Embracing Change: As the Number of Public and Private ACOs Grow, Lessons Emerge

The momentum to establish accountable care organizations (ACOs) continues to grow, as both government and commercial payers make a push for providers to begin baring risk for patient populations. 

According to Leavitt Partners Center for Accountable Care Intelligence, 744 public and private organizations became accountable care organizations between 2011 and January of 2015. In addition, the number of ACO covered lives has grown from 2.6 million in 2011 to 23.5 million in 2015.

Although the industry has seen significant growth in the last 5 years, experts say it's only the beginning and believe the industry will continue to transform how it delivers patient care in the years ahead. 

"I think absolutely that people are starting to see that in some shape or form ACOs are here, payment reform is here, to stay," says Kim Hiemenz, principal and consulting actuary with Milliman. 

While in many respects the movement is still in its infancy, experts say the initial years of ACOs have highlighted important lessons learned along the way and have helped identify key qualities necessary for ACO's to achieve success in the years ahead. But finding success and transforming health care won't necessarily be easy.

"It's going to take longer than most people expected and much longer than most people would like," says David Muhlestein, PhD, JD, senior director of research and development at Leavitt Partners, LLC. "We've figured out a lot of things, but it's not going to be a clean, pretty transition. It's going to be messy. Things are going to work. Things are going to fail. Organizations are going to succeed and organizations are going to fail." 

Paving the Path

The push toward value-based care is being led, in part, by several recent government initiatives. 

In January of 2015, the US Department of Health and Human Services announced its goal of tying 30% of fee-for-service Medicare payments to alternative payment models, such as ACOs, that are based on quality or value by the end of 2016. That percent will rise to 50% of payments by the end of 2018.

The Medicare Access & CHIP Reauthorization Act of 2015 (MACRA) is also expected to accelerate payment for value-based care. Under the Act, those organizations participating in alternative payment models will not be subject to the Merit-Based Incentive Payment System (MIPS), which could decrease payments for those who fail to adopt quality and technology initiatives, and will instead receive a lump incentive payment that will be determined based on calculating 5% of the previous year's estimated aggregate expenditures using the fee schedule. 

In addition to the activity in Medicare, Dr Muhlestein says state Medicaid agencies are also moving toward ACO models along with many of the national commercial plans such as Humana, Aetna and United.

"Policywise we are foot on the accelerator moving toward ACO because of the promise that they provide," he says. "That promise is as providers are responsible, they will change how they deliver care, they will have a financial incentive to change how they deliver care, which will ultimately lead to better costs and outcomes." 

Putting it in Practice

At an operational level, however, providers are seeing more mixed results. 

For instance, Dr Muhlestein says about a quarter of the ACOs participating in The Medicare Shared Savings Program have seen enough savings to qualify for a bonus payment, however, that figure increases for those programs who have been in the program longer. According to Dr Muhlestein, a little over a third of ACOs who have been in the program the longest are now qualifying for bonus payments.

"This is really indicative of what we are seeing across the industry," he says."It takes a lot of time and effort, it's not enough to just get the payment models in place. All of the operational models take a lot longer and it's slowly being worked out and so providers that have been there longer are doing better." 

On the commercial side, Simon Moody, principal and consulting actuary with Milliman, says he thinks it's too early to draw any significant conclusions about the success of many of the ACOs since many didn't form until 2014 or 2015. 

"So from some of the clients that I work with, we have a mix," he says. "We have some that have been through a year or so of these deals, and shared risk deals in particular and shared savings deals, and have actually achieved some savings. There are others that have not." 

Ms Hiemenz says it also often depends on how one defines success. 

"Some of them may be successful in improving the quality or the patient satisfaction but maybe they didn't achieve enough on the cost side to earn savings," she says. "On the flip side, maybe they were very successful in lowering the cost and bending the cost curve, but they didn't meet the quality targets, so therefore in some deals they are not actually eligible for the savings." 

Lessons Learned

While experts say transforming care is a slow process that may take years before its fully achieved, they also say that some lessons have already been learned along the way as more providers adopt ACO models. 

For instance, contractually, Mr Moody says there can only be so much forethought into the development of a contract for shared savings or shared risk deals. For this reason, he says its essential to have a collaborative relationship between the payer and provider so that both parties can go back later to remedy any issues that may not have been foreseen upfront.

He also says in more aggressive deals that are looking to bend the cost curve downward or even in upside-only deals, it's important for an ACO to really assess where the opportunities are to capture "leakage" or inefficiencies to ensure they are able to stay economically viable while a reduction in utilization is likely to occur. 

"You really have to look to see whether you can actually get increased volume to compensate for that reduction in revenue and so that's particularly, I think, becoming more important as there are more self-funded employers getting into the space as well," he says.

Ms Hiemenz says having quality data that is also timely is another important aspect of ACOs.

"I think as some of these initial concepts evolve we are really starting to understand and see the dynamics of the relationships between the cost targets and the quality metrics. Those really need to be aligned and work in sync to achieve and incent appropriately," she says.

Dr Muhlestein cautions, however, that while technology is important, just having the technology is not enough to find success. He says many ACOs are still struggling to find ways to effectively implement the use of technology into the work flow to use data in a meaningful way.

He also says that ACOs have learned that change won't happen overnight and getting buy-in from all stakeholders can be difficult to achieve.

"Getting people to change is the biggest challenge that the ACOs have," he says. "We talk about technology, we talk about managing pharmaceutical costs, or managing risk or doing all these different things (but), the biggest challenge they have is managing people and managing those that provide care and getting them on board and so it takes a long time because people are slow to change." 

Some ACOs are also struggling with another challenge that is starting to emerge.

"One of the challenges we are starting to see is if there are savings, what do we do with them?," Ms Hiemenz says, adding that ACOs must decide whether to re-invest the savings into the infrastructure or pass them on to individual physicians as an incentive measure.

Keys to Success

There are still many challenges facing ACOs and while it's too early to draw conclusions about who will be the winners and losers in this new health care landscape, experts say there are several characteristics that will be essential to giving an ACO the best possible footing.

First, there must be a strong organizational commitment to the concept, both at the executive leadership level and among the board of directors.

"They need to understand that this vision is possible and that it's going to take time and effort and financial resources," Dr Muhlestein says.

From a financial perspective, Mr Moody says it's also important ACOs have a sense of what financial risk means to an ACO so they are effectively able to manage risk as they move toward value-based payments.

Having the infrastructure and technology necessary to shift to value-based arrangements will also be critical.

While the future is still uncertain, experts in the field say resistance among payers and providers has eased and many now believe that how we deliver care is going to evolve in the years ahead. Medicare, commercial payers, and providers are all moving toward ACO models as they find the best way to deliver value-based care to patients in need.

"It doesn't mean that we're going to stick with ACOs," Dr Muhlestein says. "My prediction is we won't use the ACO acronym 10 years from now, we'll come up with something else, but the model of providers that are accepting risk for a population is going to continue."