Commercial payers offer few upside options
Commercial insurers have engaged in few accountable care contracts with no downside risk for providers—an option in Medicare’s primary ACO program that’s preferred by most of its participants. According to an analysis of 85 ACO arrangements by the Premier healthcare alliance, more than a third of them split savings evenly between insurers and providers with no penalties imposed for failing to meet goals. But of these upside models, only 21% are offered by commercial payers; more than half are through the Medicare Shared Savings Program or Medicare Advantage.
Upside-only options are more attractive, particularly in the early years of an ACO, because they allow providers to test care delivery models without the fear of financial losses while also offering the opportunity to earn enough in shared savings to offset ACO development costs.
Commercial payers are “effectively taking advantage of the system” by making use of the ACO infrastructure seeded by Medicare, said 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. “The Medicare program realizes this and has made a significant investment in shared savings.”
But Dr. Peter Kongstvedt, who operates a Virginia-based healthcare strategy firm, said 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 said he has a hard time believing that hospitals—given the size and market power many of them wield—are accepting payment structures that are financially unsound for them.
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 ranging from 50% to 80%, compared with Medicare’s maximum of 60%.