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The ABCs of ACOs


Premier’s population health experts have been working to help providers succeed in alternative payment models for the past decade. In 2019, 75 percent of our member accountable care organizations (ACOs) generated savings for Medicare and nearly half were eligible for shared savings, outpacing the national averages.

Based on the work we did in the formative years of population health and continue to build upon today, Premier’s experts were invited to help write a book on ACOs.

In the book, Pathways to a Successful Accountable Care Organization, Premier’s experts offer a valuable guide to starting and running a successful ACO – perhaps even more pertinent today, as COVID-19 is accelerating movement into value-based payment models.

Below, Premier's experts pull from the book to highlight six things healthcare providers need to consider to form – and then optimize – their own ACOs.

1. Legal and Compliance Considerations (Seth Edwards)

Over time, the fee-for-service model has resulted in archaic rules designed to prevent fraud and abuse, which largely do not make sense in a world of value and actuarial risk-bearing by providers. To make way for ACOs, the Centers for Medicare & Medicaid Services (CMS) and other parts of the Administration have provided fraud, abuse and payment waivers. For providers, it is important to understand these waivers, determine how to best utilize them to achieve the goals of the organization, and track the implementation of new waivers as the ACO moves to take on more risk.

It’s critical to understand the compliance requirements for the models in which the ACO participates as well as the operational structure. Medicare ACO models have a number of requirements related to the formation and operations of the ACO, and ACOs have to adhere to these requirements to avoid being placed on corrective action plans or – worse – expelled from the model.

Many organizations leverage the ACO as a vehicle to contract with multiple payer segments. This dynamic creates a need for critical evaluation of the operating model and composition of the ACO to align with CMS requirements, while creating flexibility for other payer segment requirements.

2. The Complexities of Post-Acute Care (Andy Edeburn)

Post-acute care (PAC) utilization represents a significant component of Medicare spending in the U.S., and has more than doubled since 2001. On average over the last several years, more than 40 percent of Medicare fee-for-service (FFS) acute discharges end up in some kind of PAC.

For ACOs in particular, PAC should be an immediate focus. Success with PAC organizations is never a byproduct of chance, and if left alone, PAC providers will invariably seek to optimize their world, which usually translates into higher spend for the ACO. Early adopting, proactive ACOs have worked to evaluate and engage capable post-acute providers around these long-standing patterns to define appropriate use, establish performance expectations and partner for clinical integration.

Given the variation inherent in PAC use, there is no singular solution to address the range of potential challenges – every market and organization is inimitable. Despite this, several dominant themes have emerged to address how organizations can build their own PAC strategy or solution: collaboratives, joint operating approaches and provider networks. There are also opportunities around health system-owned PAC assets and the organizational challenges that often arise when shifting PAC partners and use.

Each of these approaches has pros and cons, and providers must be strategic in how they evaluate and implement post-acute care strategies.

3. A Holistic Solution to Address Risk Scores (Glen Champlin and John Pitsikoulis)

Risk score is a key performance metric for achieving value-based payment success. CMS uses the risk score metric in every value-based program it administers to ensure cost targets reflect the acuity of a population. Without risk score accuracy – which is driven by coding and documentation accuracy and specificity – providers will have difficulty succeeding in Medicare value-based payment models and even more so in risk-bearing value-based payment arrangements.

To support providers’ additional efforts to manage more complex patients, CMS and payers are increasingly moving to reimbursement based on models that adjust for patient acuity (such as the Primary Care First per member per month payment and the new E&M structure for physician practices effective Jan. 1, 2021).

With the right analytics and assessments, ACOs can identify barriers and opportunities to generating accurate coding and documentation. Providers should aim to deploy a holistic solution that addresses all of the elements that impact clinician coding, including electronic health record (EHR) workflow, clinical workflow, billing infrastructure and analytics. If risk score accuracy is lacking, providers end up placing too much pressure on cost reduction to create financial success.

The ROI of risk score accuracy improvement is always high in value-based payment programs. In addition, coding and documentation accuracy impacts almost every aspect of healthcare delivery performance metrics – e.g., quality, reimbursement, hospital value-based purchasing program, predictive modeling – so there is a considerable halo effect for achieving success.

