Wondering about the future of accountable care organizations (ACOs)? Last week, I gave a quick snapshot of where we are with ACOs – there are now 600 of them across all payers (Medicare, Medicaid, and private health plans) covering 17% of the population (see The Many Pathways To Coordinated Care – The Restructuring Continues). But ACO performance in Medicare has been mixed (see CMS ACO Outcomes Data Identifies Highest-Performing ACOs, Medicare ACOs Improved Patient Experience For Patients With Multiple Chronic Conditions, and 19 of 23 Medicare Pioneer ACOs Move Into Year Three; Quality Outcomes Up & Financial Outcomes Mixed), which raises the question of whether the ACO concept will survive this start-up phase.
I think the short answer is that the U.S. health care system will continue to have ACO-like structures – meaning, provider organizations that are able to assume value-based and risk-based reimbursement. The reason has less to do with the health care delivery system than it does with the health care financing system. Payer organizations want these new provider reimbursement structures. The competition among health plans for “value,” the specter of increasing health care costs, and the caps on medical loss ratio are the drivers for payers to look beyond fee-for-service to other financing arrangements – which is a reason to contract with ACOs.
And, it appears that the future of payer reimbursement to ACOs just might be in bundled rates. (Bundled rates, in short, involve bundling all of a patient’s costs into a single payment irrespective of the kinds and quantities of the services provided – see Under The Bundled Umbrella: The New Financing Models Shaping Health Care.) That was one of the conclusions of The Future Of Accountable Care Organizations; How To Create Increased Share Savings With Payers, by Rich Bajner; Dennis Butts, Jr.; Donna Cameron; Roberta Herman, M.D.; Karen Hohenstein; and Vivek Gursahaney of Navigant Healthcare. They describe a future for ACOs that moves from today’s clinical integrated networks based on primary care networks, to networks reimbursed in bundled rates that add specialists and post-acute providers to accommodate this change in financing.
One key piece of their report was their description of likely future financing of ACOs. Preventive and chronic services provided on a per-member-per-month (PMPM) basis, with acute care priced at bundled rates based on narrow network-reference pricing. If this financing model gains market share, it will significantly remake the health care delivery system. This evolution will drive increased use of digital medicine, including telehealth, remote monitoring, consumer self-service technologies, and more. Additionally, the shift in risk management responsibility will make the use of decision support systems within provider systems essential. And, the role of specialists overall will change dramatically, beyond “psychotherapy” to behavioral health services also focused on consumer engagement, wellness, and chronic condition management support.
Whether this ACO financing evolution happens, and when and where, remains to be seen. But, MedPac has already recommended that Medicare “bundle” payment for 48 acute care conditions. And, Medicare will increasingly require ACOs to share risk with specialty and long-term care provider organizations. Medicaid ACOs will be expanded to include health coaching, nutritionist, dental, mental, and ophthalmic care, and ACOs in states with dual eligible demonstrations projects (see Where Are The Dual Eligible Demonstration Projects?) will be paid PMPM rates that include case management and selected social services.
Where are the ACO organizations in this evolution? The article identifies some very interesting “lessons learned”:
- Being a first-mover ACO is an advantage – Successful organizations aren’t treating this as a “fad”, but have recognized that early investment in staff education early was key to long-term financial success.
- The costs of managing risk are significant – Making the switch from fee-for-service to bundled payments (and other risk-based financial arrangements) takes significant up-front “capital, time and resources”, especially when those service programs need to demonstrate scalability later on.
- Managing physician expectations and behavior is difficult – As referral patterns and sources change, and clinical professionals are expected to shoulder both new evidence-based practices and payer data requirements, new management practices will become essential to keeping the team on board.
- Contracting effectively with payers is essential to sustainability – Poor contracts have always led to unsustainable organizations, and as those organizations adopt risk-based contracts, negotiating a contract becomes a vital competency.
- Patient care management is tough – Complex patients are tougher to manage, and bring with them more risks that require better care, better clinical professionals, better health information exchange, more coordination, and new approaches to service management.
In this evolution to the next phase of ACO contracting, there will be organizational casualties along the way. Executives of specialist provider organizations of all types will need to map a strategy that includes working with the ACOs and medical homes that come to dominate their service areas.