Affordable Care Act: Delivery System Change Moving Towards Accountable Care

Mark Zezza Senior Policy Analyst

The Commonwealth Fund

Agenda

• Vision for Health Care Reform • How Accountable Care Organizations (ACOs)

help achieve that Vision • Early Evidence on ACOs • How ACOs fit with Other Reform Efforts

Current State of Health Care in US

Vision for Future: Reflected in Affordable Care Act

• Unclear Aims: conflicts about what trying to produce

• Fragmentation: no accountability for capacity, quality or costs

• Lack of information: leaves practices unexamined

• Wrong Incentives: Rewards fragmentation and inefficiency

• Clarify Aims: better overall health and experiences at lower costs for patients

• Care Coordination: foster accountability for full continuum of care

• Better information: supports improvement; informs consumers for best care

• Payments to support efficient care: Align financial incentives with professional aims

Accountable Care Organizations Central to Achieving Vision

Medicare Shared Savings Program (MSSP) Set to begin April 1, 2012 CMS estimates 50-270 ACOs (1-5 million beneficiaries)

will participate between 2012 – 2015 https://www.cms.gov/sharedsavingsprogram/

Pioneer ACO Program

Began January 1, 2012 – 32 organizations selected Designed for more advanced ACOs http://innovations.cms.gov/initiatives/aco/pioneer/

Advanced Payment Model Upfront payments to help provider groups ramp up for ACO initiatives Focused on smaller physician groups or small hospitals serving rural or

underprivileged communities http://innovations.cms.gov/areas-of-focus/seamless-and-coordinated-care-models/advance-

payment/

Agenda

• Vision for Health Care Reform • How Accountable Care Organizations (ACOs)

help achieve that Vision • Early Evidence on ACOs • How ACOs fit with Other Reform Efforts

Simple Definition of ACOs local (and legal) entity, comprised of a group of providers that can be held accountable for the cost and quality delivered to a defined population of patients

Not Mythical Creatures

No One

Size Fits All

“its about accountable care, not just organizations” – Stu Guterman

ACOs are real but not a Panacea

Flexible model fosters local

accountability

ACO Core Features Strong primary care foundation Able to manage patient services across the full continuum of care. Enough primary care to support generate population-level impacts

• Sufficient size to support meaningful measurement of cost and quality impacts — MSSP - Assignment for at least 5,000 Medicare beneficiaries — Pioneer – 15,000 (rural Pioneers can have 5,000)

Strong organizational, legal and governance structure Capable of prospectively planning budgets and resource needs as

well as internally distributing payments (shared-savings) Leadership is key to change culture of physicians

Accountability for total cost of patient care For all services (even by non-ACO providers) and patient co-pays

Ability to report on a robust set of Performance Measures

How are Patients Assigned to the ACO?

Step 1. Providers sign agreement to participate with ACO • ACO sends list of participating

providers to partnering Payer Step 2. Payer assigns members to providers based on plurality of patient’s primary and preventative care utilization (or charges) • If assigned provider is in an

ACO, the member gets assigned to the ACO

• CMS first assigns to primary care providers, then others (specialists and nurses)

Basic Patient Attribution Approach:

Patient Attribution Issues to Consider Attribution versus Attestation and Member Notification Attribution is most used, but Attestation is useful when no recent primary care

• Attestation may be tested in Pioneer ACO Model CMS requires notification of data-sharing and opt-out (but still counted in ACO)

• ACOs must also make informational materials available Providers used for attribution must be exclusive to one ACO Easier to attribute ACO performance and limits concerns about patient

selection/dumping Concerns over locking in a specialist to a specific ACO

Prospective versus Retrospective Both approaches have pros and cons, for example:

• (Theoretically) greater incentive for ACO to treat all patients equally under retrospective approach, whereas prospective allows better budgeting

