Executive Summary

Chapter 1: Introduction

Accountable Care Organizations (ACO) are the core test beds designed for the process of innovation towards systemic solvency, aligned incentives, and cost containment. ACOs are associated with two other health care delivery models: the patient-centered medical home (PCMH) and integrated care networks (ICN). Each model is patient-centered in their underlying philosophy, each emphasizes a team-approach to providing care, and each seeks to improve outcomes while keeping costs in line. Common to all is the concept of the value of care. What makes an ACO different from an ICN, PCMH or managed care organization are the incentive structures and sometimes ownership of the ACO. 

ACOs evolved from the present system because our primary funding models, fee-for-service and capitation, each have perverse incentives that the accountable care model seeks to remedy. In a fee-for-service system, providers are compensated for each service performed, which can lead to unnecessary services being provided (and unnecessary costs). In a capitated model, providers are reimbursed at a fixed rate, usually on a per-member, per-month basis. In this reimbursement model, providers may have a disincentive to providing necessary treatments, which can lead to poor outcomes and eventually, greater costs.

 

Chapter 2: Value-based Care Models

Value-based Care Defined. ACOs and value-based care models evolved from the present system because our primary funding models, fee-for-service and capitation, each has perverse incentives that the accountable care model seeks to remedy. In a fee-for-service system, providers are compensated for each service performed, which can lead to unnecessary services being provided (and therefore unnecessary costs). In a capitated model, providers are reimbursed at a fixed rate. In this reimbursement model, providers may have a disincentive to providing necessary treatments, which can lead to poor outcomes and eventually, greater costs. 

ACO Models. ACOs are groups of health care providers, such as physicians and hospitals, that collaborate to ensure the highest quality treatment possible for a segment of the population. Both providers and payers are incentivized to work together to improve the quality of care while reducing overall costs through efficient practices. There are five primary ACO programs and models offered by Medicare: the Pioneer ACO (ended Dec. 31, 2016), the Medicare Shared Savings Program (MSSP), the Advance Payment ACO Model, ACO Investment Model (AIM), and the Next Generation ACO. There are also Commercial ACOs that are not overseen by the Centers for Medicare and Medicaid Services (CMS), Medicaid ACOs and employer-driven ACOs.

ACOs often form a separate company—typically and LLC—that distinguishes the ACO from the partnering entity.

In order to be eligible for shared savings in a Medicare ACO, ACOs provide CMS with performance data on 34 measures in four domains:

  • Patient/caregiver experience—8 measures
  • Care coordination/patient safety—10 measures
  • Preventive Care—8 measures
  • At-risk population—7 measures and 1 composite (diabetes)

New ACO models from CMS 

In December 2016, CMS announced a new Medicare-Medicaid ACO (MMACO) model that builds on the Medicare Shared Savings Program (MSSP). Under this new model, MSSP ACOs that are currently accountable for assigned beneficiaries’ Medicare expenditures can also take on accountability for the Medicaid costs of dually eligible enrollees. CMS said it “seeks to encourage participation from safety-net providers in Alternative Payment Models [APMs]” through the MMACO. The agency will partner with as many as six states in rolling out the new model, with preference given to those having “low Medicare ACO saturation.”

CMS also announced the “Track 1+” model ACO in October 2016, which appears to be a bridge to attract more providers into taking on downside risk. The amount of exposure is more limited than Track 2 or Track 3, but the upside isn’t as great either.

Commercial ACO. Commercial insurance companies encourage providers to enter into contracts in which payment is based upon the value of their care. Although the potential for commercial ACOs is considerable, the market will decide their outcome during 2014 and 2015 as providers weigh the pros and cons of joining an ACO.

Bundled Payments for Care Improvement (BPCI) Initiative. In this initiative providers enter into payment arrangements that include financial and performance accountability for episodes of care. Traditional Medicare payment structures reward providers for the quantity of care rather than the quality. Bundled payments can align incentives for various providers, thereby encouraging collaboration across specialties and care settings. The initiative comprises four models of care: three retrospective  payment arrangements and a prospective  payment arrangement. 

