Perspective
Disruptive Innovation in Academic Medical Centers: Balancing Accountable and Academic Care Daniel Stein, MD, MBA, Christopher Chen, MD, and D. Clay Ackerly, MD, MSc
Abstract Numerous academic medicine leaders have argued that academic referral centers must prepare for the growing importance of accountability-driven payment models by adopting population health initiatives. Although this shift has merit, execution of this strategy will prove significantly more problematic than most observers have appreciated. The authors describe how successful implementation of an accountable care health strategy within a referral
A
cademic medical centers (AMCs) in the United States are a heterogeneous group of health systems; while some serve as community and safety-net facilities, others are research-intensive referral centers. AMCs are best known for the latter capacity, as providers of cutting-edge tertiary and quaternary care. Although they make up only 6% of total hospitals in the U.S. health system, these academic referral centers account for 47% of organ transplants, 60% of level one trauma centers, and 66% of burn units.1 However, the sustainability of a business model built on intensive, referral-oriented acute care is eroding. In an effort to control cost growth, Medicare and commercial insurers are steadily shifting away from fee-for-service reimbursement methods that generously compensate providers for advanced procedures and D. Stein is director, Medical and Clinical Services, Walmart, Bentonville, Arkansas. C. Chen is a resident physician, Massachusetts General Hospital, Boston, Massachusetts. D.C. Ackerly is associate medical director, Population Health and Continuing Care, Partners HealthCare, and instructor in medicine, Harvard Medical School, Boston, Massachusetts. Correspondence should be addressed to Daniel Stein, 702 SW 8th St., Bentonville, AR 72716; telephone: (479) 204-6857; e-mail: [email protected]. Acad Med. 2015;90:594–598. First published online December 16, 2014 doi: 10.1097/ACM.0000000000000606
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academic medical center (AMC) requires navigating a critical tension: The academic referral business model, driven by tertiary-level care, is fundamentally in conflict with population health. Referral AMCs that create successful value-driven population health systems within their organizations will in effect disrupt their own existing tertiary care businesses. The theory of disruptive innovation suggests that balancing the push and pull of academic and accountable
care within a single organization is achievable. However, it will require significant shifts in resource allocation and changes in management structure to enable AMCs to make the inherent difficult choices and trade-offs that will ensue. On the basis of the theories of disruptive innovation, the authors present recommendations for how academic health systems can successfully navigate these issues as they transition toward accountability-driven care.
instead are moving toward accountabilitydriven payment approaches, which reward providers for improving the health of their patient populations.2 Numerous leaders in academic medicine have argued that AMCs that have traditionally focused on tertiary and quaternary care must prepare for the growing importance of accountability-driven payment models by adopting population health initiatives.3–7
to accountability-driven care and present recommendations for how academic referral centers can navigate these issues.
Although the shift toward accountabilitydriven payment has merit, execution of this strategy will prove significantly more problematic than most observers have appreciated. To successfully implement an accountable care health strategy, an academic referral center must navigate a critical tension: Their existing tertiary care driven business model is fundamentally in conflict with that of population health. Referral AMCs that create successful value-driven population health systems within their organizations will in effect disrupt their own existing core businesses. The theory of disruptive innovation suggests that it is possible to balance the push and pull of academic and accountable care within a single organization. However, achieving that balance will require AMCs to shift their resource allocation and develop management structures that will enable AMCs to make the difficult choices and trade-offs inherent to this business disruption. In this Perspective, we discuss the challenges in the transition
Two Competing Visions for Care
To provide high-end medical care, referral AMCs often heavily invest in cutting-edge medical equipment, facilities, and personnel. The high fixed costs of these resources incentivize AMCs to deliver high volumes of fee-for-service patients into these expensive medical facilities to keep them at or near capacity. Empty beds represent lost revenue; even if an insurer pays an AMC less than the cost of an admission, accepting the patient is still better financially than letting the bed remain empty because the majority of the hospital’s costs are incurred whether or not each bed is occupied. In contrast, accountable care business models, whether accountable care organizations (ACOs), bundled payments, or global capitation, reward providers for reducing the medical expenditures of their patient panels while meeting quality benchmarks. This model incentivizes providers to build highly efficient care delivery systems that promote patient wellness and keep patients out of expensive care settings such as emergency rooms and hospitals. Cognizant of the changing policy landscape, leaders of major academic referral centers have been largely united
Academic Medicine, Vol. 90, No. 5 / May 2015
Perspective
