Wednesday, May 16, 2012

What You Need to Know About ACOs

You may be concerned about what will happen with the Medicaid expansion after June’s expected Supreme Court ruling on the health care reform legislation – or whether insurers will continue to cover individuals with pre-existing conditions. But, you don’t need to worry about ACOs. They are coming your way – in Medicare, in Medicaid, and in commercial insurance.

Even though the definition is a bit amorphous there has been widening adoption at the government level – The Centers for Medicare and Medicaid Services (CMS) Innovation Center announced the list of 32 Pioneer ACOs that will test several new payment models (see Selected Participants in the Pioneer ACO Model premium members) and an initial 27 ACOs that have agreed to be responsible for the quality of care Medicare patients receive have been selected for the Medicare Shared Savings Program (see CMS Releases Final ACO Regulations for Medicare Shared Savings Program premium members). In addition, other ACOs are operating (see 164 ACOs Already Operating premium members). The ACOs are roughly defined as a local health care organization (which may include primary care physicians, specialists and hospitals) that is accountable for 100 percent of the expenditures and care of a defined population of patient.

The big confusion is where ACOs fit with all the other new service delivery system models that are emerging. A few basic ACO constructs that you should keep in mind:

• ACOs can exist within health insurance or managed care plans – or compete directly with them.

• ACOs can use primary care medical homes as a construct for managing consumer care – or not.

• ACOs can use the health home construct or intensive disease state management programs to serve the needs of beneficiary with chronic diseases – or not.

Currently, federal officials estimate that the 32 Pioneer ACOs – which are to be rewarded or penalized based on its actual performance relative to the projected benchmarks—will manage care for 860,000 Medicare patients to the tune of $1.1 billion in savings over the next five years. And the Medicare Shared Savings Program via ACOs is expected to save the federal government up to $940 million over four years through physician and health care system financial incentives coordinated Medicare beneficiary care. There are a number payment models currently planned for the Pioneer ACO model (see Beyond FFS: Like It Or Not, Performance-Based Reimbursement Is Your Future all members) – models ranging from small amounts of penalties/bonuses to models that switch to full-risk capitation in 24 months.

What should you keep in mind about ACOs as you’re planning your future strategy?

• The managers of ACOs will be as concerned about (and aggressive at managing) the costs of care as traditional insurers, including the management of specialist services and support services

• ACOs are being developed for both private and public payers and most are based on enhanced primary care model for care coordination.

• ACOs will likely consider the options to deliver as much case management and specialist services within their own system as they can.

• You need to know the likely future ACOs in your geographic market – and understand how they will be organized in order to create market positioning and service lines that work.

While ACOs have been presented as this "kindler and gentler" alternative to health insurance companies, I think that perception will be tested in practice. What I do know is that most ACOs will have very different models for providing specialist services (such as services for mental illnesses, addictions, autism, dementias) of all types – and that has big strategic implications for the health and human service field.

Sincerely,
Monica E. Oss
Chief Executive Officer, OPEN MINDS

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