Comprehensive ESRD Care (CEC) Model. This initiative is designed to identify, test, and evaluate new ways to improve care for Medicare beneficiaries with End-Stage Renal Disease (ESRD). Through the CEC Model, CMS works with health care providers and suppliers to test the effectiveness of a new payment and service delivery model in providing beneficiaries with person-centered, high-quality care. There are 37 ESRD Seamless Care Organizations (ESCOs) participating in the Comprehensive ESRD Care Model.

Oncology Care Model. The CMS Innovation Center launched its first specialty-specific, multi-payer alternative payment model, the Oncology Care Model (OCM), on July 1, 2016. The first performance period of the five-year initiative started on Jan. 1, 2017. Nearly 200 physician-led oncology practices are participating in the model—almost double what CMS anticipated—along with 16 private insurers across the country. The Medicare arm of the OCM includes more than 3,200 oncologists and will cover approximately 155,000 beneficiaries. 

Patient-Centered Medical Homes. Once a concept thought to be as elusive as the Accountable Care Organization, PCMH is a primary care model that is patient-centered, comprehensive, team-based, coordinated, accessible, and focused on quality and safety. “The medical home is not a final destination; instead, it is a model for achieving primary care excellence so that care is received in the right place, at the right time, and in the manner that best suits a patient's needs.”

Issue Briefs. This chapter also a more detailed discussion of the Oncology Care Model, the Cardiac Care Bundle, MACRA, and value-based contracting with pharmaceutical companies.

 

Chapter 3: ACO Executive Survey

In November 2016, we emailed 1,833 executives representing 689 ACOs, inviting them to participate in our third annual survey. There were 328 delivered and opened emails and 91 respondents for a 27.7 percent response rate. After qualifying questions, 77 completed the survey. What follows is a summary of our findings. 

 

Strategic Initiatives

For 2017, ACO leaders are focused on:

  • Behavioral health: improving upon or expanding existing focus on this set of patients
  • Medication management, including improving medication reconciliation processes
  • Post-acute care: developing better relationships with home health and skilled nursing facilities
  • Care management, especially care transitions: executives understand that this is where costly mistakes happen
  • Network management: keeping referrals within the network
  • Improved clinical documentation
  • COPD, CHF, diabetes and depression

 

Quality and Cost Management 

Data interoperability is at the center of effective care coordination and forms the entire framework of the ACO model yet our research shows alarmingly low rates of EHR integration.

We know from our field experience that the level of integration isn’t where it needs to be, but we were surprised to find that 66 percent of ACOs were mostly on separate systems. While this is an improvement over the 80 percent level we found in 2014, these findings point to the nascent nature of ACOs, particularly new MSSP and AIM entrants.

EHR system interoperability was in fact the most often-cited concern by respondents. But when asked specifically about what gets in the way of providing high-quality care, lack of “physician engagement" was the most common response. Keeping referrals within the ACO network is key to having an ability to control costs.

 

Partnerships and Contracting

ACOs have the strongest partnerships in the post-acute space: 74 percent of respondents said they had a formal business relationship with home health care providers, and 72 percent of respondents cited a business relationship.

We have seen an increase in contracting overall, as well as a shift from simple contracts to risk-based contracting with providers. Private duty home care companies are beginning to benefit from increased attention from ACOs.

Chapter 4: Influential ACOs

In this chapter we introduce the reader to fifteen ACOs that we believe are consequential. Some were chosen for their history and presence in the accountable care movement, such as the Dartmouth-Hitchcock Pioneer ACO, and others for their sheer size and population coverage, like the Baylor Scott & White Quality Alliance. Our goal is to provide a succinct view of notable ACOs in action and to appreciate the different ways they formed, the populations they serve, and the variability in goals and incentives found across the spectrum of what is known as accountable care. The list of ACOs profiled includes:

1. Advocate Health

2. Arizona Care Network

3. Atrius Health

4. Baylor Scott&White Quality Alliance

5. Beacon Health LLC

6. Beth Israel Deaconess Care Organization

7. Carolinas HealthCare System (Triad Health Network)

8. Dartmouth-Hitchcock

9. Memorial Hermann

10. Ochsner Accountable Care Network LLC

11. Optimus Healthcare Partners

12. Partners HealthCare

13. Physician Organization of Michigan

14. UCLA Health ACO

 

Chapter 5: Performance

Total savings for 2015 exceeded $466 million. In all, 125 ACOs (31 percent) met their savings threshold and quality performance standards, thereby qualifying for shared savings. 

