Michael Kitchell: Accountable Care Organization results
By Dr. Michael Kitchell
One of the major healthcare reforms coming out of the Affordable Care Act is the promotion of the three-part aim of: 1) better experience and outcomes of care, 2) better health of the population, and 3) lower per capita costs in healthcare.
These three goals have been the guiding force for many changes in how healthcare is delivered.
One delivery system reform involves a group of physicians who are willing to be held accountable for their quality of care and their patients’ outcomes while keeping costs below a certain level.
Not all physicians are willing to be held accountable for both quality and cost, so these delivery reforms have been based on those physicians who voluntarily agree to be part of an organization that is held responsible for the value of their care.
The concept of an organization delivering higher value care has been one of the major points of emphasis in reforming health care since Dr. Donald Berwick served as the administrator of the Center for Medicare and Medicaid.
Berwick wrote the rules for Accountable Care Organizations in 2011.
The number of Medicare Accountable Care Organizations has been growing steadily since the first year of activity in 2012, and we are now hearing about the results of the second year (2013) of Medicare Accountable Care Organization performance.
Accountable Care Organizations consist of a group of primary care physicians who are often associated with hospitals and other specialty physicians.
Accountable Care Organizations are measured by their performance on quality indicators and spending for patients that are attributed to the primary care providers who are responsible for guiding most of their care.
The hospitals and doctors in an Accountable Care Organization are paid by fee for service (the traditional way) in most cases, plus a bonus if they perform well.
Patients may not even know they are in an Accountable Care Organization because the doctor or hospital is doing the service and billing just as it always has been done.
The Accountable Care Organization’s success in achieving a bonus for their better care and lower cost though depends upon exceeding certain quality standards before receiving any payment for lowering costs. The Accountable Care Organization will not receive any bonus payment unless they are high performers in 32 quality measurements.
The payment for Accountable Care Organizations is therefore based on the services they give, and the bonus or payback depends on whether the organization keeps the costs below their historical (last year’s) spending.
The Accountable Care Organizations’ strategy is to keep costs down by prevention or earlier detection of disease (such as heart disease) and managing chronic diseases (such as diabetes), keeping patients healthier and out of the hospital, which can be very expensive.
Accountable Care Organizations cannot skimp on care because they must meet higher quality standards as well as higher patient satisfaction results.
Of the 243 groups that were Medicare Accountable Care Organizations last year, 64 of them performed well enough to receive shared savings bonuses, the amount of which is half of the savings compared to their spending the year before. Those 64 Accountable Care Organizations earned a combined total of $445 million, and even with paying those bonuses, Medicare saved a total of $372 million after accounting for all the 243 Accountable Care Organizations, some of which did not have success. Only four Accountable Care Organizations had to pay back some of the money they received in 2013 because they went over the expected spending.
Though these numbers are small compared to the $500 billion Medicare spends per year, the success of these Accountable Care Organizations in bending the cost curve down instead of going up every year is encouraging.
There are now more than 360 Medicare Accountable Care Organizations. As Accountable Care Organizations improve their disease prevention and management of chronic disease there will be more savings, and patients will benefit by their physicians’ focus on keeping them healthier rather than on increasing the number of services they bill.
The concept of Accountable Care Organizations and promotion of higher value in healthcare has been so successful that many private insurers are offering Accountable Care Organization contracts for physician groups.
In Iowa, 14 large physician/hospital groups are now contracting with Wellmark for ACO payments for value.. ..
The ACO value based payment model is voluntary, and despite it's promises some have little faith in it's ability to reign in costs. ACO may have effect, if and when it is competitive in price in the marketplace for health care.
Eighty-two percent of health plans responding to a recent survey consider payment reform a ‘major priority.’ Nearly 60 percent forecast that more than half of their business will be supported by value-based payment models in the next five years. And, of those, 60 percent are at least mid-way through implementation, according to a study published May 9 by Availity, a health information network.
The Health Plan Readiness to Operationalize New Payment Models study delves into the progress of the country’s commercial health plans, as they migrate from fee-for-service to value-based models of compensating physicians, according to a news release by Availity. The study highlights the consensus among plans that information sharing with physicians must be automated – primarily in real-time – for these models to achieve success.
The transition from fee for service to a value-based payment model will be complex.
Managing value-based payment models alongside existing fee-for-service arrangements, and across numerous health plans, is creating issues that range from accurate revenue forecasting to workflow integration challenges. According to one physician practice respondent, “The administrative complexity of administering these plans is likely to be costly. The unpredictability of the revenue stream is likely going to make administering some of these plans not worth the cost.”