CMS tries to achieve best of both worlds • Initial prospective attribution with final reconciliation at end of

performance period • Pioneers may test prospective assignment

Basic Shared Savings Model Projected Spending

Actual Spending

Shared Savings Target Spending

ACO Launched

Project benchmark spending in the performance period from the historical baseline amounts

Incorporate a savings threshold (e.g., 2%) to determine the spending target for calculating shared savings • Thresholds used to ensure no random winning

If actual spending is below target then ACO would be eligible for shared savings • Only paid out if quality threshold is met/exceeded

ACO receives prospective fixed payment

If successful at meeting budget and performance targets, greater financial benefits

If ACO exceeds budget, more risk means greater financial downside

Only appropriate for providers with robust infrastructure, demonstrated track record in finances and quality and providing relatively full range of services

Ultimate goal for most ACOs

Pioneer – in 3rd year, high-performing ACOs have option for partial capitation for Part B services or full capitation, including Part A and Part B

Payments can still be tied to current payment system, although ACO could receive revenue from payers and distribute funds to members

At risk for losses if spending exceeds targets

Increased incentive for providers to decrease costs

Attractive to providers with some infrastructure or care coordination capability and demonstrated track record

MSSP – offers a two-sided track with 60% savings. All ACOs must participate in 2-sided model after 3rd year

Pioneer – Offers greater potential (up to 75%) for shared savings earnings

Continue operating under current insurance contracts/coverage models (e.g., FFS)

No risk for losses if spending exceeds targets

Most incremental approach with least barriers for entry

Attractive to new entities, risk-adverse providers, or entities with limited organizational capacity, range of covered services, or experience working with other providers

MSSP – ACOs can participate in one-sided model, with 50% savings for 1st 3 years.

Pioneer: Offers a 1-sided option for one year

Shared Savings Offers a Wide Range of Approaches

One-Sided Two-Sided Capitation

Risk Adjustment, Corridors and Thresholds

CMS will risk adjust spending estimates using demographic factors, diagnoses and procedure codes from historical claims (CMS-HCC model) Problems with “up-coding” in pervious ACO demonstration

• Participating providers have greater incentive to code fully Decision to update risk scores for newly assigned beneficiaries to account for

differences in health status relative to continuously enrolled • Reduces incentive for ACO to avoid sicker patients

For currently enrolled, will use Age-Sex factors to update risk score Cap on savings (losses)

Vary from 5% – 15% with higher risks aligned with greater reward potential Minimum savings (loss) thresholds to ensure paying for intended

improvements rather than random chance MSSP – varies from 2.0% - 3.9% depending on size for one-sided model and

flat 2.0 percent for two-sided model Pioneer – typically flat 1.0% Share on 1st dollar basis once surpass the threshold

Performance Measurement

Critical to ensure that ACOS are not just stinting on care to stay under budgets

33 measures with 4 domains: – Patient/caregiver experience (7) – Care coordination/patient safety (6) – Preventive health (8) and, – At-Risk Populations (12)

• diabetes (6), hypertension(1), IVD (2), heart failure (2), CAD (2) Phase-in Approach

– Year 1: Pay for reporting (all 33) – Year 2: Reporting(8) Performance(25) – Year 3: Reporting(1) Performance(32)

ACO must surpass threshold on 70% of measures within each domain

Agenda

• Vision for Health Care Reform • How Accountable Care Organizations (ACOs)

help achieve that Vision? • Early Evidence on ACOs • How ACOs fit with Other Reform Efforts

ACO Movement

Source: Brookings Dartmouth ACO Learning Network Collaborative.

Notes: AMGA = American Medical Group Association; AQC = Alternative Quality Contract; PGP = Medicare Physician Group Practice Demonstration; MHCQ= Medicare Health Care Quality Demonstration.

