This weekend the temperature warmed enough to cause the neighborhood children to set up the season’s first lemonade stand. One of the moms suggested the stand be set up in the corner of the cul-de-sac. By definition, a cul-de-sac is roundish, as in no corners. When I laughingly questioned the mom as to which corner of the round cul-de-sac she had in mind, she failed to see my humor.
Each of the children brought different supplies; lemons, paper cups, a table, a hand-painted sign, water, and pre-mixed lemonade.
By closing time they had collected twenty-one dollars and seventeen cents. They met at our house to divide the spoils of their venture, a task that sounded easier than it was. The corner cul-de-sac child felt the money should be divided equally. As her only contribution to the venture had been a tablecloth, her suggestion was met with a robust debate.
I suggested they look at using some of the money to pay back those children according to what their supplies cost—according to the children the supplies did not cost them anything because they took them from their homes.
By now you have figured out where this ACO conversation is going. Without knowing ones’ costs, how can one really allocate profits against those costs? The children knew what they charged, and they knew what they made, but they knew nothing of their costs. The same concept applies when viewing the problem of performing a hip replacement instead of simply selling lemonade.
Perhaps providers should start with opening a lemonade stand to get a better understanding of the business requirements, and then work their way up to the ACO model.