In the Summer of 2011, Beacon Partners conducted this original research study to assess healthcare organizations understanding of, and preparation for, Accountable Care Organization (ACO) development.

1. Beacon Partners
Accountable Care Organization Readiness Study
Published by Beacon Partners.
© 2011, Beacon Partners, Inc. All Rights Reserved.

2. Summary
In the Summer of 2011, Beacon Partners conducted this original research study to assess healthcare organizations
understanding of, and preparation for, Accountable Care Organization (ACO) development.
This study, now the sixth of its kind by Beacon Partners, builds upon our previous efforts to understand industry
challenges related to EHR Adoption, Changing Economic Times, ARRA Preparedness and Sustainability, Health Care
Reform and a PPACA Scalable Solution. As part of our commitment to a series of thought leadership studies, including
support of a series of national trade associations and their learning series for individuals practicing in healthcare and
provocative roundtable panel discussions in a recognized trade journal, these research studies have formed the basis
for Beacon Partners’ brand of industry-leading views reflecting top-of-mind concerns for C-suite healthcare executives.
More than 200 healthcare executives responded to this study, which was completed in the third quarter of 2011. Half of
those respondents were from community hospitals, with critical access hospitals representing 21% of those
participating.
As one might guess, it is the CEO who is responsible for ACO development at many hospitals. Of our respondents,
just under half related that this was the case at their organization. Surprisingly, only 15% of our respondents were
“very familiar” with ACOs as they are currently proposed. Only 61% related they were “somewhat familiar” with this
component of PPACA.
In what would seem a contradiction given the above, more than 90% of respondents stated that they are in the
planning or development stages of an ACO, representing a jump from our second quarter survey where the number
came in at 47%.

3. Summary Cont.
Still, nearly half are unsure about how an ACO will affect their organization or whether it will improve patient care.
Perhaps none of this should be surprising given that ARRA and PPACA regulations have challenged providers to move
forward without the benefit or clarification of final rules and regulations. Nor should it surprise that this confusion has
also led to uncertainty about how to communicate ACO developments to their patients.
In terms of budgeting for an ACO, even though the March 2011 Medicare Proposed Ruling estimated startup costs to
be $1.8 million, a full 45% of those surveyed have not committed money from their operating budgets to ACO planning
efforts and 27% are unsure of their budget for these planning efforts. And yet, thanks to commitment by senior
leadership, operating budgets have increased when compared to last year.
According to Modern Healthcare, capital expenditures for IT have been growing over the past three years and plans to
continue increasing them are expected for most organizations. This may be a sign that many CIOs and COOs are
becoming optimistic regarding the potential benefits an ACO will provide to their organization.
Still, most organizations have not yet created a department or executive role dedicated to ACO development. With a full
53% falling into this category, it would be logical to wonder how the industry will be fully prepared for healthcare
reform?
Finally, with ICD-10 and 5010 requirements being top of mind for most providers these days, it’s not surprising that
more than half of our respondents reported having an action plan in place to support those requirements and meet
those current federal timelines.
We hope you find the following survey informative and useful. If you have any questions concerning its content, please
contact Beacon Partners at beaconpartners.com or (800) 4BEACON.
Thank you.

4. Study Perspective: Respondent Title
CIO
CMO/CMIO/CNO
CEO
CFO
COO
General Management
Other Management
CPO
0% 5% 10% 15% 20% 25% 30%
The majority of survey respondents were CIOs (28%) and Clinical Management
Executives (27%). With much of the work to operate ACOs residing with CIOs for network
development and clinical leadership for practice protocols and electronic record
documentation, the results are in line with industry views.

5. Study Perspective:
Type of Organization Size of Net Patient Service Revenue
Community hospital Less than $25 million
Critical access hospital $25 million - $75 million
Academic medical center
$75 million - $150 million
Ambulatory clinic
$150 million - $500 million
Multi-specialty group practice
Faculty-based practice plan Greater than $500 million
Single specialty practice Unsure
0% 10% 20% 30% 40% 50% 60% 0% 5% 10% 15% 20% 25% 30%
51% of respondents are from community hospitals, the largest segment of the hospital
industry according to the American Hospital Association. Critical access hospitals
(CAHs) are second with 21%. Only 28% of respondents have a net patient service
revenue (NPSR) of over $150 million.

