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Challenges and Opportunities in ACOs

September 30, 2011
by Mark Hagland
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A recent report looks at shared-savings programs and sees multiple strategic and IT challenges ahead

In July of this year, Suzanne F. Delbanco, Ph.D., a noted expert on payer-provider relations and reimbursement issues (among other posts, she has been CEO of The Leapfrog Group), and the executive director of the San Francisco-based, non-partisan Catalyst for Payment Reform, an independent purchaser alliance working to improve healthcare quality and reduce costs, published a report on accountable care organization (ACO) development, along with researchers from Booz Allen Hamilton. The report, funded by the Washington, D.C.-based Commonwealth Fund, and entitled, “Promising Payment Reform: Risk-Sharing with Accountable Care Organizations,” looks frankly at many of the challenges facing provider organizations whose leaders might choose to participate in the Medicare Shared-Savings Program created under the Accountable Care Act (ACA), the federal healthcare reform legislation passed in March 2010 by the U.S. Congress and signed into law by President Barack Obama.

Examining 16 diverse private-sector shared-savings models, half of them involving actual shared risk, in a variety of markets nationwide, Delbanco and her co-authors note that their “research uncovered several key findings:

> Payer-provider shared-risk models are in an early developmental phase; there are few operational shared-risk models aside from the traditional capitated HMO model.
> There are varying definitions of shared risk, and shared-risk initiatives us a variety of program designs.
> Providers do not currently have the infrastructure required to take on and manage risk successfully, though some payers are providing infrastructure and other support to providers.
> Shared-risk models have typically evolved from shared-savings programs.”

In the end, the report’s authors conclude, those shared-savings and shared-risk payment models that have been launched in the private health insurance market are too much in their infancy to be able to be declared successes yet; what’s more, the complexities of establishing such models continue to dog their progress.

Not surprisingly, the implications of such findings for the potential of the Shared Savings Program under the Medicare program, as mandated by the ACA, are many. Even as leaders of patient care organizations nationwide consider the potential financial and care management quality gains to be made, the complexities involved in potentially participating in either Medicare’s Shared Savings Program or in a private health insurer-sponsored one, are not to be underestimated.

Delbanco spoke recently with HCI Editor-in-Chief Mark Hagland regarding the strategic, operational, and IT considerations involved. Below are excerpts from that interview.

What have been the biggest challenges you and your co-authors have uncovered in the case studies you’ve examined?

Well, the two elements that are critical for providers to have in place to be able to manage any financial risk are that first, they need near-real-time access to cost information; and they have to have near-real-time access to quality information as well. So it’s one thing if a provider is getting paid fee-for-service, and these things are nice to know. But in the new model, where providers are taking on more and more financial risk, to the point where they almost resemble insurance companies, they have to have the monitoring devices in place to alert them to any needs for changing course. And ideally, providers would have dashboards that they could turn to at any moment in time, and check their status.

Suzanne Delbanco, Ph.D.

I’ve spoken to Craig Lanway, the CIO of Hill Physicians Medical Group in Northern California, about some basic issues they faced in pulling together their program, with Catholic Healthcare West and Blue Shield of California. As he noted, even achieving success around developing a universal patient ID is a challenge. Have you noted some of those basic, even mechanical, challenges?

Yes, the providers right now are not there yet, per [operational] dashboards, so they’re reliant to some extent on the health plans. But that’s complicated. And to the degree that plans can monitor quality based on claims data is good, but has its limitations. So where things have the potential to be durable is where the health plan is set up, is planning to, and is actively providing, the kinds of data the providers need. In fact, that was one of our findings, that health plans need to be able to and prepared to do that, until providers are able to monitor these things themselves.

Do you think the issue of patient assignment under the Medicare Shared Savings Program—wherein accountable care organizations might end up being responsible for the outcomes of patients whom they themselves did not bring into their ACOs—could be a stumbling block also?

Yes, though we have to separate out what might happen under the Medicare shared savings program and what might happen in the private sector, where everyone’s trying to feel their way forward. Personally—and this wasn’t in the study—I believe that there’s a lot of work that has to be done here [to the proposed ACOs regulation under the Medicare program], because it’s a little awkward to hold a provider responsible for the care of a patient who doesn’t want to be a part of the arrangement; that’s difficult. At a minimum, if the provider were given information about where that patient did seek care, or whatever, perhaps there’s something to be said for that; but as long as there’s competition in local markets among providers, I don’t see that happening. And we’ll all find out what happens in the Medicare shared savings program, but there are lessons being learned in the private sector.

What do you see as the major lessons overall that are being learned in the private sector to date?

While the feds heard that there was lots of risk-sharing being created in the private sector, what we found out is that that’s not true at all; there are very few cases where mature arrangements have created full menus of financial risk and quality outcomes triggers. For instance, in the Medicare program, there are two paths, one where they take on risk in year one and the other, where they take on risk in year three, and few are ready for either of those. And my bias, as someone who works with purchasers and employers, is that I do think that providers should assume shared risk in the future; but I don’t want us to go into this so fast that we fail; so we do have to be thoughtful about how we help providers assume shared risk.

Earlier this year, I spoke with an executive at the American Medical Group Association, who said that his member organizations, which had participated in the earlier Medicare demonstration project on accountable care, were unready for the shared savings program, as articulated in the preliminary ACO rule.

Yes, that is cautionary; and if that’s true, then this is an idea that may not be ready yet.

Do you think CMS [the federal Centers for Medicare and Medicaid Services] will listen to providers’ concerns on the shared savings program?

CMS has a history of not wanting to get too far ahead of providers on things. And I have no secret knowledge, but I would guess, just based on past experience, that they would make significant modifications to the final rule.

Given what you and your colleagues have found from your examination of private-sector initiatives, what would your advice to CIOs, regarding the strategic and operational IT challenges involved?

It’s only a question of how quickly and not whether, shared risk ultimately becomes a part of federal reimbursement.] And I would urge them to move forward as fast as they can to monitor cost and quality and implement the systems they need to. Because the value-based purchasing program is moving forward quickly now in any case.

All these programs mandated by healthcare reform are pushing providers forward in a rather clear way, wouldn’t you agree?

Yes, absolutely; towards more accountability for quality and for cost.


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