A rocky start to Medicare's approach to accountable care has done little to deter companies eager to market ancillary services and products to hospitals and medical groups.
ACO service industry blooms
The University of Pittsburgh Medical Center's health plan and the Advisory Board, a consulting company, announced a joint venture last week to market accountable care technology and outsourcing services. In Minnesota, meanwhile, specialty benefit underwriters the Star Line Group, insurance brokers U.S. Advisors and consultants Ascendant Care said they would sell reinsurance to accountable care organizations in the Medicare shared savings program.
And one of the third quarters' largest venture capital investments was the $70 million raised by Essence Group Holdings Corp. for its accountable-care software and services subsidiary.
The federal push to promote accountable care received a boost in October when officials overhauled an initial Medicare proposal that many in healthcare rejected (Oct. 24). Renewed interest in Medicare's program for ACOs has added to momentum behind the largely un-tested payment model in private markets, where commercial insurers, hospitals and medical groups have announced their own efforts.
“You're really seeing a lot of movement,” thanks to the federal initiative, insurance contracts that shift more financial risk to providers, and mergers and acquisitions between health plans and health systems, said Diane Holder, president and CEO of UPMC Health Plan. “I am not sure where it's all going,” she said, calling the activity “interesting.”
Accountable care offers hospitals, medical groups and other healthcare providers financial incentives to reach quality and cost-control goals for a group of patients. Under Medicare accountable care, which is scheduled to begin next year, hospitals and doctors can earn a share of the savings. ACOs also may select an option that offers greater potential rewards but also the risk of losses should costs climb.
Holder said the UPMC joint venture will be a first attempt to commercialize technology and expertise developed internally by the health plan. The size and scope of the UPMC Health Plan operation gave officials experience that will be valuable to customers, she said.
The Pittsburgh-based insurer is the nation's second largest provider-owned health plan, behind Kaiser Permanente, by revenue. Instead of outsourcing some functions, as other insurers do, the UPMC Health Plan “out of whole cloth, developed things ourselves,” said Holder, who also is an executive vice president of UPMC and president of the UPMC insurance services division.
Evolent Health, a newly formed company, will market services and software to help large systems develop the wherewithal to manage financial risk under accountable care and other emerging payment models, Holder said. The company will market population management technology, care management support, back office payer services and other management services.
UPMC Health Plan holds the majority stake in the company. The Advisory Board agreed to invest $10 million for a minority stake of more than 40%, said Robert Musslewhite, the Advisory Board's CEO.
Musslewhite said the consulting company approached UPMC Health Plan after hearing a growing number of hospital clients talk about the move toward value-based purchasing and population management. He said large self-insured health systems could be Evolent Health's first clients because any savings achieved though accepting more financial risk would directly benefit health systems as an employer.
MedStar Health, a Columbia, Md.-based system with nine hospitals in Maryland and the District of Columbia, is the company's first client. MedStar is expected to target the software and services toward its Medicaid managed-care plan and shared savings agreements with commercial plans.
Another ACO software and services provider raised more capital than initially planned after Blue Cross and Blue Shield Venture Partners, the Blues venture capital arm, expressed interest, W. Michael Long, chairman and CEO of the Essence Group Holding Corp., said in a news release.
“Our investment offering was oversubscribed, but this presented a unique opportunity to add such high-quality, industry-savvy new partners to our team,” Long said. The company raised $61 million in July from two venture funds but expanded the offering to $70 million to include the Blues. The funding ranked among the largest last quarter, according to a survey by the National Venture Capital Association and PricewaterhouseCoopers.
As ACOs emerge, so have efforts to differentiate them, another sign of the organizations' growing commercial significance.
The National Committee on Quality Assurance is expected to unveil newly developed standards this week after adding accountable care to its health and insurance accreditation awards.
Margaret O'Kane, president of the National Committee on Quality Assurance, said the organization's experience with accountability models and the greater need for more closely integrated medical care prompted the group to develop an ACO accreditation. She described the model as building on patient-centered medical homes, which the NCQA recognizes with a medical home designation.
Interest in the medical home recognition began slowly, O'Kane said, as some groups used the criteria as a map on which to model their practice. Based on that experience, it's unclear how many will seek accreditation as accountable care organizations, she said. “We don't know, frankly.”
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