in their call for their institutions and peers to embrace accountable care. Some observers have suggested that building a wellness-oriented health system around an academic hospital with advanced care capacity has the potential to create an organization that is uniquely capable of both preventive and specialty medicine.4 Others have argued that the profit formulas of the two business models can be synergistic: The primary care network of an ACO can refer more patients to the tertiary care facilities of its AMC, and revenue from tertiary care can be used to build the infrastructure (such as health IT) for accountable care.1 Despite the optimism for accountabilitydriven care expressed in the academic literature, only a handful of academic referral centers such as Partners HealthCare and Beth Israel Deaconess Hospital have voluntarily taken on higherfinancial-risk accountable care contracts through the Pioneer ACO program or joined bundled payment demonstrations.8 The majority of AMCs have remained focused on their core business model. Those that have joined ACOs have primarily focused on upside-only, lowfinancial-risk ACO contracts under the Medicare Shared Savings Program. The University of Michigan, widely recognized as a national leader in care quality, left the Pioneer ACO program after a year of participation.9
The gap between the optimism expressed in the academic literature about accountable care and the hesitation of academic referral centers to adopt accountable care business models is a reflection of two fundamental management challenges. First, accountable and academic models require very different sets of resources (Figure 1).10 Whereas the academic model requires advanced care units, cuttingedge facilities, and specialty and referral networks, a successful accountable care business requires a very different set of resources based around efficiently run population health programs. These include a strong, integrated primary care foundation optimized to deliver preventive health; low-cost, convenient, community-based treatment venues to deliver basic acute and chronic care more efficiently; sophisticated patient engagement programs to identify and manage lower-risk patient populations to prevent them from developing highercost medical conditions; and high-touch care management services for the most medically complex and expensive patients. Most referral AMCs lack these resources today. Although some academic hospitals have networks of primary care providers, most of their primary care resources have been oriented toward caring for patients requiring advanced medical care rather than for patients needing basic
Value Proposition Core Academic Medical Business: • We will deliver advanced medical care through world-renowned medical experts and facilities. • Our research and medical training programs ensure you will receive cutting-edge treatment. Accountable Care Business: • We will help keep you healthy through convenient, affordable care options. • By helping manage your chronic illnesses, we will help you avoid disease progression and unnecessary and expensive medical care.
medical care and care management. For example, many AMCs have developed processes to expedite specialty physician evaluation for their own primary care patients yet do not have adequate social work staff in their primary care offices to help coordinate resources for their needy patients. To make this transition, AMCs will need to redirect a significant portion of their care delivery assets away from specialty, advanced care in favor of significant investments in population health resources. The second, and more challenging, obstacle to integrating academic and accountable care is that success in one model ultimately comes at the expense of the other. Although academic hospitals require high bed capacity and high utilization rates of their advanced diagnostic and therapeutic staff, equipment, and facilities to sustain their business model, the central goal of accountable care business is to reduce the number of patients who need such services. This dynamic, where a new business model is successful at the expense of an existing, entrenched business, is the core of disruptive innovation. The Model of Disruptive Innovation
Across various industries, marketshifting innovation often occurs not at
Resources Core Academic Medical Business: • Expert specialists and researchers • Strong hospital brands and academic affiliation • Cutting-edge facilities and medical technologies • Sophisticated referral networks Accountable Care Business: • Low-cost, convenient treatment venues • Robust primary care foundation and patientcentered medical homes • Population health programs and IT systems • Patient engagement tools
Processes
Priorities/Profit Formula
Core Academic Medical Business: • Referrals from community providers • Complex care pathways to treat any/everything • Experimental treatment protocols • Investment in advanced treatment facilities New Accountable Care Business: • Care collaborations with community providers • Standardized care pathways for basic conditions • Technology-enabled decision support to push care to lower cost providers and settings • Investment in low-cost, convenient clinics
Core Academic Medical Business: • Expensive fee-for-service reimbursement for advanced clinical services and inpatient care • Government support for medical training • Research grant funding and philanthropy New Accountable Care Business: • Shared savings by keeping patient population healthy and reducing medical costs • Using lower-cost medical settings when possible • Avoiding expensive inpatient admissions; when admissions necessary, using high-value facilities
Figure 1 Differences between traditional academic medical business and accountable care business, which reflect fundamental management challenges. IT indicates information technology. Adapted from Christensen and Johnson.10