 

Results: Pioneer

  • Twelve ACOs participated in the Pioneer model in 2015—the model’s fourth performance year. Of those, eight generated savings that exceeded a total of $37 million, and four generated losses. Six of the eight that generated savings qualified for shared savings. Only one of the four that generated losses owed shared losses. 
  • The 2015 mean quality score for the Pioneer ACOs was 92.26 percent, compared with 87.2 percent in 2014. Nine ACOs had overall quality scores above 90 percent in 2015. 

 

Results: MSSP

  • Of the 392 ACOs participating in the MSSP in 2015, 119 earned shared savings and another 83 held their health care costs below their benchmark but did not meet the minimum savings threshold (and thus did not qualify for shared savings).
  • In 2014, 92 of 333 MSSP ACOs earned shared savings and another 89 held their costs below their benchmark but did not qualify for shared savings. No Track 2 ACOs owed shared losses.
  • MSSP ACOs that reported quality in both 2014 and 2015 improved on 84 percent of the quality measures reported in both years.
  • A greater percentage of MSSP ACOs that participated in a prepaid savings model (Advance Payment or AIM) generated savings above their minimum savings rate as compared with ACOs that did not participate in a prepaid savings model (45 percent vs. 29 percent). 

 

Chapter 6: Implications for Suppliers

Pharmacy

The promised success of ACOs relies on technology, coordinated care and the extent of communication among patients, physicians, pharmacists and payers. For pharmacies to exert influence and have a positive impact on costs and outcomes, they will need to take a leadership role in seeing that EHR and pharmacy management systems are connected in real time, allowing complete information sharing, successful care coordination and efficient communication. Although in most cases there currently is no reimbursement to providers to cover the cost of pharmacist services, the savings resulting from improved medication management often outweigh those costs. Being an integral part of a care team—and being compensated accordingly—is a realistic opportunity for pharmacists and pharmacies.

Pharmaceuticals and Biotechnology

Although consumer demand will surely continue to increase, given the aging population, drug companies may need to rethink their pricing strategies—an unwelcome idea within the industry, to be sure—as ACOs, health insurers and employers will be more discerning and restrictive when allowing new drugs to be approved on formulary. With financial incentives so strongly in place, ACOs are laser-focused on cost reduction that ultimately personally affects the physician (as the prescriber) in the wallet. From Pharma’s perspective, it is difficult to argue that ACOs are somehow fundamentally different from managed care, when there are even stronger incentives to block new drugs from entering the ACO universe. 

Pharma has largely responded to ACOs with indifference. Commercial ACOs are mere contracts, they argue, and they already have resources dedicated to payer relationships and contracts. For outpatient drugs, Medicare ACO beneficiaries have Part D, so why bother?

The answer is, it depends. Our research suggests that there is substantial spillover of ACO best practices into the health system or physician group with which the ACO is affiliated. That means no matter what the availability of a drug for Medicare patients, an ACO’s best practice may be to encourage physicians to prescribe a competitor’s drug away from yours.

We suggest that pharmaceutical companies follow their formula for managed care, recalling lessons learned from mistakes made in the heyday of MCOs. Pharma must start with the relationship between the company and the ACO, with aligned objectives—focused on finding patient-oriented solutions rather than driving prescription drug volume. Patient education, partnerships for population health management, physician education—each of these strategies can demonstrate pharma’s commitment to a collaborative, working relationship to achieve high-quality patient care. Pharma knows how to do this kind of relationship management well; it has perfected it along the way with managed care.

In addition to being committed to good clinical outcomes, ACOs are financially driven entities. It isn’t enough to produce a back-of-the-envelope cost-benefit analysis. If a drug reduces re-hospitalization, ACOs want to know how much, down to the dollar, they will save. For products that offer this kind of favorable profile, there is an opportunity to partner with ACOs.

