Murphy reiterated that the cost growth trajectory in healthcare delivery is unsustainable and that, at its very core, the promise of an ACO is to flip the healthcare business model to one that rewards more cost-effective care.
“The advocacy behind ACOs is all about cost,” Murphy says, defining cost as the “all-in, per capita cost of treating a defined population for a year.”
The potential cost savings are in areas including pharmaceuticals, hospital admissions, ED usage, procedures, and high-end ancillary services such as advanced imaging, which creates a significant business model conflict.
“That is where we make our living, and that is the stuff that has to be cut for accountable care organizations to really provide value from a cost perspective,” Murphy says. “We are essentially a volume-driven, transaction-oriented business. We don’t really get paid for taking care of patients. We get paid for doing stuff to them. ACOs, as I would argue and understand them, are a different business. They are not about transactions. They are about managing the care of patients over a longitudinal period of time.”
To prepare for ACOs, Carilion has made a series of strategic moves based on the belief that the health system itself needs to be realigned.