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the high end of the market but, instead, at the low end. As incumbent firms within an industry focus on improving their products to ever-higher levels of sophistication, they often overlook competitors who introduce simpler, more convenient, and less expensive products. These products are less functional but sufficient for most consumers. Over time, the low-end products capture a significant portion of the market by meeting the needs of customers who were previously overserved by the expensive, ever-more-sophisticated products marketed by incumbent companies. This pattern, described by Harvard Business School professor Clayton Christensen11 as “disruptive innovation,” has repeated itself consistently across different industries and time periods. Examples include the home telephone, which disrupted the telegraph industry; the Kodak camera, which disrupted professional photography; and the tablet computer, which has disrupted the market for personal computers.12 Historically, disruptive innovation in health care has been limited by government regulation and the thirdparty fee-for-service reimbursement system, which has made high-cost, technologically sophisticated care a profitable business model.12 However, the slow but steady shift to accountable reimbursement models by Medicare and private payers, as well as the rising role of consumerism in health care, have created an opportunity for disruptive innovation to emerge. Under accountable reimbursement models, organizations have incentives to do everything they can to avoid requiring expensive, intensive interventions and therefore are motivated to help patients better manage their health to avoid preventable conditions and complications. These efforts, when successful, have the potential to render unnecessary much of the highly sophisticated, academic-level care that is delivered today. For example, Partners HealthCare’s Integrated Care Management Program uses nurse case managers to help coordinate care for its highest-risk patients, who represent a disproportionate share of Partners HealthCare’s medical spending. These nurse managers arrange follow-up care, identify social resources, provide health counseling, and draw the attention of
596
physicians when patients first begin to endorse symptoms, all in the hope of keeping patients out of hospitals and emergency rooms. The program has decreased hospitalizations by 15% to 20% while improving care quality and achieving savings for Partners’ accountable business at the expense of its academic business.13 Accountable care business models create incentives for health systems to deliver care in the most efficient setting possible. For the majority of patients with relatively straightforward primary and secondary care needs, referral AMCs’ resources are excessive and unnecessarily expensive. In the language of disruptive innovation, these AMCs overserve the market. Rather than admit noncritically ill patients to an advanced academic hospital, an accountable care business would instead drive inpatient care to other providers, such as freestanding care centers or community hospitals for secondary care, if these nonacademic providers can offer high-quality inpatient care at lower prices than academic hospitals. Likewise, the accountable care business would want to direct patients to low-cost community providers, such as a retail clinic, rather than to a more expensive and less convenient primary care clinic affiliated with the AMC. Some health systems have gone so far as to take medical care directly to the patient. For example, Presbyterian Health in New Mexico has established a "hospital at home" program that brings
medical equipment and personnel to patients’ homes, providing inpatient-level services to acutely sick patients in a more convenient, lower-cost setting.14 This continued push to provide care through more convenient and lowercost settings and models will eventually displace more and more of the services offered today by academic referral centers. Patients who truly require tertiary- and quaternary-level clinical care would still be sent to referral AMCs, but many of the less complicated patients who today are hospitalized in high-level academic facilities may be cared for in lower-cost settings in the future. As a result, competition may grow fierce for the subgroup of patients truly needing advanced care, forcing referral AMCs to expand their referral population base and potentially even driving some academic referral centers out of business. The Way Forward
Referral AMCs must adjust to the new reality of accountable care. However, to successfully execute an accountable care business strategy within an AMC, its leadership must appreciate the inherent tension between the two business models. There must be explicit recognition that accountable care is a very different business than academic care and that, if successful, accountable care will disrupt much of academic care. In Table 1, we present the key steps to execute this strategy and navigate the tension between
Table 1 Key Strategic Imperatives for Implementing a Successful Accountable Care Business Within an Academic Medical Center (AMC) Key strategic imperativesa
Comments
Obtain leadership commitment
• A MC’s senior leadership must fully embrace the need for accountable care business. • AMC’s senior leadership must create sense of organizational urgency. • Accountable care business requires different resources, processes, and profit formula. • An organizational structure with accountable care business reporting to AMC business will impede success.
Create autonomous business unit
Empower accountable care team
• A ccountable care team must be given autonomy to invest in new care models and use non-AMC providers and facilities to deliver high-quality, lower-cost care.
Establish dedicated resources
• A ccountable care team must have a dedicated funding stream and control over how its budget is spent.
Report directly to health system chief executive officer
• O nly the CEO can manage the inevitable tension between accountable and academic care.
Most imperative categories based on concepts presented by Christensen and Raynor17 for approaches to potentially disruptive business opportunities.
