Health Affairs: ACOs' work just beginning

Now that 27 Medicare Shared Savings Program participants have been announced, bloggers for Health Affairs examined the state of accountable care organizations (ACOs). Turns out, the fun is just getting started.

Douglas Hastings, chair of the board of directors of Epstein Becker & Green, noted that, finally, the industry has reached an apex of how clinical and financial integration go together. “Financial integration among providers involves: shared financial data and shared financial risk and reward; mutual dependency on financial outcomes; and aligned financial incentives,” Hastings wrote on April 11. “Clinical integration among providers involves: shared clinical data and shared patient relationships; mutual dependency on clinical outcomes; and aligned clinical incentives. People debate the comparative meaning of the terms clinical integration, coordinated care and accountable care, among others. While all convey the importance of multi-provider collaboration, 'accountable care' to me best integrates the concepts of financial and clinical integration.”

Hastings noted that only time will tell whether common ownership and employment models will be more effective than network models in ACO development or whether some of each will succeed. “Antitrust enforcement will continue to challenge mergers deemed to be anticompetitive,” he concluded. “There is the potential for new forms of contracting (rather than mergers) among providers, including in some cases high market-share providers, working with payors (public and private) to accomplish accountable care goals through value-based payment arrangements to create antitrust-acceptable pathways.”

Steven Lieberman, president of Lieberman Consulting, on a blog dated April 12, gave accolades to the participating ACOs, noting starting one is a complex, time-consuming enterprise. However, he stated that launching an ACO is only the beginning and viability needs to be examined.

Lieberman stated that ACOs will need the Centers for Medicare & Medicaid Services (CMS) to provide usable data on a timely basis for essential tasks such as identifying attributed beneficiaries, tracking beneficiary utilization with both ACO and non-ACO providers and reporting financial performance against budget targets. The success of an ACO will hinge on :

• The capacity to generate and analyze meaningful reports, incorporating CMS data as well as data the ACO and its providers may generate directly; and
• Improved clinical processes and re-engineered care delivery to achieve shared savings.

“To receive shared savings bonuses, ACOs have to both save money and meet quality benchmarks,” Lieberman wrote. “While succeeding on ACO quality measures should be relatively more straightforward in the first year, over time meeting the benchmarks will become more challenging. ACOs will need to develop systems to track performance on quality measures, and develop effective interventions to improve substandard performance.”

He also pointed out potential risks for ACOs:
Individual ACOs may fail as businesses, operating at a loss;

• If ACOs spend more than budget, they are likely to increase Medicare costs;
• ACOs accepting two-sided risk have the possibility of exceeding their budgets and may not have sufficient reserves to finance their losses;
• ACOs may cause some providers to experience lower income, as unnecessary care is reduced, utilization is shifted to less expensive freestanding facilities and away from more expensive hospital-based settings, or volume is channeled to preferred providers; and
• ACOs may promote provider consolidation or otherwise facilitate dominant providers exercising greater market power, developments which could increase private sector costs and reduce the potential for competing systems of care.  

“Meeting the operational challenges, meeting performance requirements, mitigating the potential risks, and continually monitoring and evaluating what works and what doesn’t will require enormous effort on the part of the ACOs, CMS and other interested parties,” concluded Lieberman. “Those participating in ACOs and staff at CMS should take a moment to reflect on what they’ve accomplished – the successful launch of a promising major initiative. After basking in the moment, however, they have to recognize that the hard work has only just begun.”