Co-Management: An Option to ACOs

With the anticipated release of the ACO regulations, hospitals were provided with another reason to prepare for the payment reforms that are set to become reality in the next five years. Whether you implement an ACO or you don’t, rewarding providers for quality and efficiency is a must. There are several ways to achieve this outcome.  The Co-Management option is discussed below – we’ll discuss others in future editions.

Traditionally, the co-management model has been used by hospitals looking to improve their alignment with a group of physicians in a key service line. In a typical co-management agreement, additional administrative and bonus compensation is paid by the hospital to the physicians, and the physicians in turn take responsibility for improving metrics related to quality, efficiency, and budget in a hospital service line. This gives the incentive for the physicians to do more work in that particular hospital, and subsidizes the physicians’ incomes to reduce the incentive for the physician to compete with the hospital.

Co-management deals represent an opportunity not only to align with physicians, but to begin the process of changing the way care will be delivered at your hospital by your medical staff. In addition to the short-term revenue and referral gains, a co-management agreement can help:

•  Increase awareness of metrics related to quality, efficiency, and cost within a service line
•  Identify gaps at the hospital and within service lines for the efficient delivery of quality care
•  Identify physician leaders in key service lines who can become responsible for effecting change in physician practice patterns
•  Begin the discussion about how the hospital and its medical staff will work together to leverage the work done in a co-management arrangement to succeed under new payment models

In new co-management deals, physicians are directly rewarded for improvements in a service line’s operational, clinical, and budgetary performance.

Co-management represents an opportunity to improve hospital service lines in the short-term, while at the same time hedging against the impact of potential payment reforms in the long-term.

HSG has extensive experience in helping hospitals determine service line selection, physician selection, metric development, and contract development for co-management agreements.