a
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the existing academic business model and the new accountable care business. First, the AMC’s senior leadership must fully embrace the need for an accountable care business, and they in turn must establish a sense of organizational urgency in pursuing such a business.15 Drawing on their academic mission, AMCs can present this new business as an opportunity to lead the nation in being better stewards of societal resources.3 Although simple in concept, executing this first step may be a challenge in many AMCs, which are notoriously decentralized and complex, with multiple lines of authority within and across traditional academic departments, research institutes, and management.4,16 Second, responsibility for developing the accountable care business must be granted to an autonomous team.17 Although AMCs may be tempted to embed this team within its existing businesses (e.g., within its hospital or physician leadership structures), accountable care requires managing and aligning the full spectrum of patient care needs across multiple care settings, departments, and divisions—from primary care to emergency rooms to hospitals to postacute providers. Authority to do so cannot derive within a single business unit or department. More importantly, it is not possible for a single operational unit to successfully deliver on two very different and conflicting business models.17 Under these conditions, most organizations fail to adopt the new innovation because it erodes the profitability of its existing business and therefore meets strong internal resistance from those inside the organization who have the most to lose. Such an endeavor at an AMC would inevitably weaken and critically handicap the new accountable care business as management pushes it to conform to the processes, metrics, and financial imperatives of the existing academic care business.18 The only way to avoid this clash with the core academic care business is to set up the new accountable care business as a separate business unit, with its own revenue and costs. This unit should be given sufficient autonomy to build needed resources, develop new care management processes, and pursue unique profit models.18 This autonomous unit should
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have a dedicated funding stream, with the flexibility and control to determine how those funds are invested. It should be explicitly recognized and accepted from the outset that the accountable care business may conflict with the priorities of the core academic care business.17 Finally, it is critical that the new accountable care business directly report to the senior leader who has the authority to continue investing and prioritizing the accountable care business even when it is causing financial losses for the core academic care centers. This trade-off will inevitably create tensions between the businesses. In most organizations, only the most senior manager, the chief executive officer, could effectively manage this trade-off.16,17 Conclusion
Ultimately, the barriers to successful adoption of accountable care by academic referral centers will not be local competitors, payers, or even government regulators. The greatest challenges lie in its conflict with the existing academic referral center business model. For such AMCs to successfully create innovative accountable care business and to improve the value of their care delivery,19 their leadership must be fully committed to the undertaking and willing to help shepherd the business through the inevitable conflicts that will arise. In addition to the issues outlined above, the transition to accountable care will raise a number of other questions for AMCs. Faculty members have been traditionally promoted and rewarded on the basis of research output or teaching expertise. However, performance in accountable care contracts is not dependent on either of those domains but rather on the ability to deliver care more efficiently. Should health systems adapt by providing faculty promotion opportunities based on value of their care delivery? Many AMCs have faculty engaged in research around health policy and health care delivery. How can AMCs best leverage their academic resources to ease this transition? The fact that AMCs have clinical faculty from many different specialties creates opportunities for their accountable care initiatives (e.g., case management) to cut across clinical departments. How can AMCs best use
multispecialty engagement in their efforts to reduce costs? As payment models shift, AMCs will and should continue to be the crown jewels of America’s health care system; there will always be a need for tertiaryand quaternary-level care, and for hospitals to produce well-trained young physicians. But the transition from highintensity focused care to a population health management system will be more challenging for AMCs than many observers have appreciated. Funding/Support: None reported. Other disclosures: Dr. Daniel Stein is director of medical and clinical services for Walmart. Dr. Ackerly is associate medical director for population health and continuing care at Partners HealthCare and serves on the advisory board of CarePort Health. Ethical approval: Reported as not applicable. Disclaimer: The findings and views in this article do not reflect the official policy of Walmart, CarePort Health, Partners HealthCare, or Massachusetts General Hospital.
References 1 Pricewaterhouse Cooper. The Future of the Academic Medical Center: Strategies to Avoid a Margin Meltdown. Dallas, Tex: Pricewaterhouse Coopers; 2012. 2 Griner PF. Payment reform and the mission of academic medical centers. N Engl J Med. 2010;363:1784–1786. 3 Nabel E, Ferris T, Slavin P. Balancing AMCs’ missions and health care costs—mission impossible? N Engl J Med. 2013;369:994–996. 4 Dzau VJ, Cho A, Ellaissi W, et al. Transforming academic health centers for an uncertain future. N Engl J Med. 2013;369:991–993. 5 Washington A, Coye M, Feinberg D. Academic health centers and the evolution of the health care system. JAMA. 310;18:1929–1930. 6 Fuchs VR. Current challenges to academic health centers. JAMA. 2013;310:1021–1022. 7 Grumbach K, Lucey CR, Johnston SC. Transforming from centers of learning to learning health systems: The challenge for academic health centers. JAMA. 2014;311:1109–1110. 8 Centers for Medicare and Medicaid Services. Pioneer ACO Model. http://innovation. cms.gov/initiatives/Pioneer-ACO-Model/. Accessed October 19, 2014. 9 University of Michigan Health System. Success and change: U-M Pioneer ACO update. July 16, 2013. http://www. uofmhealth.org/news/archive/201307/ success-and-change-u-m-pioneer-acoupdate. Accessed October 19, 2014. 10 Christensen CM, Johnson MW. What Are Business Models and How Are They Built? Harvard Business School Module Note 610-019. August 2009. http://www.hbs. edu/faculty/Pages/item.aspx?num=37729. Accessed December 4, 2014.
