Even as Accountable Care Organizations and other payment reform models become more common, there is still not much comprehensive information about which models providers participate in most often, and what exactly to do to make those arrangements work well.

It is also important for providers to understand the best practices – in care delivery reform, culture change, health information technology, clinical decision support, analytics, payment design, and so forth – that lead to success.  A new brief from the Premier healthcare alliance is a good place to look to start answering those questions.

ACOs and Payment Reforms:

Accountable Care Organizations (ACO) are one of several payment reform models gaining popularity as a way to control health costs and improve the quality of care. To reach those goals, ACOs rely on a mixture of care coordination, shared savings, and risk-sharing among the providers and health plans who make up the organization. The basic idea is: If providers manage to reduce costs while maintaining or improving quality, they get part of the savings. In some cases, providers share some of the risk for losses.

The most well-known program for ACOs is the Medicare Shared Savings Program. The Centers for Medicare and Medicaid Services (CMS) reports 220 ACOs existed as of March 2013, covering 3.2 million Medicare beneficiaries in 47 states plus the District of Columbia. See here for a neat fact sheet with information on demographic composition and risk profiles for Medicare ACO participants.

In addition to ACOs, payors and providers are starting to use various payment reforms designed to promote value for money in health care. Some states are working to engage Medicaid ACOs. The Center for Medicare and Medicaid Innovation (CMMI) has several bundled payment models, which pay providers for a package of services rather than for each service, as is the case in traditional Medicare. Private health plans and employer health plans have also taken an interest in bundled and value-based payment models. See the payment reform section of this blog for much more on the topic.

Shared Savings with No Loss-Risk the Most Popular:

There isn’t much research showing how many health plans and providers are choosing which approaches, or why. A new brief from Premier healthcare alliance shares interesting information to help answer those questions, based on almost three years of watching 22 health systems implementing ACOs who participate in Premier’s Partnership for Care Collaboration (PACT).

Among PACT members, shared savings programs with no risk for losses were by far the most prevalent, and capitated payment models were the least prevalent.

Here is an overview of what Premier found:

  • 14 of 22 PACT members participated in Medicare’s Shared Savings Program.
  • 13 of those 14 members participated in Track 1 of the Medicare Shared Savings Program, in which ACOs share only savings and not losses. In Track 2, ACOs share both savings and losses.
  • 10 members in the public market participated in non-Medicare programs, mainly Medicaid ACOs in coordinated care programs for patients with chronic illnesses.
  • Share-savings deals that also gave ACOs risk of sharing losses were more common in commercial health insurance markets, with 11 agreements among PACT members for those kinds of arrangements.
  • By number of enrollees, shared savings agreements with no risk for losses were the most common, covering roughly 748,000 people.
  • Providers who are testing out care management fees managed 394,000 patients.
  • 469,000 people were covered under agreements in which providers bore risks for losses.
  • 165,000 people were covered under bundled payment agreements.
  • Only 53,000 people were covered under capitated payment arrangements, in which payors give providers a single payment per person per month. Such arrangements leave providers with the risk of losing money if the cost of care is more than the capitated payment.

The level of savings ACOs received was between 25 percent and 60 percent for ACOs working with Medicare and Medicaid, and between 50 percent and 80 percent for ACOs working with commercial market health plans. But again, commercial health plans were more likely to require ACOs to take on risk for losses, so you would expect the level of shared savings to be higher to compensate.

Best Practices for Providers Getting Into Value-Based Payment:

Since ACOs and payment reform models are relatively new, both payors and providers are still working out best practices for how to make them successful. Not long ago, I wrote a blog post about how physicians can prepare for value-based payment, which Medicare will make mandatory in 2015 for all practices with at least 100 physicians. The Premier brief has similarly helpful advice for providers starting value-based payment arrangements with health plans, again based on the PACT program members’ experience.

Among the best practices listed in the Premier brief were:

  • Gather, share and analyze data
  • Make sure you understand the costs of managing payment reform activities such as care management, which usually require additional staff or infrastructure.
  • Adjust for population risk and establish protections from outliers who cost much more than the average case.
  • Measure quality and cost to help set achievable payor contract terms.
  • Design effective incentives to influence provider behavior to promote ACO goals.

The brief later goes into detail on those points. See here for the full document.