Taking a longer view, Pharma should consider what it already knows about the future and fold those plans into drug development. Health care delivery in the U.S., whether under the ACO moniker or not, has shifted toward a focus on population health. Public policy is driving the change: With an aging population, increasingly expensive technologies and long-term Medicare solvency issues, policymakers have no choice but to focus on expensive chronic diseases and aggressively manage them.

 

Medical Device Manufacturers 

The medical device industry, more broadly known as MedTech, is in the midst of what Ernst & Young calls the perfect storm. From 2000 to 2007, revenue for MedTech companies in the U.S. and Europe grew at an average of 13 percent annually, while spending on research and development activities grew by an average of 15 percent annually. Since 2008, revenue growth has slowed to an average of 7 percent per year and R&D has suffered a similar decline in investment, also down to an average of 7 percent annually. Ernst & Young estimates that had the pre-2008 growth rates continued, the industry would have posted an additional $131 billion in revenue between 2008 and 2012 and would have invested an additional $12 billion in R&D during the same period. Any one of the following trends would put pressure on industry sales and profits—the fact that MedTech is facing all three is of great concern.

  • Value-based health care. From the ACO’s perspective, new products that can’t demonstrate enhanced care and keep costs in line won’t be adopted. MedTech faces the same product development challenges as pharma, tech and other suppliers.
  • Regulatory pressures. The U.S. and the European Union have made regulatory processes for obtaining new product approvals more stringent. The EU in particular shows signs of continued scrutiny with regard to medical device companies.
  • Resource constraints. As a result of the first two trends and a sluggish global economy, investors are sitting on their hands and device companies are feeling the pressure.

Successful MedTech firms will embrace the notion of selling value, rather than a product, to ACOs. A recent ZS Associates and Aberdeen Group study found that companies that promote the total economic value of a medical product or service have higher customer retention, market share, revenue and profits. So, both MedTech and ACOs win if MedTech sells its products in a way that ACOs actually prefer.

Long ago, pharma learned the value of promoting total disease management and prevention over selling product to treat a single patient. MedTech should view health care delivery in a manner similar to ACOs, speaking the language of prevention and population health management. In the end, a surgical device is just a surgical device, just as a drug is just a drug. It is a communication mindset, an approach to research and development, a way of delivering comprehensive value to the physician and the patient that are keys to creating lasting partnerships with ACOs.

Successful MedTech companies will navigate new financial models for payment called for by ACOs that make expenses predictable over time. One can envision a capitated arrangement in which surgical supplies or devices are paid for at a flat rate per patient. Such a shift will require considerable changes in the culture of most organizations that reward superstar salespeople based on the volume of units sold.

 

Durable Medical Equipment

Several regulations have been put into effect in recent years that influence the durable medical equipment (DME) market segment. For example, one regulation stipulates that DME must have a three-year minimum lifetime; this helps to ensure that ACOs will not spend large sums of money on expensive DME that cannot withstand long-term use.

In addition, the Affordable Care Act requires documentation stating that a physician or another qualified clinician has had a face-to-face encounter with the patient within the six months prior to a DME order is written. The regulation is intended to prevent unnecessary DME orders by making sure that physicians have current knowledge of their patient’s condition. The face-to-face provision in the ACA has been pilloried by home care providers and DME as an example of government overreach, or at the least, a well-intentioned provision ungrounded in the reality of providing day-to-day care. CMS is considering amendments to how the law is implemented.

To be successful in this changing market, the overarching goals of any DME company should mirror those of ACOs (e.g., reducing readmissions, improving patient outcomes) and should be clearly reflected in the company’s products and services. DME companies should also look to develop partnerships with ACOs because of an ACO’s highly insulated referral processes and nuanced payment structures. Typically, DME companies have generated income through referrals, and this model isn’t necessarily changing—but who receives the referral might.

In the past, DME prices were determined by the Durable Medical Equipment, Prosthetics/Orthotics and Supplies (DMEPOS) fee schedule established by CMS. This fee schedule put maximum price limitations on DME, but in recent years a shift has occurred to terminate this fee schedule and implement competitive bidding. Also established by CMS, the DMEPOS Competitive Bidding Program pits DME companies against each other to vie for the  chance to be the main suppliers of specific medical devices. Competitive bidding winners are then awarded a three-year CMS contract to meet the demand of CMS beneficiaries. ACOs should benefit from competitive bidding since it drives prices down and locks vendors in over time, which makes a hospital’s expense stream more predicable.