4. Employee Health Management and the Role of an ACO (Jeremy Mathis)

From 2015 through 2020, commercial premiums rose by approximately 22 percent, pointing to the fact that self-funded employee health plans are struggling to truly reduce costs and improve the health of their employees. To drive true performance improvement, employers must overcome the patchwork of interventions that incrementally reduce costs or shift the burden to their employees through benefit design.

ACO capabilities that support the use of a high-value network will help health systems and employers optimize their self-funded plans. Effective deployment of this approach requires a strategy that’s integrated across human resources, third-party administrators (TPA), provider networks and population health teams. ACOs or other integrated provider networks such as clinically integrated networks (CINs) are a vital component and should serve as the nucleus for this strategy in a health system.

To effectively implement this type of integrated strategy, ACOs must build around six capability domains:

  • Data analytics and reporting
  • Benefit design
  • Care and disease management
  • Wellness and prevention
  • Clinical integration
  • High-value network optimization

These capabilities should be implemented in a specific order to optimize ROI. With proper design, timing and integration, health systems can move beyond moderate performance improvement and toward high-quality, cost-efficient care for their employee health plans.

5. Building Successful Two-Sided Risk Models (Authors include Elyse Pegler and Bryan Smith)

CMS has taken several clear, decisive steps to accelerate the trajectory toward higher risk-based models, including new ACO regulations (Pathways to Success), progressive models (Direct Contracting) and lofty goals (LAN: 100 percent of Medicare and Medicare Advantage payments tied to quality and value through two-sided risk models by 2025).

Two-sided risk models better reward providers, if executed properly, and build off many capabilities that ACOs in one-sided risk already have in place while requiring some new clinical, technical and administrative functions.

Keys to success in two-sided risk models include:

  1. Market and financial assessments that cover market dynamics, disruptors and financial readiness for risk-based contracts. To ameliorate the lower volume from reduced utilization, organizations should pursue specialist alignment and engagement strategies to support in-network keepage and market share growth.
  2. Effective new care delivery models. ACOs can jointly develop and establish these with network providers, and cover topics such as shared care plans across the continuum of care, monitoring of provider performance for quality and efficiency, and analysis of performance data and referral patterns to ensure continuous improvement.
  3. Robust population health data and analytics. In two-sided risk models particularly, ACOs need to evaluate and benchmark the effectiveness and ROI of clinical interventions; establish interoperability between providers to exchange clinical data and to manage and prevent leakage; and integrate EHR clinical data with payer claims information.

6. Melding Bundled Payments and Primary Care Models with Your ACO (Seth Edwards, Mark Hiller, Beth Ireton, Miriam McKisic and Mike Schweitzer)

Perhaps one of the best-kept secrets in fully optimizing your ACO is the inclusion and integration of other, synergistic value-based models. Leveraging other models can be a mechanism to align incentives across the entirety of the healthcare continuum, especially for ACOs tackling shared savings.

Two examples of models to meld into your ACO are:

  • Shadow bundles, which use existing ACO-attributed lives and claims data to align specialists and provide an in-depth view of procedural or chronic disease opportunity. They offer a blueprint for expanding population health management work with specialists and PAC provider partners within specific disease states or procedures. Providers can customize and design their shadow bundles to determine how to narrow their network of providers and improve the care model for selected procedural and/or complex chronic conditions for better outcomes. They also leverage existing ACO business strategies and resources such as ACO data.
  • Primary care engagement models. These models realign primary care providers in team-based models, enabling truly comprehensive care designed to engage beneficiaries and keep them out of the acute care setting. Comprehensive Primary Care First creates a blended fee-for-service and capitated payment model while Primary Care First aims for a total primary care capitated payment model. Participants receive care management fees to support the additional activities required to drive results.

What's Next?

As we've written about for years, starting and running an ACO is a smart step for providers to take in establishing value-based payment structures. The key to success, however, is in the execution.

Our experts have helped hundreds of health systems stand up ACOs, earn shared savings and improve the cost and quality of care of their populations. Learn more.

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