Michael is 68 years old, and he's suffering from congestive heart failure, or CHF. He leads a sedentary lifestyle with limited physical activity, smokes, and has a diet that is heavily skewed towards high fat, high sodium takeout, and frozen foods. He takes his multiple medications regularly, but has been in the emergency room a few times over the past year, when his legs swell and he has trouble walking. Emergency room visits inevitably end up as overnight stays in the hospital, where his cardiologist attempts to counsel him on leading a healthier lifestyle by not smoking and eating more fruits and vegetables. The cardiologist also encourages him to take advantage of a service provided by his insurance company, when nurses call him periodically to check up on how he is feeling, answer questions he may have, and help them better manage his condition. Michael is not alone, as CHF is prevalent in older people. Patients with CHF typically have a high risk of hospitalization, emergency room visits, and readmissions as a result of medication non compliance and poor lifestyle choices, as well as poor discharge planning and follow up care. Insurance companies have deployed disease management models that focus on lifestyle modifications like diet, exercise, smoking, as well as medication compliance. Michael's cardiologist, who is also his primary care physician, has recently joined an ACO, an Accountable Care Organization. In efforts to improve care management and care coordination, the PCPs and the cardiologist within the ACO are working to develop programs that target CHF patients. They are using their electronic medical records and claims data to develop analyses, allowing them to proactively identify patients that are at high risk for complications and outreach to those patients. Michael's cardiologist has hired a nurse who does care management, calling patients with CHF regularly to ask about their physical symptoms, nutrition, and activity levels, as well as taking calls from CHF patients to help them with their questions. So, why did the practice hire the nurse especially when the insurance company already offers a service with nurses calling these patients? The ACO and its participating physicians are now in a shared savings payment model, where they are an incentives for improved quality and cost efficiency of care. They also realized, based on surveys of their patients, that patients respond far better to nurse outreach from their own physician offices rather than an insurance company. If patients respond better, then they will have better health care outcomes and everyone wins. Financial analysis of health care costs for CHF patients over time is showing net cost savings with increased pharmacy, lab, and professional services, as well as the cost of adding staff to outreach to those patients. But those are offset by reduced hospitalizations and readmissions. Under a fee-for-service payment model, the hospital CFO would notice that reduction in emergency room and admissions for patients with CHF and would be very concerned about that lost revenue. However, under a shared savings arrangement, the ACO has reduced hospital services, which means lower medical costs relative to targets. The ACO gets to keep a large portion of those savings, which are then distributed among the ACO participants. So, if you were the CFO of this hospital, how would you measure the impact of this CHF management model? There are trade-offs here that need to be considered, and new business models may need to be developed. You've got better care for the patients. You're earning incentives through the ACO. But you're losing revenue due to lower hospitalizations. But you should be able to replace those lost beds with higher-margin hospitalizations. Let's keep something in mind though; Change is inevitable, and we need to make sure we are getting with the program. We need to figure out how to be successful in this new world.