“OK, so you’re saying that we’ll see reduced revenue to the hospital — let’s say it’s $10 million — and Medicare will keep the first 2 percent. So that leaves nine and change, and then we’ll pay for infrastructure, so that’s like $4 million or so, and split what’s left with the doctors, so we’ll keep just over $2 million… but since my overhead costs on that same volume is $4 million, we’ll have a net loss of $2 million. Do I have that right?”

You fidget in your chair, realizing this is not going as well as you pictured in your head. “Um, well yes, but you see—”

“Get out of my office!”

OK, so maybe it went a little better — but only if you were able to explain the real reason to participate in a Medicare ACO.

The Centers for Medicare and Medicaid Services have been remarkably clear that the era of fee for service is coming to an end. Bundled payments, capitation, and outcomes-based compensation will continue to come at providers at an accelerated pace. So whether we like it or not, we have to get good at managing care. More specifically, we need to understand that volume — the revenue necessary today to keep the lights on, make payroll, and deliver bond payments — will be pure expense in the next few years.

The CFO was right. The ACO model is like telling your hourly staff: “Hey, reduce your hours, and for every dollar we save I’ll give you 20 percent of the savings.” Most people cannot do it and still make their mortgage payments. If instead you said, “Here’s the deal. I’m moving you to a salary at 80 percent of your current take-home pay to get your work done. So if you can get it done in 10 hours or 40 hours, I don’t care — you still get paid,” your employee may not be happy, but they will likely adapt. They will look at their calendar and decide that some meetings do not help them with their workload; you might call these unnecessary services. They will verify that the work they are doing was not already completed by a colleague, reducing duplicative services. They will find new ways to communicate rather than spending four hours a day on email, reducing administrative burden. They will look for better ways to accomplish their work by pursuing innovation, and you can bet they will learn from others by adopting best practices.

Shared savings is the wrong lexicon. The true benefit of developing an ACO is the ability to tear away the arcane structures that have misaligned incentives across the care continuum.

It justifies investments in the people, the tools, and the processes essential to preparing for a world of clinical and economic accountability. How can we value shared governance today, while we are still tied to the yoke of fee for service? We cannot, unless we see this as the essential ingredient to create true collaboration among hospitals, physicians, and other caregivers.

Had our mythical CFO had a few more minutes before talking with the bond rating agency, we might have made the case that investing in these intangibles is as critical as the next building project. In the same way that we expect returns on our investments in hard assets, we should challenge ourselves to forecast a reasonable return for the capabilities we need to manage whole populations in a fixed-payment world.

The ACO provides a relatively safe harbor to run sea trials on the ship that will be required to carry us through the storm of transformation coming our way. So the ACO cannot be a project for a small team of people in the back rooms of the office. It has to be a core element of corporate strategy, with the time, attention, and focus that would be placed on any other strategic development.

CFOs should not just roll over and accept the pet project of some EVP, but instead ask the tough questions about when this thing called the ACO will return the investments that need to be made to ensure the long-term future of the organization. Instead the CFO might say: “OK, wait a minute, there’s got to be more to this than what’s on the surface. I’m cancelling my next meeting — we need to get this right.”

You sit back, suppress a smile, and think: now we’re talking.