ACOs depend on market engagement

May 1, 2014

Experts say directly comparing ACO models can be difficult because stakeholders often take different approaches to care management

 

As payers, hospitals and physician groups continue to join the accountable care organization (ACO) movement, experts say the biggest indicators of success aren’t necessarily who is operating the ACO, but rather the market dynamics and stakeholder engagement within each ACO. 

Initially, most ACOs were being formed by hospitals, but according to Kim Hiemenz, FSA, MAAA, a consulting actuary for Milliman, the industry saw a shift toward physician leadership and is now seeing a surge in joint physician and hospital leadership. 

“The most successful models that I personally have seen are those that have strong physician engagement,” she says. “You really have to have physician leaders engaged, and to take that a step further, you need all parties-the hospital, the physicians and the payers-involved to be collaborative, to have some skin in the game and have incentives aligned.” 

Experts say comparing ACO models can be difficult because stakeholders often take different approaches to care management. For instance, the goal of physician-sponsored ACOs is often to keep patients out of the hospital, while hospital-sponsored ACOs, on the other hand, seek to improve the quality of care and efficiency once a patient is admitted.

David Muhlestein, PhD, director of research for Leavitt Partners, LLC, says these differing approaches make it difficult to say one approach is definitively better than another. He says initial data, however, suggests that physician-sponsored ACOs might be performing slightly better.

“The reason for that is if you can prevent a hospitalization, that saves a whole lot more money than doing a lot of existing hospitalizations more efficiently,” he says. 

The biggest opportunity is in true partnership arrangements between physicians and hospitals, but he says those arrangements can be difficult to find. 

“The challenge is, generally speaking, how it’s being driven by one or the other. So even if a hospital system has partnered with a physician group, one or the other is really driving that ACO arrangement,” he says. 

Stephen Rosenthal, vice president of network management at Montefiore Medical Center, says the New York-based academic medical center currently manages about 300,000 lives in both full-risk, capitated and shared-risk models. 

He sees real advantages to being a provider in an ACO arrangement. 

“You are allowed now as the provider to think creatively about the best thing to care for your patient, which is unfortunately taken out of the system in the transaction relationships that providers have with insurance companies,” he says. “When the provider is part of the system and has direct opportunity to have an impact, you can see dramatic changes occur because the physician is now more intimately involved in that opportunity.” 

 

 

Cooperative payers

Doug Chaet, senior vice president of contracting and provider networks at Independence Blue Cross in Pennsylvania, and an MHE editorial advisor, agrees that to make progress in efficient care management, the efforts need to be physician-led. He also says payers play a valuable role in the process. 

The plan, which has about 90% of its contracted delivery systems on an ACO payment model, reports seeing reductions in cost, improvement in rates of readmissions and improvement in the incidence of hospital-acquired infections since beginning the ACO arrangements.

“In most cases, regardless of who sponsors the organization, you are always going to need a cooperative payer because it’s the cooperative payer who channels the patients to the providers,” he says. 

Regardless of who is operating the ACO, experts agree that the best indicators of success are plans with strong physician engagement at the primary care level and carefully aligned incentives.

“The ones that are struggling to get off the ground are those in which the deals presented to either party are very one-sided,” Hiemenz says. 

Muhlestein says preliminary results also suggest ACOs that take a more targeted approach and focus on just a few targets-whether it’s the patients who cost the most or a specific disease state-seem to be performing better than those with a broad approach.

The role of geography

When it comes to ACO growth, experts say location is critical. No two markets are alike and no two medical communities are alike.

According to Muhlestein, areas where ACOs are growing the fastest are in markets such as Boston or Southern California, where providers are already accustomed to bearing risk and focusing on population health management. Through previous experience, they are more readily prepared to shift to ACO payment models.

“If the market was relatively well prepared, we’ve seen a lot of growth simply because it’s easier for these organizations to say they’re an ACO because, in effect, they’ve been doing that for the last 20 years,” he says. 

Competition is also a strong motivator. Experts are seeing more ACOs in areas of the country where the dominant provider in the market has already  joined the ACO movement. 

Hiemenz says growth trends across the country vary somewhat depending on whether one looks at data for Medicare ACOs only, or ACOs in a broader context, but says Midwest states as well as California, Florida and Texas are all seeing growth in both areas. 

Payers also contribute to market dynamics and ACO growth. According to Muhlestein, Medicare ACOs are growing due to the national scope of the initiative, but how quickly the new payment model is adopted in the commercial or Medicaid arena is often dependent on payers’ willingness to participate in ACOs.

For instance, he says Alabama is the state with the  lowest ACO penetration because the payer with the largest share of the market in the state is not yet participating in ACOs. 

“Payers can definitely influence how fast a market is moving or if it will move at all toward accountable care, at least in the short term,” he says. 

 

 

Stakeholder challenges

While some payers and providers have eagerly adopted ACO models, others are more hesitant to get in the game. For instance, a recent survey from Purdue Healthcare Advisors found that 46% of the hospital executives surveyed had no plans to implement an ACO-like model in the near future. 

Randy Hountz, principal advisor of operations for Purdue Healthcare Advisors says the reason listed by the majority (52%) of executives for the hesitance was that there were just too many unknowns right now. 

“They wanted stronger evidence and consistency of successful models,” he says. 

Muhlestein says many payers haven’t seen the incentive to participate yet. 

“Even if payers think they are going to save money in the long term, in the short term, it costs them a lot of money, time and effort. If they don’t think it’s going to work in the long run, why invest that time now,” he says.

For all stakeholders, time is a factor. Hiemenz says before an ACO can get up and running, stakeholders must first agree on the details of how to structure the agreement-everything from defining the measurement period to deciding on what type of risk adjustment-as well as deciding on what reimbursement models to use.

“That really adds to the time it takes to get an ACO off the ground and running,” she says.

Chaet says payers’ biggest challenge is securing physician engagement and offering generous financial incentives in the ACOs.

Even if the term “ACO” goes away in years to come, the principals beyond it and the idea of shared savings will not. 

Jill Sederstrom is a freelance writer based in Kansas City.