 

Home Health Care

Heading into 2014, the home health care industry faced a number of challenges—most notably reduced reimbursement resulting from the budget sequester, declining future reimbursement rates from Medicare and increased industry consolidation. Since 2011, home health care has also been under the watchful eye of the CMS and the U.S. Justice Department, which is cracking down on Medicare fraud, including overbilling. 

With so much focus on lower reimbursement rates (and added costs) for home health care associated with the Affordable Care Act, it would be easy for home health companies, entrenched in a mindset of doing business as usual, to lose sight of the trend toward a new system of payment and this new, emergent business model. Change may come slowly, but the companies prepared to embrace it with specific ideas will be rewarded. ACOs are open to new and innovative contracts, as long as quality and cost control goals are in mind and ultimately achieved.

If home health agencies do not define their role, it will be defined for them. ACOs could choose to form their own home health units or dictate unwieldy terms to regional players. By taking a leadership role, home health can focus on its strengths in perfect alignment with the ACO mission—lower costs and better outcomes—with care delivered in a manner that patients prefer. As we and others have noted elsewhere, the home health care industry has a strong argument for why it should play a larger role in our health system. Leading the effort on accountable care is a critical factor for success in the short term, and ultimately, the survival of home health care. 

 

Ambulatory Care

The rise of ACOs provides a lucrative opportunity for ambulatory care providers. According to Edmundson, participating in an ACO makes it possible for ambulatory care providers to serve a larger population, as they can provide services to people living farther away from hospitals and other care facilities. People living in suburban areas are often unwilling or unable to travel to urban medical centers and large hospitals. Ambulatory care providers can step in to fill the void, with the potential to revamp their business and generate more revenue.

In 2011, federal enforcement agencies issued two waivers that could directly affect ambulatory surgery centers (ASCs)—facilities that provide same-day surgical care, including diagnostic and preventive procedures. These waivers exempt ACOs from prosecution under existing health care laws. The first waiver pertains to antitrust laws and gives ACOs the option to bring together normally competing providers, including ASCs, to coordinate patient care. The second waiver, which pertains to health care fraud and abuse laws, allows ACOs to use their shared savings payments to reward providers for using more effective forms of care, potentially including ASC referrals. Additional clarification regarding ASC referrals is necessary.

 

Long-term Care

Pros and cons exist for all types of health care providers when considering participation in an ACO, and long-term care is no different. Most important, unless long-term care providers join an ACO, their means of revenue generation could be threatened, since long-term care providers receive most of their business through referrals from hospitals and physician referrals. The referral sources will continue to be the same under the ACO model, but long-term care facilities will need to participate in ACOs or risk losing referrals and business to other long-term care providers that are ACO participants.

Though there are benefits associated with participating in an ACO, the decision to do so may not be simple for many long-term care providers. Lack of capital, insufficient IT capabilities and additional legal requirements under the Affordable Care Act (ACA) may make the proposition a daunting one. For example, complying with section 3004 of the ACA, which concerns quality reporting, could necessitate considerable investments in IT. Other provisions of the ACA, however, offer opportunities to generate new revenue streams for long-term care providers that are willing and able to take an innovative approach. For instance, section 10202 provides incentives for states to offer home and community-based services as a long-term care alternative to traditional nursing homes. 

 

Hospice

Providers that offer services through programs referred to as advanced illness management or home-based palliative care—services including 24-hour, on-call nursing support, in-home treatments, palliative care and education about hospice care—can play a pivotal role in helping ACOs control the ballooning cost of caring for these patients.

As one example, Hospice of Michigan’s @HOMe Support program provides services by phone and in person that are designed to reduce unnecessary tests and procedures, decrease visits to the emergency department and ease the burden of caregivers. In conjunction with two insurers, Hospice of Michigan pilot-tested the program in 2007. An analysis conducted in 2011 showed that the program achieved overall cost savings of 30 percent, despite a considerable increase in home-care spending. Those results led Hospice of Michigan to contact Detroit Medical Center, a participant in the Pioneer ACO program, with a proposal to do advanced illness management for the ACO. Hospice of Michigan was awarded the contract, and the @HOMe Support program continues to demonstrate cost savings ranging from 30 percent to 36 percent.

