How ACOs Can Succeed Under Value-Based Care

By Brett Furst, Payformance Solutions

Value-based care has been discussed for years in healthcare circles, but the healthcare system may be approaching a breaking point in its transition to this model of rewarding quality of care over volume.

Health costs are unsustainable, and those who aren’t on the value-based train are part of the problem, attendees at a major recent conference were told. "If you invest, you're part of the solution, even if your fee-for-service revenue goes down," Healthcare Financial Management Association President Joseph Fifer said during his keynote at the group’s annual conference. "But if you don't invest, someone else will. And the revenue could still go down."

Accountable care organizations (ACOs) were formed in part to implement value-based strategies, but the transition to ACOs has moved more slowly than many expected. And the federal government has begun to take notice, with CMS Administrator Seema Verma proclaiming that “the time has come to put real ‘accountability’ in ACOs.”

The problem that Verma – and for that matter, other critics – have is that they believe ACOs have done too little to reduce the cost of care because ACOs’ downside risk is insufficient to incentivize provider behavior change. Soon, things could be different. CMS has called for a dramatic reduction in the time period that ACOs can participate in a popular upside-only program to two years from the current six.

Many ACOs participating in this initiative, called the Medicare Shared Savings Program (MSSP), are not pleased, and have threatened to quit rather than be forced to take on additional risk. No doubt, some will do just that. Many others, though, are committed to ACOs and believe in their ability to deliver on the promise of value-based care.

Among the ACO true believers, those that choose to proceed in this new world of additional risk should consider follow the following four principles to set themselves up for success.

Realize it takes time and patience: ACOs, which were first launched by Medicare in 2012, are groups of doctors, hospitals, and other healthcare providers who come together voluntarily to give coordinated, high-quality care to their patients. They are intended to align incentives among providers, and to be held “accountable” for the quality of care and total health spending on their patients. That means an ACO shares in savings if it keeps total spending for its patients below its given target, but the ACO is financially penalized by CMS if spending for its patients exceeds the target.

As you can guess from that brief description, it’s no easy task to get an ACO up and running. There are myriad administrative tasks, from setting financial targets to creating reporting and operating structures, to name just a few. Once the ACO is operating, it’s unrealistic to expect quick results. Medicare ACOs get better at saving money the longer they’re in operation, according to CMS. The bottom line: ACOs are a marathon, not a sprint.

Know your patient population: Among the greatest challenges at an ACO’s inception is getting a handle on its patient population, which is a prerequisite to engineering an effective population health program. This task starts with developing and maintaining a robust patient registry that includes any and all relevant information about each patient – not only clinical information, but also behavioral and economic data that provide insight into social determinants of health.

This data should be shared among all participants in the care continuum – PCPs, specialists, patient navigators and the like – with the goal of getting actionable information into the hands of front-line care providers. Through the sharing of important data about patients’ health and living circumstances, ACOs may be able to get ahead of emerging health conditions and treat them before costs escalate.

Eliminate waste & incentivize quality: ACOs are designed to achieve savings in part by aligning providers’ incentives around cost-reduction initiatives such as eliminating waste and unnecessary spending. To accomplish this, ACOs must first measure performance, cost and quality across all defined clinical episodes within their networks to find opportunities to reduce costs and utilization.

Transparency is the key. An ACO’s value-based contracts must establish common procedures and guidelines for performance measurement. Once leadership has identified high-performers within the network, they can begin modeling best practices to be implemented across the rest of their network. In the event that certain providers fail to follow best practices, an ACO’s value-based contracts should provide an enforcement mechanism (likely financial) to spur behavior change.

Understand your risks and opportunities: For ACOs, risk and opportunity are essentially like two sides of the same coin that can’t be separated and must be accepted together. An excellent way to begin understanding risks and opportunities is to perform a 36-month retrospective analysis of all episodes and performed procedures. Doing so will furnish ACOs with comparative insights to help determine what patients, procedures and partners they can assume additional risk on without losing profitability.

A word of advice: When examining procedures upon which to enter into value-based agreements, ACO leadership should take an approach that is pervasive, not prescriptive. In other words, look at every episode of care performed in the network as an opportunity for value-based agreements; don’t limit yourself to areas of perceived strength. Not every ACO is ready to engage in value-based contracts for every condition, so make opportunistic grabs. Look for risk-adjusted variation in volume and cost, and let the analytics show you where to start. The episodes of care that experience the greatest variation hold the greatest opportunity for cost and quality improvements through the adoption of best practices.

While ACOs may have made slower progress in cost reduction than some had hoped, it’s important to remember that these organizations hold strong potential to reduce costs and boost quality – if done right. In the beginning progress is a tough slog, requiring leadership to remain patient and vigilant. In the meantime, more downside risk is coming. Forward-thinking ACO leadership can prepare by understanding their patient populations, eliminating excessive waste and incentivizing quality, and understanding their risks and opportunities.

About The Author

Brett Furst serves as a chief strategy officer of Payformance Solutions, where he leads go-to-market strategy and sales execution to realize Payformance Solutions’ vision of transforming payment transformation in the healthcare industry. He is a senior executive with over 27 years of experience in selling and managing technology solutions in the healthcare, manufacturing and CPG industries.