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Perspective 11 Christensen CM. The Innovator’s Dilemma: The Revolutionary Book That Will Change the Way You Do Business. New York, NY: HarperBusiness; 1997. 12 Christensen CM, Bohmer R, Kenagy J. Will disruptive innovations cure health care? Harv Bus Rev. http://hbr.org/web/extras/insightcenter/health-care/will-disruptive-innovationscure-health-care. Accessed October 23, 2014. 13 Kowalczyk L. Hospital strains to cut elder care costs. Boston Globe. May 17, 2009. http://www.boston.com/news/health/ articles/2009/05/17/hospital_strains_to_ cut_elder_care_costs/?s_campaign=8315. Accessed October 23, 2014.
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14 Cryer L, Shannon SB, Van Amsterdam M, Leff B. Costs for ‘hospital at home’ patients were 19 percent lower, with equal or better outcomes compared to similar inpatients. Health Aff (Millwood). 2012;31: 1237–1243. 15 Kotter JP. To create healthy urgency, focus on a big opportunity [blog post]. Harv Bus Rev. February 21, 2014. blogs.hbr. org/2014/02/to-create-healthy-urgencyfocus-on-a-big-opportunity. Accessed October 26, 2014. 16 Kastor J. Accountable care organizations at academic medical centers. N Engl J Med. 2011;364:e11.
17 Christensen CM, Raynor ME. The Innovator’s Solution: Creating and Sustaining Successful Growth. Boston, Mass: Harvard Business School Press; 2003. 18 Christensen CM, Kaufman SP. Assessing Your Organization’s Capabilities: Resources, Processes, and Priorities. Harvard Business School Module Note 607-014. September 2006 (Revised August 2008). http://www.hbs. edu/faculty/Pages/item.aspx?num=33501. Accessed December 4, 2014. 19 Porter ME, Lee TH. The strategy that will fix health care. Harv Bus Rev. October 2013. http://hbr.org/2013/10/the-strategy-that-willfix-health-care/. Accessed October 23, 2014.
Academic Medicine, Vol. 90, No. 5 / May 2015
Disruptive Innovation in Academic Medical Centers: Balancing Accountable and Academic Care Daniel Stein, MD, MBA, Christopher Chen, MD, and D. Clay Ackerly, MD, MSc
Abstract Numerous academic medicine leaders have argued that academic referral centers must prepare for the growing importance of accountability-driven payment models by adopting population health initiatives. Although this shift has merit, execution of this strategy will prove significantly more problematic than most observers have appreciated. The authors describe how successful implementation of an accountable care health strategy within a referral
A
cademic medical centers (AMCs) in the United States are a heterogeneous group of health systems; while some serve as community and safety-net facilities, others are research-intensive referral centers. AMCs are best known for the latter capacity, as providers of cutting-edge tertiary and quaternary care. Although they make up only 6% of total hospitals in the U.S. health system, these academic referral centers account for 47% of organ transplants, 60% of level one trauma centers, and 66% of burn units.1 However, the sustainability of a business model built on intensive, referral-oriented acute care is eroding. In an effort to control cost growth, Medicare and commercial insurers are steadily shifting away from fee-for-service reimbursement methods that generously compensate providers for advanced procedures and D. Stein is director, Medical and Clinical Services, Walmart, Bentonville, Arkansas. C. Chen is a resident physician, Massachusetts General Hospital, Boston, Massachusetts. D.C. Ackerly is associate medical director, Population Health and Continuing Care, Partners HealthCare, and instructor in medicine, Harvard Medical School, Boston, Massachusetts. Correspondence should be addressed to Daniel Stein, 702 SW 8th St., Bentonville, AR 72716; telephone: (479) 204-6857; e-mail: [email protected]. Acad Med. 2015;90:594–598. First published online December 16, 2014 doi: 10.1097/ACM.0000000000000606
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academic medical center (AMC) requires navigating a critical tension: The academic referral business model, driven by tertiary-level care, is fundamentally in conflict with population health. Referral AMCs that create successful value-driven population health systems within their organizations will in effect disrupt their own existing tertiary care businesses. The theory of disruptive innovation suggests that balancing the push and pull of academic and accountable
care within a single organization is achievable. However, it will require significant shifts in resource allocation and changes in management structure to enable AMCs to make the inherent difficult choices and trade-offs that will ensue. On the basis of the theories of disruptive innovation, the authors present recommendations for how academic health systems can successfully navigate these issues as they transition toward accountability-driven care.
instead are moving toward accountabilitydriven payment approaches, which reward providers for improving the health of their patient populations.2 Numerous leaders in academic medicine have argued that AMCs that have traditionally focused on tertiary and quaternary care must prepare for the growing importance of accountability-driven payment models by adopting population health initiatives.3–7
to accountability-driven care and present recommendations for how academic referral centers can navigate these issues.
