Medi­care’s new ACO model preps providers to be­come in­sur­ers

Modern Healthcare - - NEWS - By Bob Her­man

The lat­est it­er­a­tion of Medi­care’s ac­count­able care ex­per­i­ment paves the way for more doc­tors and hospi­tals to evolve to­ward start­ing their own Medi­care Ad­van­tage plans, stok­ing a trend that’s al­ready well un­der­way.

That’s not to say all health sys­tems in­ter­ested in man­ag­ing pop­u­la­tion health will start ap­ply­ing for in­sur­ance li­censes. Some pro­gres­sive sys­tems such as Dart­mouth-Hitch­cock in Le­banon, N.H., are con­tent to pur­sue value-based pay­ment mod­els with the help of pri­vate in­sur­ers. How­ever, the launch of the Next Gen­er­a­tion ACO model makes it clear the fed­eral govern­ment wants providers to take more fi­nan­cial risk in Medi­care now that they have some ex­pe­ri­ence.

“It’s full risk and full cap­i­ta­tion, and I think that’s re­ally where CMS wants to go,” said Dr. Bill Bithoney, a health­care man­ag­ing di­rec­tor at con­sult­ing firm BDO and a for­mer hos­pi­tal ex­ec­u­tive.

ACOs are a sta­ple of the de­liv­ery re­forms em­bed­ded in the Af­ford­able Care Act. Pri­mary-care of­fices, spe­cial­ists, acute-care hospi­tals, nurs­ing homes and other post-acute fa­cil­i­ties are ex­pected to work to­gether to man­age care for a set group of pa­tients. If groups can lower costs and achieve high qual­ity scores, they’re re­warded with a share of Medi­care’s sav­ings.

Providers have em­braced the op­por­tu­nity for shared sav­ings based on good per­for­mance, known as up­side risk. But they have been less ea­ger to ac­cept down­side risk, or pay­ing penal­ties if cer­tain per­for­mance thresh­olds aren’t met. Only 1% of Shared Sav­ings ACOs were in two-sided risk mod­els last year. The per­cent­age is higher for 2016, but still only about 5%.

The CMS built the Next Gen­er­a­tion pro­gram in re­sponse to providers’ dis­sat­is­fac­tion with the more strin­gent Pi­o­neer ACO model, but it also wanted to make ac­cept­ing full risk as palat­able as the eas­ier in­cen­tives of the Shared Sav­ings pro­gram, which now has 434 par­tic­i­pants. The new model prospec­tively as­signs Medi­care ben­e­fi­cia­ries to ACOs and al­lows waivers for things such as lim­its on tele­health ser­vices and the rule re­quir­ing a three-day in­pa­tient hos­pi­tal stay be­fore Medi­care pays for skilled nurs­ing.

One of the big­gest dif­fer­ences is that Next Gen­er­a­tion par­tic­i­pants, start­ing in 2017, can choose cap­i­tated pay­ment, mean­ing Medi­care would pay the ACOs a per-mem­ber, per-month lump sum, and providers would then be re­spon­si­ble for any care that pa­tients need.

ACOs that burn through those pay­ments are on the hook for the ad­di­tional costs. In essence, they would act like Medi­care Ad­van­tage in­sur­ers— ex­cept that their Medi­care ben­e­fi­cia­ries still have tra­di­tional Medi­care cov­er­age. That means those pa­tients can seek care from hospi­tals and doc­tors out­side the ACO. The process for fill­ing the Next Gen­er­a­tion slots was com­pet­i­tive since it gives hospi­tals and doc­tors more tools to co­or­di­nate care for their ben­e­fi­cia­ries. But the CMS wanted to keep the trial group small.

“This was like get­ting into Har­vard,” said Richard Barasch, CEO of Uni­ver­sal Amer­i­can, an in­surer that’s in­vested heav­ily in Medi­care’s ACO mod­els. Uni­ver­sal’s Ac­count­able Care Coali­tion of South­east Texas is one of the 21 Next Gen­er­a­tion ACOs. The com­pany “ab­so­lutely” will look at the cap­i­ta­tion model in the se­cond year since it al­ready runs Medi­care Ad­van­tage plans, he said.

Rob Laze­row, a prac­tice man­ager at the Ad­vi­sory Board Co., a con­sult­ing firm that works with hospi­tals and doc­tors, said some Next Gen­er­a­tion ACOs may form their own Medi­care Ad­van­tage plan as they gain more ex­pe­ri­ence. Th­ese will be provider or­ga­ni­za­tions that have stronger fi­nances, are will­ing to de­vote large cap­i­tal re­serves to in­sur­ance pay­outs and have the drive to run health plans.

Gain­ing ex­pe­ri­ence with cap­i­ta­tion as an ACO “ab­so­lutely” could push some providers to ex­plore be­com­ing in­sur­ers, said Josh Seidman, a se­nior vice pres­i­dent at con­sult­ing firm Avalere Health and a for­mer health tech­nol­ogy of­fi­cial in the Obama ad­min­is­tra­tion. “The ques­tion is, to what ex­tent are ACOs des­ti­na­tions or step­ping stones to some­thing else?”

Provider or­ga­ni­za­tions that don’t have an in­sur­ance in­fra­struc­ture or want to avoid the in­creased reg­u­la­tory over­sight as­so­ci­ated with in­sur­ance may pre­fer to stick with ac­count­able care con­tracts.

What’s clear, though, is that ACOs that de­cide to start their own Medi­care plans, or at least choose the cap­i­tated ap­proach, can reap a big­ger fi­nan­cial re­ward. When BDO’s Bithoney was a hos­pi­tal CEO in the Sis­ters of Prov­i­dence Health Sys­tem in Spring­field, Mass., his team worked with Tufts Health Plan on its Medi­care Ad­van­tage prod­uct and achieved sav­ings of 12.8%. That would’ve been 4% in to­day’s re­im­burse­ment en­vi­ron­ment, but that’s still a wind­fall, he said. “It was much more prof­itable than a (Shared Sav­ings) ACO could be.”

“The ques­tion is, to what ex­tent are ACOs des­ti­na­tions or step­ping stones to some­thing else?”

Josh Seidman Avalere Health

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