How Provider-Led ACOs Can Generate Long-Term Savings

The accountable care organization (ACO) payment model is being propelled into prime time by value-based care efforts of both government and commercial health plans. But many providers are showing a lack of readiness or willingness to participate in ACOs, particularly those under the Medicare Shared Savings Program.

Success among ACOs has been spotty, at best, and difficult to achieve for most. No one has discovered a tried-and-true recipe for ACO success across the board.

Future ACO Economics Will Require Sharing Financial Risk

ACO economics will get even tougher in the future. The option of having an ACO with savings but no downside risk—which requires participating physicians to share in deficit repayment—is planned for elimination in a year, replaced with required financial risk for expenditures exceeding the benchmark.

Despite provider concerns, both private insurers and government payers are rapidly adopting ACOs. Today, more than 10 percent of all covered individuals are in private and government ACOs, and that percentage is likely to grow dramatically as Medicare speeds its plan to push providers into ACOs while increasing the financial risk to those providers, which it has pledged to do. Meanwhile, the nation’s business sector has 32 million covered lives in ACOs, surpassing Medicare’s volume, and can be expected to build benefit plans upon these networks to avoid premium increases. It won’t be long before providers have no choice but to participate.

ACO Economics Concern Providers

Two key points about ACO economics cause the greatest concern to providers. First, patients maintain the freedom to go to any provider that will accept Medicare. With that free choice, a patient whose primary care physician is in an ACO has the option of seeking specialty services or be hospitalized outside the ACO—a feature that makes it difficult for the ACO to coordinate patient care or control its costs.

A second concern is the formula for establishing expenditure targets, which essentially lowers the cost target every year. Providers that cannot find a formula for realizing both immediate and long-term savings will find the financial effects of ACO participation devastating. Traditional programs to generate lower costs—readmission reductions, population health, referral control, and case management—will exhaust their potential for further savings at some point, even if they are successful.

These two vulnerabilities in ACO economics can cause challenges from the patient perspective as well. Patients will be aware of restrictions on access to care, or new administrative inconveniences. To address these concerns, ACO initiatives must be focus on create value that is perceptible to patients, apart from the value created for providers.

ACO Innovation Is the Key to Long-Term Success

For an ACO to be successful in the long term, it must reengineer its healthcare operations to be proactive and available to patients before an incident occurs. Cost can be driven up by care that is fragmented over time or by incidents in a clinical condition that could have been prevented. The ACO network and service lines must help patients obtain information inside and outside of the specific episode of care. Innovation should occur in participating physician practices, and it should involve the following four steps.

Develop consumer-focused operations. Loyalty of patients will be strongly linked to consumer-friendly operations, information on treatment options, price transparency, and conveniences such as online scheduling and telemedicine. The ACO’s goal should be to change the dynamic of care to ensure patients seek preventive care within the system before a condition reaches a critical, expensive stage. Although some ACOs look to population health management efforts to provide such patient outreach, most population health initiatives are designed only to fill the gaps in care. A more far-reaching customer service strategy is needed, with multiple operational and clinical components, only one of which is population health.

An important means for lowering costs will be through empowering patients to make decisions about their own care. Providing time for physician-patient conversations about treatment options and support through information about benefits and risks will help patients in making value-based decisions about pursuing care.

Optimize the ACO network to limit cost-driving effects. Physician-led ACOs have tended to be the most successful, especially those that are primary-care-driven. Large multispecialty groups and hospital-based ACOs can achieve similar success by organizing the network selectively to ensure primary care physicians are included and are committed to the ACO mission. Information about historical costs should be shared with the physicians to provide a basis for conversations about potential ways to reduce costs. In particular, Medicare data that are provided to practice groups on their relative costs compared with those of their peers should be shared within ACOs.

Support physicians in their efforts to achieve their goals for high-quality patient care. An ACO cannot make the enterprise succeed in an environment of physician burnout. An ACO cannot expect to succeed by holding ACO physicians accountable for costs and outcomes that they cannot possibly control by themselves.

A learning environment for all physicians must be the foundation for reviewing analytics, determining interventions, and developing programs. Physicians should be able to influence the ACO with input on the tools they require to provide better care.

Extend ACO services to engage community and other social support systems. Health care works within the context of patients’ lives in their families, social groups, and communities. ACOs should establish value for patients by engaging with providers of those other resources. These outside providers will be clearly distinguishable from the ACOs participating providers, and in fact may initially be perceived as competitors. But extending an ACO’s services into such areas is not about money; rather, it is about the need to add additional legs to the continuity-of-care spectrum, including working with public health entities, local patient support organizations, and churches providing social support.

An ACO absolutely can sustain long-term savings, but it can do so only with a program that is both inventive and imaginative. The real test of value-based health care for providers is in the creation of innovative systems that focus on patients as consumers.