Although the shift toward accountabilitydriven payment has merit, execution of this strategy will prove significantly more problematic than most observers have appreciated. To successfully implement an accountable care health strategy, an academic referral center must navigate a critical tension: Their existing tertiary care driven business model is fundamentally in conflict with that of population health. Referral AMCs that create successful value-driven population health systems within their organizations will in effect disrupt their own existing core businesses. The theory of disruptive innovation suggests that it is possible to balance the push and pull of academic and accountable care within a single organization. However, achieving that balance will require AMCs to shift their resource allocation and develop management structures that will enable AMCs to make the difficult choices and trade-offs inherent to this business disruption. In this Perspective, we discuss the challenges in the transition
Two Competing Visions for Care
To provide high-end medical care, referral AMCs often heavily invest in cutting-edge medical equipment, facilities, and personnel. The high fixed costs of these resources incentivize AMCs to deliver high volumes of fee-for-service patients into these expensive medical facilities to keep them at or near capacity. Empty beds represent lost revenue; even if an insurer pays an AMC less than the cost of an admission, accepting the patient is still better financially than letting the bed remain empty because the majority of the hospital’s costs are incurred whether or not each bed is occupied. In contrast, accountable care business models, whether accountable care organizations (ACOs), bundled payments, or global capitation, reward providers for reducing the medical expenditures of their patient panels while meeting quality benchmarks. This model incentivizes providers to build highly efficient care delivery systems that promote patient wellness and keep patients out of expensive care settings such as emergency rooms and hospitals. Cognizant of the changing policy landscape, leaders of major academic referral centers have been largely united
Academic Medicine, Vol. 90, No. 5 / May 2015
Perspective
in their call for their institutions and peers to embrace accountable care. Some observers have suggested that building a wellness-oriented health system around an academic hospital with advanced care capacity has the potential to create an organization that is uniquely capable of both preventive and specialty medicine.4 Others have argued that the profit formulas of the two business models can be synergistic: The primary care network of an ACO can refer more patients to the tertiary care facilities of its AMC, and revenue from tertiary care can be used to build the infrastructure (such as health IT) for accountable care.1 Despite the optimism for accountabilitydriven care expressed in the academic literature, only a handful of academic referral centers such as Partners HealthCare and Beth Israel Deaconess Hospital have voluntarily taken on higherfinancial-risk accountable care contracts through the Pioneer ACO program or joined bundled payment demonstrations.8 The majority of AMCs have remained focused on their core business model. Those that have joined ACOs have primarily focused on upside-only, lowfinancial-risk ACO contracts under the Medicare Shared Savings Program. The University of Michigan, widely recognized as a national leader in care quality, left the Pioneer ACO program after a year of participation.9
The gap between the optimism expressed in the academic literature about accountable care and the hesitation of academic referral centers to adopt accountable care business models is a reflection of two fundamental management challenges. First, accountable and academic models require very different sets of resources (Figure 1).10 Whereas the academic model requires advanced care units, cuttingedge facilities, and specialty and referral networks, a successful accountable care business requires a very different set of resources based around efficiently run population health programs. These include a strong, integrated primary care foundation optimized to deliver preventive health; low-cost, convenient, community-based treatment venues to deliver basic acute and chronic care more efficiently; sophisticated patient engagement programs to identify and manage lower-risk patient populations to prevent them from developing highercost medical conditions; and high-touch care management services for the most medically complex and expensive patients. Most referral AMCs lack these resources today. Although some academic hospitals have networks of primary care providers, most of their primary care resources have been oriented toward caring for patients requiring advanced medical care rather than for patients needing basic
Value Proposition Core Academic Medical Business: • We will deliver advanced medical care through world-renowned medical experts and facilities. • Our research and medical training programs ensure you will receive cutting-edge treatment. Accountable Care Business: • We will help keep you healthy through convenient, affordable care options. • By helping manage your chronic illnesses, we will help you avoid disease progression and unnecessary and expensive medical care.
