How Medicare Accountable Care Organizations Keep CAHs Afloat

February 09, 2016 - Medicare accountable care organizations (ACOs) are finally smoothing out regional hospitals' revenue cycle wrinkles. But successful ACOs still need to adopt tighter standards to remain financially viable.

Critical access hospitals (CAHs) – many of which lack a standard emergency room – generally did not qualify for ACO-based incentives and funding. 

But last year, CAHs began taking charge and creating new opportunities by establishing new ACOs.

Because these particular healthcare providers tend to be smaller in size than their larger hospital counterparts, they can manage cost obstacles with greater ease,  said Lynn Barr, MPH, Chief Transformation Officer of the National Rural Accountable Care Consortium, to RevCycleIntelligence.com.

“[It] is easy to get all the decision makers of a small hospital into a single room and start talking about and implementing changes,” she stated.

“They are flexible and have great relationships with the community because they know these patients, in many cases, all of their lives.”

One of the biggest problems critical access hospitals face is a general lack of cash. Joining an ACO is costly, especially when it comes to IT and legal costs, said Barr.

The average day’s cash on hand for a critical access hospital is 69 days, she added.

Critical access hospitals have specific revenue challenges

“The hospital is probably the largest employer in the region. From a tangential perspective, the congressmen and regional people understand that,” said Dutch Dwight, Medullan’s Vice President of Business Development, to RevCycleIntelligence.com.

“They see a value by working across federal and state agencies – whether it be the Department of Agriculture or CMS. Politically, this aligns the stars and makes sure care is provided in the regional hinterlands.”

CAHs – essentially the stepchildren of the standard hospital organization – manage a specific set of revenue cycle challenges, such as the lack of profit centers, Dwight explained.

But profit opportunities for CAHs do exist, especially within regions of great need. CAHs could even become “true test beds for innovation and investment," Dwight said in an earlier chat.

But because of cost limitations, CAHs remain selective about what tool sets they deploy.

Even though an MRI tool can help boost revenue, it is unlikely to find an MRI 200 miles away from a city, he explained.

“The Medicare ACO angle, where there are still a significant elder population in the hinterland, will allow the critical access and rural hospitals to be able to find ways to stop-gap revenue losses and maintain these facilities,” Dwight stated.

“It's a positive net-loss to transition to value-based care, because the former episodic fee-for-service orientation was too spiky.”

The typical CAH CEO is still concerned about meeting payroll, Dwight continued.

“It's classic business management,” he said. “The hospital administration will embrace a payment cycle from the payer – the federal government – which manages maybe 25 to 35 percent of the overall revenue in the hospital, depending upon the demographics, because it will help smooth out the revenue cycle.”

ACOs need to embrace technology solutions, he claimed. This approach may help lower the overall cost of application management.

“The lower cost connection is that hospitals are going do an asset allocation of their revenue stream,” he asserted.

“Across the healthcare industry there have yet to be transformational solutions to enable a dramatic reduction in cost per claim. Many ideas have been bantered about, but none have been combined in a fundamental way.”

“If ACOs are to be successful, they should drive more standards adoption,” he said.

“[Since] the success of the Medicare ACOs is the present direction, [The Centers for Medicare & Medicaid Services] CMS could come out and say, ‘No more payment until ‘x’ standard is adopted.’"

"Adoption of a standard will enable the rural and critical access hospitals to survive at a lower cost of delivery.”