With ACOs as such a hot topic right now, and the variety of forms these organizations can take, healthcare investors can examine not only opportunities in ACOs themselves but in healthcare related businesses that will service or be affiliated with ACOs. A fundamental tenant of the ACO model is investment in infrastructure aimed at both cost-efficient delivery of care and enhancing quality of care. Thus there will very likely be businesses that emerge or expand to focus on such infrastructure and consolidation of certain resources. Such businesses may include the following, most of which exist already today but will have the opportunity to expand their services to meet the needs of ACOs:
1) Billing and coding services, including software manufacturers for internal billing, coding and collection functions, as well as outside third party billing companies, modified to efficiently retrieve all necessary data for the different components from the ACO for consolidated billing;
2) Payor contracting and payor relations professionals, particularly as commercial payors integrate ACO models into their plans;
3) Analytics companies to provide analysis of the various patient intake, record-keeping, data sharing, billing/collection and quality initiative aspects of the ACO;
4) Purchasing organizations and equipment lessors with programs designed for ACOs rather than the individual physician practice, hospitals and other individual components;
5) Health information technology companies. Forward-thinking health IT hardware and software manufacturers in particular can examine the needs of ACOs seeking to roll in different provider types and a myriad of physical sites and their need to efficiently share information in a HIPAA-compliant manner.
One way that CMS seeks to better understand the efficiency opportunities with ACOs is by engaging the 10 healthcare organizations that participated in its five-year Physician Group Practice (PGP) Demonstration. The PGP Demonstration, which began in 2005 and ended in March of 2010, enabled physician groups to share up to 80% of the savings they generated above a minimum threshold by improving quality and reducing costs. CMS hopes engaging these PGP Demonstration participants will help resolve some of the outstanding issues related to quality and cost measurement. CMS has indicated that these PGP Demonstration participants may provide valuable insight into the infrastructure changes that they themselves found effective, and those exemplary changes could provide a template for future ACOs. Healthcare investors can also follow CMS’s analysis with these PGP Demonstration participants to better understand what has worked for other organizations as a way of anticipating what related businesses may be most in demand.
In addition to tracking these CMS inquiries, Sarah Klein’s article for The Commonwealth Fund examines the admissions, medical records, health IT, patient survey and other infrastructure changes made by four of the ten participants and their feedback as to the value of those changes. Executives from St. John’s Health System based in Springfield, Missouri, Everett Clinic based in Everett, Washington, Billings Clinic in Billings, Montana and Carilion Clinic in Roanoke, Virginia all discuss their systems’ PGP Demonstration experience.
Even if the ultimate success of various ACO models is murky, one thing is clear. There will likely be significant focus on how businesses that service the healthcare industry can fill the needs of ACOs, and interested investors will need to examine the viability of these businesses in light of the ultimate potential and staying power of the ACOs they serve.