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  • Part 3/4: Strategies for Independent Practices During Changing Times

    Strategies for Independent Practices During Changing Times:

    Value-Based Relationships with ACOs

    By Jim Hoyme

    Quote“In health care, the days of business as usual are over. Around the world, every health system is struggling with rising costs and uneven quality despite the hard work of well-intentioned, well-trained clinicians. Countless incremental fixes [have not had much impact]. It’s time for a fundamentally new strategy… maximizing value for patients … achieving the best outcomes at the lowest cost.”


    Michael Porter, PhD, Harvard Business School. Health care strategist
    The Strategy That Will Fix Health Care. HBR Oct 2013

    This is part 3 of a 4 part series on how independent therapy practice owners can develop strategies for long term success in a changing market. In this blog we will address the critical activity of developing meaningful relationships with Accountable Care Organizations – ACOs.


    Review of Parts 1 and 2


    In Part 1 – The Impact of Health Care Reform: 10 Factors Physical Therapists Can’t Ignore – we highlighted these 10 highly influential factors:

    1. Downward Pressure on Reimbursement
    2. The Triple Aim
    3. Volume to Value Payment Models with Risk Sharing
    4. Patient Centeredness
    5. Collaboration
    6. Consolidation
    7. ACOs
    8. PCMHs
    9. Increasing Regulatory Pressures on Providers
    10. Innovation


    These 10 factors all relate to the move toward value delivery in health care.  http://bit.ly/TPI10factors


    In Part 2 – Strategies for Independent Practices During Changing Times: Value-Based Relationships with Health Plans – we emphasized 5 points physical therapists should consider related to those 10 factors:

    1. Delivering Value to Powerful Decision-Makers. A Triple Aim Mission, a Value-Based Culture, and an Innovation Strategy form the basis for a long term relationships with health care decision-makers.
    2. The ‘Commodity Syndrome’ is Killing Us. Overcome the ‘commodity syndrome’ by developing ‘win-win’ solutions addressing health plans’ needs – reducing TCOC and improving enrollees’ health.
    3. The Musculoskeletal Cost Funnel. Therapy practices that can keep a significant number of patients away from high cost medical services can negotiate value-based contracts with health plans.
    4. Value Based Model Options. We described 3 value-based models designed for ‘win-win-win’ – benefit the health plan, reward your practice, improve the health of patients:
      • Per Diem Rate with a financial reward for achieving outcomes benchmarks
      • Case Rate with a financial reward for achieving outcomes benchmarks
      • Shared Savings model based on TCOC savings
    5. Leadership and Teamwork are Critical. Practice leaders must devote time, effort, and resources to lead their teams through the challenges of health care reform. http://bit.ly/TPIvalblog2


    The same 5 points that impact relationships with health plans apply to relationship building with ACOs as well. Let’s check out the opportunities in the ACO world.


    The Growth and Impact of ACOs1


    The Accountable Care Organization, or ACO, came onto the health care scene in 2012. According to the American Academy of Family Physicians, ACOs are defined as “a group of health care providers who agree to take on a shared responsibility for the care of a defined population of patients while assuring active management of both the quality and cost of that care”. In other words, ACOs are accountable for quality and cost. ACOs, in a way, are like a combination of a care system and a health plan.


    There is a lot of information available about ACOs, and here are some of the key points to consider:

    • ACOs must have primary care as their foundation and most are created around hospital systems.
    • There are several types of ACOs; some are Medicare-based, some are commercial-based.
    • All ACOs must share financial risk with the payors.
    • There are about 750 ACOs in the US and the number will grow in 2016.
    • The Next Generation” ACOs, starting in 2016, must bear greater financial risk than previous models.
    • A large majority of Americans now live in an area with 1 ACO and over 50% live near at least 2.
    • A majority of US physicians are now employed by health systems or ACOs.
    • ACOs and health plans are creating ‘narrow networks’ of providers to better manage care and cost.
    • ACO decision makers will decide which providers are allowed to see the ACO’s patients.
    • In many cases, ACOs will actually reimburse independent providers with whom they contract.


    ACOs are here to stay, and their decision-makers will become more powerful and influential as health care reform marches on.