6. Surprisingly, 15% of respondents are ‘very familiar’
with ACOs as currently proposed
Very familiar
Somewhat familiar
Not familiar
0% 14% 28% 42% 56% 70%
Given the strong representation by C-suite respondents, we were surprised that only 15%
are ‘very familiar’ with ACO federal regulations as currently proposed. While 61% were
‘somewhat familiar’ with ACOs, a shocking 1 out of 4 answered ‘not familiar’ with this
aspect of the Patient Protection and Affordable Care Act (PPACA).

7. In most organizations the CEO is responsible for
developing an ACO
CEO
Other, please specify
COO
Unsure
CMO
CFO
CNO
CIO
CMIO
0% 10% 20% 30% 40% 50%
Far and away, the top respondents (49%) named the CEO as the person responsible for
ACO development. CEOs are forward-looking, visionary leaders tasked with balancing
day-to-day operational needs with physician alignment strategies based upon community
healthcare needs. ACOs intersect these position responsibilities directly.

8. Still, most respondents are currently developing ACOs
In development
Operational
Pre-planning
Unsure
No current plans underway
0% 10% 20% 30% 40% 50%
92% of respondents underway with planning/development of an ACO, a jump from 47%
in our 2Q2011 survey. Now, 49% are currently in development of an ACO, with another
30% already operational.

9. Zero respondents anticipate paying penalties in outer
years of ARRA
Less Than $25 million
$25 million - $75 million Pre-planning
$75 million - $150 million
$150 million - $500 million
Greater than $500 million In development
Unsure
Operational
Unsure
No Current plans
0% 10% 20% 30% 40% 50% 60%
While part of the economic stimulus package, Meaningful Use (MU) stages are tied to
ACO participation. It is encouraging to note a shift nationally to attaining MU. 54% of
organizations with a net patient service revenue of greater than $500 million are already
operational in attaining Stage 1 objectives.

10. More than half of respondents have developed an
action plan to support ICD-10 and 5010 requirements
Yes, with our hospital and sponsored/affiliated practices
Not yet, in preliminary planning phase
Yes, within our affiliated healthcare system
Unsure
No, none planned
Other
0% 10% 20% 30% 40%
These project plans and operational changes come with important headlines and
deadlines. On pace to meet those measures, 56% of respondents have already
developed an action plan with their hospital and sponsored/affiliated system (33%), or
within their affiliated healthcare system (23%) to support ICD-10 and 5010 requirements
within the current federal timelines.

11. Many believe certain components of ACOs will have a
positive impact on their organization
Positive impact
Negative impact
Neutral impact
Unsure Per member/per month
Primary care capacity
Clinical quality reporting
Healthcare connector contracting
Medical staff allignment
Continuum of care transitions
Interoperable IT systems
0% 10% 20% 30% 40% 50%
Over 39% of respondents believe that clinical quality reporting, medical staff alignment
and continuum of care transitions components will have a positive impact on their
organization. Others are unsure on certain components such as interoperable IT
systems and healthcare connector contracting. From our 2Q2011 survey, which posed
a similar question, we note a prioritization for interoperable IT systems now viewed as a
positive impact (37%).

12. Still, most organizations have not yet created a
department or executive role to develop an ACO
Yes
No
Unsure
0% 10% 20% 30% 40% 50% 60%
With the magnitude of the PPACA changes, and the development of an ACO being just a
piece of necessary organizational-wide efforts, we find it short-sighted that only about 1/3
of responding healthcare organizations have created a department or executive role to
develop an ACO. And, with 53% not having done so yet, one could logically wonder how
the industry will be fully prepared for healthcare reform.

13. And only 1/3 of organizations plan to hire or reallocate
existing personnel to develop an ACO
No, we have no plans to hire
We are reallocating existing personnel
Unsure
Yes, we have plans to hire
0% 10% 20% 30% 40% 50%
Fiscal budgeting cycles are in full swing for most organizations and now would be the
time to plan for support to develop reform related roles. However, 44% of organizations
have no plans to hire personnel to handle ACO development, and another 25% plan to
reallocate existing personnel.

14. Operating budgets for ACO development remain low…
Less than $1 million
$1 million - $3 million
More than $3 million
None is the budget at this time
Unsure
0% 10% 20% 30% 40% 50%
In the Proposed Rule published 3/31/2011, Medicare estimated that start-up costs for
ACOs would be $1.8M. Yet, 45% of organizations have not committed money from their
operating budgets towards resources that support ACO planning efforts, and another
27% are unsure what their current budget is for planning efforts.

