By now, the accountable care organizations in the CMS Innovation Center's Pioneer ACO model were supposed to have shifted half their total business into risk-based contracts by selling the structure they honed in the federal program to Medicaid and private plans. Some have, but many of them have a ways to go.
The Pioneer program entered its fourth year in January with 19 organizations operating across markets from California to Minnesota to Massachusetts. They're paid by Medicare under an incentive structure that rewards better quality and lower costs and penalizes poor performance. Policymakers hope the revised incentives will emerge as a more efficient alternative to the way Medicare and most insurers still pay providers—reimbursing for each individual test, visit or procedure, with no regard for the total cost of care.
The uneven progress of the Pioneer ACOs toward meeting their 50% goal—they were supposed to reach that threshold a year ago—underscores the uncertainty that policymakers and industry executives face as they test ways to change healthcare's business model. The ACOs that joined the Pioneer program were accepted because they were deemed well-equipped to handle the care coordination and financial risk demanded by the model.
Although they are growing, only a small portion of U.S. healthcare dollars paid by private plans and self-insured employers are under similarly structured contracts. For some of the Pioneers, local competition and negotiations over the financial risk and performance measures have slowed their efforts to change that. They also face financial strain because their efforts to earn incentives under the new models erode revenue from fee-for-services contracts.
Some of the Pioneers entered the program better positioned than others to meet their target because they already had some of their business in accountable care, managed care and global budgets, which rely on varying mechanisms to tie compensation to how well providers control health spending.
In Massachusetts, the Mount Auburn Cambridge Independent Practice Association entered the Pioneer program already operating under global budgets with three major health plans. “The Pioneer ACO was a natural,” because it brought more business into risk agreements already familiar to its physicians, said Dr. Barbara Spivak, Mount Auburn's president.
Montefiore Medical Center in New York has doubled its revenue from risk-based contracts since 2012, when it became a Pioneer ACO, said Stephen Rosenthal, chief operating officer of Montefiore's Care Management Co. With the growth, its contracts cover roughly 300,000 people and account for nearly half the organization's revenue, he said. The ACO will seek to manage care for roughly 1 million people by 2018, he said.
And many of the Pioneers have, in fact, added new risk contracts with private plans and with Medicaid in states that have expanded managed care in their programs. Eastern Maine Health System's ACO, Beacon Health, entered into a private accountable-care contract this year to manage care for 36,000 people, adding to the 28,000 Medicare patients included in its Pioneer ACO, said Jeff Sanford, Beacon Health's chief financial officer. In Illinois, the state's new accountable care program boosted risk revenue for OSF Healthcare System's ACO by 10% to roughly half, said Robert Sehring, chief ministry services officer for the Peoria-based system.
Others, though, have had a harder time.
“We didn't get as far as we would have liked,” said Dr. Dave Krueger, executive director and medical director for Bellin-ThedaCare Healthcare Partners, a Pioneer ACO based in Green Bay, Wis.
The organization started without any existing contracts to reference, he said. Negotiations over critical details—sharing patients' medical and spending data, calculating savings and incentives, monitoring and measuring quality—have required more time than expected. Health plans hesitate to share data that could reveal competitive or proprietary information, he said.
Bellin-ThedaCare compromised. The ACO reached two-year contracts with health plans with limited incentives, Krueger said. That gave the ACO and health plans time to finalize a more aggressive agreement, but the contracts are shorter than the typical three to five years. “If we rush it and we wind up with a model with too many flaws in it, we could wind up with a model that falls apart before it gets started,” he said.
ACOs need time to build more transparent relationships with health plans, said Kody Koepke, director of pricing for Park Nicollet Health Services, another Pioneer ACO, based in St. Louis Park, Minn. Park Nicollet merged in 2013 with HealthPartners, a Bloomington, Minn.-based integrated delivery system. The ACOs need a clear understanding of their financial risk for managing care, which is often calculated using the actuarial expertise and proprietary software of health plans. Revenue at risk under commercial contracts account for roughly 4% to 5% of the Twin Cities-based ACO's revenue, Koepke said. “We don't enter them lightly.”
The makeup of a particular ACO can also make it more difficult to shift a large percentage of revenue into accountable-care and similar contracts. Minneapolis-based Allina Health's includes a quaternary teaching hospital with a flood of patients who aren't included in accountable-care contracts, which often identify patients by their primary-care providers, said Meg Hasbrouck, the system's vice president of contracting and reimbursement.
As revenue from risk-based contracts grows, so does flexibility to invest in services that health plans previously did not pay for, such as care coordinators or chronic-disease management, executives said. The transition, however, can create financial stress. Even though the risk contracts reward providers for reducing costly services, other contracts reward them for opposite choices.
In addition, placing more revenue under risk-based contracts makes ACOs more vulnerable to what happens when patients get care from other doctors and hospitals.
Atrius Health, based in Newton, Mass., now has roughly 75% of the revenue for its ACO under risk contracts, compared with 50% when the network joined the Pioneer program three years ago, said Beth Honan, Atrius Health vice president of contracting. This year, Atrius has agreed to share the savings with affiliated hospitals that meet the ACO's performance and spending targets.
The experience of the Pioneers is not “particularly surprising,” said Francois de Brantes, executive director of the Health Care Incentives Improvement Institute, a not-for-profit organization that studies and promotes payment reform. The dynamic needs to change, deBrantes said, because health systems need the privately insured to help finance changes in care delivery that will reduce utilization and overall costs. “The pressure is mounting,” he said. “You can't have a successful payment reform activity with half the market sitting out.”
Follow Melanie Evans on Twitter: @MHmevans