medical care and care management. For example, many AMCs have developed processes to expedite specialty physician evaluation for their own primary care patients yet do not have adequate social work staff in their primary care offices to help coordinate resources for their needy patients. To make this transition, AMCs will need to redirect a significant portion of their care delivery assets away from specialty, advanced care in favor of significant investments in population health resources. The second, and more challenging, obstacle to integrating academic and accountable care is that success in one model ultimately comes at the expense of the other. Although academic hospitals require high bed capacity and high utilization rates of their advanced diagnostic and therapeutic staff, equipment, and facilities to sustain their business model, the central goal of accountable care business is to reduce the number of patients who need such services. This dynamic, where a new business model is successful at the expense of an existing, entrenched business, is the core of disruptive innovation. The Model of Disruptive Innovation
Across various industries, marketshifting innovation often occurs not at
Resources Core Academic Medical Business: • Expert specialists and researchers • Strong hospital brands and academic affiliation • Cutting-edge facilities and medical technologies • Sophisticated referral networks Accountable Care Business: • Low-cost, convenient treatment venues • Robust primary care foundation and patientcentered medical homes • Population health programs and IT systems • Patient engagement tools
Processes
Priorities/Profit Formula
Core Academic Medical Business: • Referrals from community providers • Complex care pathways to treat any/everything • Experimental treatment protocols • Investment in advanced treatment facilities New Accountable Care Business: • Care collaborations with community providers • Standardized care pathways for basic conditions • Technology-enabled decision support to push care to lower cost providers and settings • Investment in low-cost, convenient clinics
Core Academic Medical Business: • Expensive fee-for-service reimbursement for advanced clinical services and inpatient care • Government support for medical training • Research grant funding and philanthropy New Accountable Care Business: • Shared savings by keeping patient population healthy and reducing medical costs • Using lower-cost medical settings when possible • Avoiding expensive inpatient admissions; when admissions necessary, using high-value facilities
Figure 1 Differences between traditional academic medical business and accountable care business, which reflect fundamental management challenges. IT indicates information technology. Adapted from Christensen and Johnson.10
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the high end of the market but, instead, at the low end. As incumbent firms within an industry focus on improving their products to ever-higher levels of sophistication, they often overlook competitors who introduce simpler, more convenient, and less expensive products. These products are less functional but sufficient for most consumers. Over time, the low-end products capture a significant portion of the market by meeting the needs of customers who were previously overserved by the expensive, ever-more-sophisticated products marketed by incumbent companies. This pattern, described by Harvard Business School professor Clayton Christensen11 as “disruptive innovation,” has repeated itself consistently across different industries and time periods. Examples include the home telephone, which disrupted the telegraph industry; the Kodak camera, which disrupted professional photography; and the tablet computer, which has disrupted the market for personal computers.12 Historically, disruptive innovation in health care has been limited by government regulation and the thirdparty fee-for-service reimbursement system, which has made high-cost, technologically sophisticated care a profitable business model.12 However, the slow but steady shift to accountable reimbursement models by Medicare and private payers, as well as the rising role of consumerism in health care, have created an opportunity for disruptive innovation to emerge. Under accountable reimbursement models, organizations have incentives to do everything they can to avoid requiring expensive, intensive interventions and therefore are motivated to help patients better manage their health to avoid preventable conditions and complications. These efforts, when successful, have the potential to render unnecessary much of the highly sophisticated, academic-level care that is delivered today. For example, Partners HealthCare’s Integrated Care Management Program uses nurse case managers to help coordinate care for its highest-risk patients, who represent a disproportionate share of Partners HealthCare’s medical spending. These nurse managers arrange follow-up care, identify social resources, provide health counseling, and draw the attention of
596
physicians when patients first begin to endorse symptoms, all in the hope of keeping patients out of hospitals and emergency rooms. The program has decreased hospitalizations by 15% to 20% while improving care quality and achieving savings for Partners’ accountable business at the expense of its academic business.13 Accountable care business models create incentives for health systems to deliver care in the most efficient setting possible. For the majority of patients with relatively straightforward primary and secondary care needs, referral AMCs’ resources are excessive and unnecessarily expensive. In the language of disruptive innovation, these AMCs overserve the market. Rather than admit noncritically ill patients to an advanced academic hospital, an accountable care business would instead drive inpatient care to other providers, such as freestanding care centers or community hospitals for secondary care, if these nonacademic providers can offer high-quality inpatient care at lower prices than academic hospitals. Likewise, the accountable care business would want to direct patients to low-cost community providers, such as a retail clinic, rather than to a more expensive and less convenient primary care clinic affiliated with the AMC. Some health systems have gone so far as to take medical care directly to the patient. For example, Presbyterian Health in New Mexico has established a "hospital at home" program that brings
medical equipment and personnel to patients’ homes, providing inpatient-level services to acutely sick patients in a more convenient, lower-cost setting.14 This continued push to provide care through more convenient and lowercost settings and models will eventually displace more and more of the services offered today by academic referral centers. Patients who truly require tertiary- and quaternary-level clinical care would still be sent to referral AMCs, but many of the less complicated patients who today are hospitalized in high-level academic facilities may be cared for in lower-cost settings in the future. As a result, competition may grow fierce for the subgroup of patients truly needing advanced care, forcing referral AMCs to expand their referral population base and potentially even driving some academic referral centers out of business. The Way Forward
Referral AMCs must adjust to the new reality of accountable care. However, to successfully execute an accountable care business strategy within an AMC, its leadership must appreciate the inherent tension between the two business models. There must be explicit recognition that accountable care is a very different business than academic care and that, if successful, accountable care will disrupt much of academic care. In Table 1, we present the key steps to execute this strategy and navigate the tension between
Table 1 Key Strategic Imperatives for Implementing a Successful Accountable Care Business Within an Academic Medical Center (AMC) Key strategic imperativesa
Comments
Obtain leadership commitment
• A MC’s senior leadership must fully embrace the need for accountable care business. • AMC’s senior leadership must create sense of organizational urgency. • Accountable care business requires different resources, processes, and profit formula. • An organizational structure with accountable care business reporting to AMC business will impede success.
