Commercial payers are “effectively taking advantage of the system” by making use of the ACO infrastructure but relying on Medicare and providers to cover the bulk of the costs, Blair Childs, Premier's senior vice president of public affairs. “ACOs invest millions of dollars in permanent infrastructure such as preventive care, chronic disease management, medical homes, technology and provider networks,” he said. “Shared savings helps offset the costs of these investments, as well as losses that come from decreased utilization. The Medicare program realizes this and has made a significant investment in shared savings.” He said some commercial payers see this as “a free ride.”
But Dr. Peter Kongstvedt, who operates a Virginia-based healthcare strategy firm, says that “if (commercial payers) are piggybacking off what Medicare does, it's not a bad deal for the hospital. The more private payers, the less the hospital has to invest.”
Kongstvedt also points out that because of the size and market share that many hospital systems possess, he has a hard time believing that hospitals are accepting payment structures that are financially unsound for them.
And in fact, Fairview Health Services, a six-hospital system in Minneapolis, was able to take the Medicare shared-savings incentive and negotiate the inclusion of value-based agreements into four contracts with commercial payers, Childs says.
He credits the payers who are “stepping up and trying to engage” by offering these models. “We're hopeful that more will do what we're seeing in Minnesota,” Childs says. “If you're really going to change the model and have an impact on cost and quality, it needs to be a shared investment model. The only way to make this work is to align incentives.”
Nearly 70% of commercial ACO payment arrangements to date have used only care management fees or downside shared-savings models, where providers face a financial loss if they fail to meet utilization and quality targets, according to the Premier study. In exchange for the downside risk, however, commercial payers tend to be more generous than Medicare if providers do meet targets—offering shared savings typically ranging from 50% to 80%, compared with Medicare's maximum savings split of 60%. Care management fees typically pay ACOs $3 to $5 per member per month.
Last month, Blue Cross and Blue Shield of Illinois and OSF HealthCare System in Peoria, Ill., announced their plans to form a new ACO with the downside-risk feature. “Our new arrangement is going to align the incentives to provide a greater emphasis and focus on improving the quality of care that we deliver in a way that is centered on the patient,” OSF HealthCare's CEO Kevin Schoeplein said in a news release. “As we begin to see the results from this model over time, our hope is that it will also allow healthcare to be more affordable. Blue Cross will reward us for success, and we'll realize reduced reimbursements where we miss the mark.”
As one of the 32 organizations selected by the CMS for participation in its Pioneer ACO program, the Illinois ACO—scheduled to begin in January 2014—intends to move the system from a traditional fee-for-service volume approach to a fee-for-value payment model. Premier reports that these risk-based arrangements with payers allow providers to build the infrastructure over time that they need to support an accountable care model—at an estimated cost of $1.7 million to $12 million, according to the American Hospital Association.
Kongstvedt cautions that one size does not necessarily fit all. He says provider payment arrangements are “hellaciously complex,” and “the biggest schism is between payers and everyone else.”
Childs sees the potential for greater uniformity among ACOs and both their government and commercial benefactors later this year. “With (state insurance) exchanges or different marketplaces that are being designed, that should be a significant motivator for carriers to step up. The winners in those exchanges will be providers of qualified health plans that are high value, that are quality, and provide better patient satisfaction and lower cost. That's exactly what an ACO is designed to do.”
Follow Rachel Landen on Twitter: @MHrlanden
