We are witnessing a tremendous transformation of the American healthcare industry spurred on by the Patient Protection and Affordable Care Act (PPACA) of 2010. One exciting aspect about the PPACA is the focus on reducing waste and driving down costs while delivering higher value care. Novel payment methods, such as bundled payments for episodes of care and pay-for-performance (P4P) programs, are innovations that reward quality performance rather than simple volume. Together, these and other new approaches have provided the impetus for Accountable Care Organizations (ACOs).

Accountable Care Organizations are distinguished by the provider being accountable for the healthcare quality, medical costs, and overall clinical results for a defined population at a fixed price. Some are asking if it works and whether it will work in workers’ compensation. It may surprise many of my colleagues, but I answer, “Yes,” to both of these questions, especially when it comes to workers’ compensation.

Most acknowledge that misalignments in our healthcare industry contribute to significant medical waste with high cost and low-value care. In fact, the Journal of American Medical Association (JAMA) published an article in April 2012 that determined the cost from medical waste in the United States for the year 2011 to range from $553 billion dollars to $1.2 trillion dollars. Even at the lower end of this estimate, waste accounted for 21% of the nation’s total healthcare expenditure in 2011. Concurrently, our health outcomes, as well as confidence in the healthcare system, lag significantly behind many nations like the United Kingdom, Switzerland and Canada (Commonwealth Fund International Health Policy Survey, 2010).

Implementing elements of the ACO model may improve the traditional, transactional model rooted in the workers’ compensation system. Although the workers’ compensation industry has always operated independently from mainstream healthcare with myriad jurisdictional variations, National Council on Compensation Insurance (NCCI) data now points to medical expenses as the key driver of workers’ compensation costs associated with lost time claims. The fact of the matter is healthcare issues afflicting the private and government healthcare sectors are now profoundly impacting the workers’ compensation industry, as well.

The responsibility for the injured worker’s lifetime care creates incentive for the entire workers’ compensation system to change and ultimately benefit when injured workers attain the best clinical and functional outcomes. Taking a multi-episodic approach to measuring and rewarding clinical outcomes would improve quality and reduce the long tail of lifetime claims costs. The approach would also encourage evidence based medicine and orient all parties toward patient-centric care.

As the Chief Medical Officer of Paradigm Outcomes, I’ve seen firsthand how guaranteeing a clinical outcome at a fixed price for catastrophic and complex workers’ compensation claims raises the likelihood of success in a specific claim. This practice is as central to how we manage a case as it is to an ACO. Successfully implementing the best elements of an ACO requires four things:

• First, the organization must retool its culture toward a value orientation.  Everyone in the system must be injured worker focused and make every decision based upon achieving the desired clinical outcome.
• Second, the care decisions must be both evidence-informed and clinical outcome oriented. It’s all about systematically focusing on when and what the injured worker will need in order to get functionally better and achieve the desired clinical outcome faster. This is a much more complex and arduous process than the traditional utilization review process of simply approving or denying requested treatment authorizations.
• Third, the clinical experts must have a comprehensive understanding of the injured worker’s relevant psychosocial behavioral elements. Care managers and providers must go beyond just the medical issues in order to achieve the desired clinical outcomes effectively and efficiently.
• Finally, payors, care managers and providers all require data. Data must be robust enough to ascertain both clinical and business insights, as well as guide decision making to achieve the desired clinical outcomes.

Despite the seemingly disruptive healthcare transitions being noted by many, I am encouraged and refreshed by our healthcare industry’s endeavor to move away from the insanity Einstein described as, “doing the same thing over and over again and expecting different results.” I am particularly looking forward to the further evolution of ACOs. By more appropriately focusing on clinical quality, accountability, value and outcome achievements, the workers’ compensation industry has a real opportunity to apply the best features of an ACO model to reduce medical spending and waste, while improving the lives of injured workers. I, for one, believe that the despite the many uncertainties looming over the future of our healthcare system, there are many more propitious and innovative opportunities ahead.

About the Author

Michael Choo, MD, is the Chief Medical Officer for Paradigm Outcomes. He maintains the company’s relationships with its network of consulting physicians and centers of excellence, and is responsible for enhancing clinical operations and leading clinical analytics, research and development. He also teaches emergency medicine, internal medicine, and family practice residents at Wright State School of Medicine. For more information about Dr. Choo and Paradigm’s Systematic Care Management^SM approach visit www.paradigmcorp.com.