 

Chapter 7: Market Outlook

The most important variable influencing the market outlook for ACOs—and the entire Affordable Care Act—is of course the outcome of the November 2016 presidential election. To say that Donald Trump’s unexpected win caught the health care sector off guard is an understatement. Had Hillary Clinton won, as anticipated, business would have continued as usual. Now, though, with President Trump as an ally, it’s likely that the Republican-led Congress will proceed with a long-awaited opportunity to dismantle the Affordable Care Act (ACA). 

What’s in store for consumers, physicians, hospitals, insurers, the pharmaceutical industry and other stakeholders is anybody’s guess at this point, but most policy analysts believe that a complete and immediate repeal of the ACA probably won’t happen. It’s far more likely that Trump and congressional Republicans will set about modifying, and perhaps renaming, the ACA.

 

1. Issues and Opportunities

Big Data

In total, the U.S. health care industry stands to save $300 billion annually by leveraging the analytical capabilities of big data—roughly 10 percent of the overall spend. Data management is the cornerstone of an ACO’s ability to effectively match quality of care to patient outcomes. The challenge, however, is not only managing the overwhelming volume of data available, but also the variety of structured and unstructured data that are gathered. Whether a health care organization is a single physician, a multi-provider system or an ACO, digitizing high volumes of historical data can potentially help in the following areas:

  • Disease detection
  • Population health management
  • Health care fraud detection
  • Outcome prediction
  • Identification of high-risk patients
  • Standardization of care delivery

Mobile Health Market

According to a recent report by market research firm Grand View Research, the global mHealth (mobile health) market is poised to reach $49 billion by 2020, with monitoring services as its fastest-growing segment (CAGR 49.7 percent from 2014 to 2020). This growth will be driven by providers and consumers finding alternative ways to deal with increasing health care costs; hence, ACOs should focus on leveraging cost-effective mobile monitoring platforms in this changing landscape of patient care.

Internet Support Groups

With the proliferation of social media platforms and increased consumer preference for easy, convenient ways to connect, ACOs have an opportunity to achieve cost savings, care improvement and patient satisfaction through internet support groups (ISGs). Some ISGs have 200,000 or more participants who organize themselves into groups based on specific medical topics. Some are small, practice-affiliated online communities while others are large, professionally managed groups. Beyond the benefit of this being a relatively low-cost platform is the benefit of increased patient engagement. With timely preventive care reminders, user-generated content and expert-led discussions, ISGs have the potential to create dynamic and highly interactive online communities.

 

Telemedicine

Initially available only to a select few, telemedicine or “telehealth” has increasingly become a popular means of doctor-to-patient interaction. By connecting remotely through the Web (via emails, videoconferencing, instant messaging, etc.), physicians are able to meet with patients at significantly lower costs on both sides, whether it be a reduction in the need for administrative support, or a reduction in travel costs or waiting time at a physician’s office for patients. Further, in a system that is expected to face a physician shortage crisis by 2020 (91,500 fewer physicians than needed will be in practice), a scalable and time-efficient mechanism for doctor-patient interaction such as telemedicine is key to mitigate the impending shortfall.

Medical Tourism

Increasingly, patients from the U.S. are traveling abroad for high-risk surgical procedures to reduce health care expenditures. The cost of coronary artery bypass (CABG) surgery in India, for example, is approximately $10,000, while the cost of the same procedure in the U.S. was estimated to be between $122,424 and $176,835. Without a concerted effort to reduce procedural costs, ACOs stand to lose substantial business from this booming industry. On the other hand, some payers have encouraged medical tourism as a cost-control mechanism. One can envision ACOs seeing medical tourism as an opportunity rather than a threat.

Industry Consolidation

Though consolidation facilitates hospitals in becoming more robust health systems, consolidation also gives a range of parties (e.g., nurses, physicians, medical technicians) the ability to access sensitive information for a large number of patients across expansive geographical locations. Thus, this creates an inviting situation for system breaches that can cost as much as $1.5 million in HIPAA fines for businesses. Additionally, some insurers see consolidation as a way for hospitals to form closer ties with physician groups to have more clout while negotiating insurer payments, which over time has the potential to drive up health care costs. On the other hand, although they are less nimble, larger systems can more aggressively negotiate with suppliers and keep costs in check. Accordingly, the fine line between improving care and limiting provider choice through consolidation needs to be straddled carefully.

