Six Target Markets for ACO-Type Partnerships
By Joseph F. Damore and Barbara Gray, HFMA Journal, April 25, 2011
As finance leaders consider whether to apply to the Medicare Shared Savings Program, they should evaluate the application of accountable care principles to six other markets for value-based contracting.
When the Centers for Medicare & Medicaid Services issued proposed regulations for Medicare accountable care organizations (ACOs), it refocused attention on the need to improve population health while slowing cost growth.
But as hospitals develop plans for accountable care, they would be wise to consider additional market segments. After all, the need for higher value health care doesn’t start and end with Medicare. You can find accountable care principles at play in many places as providers and payers drive toward new, value-driven models of care in lieu of traditional fee-for-service. These providers are meeting quality metrics, implementing improved care processes (such as transitions of care and patient activation), assuming risk, forming partnerships with payers and other providers, offering incentives for population health and wellness, and deploying health IT.
Six Markets Beyond Medicare
Based on our work assessing “ACO readiness” in nearly 90 markets, it is clear that there are at least six additional partners or populations to target beyond Medicare.
Your own employee health plan. The first place to look is in the mirror. Most major health systems and large hospitals are self-insured, so a good place to start on the journey to accountable care is with your own employees. This will provide the organization with a “learning laboratory” that will help minimize risk when assuming accountability for additional populations.
Like other major employers, many health systems are already using incentives to promote healthy behavior among employees, like losing weight. Some health systems, such as the Cleveland Clinic, are no longer hiring smokers. They are also encouraging their own employees with chronic illness to enroll in disease management programs and designing benefits to reward employees for taking cost-saving measures, such as using generic drugs.
Self-funded employers. Large self-insured employers are ripe for turning to ACOs to provide their care. In one of the East coast markets that we assessed, a self-funded employer with a 10,000-employee workforce is implementing the Medicare shared savings model for their employee health plan with a select handful of health systems.
This company’s approach is novel. It projected health spending on a per-capita basis for company employees and made an agreement with partnering health systems that if the company came in under the target in 2011, it would split the savings with the healthcare organizations. There is no penalty if the company falls short of its target.
Health plans/insurers. Shared savings models are not the sole province of self-funded plans. Insurers are beginning to enter into accountable care agreements with health systems as an insurance product. Several agreements throughout the country already have been announced, including the following:
o Aetna and the Carilion Clinic
o Humana and Norton Healthcare
o CIGNA and Piedmont Medical Group
o Three major Minnesota insurers and Fairview Health Services
The rewards for meeting mutually agreed on quality standards and cost reductions include bonus payments and shared savings to the accountable care network.
Medicaid. Community Care of North Carolina is ahead of its time. This program places a significant emphasis on primary care and care management. Primary care physicians are paid fees for their services, plus a $3 to $5 management fee for coordinating care per Medicaid recipient, per month.
There are also incentives for practices to meet quality targets and a shared savings program for primary care physicians. Other states, such as Alabama, are adopting similar medical home models and incentive systems to manage and to deliver care.
The uninsured. The Camden (N.J.) Coalition of Healthcare Providers uses care management programs for the uninsured and is putting accountable care principles to work for some of its most fragile citizens. A citywide project targets residents with both complex medical conditions and social issues (that is, the same individuals who overuse the city’s emergency departments and hospitals). Coalition members, such as social workers, health outreach workers, and nurse practitioners, help patients simultaneously stabilize their social environments and manage their health conditions. The result has been a significant reduction in healthcare costs.
Federally Qualified Health Centers are another potential key partner in implementing this model for the uninsured.
Individuals. Frustrated by increasing premiums, business leaders and owners are backing away from employer-sponsored health plans. Instead, they are giving employees lump sums to purchase health insurance directly. In addition, in states such as Massachusetts, individuals are purchasing insurance through an insurance exchange, buying policies with deductibles and benefits that suit them.
Succeeding in the individual market will depend on finding the right payer partner that is willing to not only design products for individuals, but also to partner with the accountable care network to manage care. To keep costs down for individuals, it will be essential to include effective care (i.e., incentives to motivate people to choose better quality, lower cost providers) and chronic disease management programs into the benefits package.
Think Broadly When Applying ACO Principles
One of the most significant lessons learned from our assessments is to think broadly. Many people have compared ACOs to unicorns: a creature that has magical powers but that no one has ever seen. Across the country, health systems, insurers, and governments are taking steps to put systems of care in place that are beginning to show us what accountable care might look like.
Applying accountable care principles beyond the Medicare market is essential if this country is going to successfully reverse the out-of-control healthcare costs that threaten the nation’s fiscal health. The momentum is beginning to build across both the private and government sectors—even before Medicare ACOs become a reality.
Joseph F. Damore, FACHE, is vice president, Premier Consulting Solutions, in Washington, DC (). Barbara Gray is vice president, Premier healthcare alliance’s Accountable Care Collaborative, in Charlotte, NC ().
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