Create autonomous business unit
Empower accountable care team
• A ccountable care team must be given autonomy to invest in new care models and use non-AMC providers and facilities to deliver high-quality, lower-cost care.
Establish dedicated resources
• A ccountable care team must have a dedicated funding stream and control over how its budget is spent.
Report directly to health system chief executive officer
• O nly the CEO can manage the inevitable tension between accountable and academic care.
Most imperative categories based on concepts presented by Christensen and Raynor17 for approaches to potentially disruptive business opportunities.
a
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Perspective
the existing academic business model and the new accountable care business. First, the AMC’s senior leadership must fully embrace the need for an accountable care business, and they in turn must establish a sense of organizational urgency in pursuing such a business.15 Drawing on their academic mission, AMCs can present this new business as an opportunity to lead the nation in being better stewards of societal resources.3 Although simple in concept, executing this first step may be a challenge in many AMCs, which are notoriously decentralized and complex, with multiple lines of authority within and across traditional academic departments, research institutes, and management.4,16 Second, responsibility for developing the accountable care business must be granted to an autonomous team.17 Although AMCs may be tempted to embed this team within its existing businesses (e.g., within its hospital or physician leadership structures), accountable care requires managing and aligning the full spectrum of patient care needs across multiple care settings, departments, and divisions—from primary care to emergency rooms to hospitals to postacute providers. Authority to do so cannot derive within a single business unit or department. More importantly, it is not possible for a single operational unit to successfully deliver on two very different and conflicting business models.17 Under these conditions, most organizations fail to adopt the new innovation because it erodes the profitability of its existing business and therefore meets strong internal resistance from those inside the organization who have the most to lose. Such an endeavor at an AMC would inevitably weaken and critically handicap the new accountable care business as management pushes it to conform to the processes, metrics, and financial imperatives of the existing academic care business.18 The only way to avoid this clash with the core academic care business is to set up the new accountable care business as a separate business unit, with its own revenue and costs. This unit should be given sufficient autonomy to build needed resources, develop new care management processes, and pursue unique profit models.18 This autonomous unit should
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have a dedicated funding stream, with the flexibility and control to determine how those funds are invested. It should be explicitly recognized and accepted from the outset that the accountable care business may conflict with the priorities of the core academic care business.17 Finally, it is critical that the new accountable care business directly report to the senior leader who has the authority to continue investing and prioritizing the accountable care business even when it is causing financial losses for the core academic care centers. This trade-off will inevitably create tensions between the businesses. In most organizations, only the most senior manager, the chief executive officer, could effectively manage this trade-off.16,17 Conclusion
Ultimately, the barriers to successful adoption of accountable care by academic referral centers will not be local competitors, payers, or even government regulators. The greatest challenges lie in its conflict with the existing academic referral center business model. For such AMCs to successfully create innovative accountable care business and to improve the value of their care delivery,19 their leadership must be fully committed to the undertaking and willing to help shepherd the business through the inevitable conflicts that will arise. In addition to the issues outlined above, the transition to accountable care will raise a number of other questions for AMCs. Faculty members have been traditionally promoted and rewarded on the basis of research output or teaching expertise. However, performance in accountable care contracts is not dependent on either of those domains but rather on the ability to deliver care more efficiently. Should health systems adapt by providing faculty promotion opportunities based on value of their care delivery? Many AMCs have faculty engaged in research around health policy and health care delivery. How can AMCs best leverage their academic resources to ease this transition? The fact that AMCs have clinical faculty from many different specialties creates opportunities for their accountable care initiatives (e.g., case management) to cut across clinical departments. How can AMCs best use
multispecialty engagement in their efforts to reduce costs? As payment models shift, AMCs will and should continue to be the crown jewels of America’s health care system; there will always be a need for tertiaryand quaternary-level care, and for hospitals to produce well-trained young physicians. But the transition from highintensity focused care to a population health management system will be more challenging for AMCs than many observers have appreciated. Funding/Support: None reported. Other disclosures: Dr. Daniel Stein is director of medical and clinical services for Walmart. Dr. Ackerly is associate medical director for population health and continuing care at Partners HealthCare and serves on the advisory board of CarePort Health. Ethical approval: Reported as not applicable. Disclaimer: The findings and views in this article do not reflect the official policy of Walmart, CarePort Health, Partners HealthCare, or Massachusetts General Hospital.
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