Utilizing Patient-Reported Outcomes

There is recent mounting interest in using Patient-reported outcomes (PROs) for accountability and improving performance, since they give insight into the impact of a patient’s treatment on a more personal level. Through this increased interaction, patients may feel more engaged and better satisfied with their treatment process, which in turn is likely to lead to improved outcomes. There are, however, no current system-wide implementation strategies for health care organizations, and administrators may view this data collection as a time-consuming burden that slows down clinical workflow during patient encounters. Moreover, PROs are not commonly integrated into EHRs.  

Aging Population

Although our aging population poses a variety of strains on the country’s economy, this trend will prove ACOs to be an integral factor in health care cost containment. It is estimated that almost 84 million U.S. citizens will be 65 or older by 2050, up from 43.1 million in 2012. That's nearly twice as many patients who will be eligible for Medicare, and patients in this age group tend to have multiple health issues that sometimes require high-cost clinical procedures. To meet the need of keeping costs low, ACOs would fare well by forming relationships with post-acute care providers, such as those in the hospice, home health and assisted living industries. After patient discharge, tracking data on the post-acute side can also help ACOs better predict patient outcomes and streamline processes that have the most potential to lower input costs. ACOs strive to create an interconnected care delivery process wherever possible; integrating post-acute care into an ACO’s model is a best practice approach to achieve significant cost reductions.

Medicare Limitations

Medicare beneficiaries are not required to limit themselves to one primary care physician. In most cases, this leads to a lack of continuity when reporting patient outcomes. According to The JAMA Network’s report on patient-ACO assignment patterns, there is indeed a challenge in attaining organizational accountability: Approximately one-third of beneficiaries assigned to ACOs in 2010 or 2011 were assigned to a different ACO in each year. Additionally, the researchers found that while only 8.7 percent of primary care office visits were provided outside the assigned ACO, two-thirds of specialists visits were outside the assigned ACO. The report concluded that “leakage of outpatient specialty care, particularly among high-cost and medically complex patients, could pose a significant care coordination challenge to ACOs and substantially limit their ability to achieve economies of scope in both patient-specific and systemic approaches to controlling spending.” Since it is unlikely that Medicare would limit physician availability to beneficiaries, ACOs should consider instituting patient incentives that might influence patients to stay within the ACO system of providers or affiliates.

Rural Hospitals

With the stipulation that ACOs must have at least 5,000 Medicare beneficiaries to qualify for shared savings, and steep upfront expenses averaging $1.7 million, many rural health clinics and critical access hospitals have not been able to join the Medicare Shared Savings Program. To overcome these barriers, an initiative called the National Rural ACO (NRACO) is working to create a nationwide network of rural health care providers to qualify for and take advantage of MSSP benefits. So far, nine rural communities have joined this network, and the NRACO encourages more rural communities to send in applications to join. There is indeed high interest: more than 60 rural clinics wanted to be added the network in 2014. To meet demand, NRACO’s founder, Lynn Barr, anticipates “forming multiple regional and national rural ACOs to accommodate up to 100 additional rural communities next year.”

 

2. Critical Success Factors

Embrace Technological Change

To capture a holistic view of a patient’s health, ACOs must move beyond internal electronic medical records and institute robust IT platforms capable of compiling, integrating and analyzing diverse sets of data (e.g., cost, pharmacy and utilization data) from multiple external sources. Further, efforts should be geared toward improving IT frameworks and not on supporting outdated systems that may not be able to sync with emerging health IT software applications. 

 

Hospitals should pinpoint physicians who seem resistant to technological change and educate them regarding the benefits of and procedures associated with impending structural changes. Physician buy-in is essential to the successful implementation of health IT solutions, which in turn is critical to the process of improving the quality of care. Hence, physicians should be given adequate support and empowerment during the technology adoption process.

