressure monitoring. When a health system is on the hook to bear the cost of expensive treatments for cancers discovered too late, or for treating victims of preventable strokes or heart attacks, instead of earning fees from later, more expensive treatment activities, it’s likely to pay more attention to prevention and screening.

Awareness is certainly a good start. However, even the good news about cost for most of the 32 pilot centers likely falls far below the potential cost improvements. Wide agreement among industry experts points to massive waste in the health care delivery system — 30% or more of every dollar spent may be wasted — the reduction of which could obviously have substantial impact on costs.

Dr. William Chin, of HealthPartners, speaking at a recent athenahealth client forum, defined waste as “an expenditure that, if eliminated, would not reduce the quality of care.” He went on to ask the clinicians in the room, “In your practices, have you ever seen something being done that doesn’t need to be done?” The widely shared response was, “Every day!” Getting rid of waste clearly improves cost. It also lowers the potential for unnecessary harm. But waste reduction doesn’t just happen. It requires serious leadership driving serious initiatives to alter delivery systems and engage patients in healthy lifestyles.

The point is, neither quality nor cost improvement is automatic. Putting payments at risk doesn’t by itself lead to better care at a lower cost, and we should not expect it to. The payment design motivates both, but doesn’t produce it. What does produce these desired results? Leadership actions that drive a set of integrated structural and behavioral changes.

Structural changes are needed to make collaboration across providers treating the same patients for different conditions not just possible, but difficult to avoid. Behavioral changes are needed to ensure that patients get better, more efficient, higher quality care, as well as to help encourage healthy choices outside the clinic.

Watching the industry struggle to assess the results at issue reminds me of discussions a decade ago on quality improvement collaboratives, such as those initiated by the Institute for Healthcare Improvement (IHI) or the Vermont Oxford Network, which invited hospitals to form quality improvement teams and share practices and results with each other. The eerily similar debate at that time concerned whether or not collaboratives led to improvement; the results were, you guessed it, “mixed.”

It surprised me then that the debate was framed as one of whether collaboratives worked, rather than about under what conditions collaboratives produce results (and how they do it). The topic caught the attention of Yale Medical School Professor Ingrid Nembhard, then my doctoral student, who conducted high-quality field research showing that how well QI teams were structured and managed explained performance improvement. Unsurprisingly, signing up to join a collaborative wasn’t a magic wand.

Fast forward. Today’s so-called mixed results with respect to pilot ACOs lowering costs sounds an echo of these earlier questions about the effectiveness of collaboratives. In health care, we still haven’t learned to value and focus on the role of leadership. How well a particular tool is used — be it a collaborative or an ACO — is what matters. It is noteworthy that the only explanatory remark in the WSJ coverage related to the cost results was that the lack of improvement could be understood as a premature conclusion, given that only a year has passed and the program had a three-year timeline for achieving its goals. This may be true, but it is not terribly informative. Just as Nembhard recognized, field-based research is called for to figure out what the 18 centers whose costs were lowered did differently from the others. And we should not wait two years to get started.

Can “these pillars of the landmark federal health law,” as the WSJ’s Beck put it, “help transform care?” The answer is, of course they can, but not merely by changing payment systems. Transforming care occurs only through the hard work of changing behavior. This is a leadership challenge.

This post originally appeared on the athenahealth Leadership Forum.

Amy Edmondson is the Novartis Professor of Leadership and Management at Harvard Business School. Follow @AmyCEdmondson on Twitter.

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