    Opportunities for Independent Physical Therapists with ACOs


    While the thought of the ACO model can be daunting and their threat to private practices is real, tremendous opportunity exists for independent therapy practice owners who can deliver on the needs of ACOs and bring them tangible value. Remember . . . ACOs must deliver a broad range of quality health care services that improve the health of their members, and their providers must manage the cost of that care. The ACO mantra is based on quality and value – two factors many physical therapists have espoused for years. It is an invitation to overcome the ‘commodity syndrome’.

    One of the broad range of services ACOs must deliver is physical therapy, and they essentially have 3 ways to do so:

    1. They can invest their money in bricks, mortar, and people. This gives them full control, but building physical therapy clinics is expensive. Investing in physical therapy infrastructure takes financial and human resources away from other important ACO services.
    2. They can acquire existing private therapy practices. This gives ACOs control, but it is not easy. This approach is expensive, diverts resources, and creates the challenge of integrating the culture of the independent practice into the way of life of the large ACO. Culture change is always hard.
    3. The ACO and independent practice create some type of ‘partner’ agreement. The physical therapy organization remains independently owned and creates a close, trusted relationship with the ACO. The ACO that chooses this approach recognizes the measurable value independent therapy practices bring. Additionally, the partner model provides frees up money for the ACO to invest in more profitable services.



    So how do ACO decision makers decide? It really boils down to two factors . . . Money and Control. Payment methodologies from payors to ACOs are moving from traditional fee for service (FFS) to more risk-sharing, per-member-per-month models called Capitation. As this happens, ACOs must 2start looking at the profit margins of each service line. Physical therapy will become a cost center rather than a profit generator. In an FFS world, physical therapy can generate a lot of revenue for a hospital system by dong more interventions, more visits. In the capitated world of an ACO, however, the cost of delivering and managing physical therapy becomes a major factor. Doing more costs the ACO more of it’s capitated budget, however, doing more effective care in fewer visits saves the ACO money.

    Remember . . . under capitated payment models, ACOs have a finite amount of money to spend on services. Thus they must spend it wisely. Does it make sense to invest in the high cost of delivering and managing physical therapy services? Or does it make more sense to contract out those physical therapy services to a talented independent therapy organization? Key factors independent physical therapy practices must prove they can deliver are:

    • Convenient access across a number of clinics and therapists
    • A reputation for caring, patient-centered service in your community
    • High quality care by talented therapists with measured, high level outcomes
    • A proven process and ability to manage care effectively to eliminate unnecessary interventions and drive down TCOC
    • A willingness and ability to share financial risk with the ACO through innovative changes
    • A Leadership Team to simplify communication, drive innovation, manage change, and hold providers accountable


    Although money and control will always be an issue, independent therapy practice owners who can prove their commitment to delivering the Triple Aim increase their potential of a narrow network provider relationship with ACOs.


    Selling Your Value


    So how does the independent physical therapist influence the ACO decision makers to re-direct their focus away from their present ‘interest’ of money and control to their actual ‘needs’ of effective, Triple Aim care management?   Get them to move from thinking they must control physical therapy as a revenue generator to realizing their best strategy is to partner with independent physical therapists who help the ACO save money and improve outcomes.


    Start with these 6 steps:


    1. Research Your ACOs

    Research your local market to find out which hospitals and clinics have formed ACOs. Locate the 5names and roles of people in decision-making positions within each ACO – CEO, COO, CFO, VP of Business Development, VP of ACO Services, Director of Outpatient Services, Medical Director, and Director of Orthopedic Services are typical decision-making roles. Here are some other questions for which you must find answers.

    • How many rehab clinics do they have? If they have a lot of clinics it shows they value physical therapy. If they value physical therapy, they may want to supplement their clinics with independents. Few clinics indicate they either may need more clinics or they may not place much value in physical therapy. Either scenario offers you an opportunity.
    • What is the ACO’s position regarding primary care? Do they employ the primary care teams or use independent physician groups? Do they manage independent doctors through some type of network? Do they allow their physicians to refer outside of the ACO? Talk to the primary care physicians you know to find out answers to these questions.
    • Have they formed ‘narrow networks’ with health plans? Call your contract rep at all the commercial health plans. Ask if any ACOs have formed narrow networks, the specific name of the narrow network, and if they are open to independent providers. In all likelihood, the ACO gets to choose the providers, but by asking the health plan, you can get even more details about the ACO, such as names of their decision makers. Don’t forget to ask your rep if the ACOs are in risk sharing arrangements with health plan.