 

Improve Patient Attribution Methods

The Medicare ACO model stipulates that organizations need clearly specified patient populations for which they will be held accountable. Patient attribution, or the assignment of ACO members to a specific provider or providers, is necessary to establish accountability, which makes an efficient methodology for patient attribution a key concern for ACOs of all types. 

 

Customize Patient Care

Out of all the facets of the triple aim philosophy, which also includes improving population health and reducing per capita health care costs, patient satisfaction is the hardest to directly influence. Many factors can lead to unfavorable patient satisfaction scores—the patient’s temperament, lack of education on processes and possible misunderstandings with providers or provider affiliates are just a few. 

Accordingly, ACO leaders should focus on managing patients in ways that target patients’ specific needs, such as through real-time clinical management activities like patient registries and predictive modeling. These population management tools are useful in identifying gaps in care and shedding light on opportunities for patient outreach, which can positively affect patient experience measures and improve the quality of care. Registries can also assist ACOs with pinpointing high-risk patient populations (those that have the greatest potential to negatively affect costs) through the integration of EHR, claims, pharmacy and lab data. Predictive modeling can be used to stratify groups of patients and predict costs associated with specific groups to identify those most likely to increase total health care expenditures.

 

Engage Assisted Living, Retirement and Post-acute Care Communities

ACOs strive to avoid hospitalizing patients through a greater emphasis on preventive and primary care, and they want to shorten patient stays in long-term/post-acute care facilities by moving patients to more cost-effective care settings such as home care and outpatient rehabilitation. Thus, including long-term care facilities on their referral lists may not be a priority for some ACOs, yet these facilities can play a vital role in the care coordination process—more than a third of Medicare fee-for-service patients use some form of post-acute care. As such, it is in the best interest of long-term care providers to seek relationships with ACOs (specifically their discharge planners) to avoid being left behind in the emerging health care market.

Some predict that skilled nursing facilities (SNFs) will play a dominant role in coordinated care, particularly those set up to provide transitional care as an interim step between the hospital and home care. In this capacity, SNFs serve as an extension of the hospital, providing a less-expensive setting for patients who still require a greater level of care than can be provided at home.

 

Utilize Home Health Agencies

Because the home is typically seen as the least-expensive care setting, home health agencies are becoming progressively attractive to organizations pursuing the ACO model. To lower costs, patients are being discharged from the hospital at the earliest opportunity. Vendors capable of providing quality care in the patient’s home as the patient continues to recuperate can help ACOs achieve the overall goals of reducing costs and readmissions. Home health agencies can benefit by forming relationships with hospitals and long-term care providers, since both types of facilities will be sources of referrals for patients who need transitional care. Home health companies must actively seek out a position with ACOs, not as another line item but as a vehicle to help achieve their shared savings objectives. 

 

Partner with Hospice/Palliative Care Services

Hospice and palliative care providers stand to attract high ACO partnership interest, thanks to factors such as anticipated increases in chronic disease cases among an aging population and the strong competencies these providers demonstrate in disease intervention and symptom control when the decision has been made to end other treatment efforts. Both types of care can be delivered in less-costly settings than the hospital or a skilled nursing facility. Nevertheless, hospice and palliative care providers need to be able to show their ability to reduce readmissions, emergency department utilization, the length of hospital stays and inpatient mortality rates.

 

Reduce Patient Attrition

Retaining patients is possibly the most important core competency that ACOs should develop. Patient attrition makes it more difficult to track spending, inevitably compromising an ACO’s ability to achieve shared savings. Having patients attain care from providers outside of the ACO’s network also erodes efforts to coordinate care. The solution is a two-pronged approach involving physician and patient education.

To optimize in-network referrals, physicians need to be kept up-to-date regarding other available providers within the ACO market. They should also be reminded that other providers in the ACO are working toward the same goals of improved quality and reduced costs, and that ultimately all of the ACO’s providers want to achieve shared savings. 

Patients need to be made aware of the benefits of coordinated care, preferably during an early point of interaction with the ACO. It helps to have providers instruct patients to contact their primary care physician (or other participating ACO provider or administrative staff member) if they need additional care. If patients require specialty care, providers can help by referring them to an in-network specialist or directing them to a care coordinator who can do so.