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Will ACO Evolution Mimic How Health Plans Evolved?

The health plans’ networks (and the associated payment models) offered today have evolved over time. In recent history, the traditional indemnity plans have given way to managed care to corral costs and provide some higher degree of provider accountability to slow cost growth and improve care. Patients, however, were not fans of the managed care model; some patients saw it as rationing care since the model significantly reduces their choices in both which doctors they saw and when they saw them. Let’s explore how Accountable Care Organizations (ACOs) evolved from these conditions.

Broad PPOs emerged from the managed care era to maximize member choice and flexibility while showing patients the significant cost implications for out-of-network choices (which said you can go to these doctors but look how much more it will cost you). This improved access and, for a time, satisfaction but did not address continually rising costs.

To address premium growth, and in response to the rules from the Affordable Care Act, health plans have reduced the size of their PPO networks by either eliminating the out-of-network component or adding significantly more physicians to the out-of-network list. While cost was a significant factor in network shrinkage, another goal was to improve the quality and coordination of care. In theory, people would have less flexibility to participate in multiple health systems which would give doctors more ability to manage care (returning to that term).

Better coordination of care, improved quality, and management of spending growth are central tenants of Accountable Care Organizations. As health plans pushed providers to deliver care differently and manage expenses downward, it made sense that ACOs formed to take on some of the functions of a health plan and capture more potential patient share in a market. If providers were going to be more accountable they would need to better integrate with the other providers their patients saw and, if possible, recoup additional revenue.

To expand their reach, ACOS and health systems acquired practices and partnered with multiple specialists that they previously competed with for patients. As they were pushed to value-based contracts and/or tighter margins per patient, ACOs and health systems wanted more patients while working to become more efficient and successful in value-based models. Unfortunately, in many cases, their growth got in the way of their success.

The number of ACOs that failed completely or failed to hit performance targets is significant. There are also many ACOs and plans that are hitting quality/performance metrics now, but are at risk of not hitting their targets in the future as requirements increase. ACOs will be forced to consider the following measures when negotiating the next wave of value-based contracts:

  1. Ask payer/insurers to slow down the push to value much like CMS is backing off some of their payment initiatives
  2. Remove low performers from the network entirely
  3. Invest in low performing providers, with your payer/insurer partner where possible

Option 1: Slowing Down

As witnessed by the CMS delay or cancellation of bundled payment programs, there is a precedent for providers to get payers to slow down on value-based purchasing models. This might work for some providers and systems but for those who have made significant investments in technology and improving patient outcomes – these investments need to be recouped through the incentives put in place in their value-based contract.

Additionally, many high performing systems are leaning heavily into improvement and value-based contracting, taking away the incentives leaves those systems unable to financially benefit from years of investment and process improvement. From a payer perspective, health plans are facing mounting financial pressure and criticism for not doing enough to improve patient health. Health plans need to show improvements in patient outcomes to justify their value to large employers and their members who pay significant dollars in monthly.

Option 2: Create a High Performer Only ACO

Much like the insurers who shrunk many of their PPO networks to maximize certain results, health systems and ACOs could evaluate performance at provider level, determine what a high performing network might look like and move forward from there with a skinny ACO. This strategy could dramatically reduce the size of an ACO, which would then reduce access for patients, and potentially generate insufficient revenue for the ACO to be sustainable in the long term.

The consequences to patients in this approach could be severe. If some markets, or portions of markets, only have access to lower performing physicians, how will patients effectively manage their conditions? Will they disengage in their healthcare? If these physicians are not able to bring in patients, how will they improve and invest in their practices? How will they integrate going forward?  On the flip side, will high performers continue to be high performers if they are forced to take care of considerably more patients or an entirely different mix of patients?

Option 3: Dedicate Resources to Low Performing Providers and Build for the Long Haul

This is not only the best-case scenario, but also the most challenging. There are multiple provider systems that are well equipped and prepared for the shift to value. In a series of interviews Relias conducted with heads of health systems of varying sizes, they reported about 25% elation, 50% prepared, and 25% dread to describe the feeling of what the next three to five years of shifting to value would mean.

The 75% of respondents who responded feeling prepared and dread wanted things to slow down so they could get their staff and systems ready. What “ready” meant for the health system heads was significantly different: for some, it meant they needed more time to coordinate EHR interoperability from facility to facility, for others it meant understanding how to better communicate about safety culture. There was also concern about implementing clinical pathways to standardize care delivery, and a lack of practice level leadership in many cases.

The interviews showed that many of the people interviewed thought that their physicians had some but not all pieces of what it would take to be successful in value-based reimbursement. The challenge is to identify which pieces of the puzzle are missing and figure out an approach to address what’s missing, whether skills or technology. It is much simpler to work on filling in the missing pieces in a smaller system as it grows than figuring out the gaps as a large system. However, understanding and filling the gaps will allow health plans and ACOs to have bigger networks that provide the choice that their patients want while still succeeding in the integration and management of smaller networks and managed care.

Much like how health plan networks evolved over time, ACOs will also change over time, but the question is, how they do so. ACOs have the opportunity to understand how health plans have changed and use that historical knowledge to build a sustainable model with their health plan partners that continually improves.

See ACO resources and products from the experts at Relias and our partners at Nurse.com.

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