    1. ACO Analysis

    After getting as much information as you can about each ACO, analyze every one. Record your 3assessment of each ACO’s level of integration, willingness to use independent providers, value placed on physical therapy, extent of narrow network involvement, level of financial risk with commercial health plans, and who the ideal contact people are.


    1. Your Predicted ACO Concerns

    Review the 10 factors related to health care reform and the key factors independent practices must prove they can deliver (noted earlier in this blog).


    1. Define Your Value

    Analyze the likely needs and wants of the ACO decision makers and determine how your practice will meet their expectations. Plan to ‘Wow’ them. Answer key questions, address key points:

    • Do you have enough clinics in the area?
    • Do you have a defined plan to keep people in the ‘low cost part of the funnel’?
    • How do your therapists consistently manage their care in order to achieve predictable costs and outcomes?
    • Do you have outcomes measures that prove your quality claims?
    • Name the leader to serve as your contact person and negotiator.
    • Determine who will hold therapists accountable for achieving expected outcomes and managing their care consistently.
    • Create 1-3 care pathway and care model options to propose to the ACO that will reduce their TCOC related to musculoskeletal pain while still achieving measurable quality outcomes. Provide your specific prediction of the percentage of the TCOC you can reduce. We suggest you include at least one option that is a collaborative model with primary care, orthopedics, nutritionists, personal trainers or other providers.
    • Key concepts: Quantifiable, Accountability, Collaboration, Teamwork.


    1. Get a Seat at the Table with the ACO Decision Makers

    Now you are ready to reach out to one of the ACO’s leaders and decision makers. Realize these people are very busy. You must sell them on the value of meeting with you.   Your introduction and request for the short meeting must include your ability to reduce their costs, deliver quality, and provide convenient access.

    Come to the meeting well prepared.

    • Have an outline of your ideas and proposal in front of you, but be ready to make adjustments based on what you learn.
    • Ask questions. Listen. Find out their actual needs and expectations, and make your pitch based on those expectations.
    • As you learn more about their ACO, ask directly if they are open to working with an independent therapy group. They may say, “ We feel we must own the service and employ the providers in order to best manage our risk.” That response indicates you have a big challenge ahead of you, but it doesn’t necessarily close the door in your face.
    • Be persistent and move them from their ‘interest’ to their ‘needs’ and how you will fulfill those needs. If they say, “Yes we are open to working with independents” or “We are not sure”, the door is wide open for you to sell make your sales pitch.
    • Don’t be discouraged. My good friend Dirk Wierbicky, VP of Business Development at BMS, always says, “The sale doesn’t start until they say ‘no’.”

    You won’t come to a solution or decision on the first meeting, so don’t leave the meeting without a ‘next step’ and ‘call to action’ in place. The goal of your first meeting is to get a 2nd one on the books.


    1. Prioritize4

    After you have met with all of the ACOs in your area, it’s time to prioritize.

    • Place those with whom you have the greatest potential at the top of your priority list. Focus on them.
    • Create your follow up plans based on your priorities.
    • Keep your momentum going with an action plan, time frame, and accountability.



    Creating a relationship with an ACO is not much different than working with health plans. Let’s face it . . . they have similar wants and needs. Lower TCOC and healthier people. It’s all about selling your Triple Aim value. Building trusting, meaningful, ‘win-win’ relationships with ACOs will be critical for most of us as we diligently work to remain independent and successful for years to come.

    Our 4th and final blog in this series will bring this information together in a practical way. We will focus on our MSO model and some specific examples of our successes with health plans and ACOs here in the Twin Cities market.

    If you have questions or comments, please contact me at

    Jhoyme@thearpypartners.com . I would be glad to talk with you about the increasingly important part of your long term success . . . a relationship with ACOs.


    Keep Learning . . . Keep LEADING!

    Jim Hoyme





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