Tuesday, 22 March 2016 06:27

Are ACOs the Answer for Value-Based Care?

Written by

One of the concepts being used to move the healthcare industry from the current fragmented, episodic delivery-of-care model to a value-based model is the accountable care organization (ACO). In theory, this concept should allow providers to work in a much more collaborative and cohesive manner and provide better quality care at lower costs. What are the early results? The answer may depend on who you ask.

To evaluate this, let’s review some of the associated CMS initiatives and their results.

CMS has expanded the number of ACO models under the Patient Protection and Affordable Care Act in an attempt to improve quality of care, better coordinate care delivery, and bend the cost curve. These models include the Pioneer model, the Medicare Shared Savings Program (MSSP), the Next Generation model, and the Comprehensive ESRD care model.

Currently, in total there are 477 ACOs participating in these programs, covering 8.9 million beneficiaries, and 64 ACOs are in risk-bearing models. In 2014, the 20 ACOs in the Pioneer program and the 333 in the Shared Savings program had a combined level of program savings of $411 million. However, 45 percent pf participants cost Medicare more than projected, and after paying bonuses, the ACO program incurred a $2.6 million net loss to the Medicare trust fund.

From the perspective of CMS, the early results are revealing success, as the agency cites improved care based on common quality metrics when compared to fee-for-service providers. Pioneer ACOs improved in 27 of 33 quality metrics, and Shared Savings participants improved on 26 of 33 quality measures. The Pioneer model was designed for healthcare organizations that have already had experience in coordinating care across settings. There have been three years of results recorded for the Pioneer program, and in Year 3, a total of 11 of the 20 participants received payments for their share of the shared savings, three had to make payments back to CMS, and six were revenue-neutral.

On a gross cost savings basis, as noted above, including both the Pioneer and Shared Savings programs, there was $411 million in savings. And the rate of ACOs generating cost savings has been increasing for those providers that have participated in the program the longest. Of those providers who have been in the program since 2012, a total of 37 percent generated savings, compared to 27 percent and 19 percent for those who entered in 2013 and 2014, respectively. CMS believes this illustrates that with more experience, providers improve performance, and this is a positive long-term trend.

However, when you look beyond the numbers, it’s important to note the following: of the ACOs participating in 2014, there were 196 that saved Medicare money, 157 that cost more than anticipated, but only three that had to repay Medicare for losses.

On the flip side, from the providers’ perspective, there have been mixed results. Providers note that while some ACOs have seen savings, it has been a rather small amount, and when adding in providers’ investments in new data systems, infrastructure, care management protocols, and incentive payments, the net impact has been a loss. There is some speculation that the early results are biased due to the preponderance of large health systems, hospital networks, and large multi-specialty physician groups. Given the large capital expenditures and fixed costs of these organizations and the continuation of the fee-for service payment structure, there is still a volume-based incentive to drive revenue and less emphasis on cost reduction. Another issue affecting performance was that most participating providers were reluctant to assume a higher risk/reward structure, instead opting for a less risky model.

In the short term, Medicare will have to deal with the issue of participation in the program and whether to make the repayment of cost overruns by providers mandatory. This could cause current participants to drop out of the program and limit new participants. However, not implementing repayment may limit the amount of cost savings, since providers will have less incentive to reduce cost.

So in terms of answering the question of whether ACO are the answer to the value-based payment question, it looks like the jury is still out. In order to answer this question more comprehensively, we will need more broad-based participation in the program, a longer period of time for ACOs to fully implement value-based care, and payment models that truly provide incentives to provide quality care at a reasonable cost.

Stay tuned.

 

About the Author

Greg Adams is the chief strategy officer for Panacea Healthcare Solutions and has over 35 years of experience in the field of healthcare, including 20 years’ experience as a hospital CFO. His experience includes financial operations, managed care contracting, physician practice management, patient accounting, patient access, health information management, materials management, and real estate development. Greg is the past chairman of the Healthcare Financial Management Association (HFMA), having served as the chair of its Board of Directors in 2011-12. In that role he oversaw the services the organization provides to its 40,000 members. Greg speaks extensively on healthcare reform and the transition to a value-based payment system. His speaking engagements include national, regional, and state programs. He previously served as a member of the National Board of Directors for HFMA from 2002-2005 and as president of the New Jersey chapter in 1997-98. He has also served as a member of the Board of Trustees and chairman of the Finance Committee at St. Ann’s Home for the Aged in Jersey City, N.J.

Contact the Author

This email address is being protected from spambots. You need JavaScript enabled to view it.

Comment on this Article

This email address is being protected from spambots. You need JavaScript enabled to view it.

Last modified on Wednesday, 23 March 2016 04:25

Greg Adams is the Chief Strategy Officer for Panacea Healthcare Solutions and has over 35 years of experience in the field of healthcare including 20 years experience as a hospital CFO. His experience includes financial operations, managed care contracting, physician practice management, patient accounting, patient access, health information management, materials management and real estate development.  Greg is the Past Chair of the National HFMA, having served as the Chair of its Board of Directors in 2011-12. In that role he oversaw the services the organization provides to its 40,000 members. Greg speaks extensively on healthcare reform and the transition to a value based payment system. His speaking engagements include national, regional, and state programs. He has previously served as a member of the National Board of Directors for the Healthcare Financial Management Association from 2002-2005 and as President of the New Jersey chapter in 1997-98. He has also served as a member of the Board of Trustees and Chairman of the Finance Committee at St. Ann’s Home for the Aged, Jersey City, New Jersey.