15. but thanks to senior leadership commitment, IT investment
and systems operating budgets have increased somewhat
compared to last year.
Stayed the same as previous years
Increased as a result of senior leadership commitment
Unsure
Increased as a result of medical staff involvement
Stayed the same as a result of merger
Decreased
0% 10% 20% 30% 40% 50%
Consistent with our 1Q2011 and 2Q2011 surveys, as well as Modern Healthcare’s 21st
annual IT survey, capital expenditures for IT have been growing the past 3 years and are
planned to increase over the next several years for most organizations. With 30%
claiming budget increases as a result of senior leadership commitment and another 6%
increase as a result of medical staff involvement, the support of their C-suite colleagues
should assist CIO efforts overall.

16. Even though nearly half of respondents are unsure
how an ACO will affect their organization
Unsure how it will affect our organization
Will improve patient outcomes
Positive move for our organization
This is an unnecessary expenditure
Unnecessary burden on our personnel resources
Will have a negative effect on patient outcomes
0% 10% 20% 30% 40% 50%
46% believe an ACO is a positive move for their organization or will improve
patient outcomes. Patient protection and affordable care were the dual policy
goals of the PPACA.

17. CIOs and COOs are showing glimpses of optimism
regarding an ACO’s effect on their organization
CEO
COO
CFO
CIO This is an unnecessary expenditure
CMO/CMIO/CNO
This is a positive move for our organization
Unnecessary burden on personnel resources
Will improve patient outcomes
Will have a negative effect on our patient outcomes
Unsure how this will affect our organization
0% 14% 28% 42% 56% 70%
Showing that ACOs, while focused on payment reform, are truly rooted in patient care
continuum, only 8% of CFOs and 6% of CMOs believe ACOs will have a negative effect
on patient outcomes. No other respondent categories believe patient outcomes will be
negatively affected.

18. Plans to communicate the development of an ACO to
patients are still undecided or unplanned
Unsure/Don’t know
We have no plans to do so
Via a patient portal
Direct mail campaign
Posters and notices inside our facility
Email campaign
We’ll rely upon the Federal Gov’t
0% 10% 20% 30% 40% 50%
With uncertainty surrounding ACO rules and regulations in general, it has become
apparent that respondents are even more unsure of how to communicate ongoing
developments to patients, while 22% don’t plan to communicate these changes at all.

19. Undefined rules and confusion of ACO structure
remains to be the top concern in the market
Undefined rules/confusion of ACO structure
High start-up costs/not enough capital to support ACOs
Regulatory issues
Unsure
Physician and staff alignment
Other, please specify
I don’t have any concerns
Not enough IT systems to support ACOs
0% 10% 20% 30% 40%
ARRA and PPACA regulations, to name just two, have challenged organizations to move
forward without clarity of final rules or regulations. The term used most often is
“directionally correct.” Here, 31% of respondents listed undefined rules and confusion of
ACO structure as their top concern in the market, followed by high start-up costs (17%)
and regulatory issues (14%). Clearly, progress still needs to be made.

20. Single-vendor solutions are the preference for patient
demographics, business/operating systems, clinical and
health record needs.
Single-vendor solution
Best-of-breed
Unsure
For inpatients
For ambulatory areas
For physician practices
0% 12% 24% 36% 48% 60%
Single-vendor solutions remain the choice of respondents for inpatients 59% of the time,
for ambulatory areas 53% of the time, and for physician practices 47% of the time. These
longitudinal results are consistent with our 1Q2011 and 2Q2011 surveys. As a settled
area, while we will likely de-emphasize this aspect of our research over time,
organizations do not have that luxury as they begin to wrestle with support of disparate
systems resulting from increased mergers and acquisitions.

21. 2011, 2010, 2009, 2008 and 2007
2011, 2010, 2009, 2008
BBJ Pacesetter Award
2011, 2010, 2009, 2008 Top 100 List
2011, 2008 Top 100 Best Places to Work
2011, 2010, 2009, 2008 Top 20 Healthcare
Management Consulting Firms
2008 Category: Staff Augmentation
2008 Lifetime Achievement Award
Ralph Fargnoli, President and CEO

22. For more information, please contact Beacon Partners:
Kevin Burchill
KBurchill@beaconpartners.com
1-781-681-7460
www.beaconpartners.com
Marketing inquiries please contact Jason Shniderson:
Jason Shniderson
JShniderson@beaconpartners.com
1-781-681-7487
www.beaconpartners.com
Media inquiries please contact Tracy Hartman at Aloft Group
THartman@aloftgroup.com
1-978-462-0002 x103