= Beacon Communities (13) Public Sector

= Pioneer (32) = PGP, MHCQ (13)

= CIGNA (12)

= Brookings-Dartmouth Pilots (5) = Premier Implementation (23)

= AQC (9 in Massachusetts)

= Other private-sector ACOs

Private Sector

= AMGA Collaborative (16)

2009 January 2012

Medicare Physician Group Practice (PGP) Demonstration

Provides Early evidence on shared savings in multispecialty groups

Background: 10 integrated multispecialty provider groups testing care reforms for Medicare beneficiaries under a shared-savings payment model (started 2005)

Quality performance: After 5 years, all 10 sites achieved benchmark performance on at least 30 of 32 measures

– Share in more savings with better performance – 5- year percentage-point average increases:

• 11% on diabetes measures • 12 % on heart failure measures • 6 % on coronary artery disease measures • 9 % on cancer screening measures • 4 % on hypertension measures

Cost Performance: Achieved over $134 million in savings relative to similar cohort of patients. Nearly $110 went back to the providers.

Measure of success: All groups agreed to a 2-year extension (through 2012)

Source: https://www.cms.gov/demoprojectsevalrpts/md/itemdetail.asp?itemid=CMS1198992

BCBS Massachusetts:

Alternative Quality Contract

• The BCBS AQC is an innovative global payment model with substantial performance incentive payments – Negotiates budgets with each organization based on historical spending

• Over time, budgets linked to growth in overall economy – Groups still paid based upon Fee-for-Service with end-of-year

reconciliations – Groups bear between 50% - 100% of the risk for excess costs – Performance bonuses available up to 10% of budget

• 8 diverse organizations signed a 5-year contract in 2009 – Represented more than 25% of the state’s providers and 305,000 BCBS

members – Up to 12 groups and 470,000 members (as of 1/2011) – Caveat – HMO members only

• Initial results show that all groups are hitting quality targets and there is evidence for reduced costs

AQC Associated with Smaller Spending Increase: 6.8% vs. 8.8%

Source: Z. Song, D. G. Safran, B. E. Landon et al., "Health Care Spending and Quality in Year 1 of the Alternative Quality Contract," New England Journal of Medicine, published online July 13, 2011.

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How do Providers/ACOs Succeed at improving outcomes, care and costs?

ACOs in the Alternative Quality Contract: Price decreases from shifting care to providers that charge

lower fees • Reduce network leakage

– Helps coordinate care more effectively – Replace lost patient volume from more efficient care – Direct care away from more expensive places

Managing high-risk patients • Reduce services with limited value (avoidable admissions,

readmission and ER visits) • Expand home visits, better discharge planning, etc… • Better patient education and medication/therapy compliance • Predictive Risk Models

Source: Z. Song, D. G. Safran, B. E. Landon et al., "Health Care Spending and Quality in Year 1 of the Alternative Quality Contract," New England Journal of Medicine, published online July 13, 2011.

How do Providers/ACOs Succeed at improving outcomes, care and costs?

Through systematic efforts to improve quality and reduce costs across the organization: – Reduce avoidable admissions and ER visits – Using appropriate workforce (increased use of NPs) – Improved care coordination – Reduced waste (i.e. duplicate testing) – Internal process improvement – Better patient adherence to recommended care – Point of care reminders and best-practices – Savings in hospital supply costs – Actionable, timely data – Choices about capacity

Initiatives will vary with each organization

Risk Sharing Within ACOs ACO framework transfers financial risk from payers to ACO

Individual providers are indirectly affected Ideally Shared Savings should at least support investments for shared

resources (i.e., HIT, discharge planners, etc…) ACOs taking on greater risk (e.g., capitation) should have better care

management expertise • State licensing and regulatory requirements to protect solvency

Wide variation in how ACOs pay and share risk with its providers Can take capitation from payer, but pay providers on FFS basis Bonus potential (up to 1/3 of compensation) Tradeoffs between exposing individuals to risk of non-performance by

others and rewarding only individual performance Individual incentives aligned with overall ACO aims

Challenge in achieving shared vision of leadership team and governing boards to support move toward accountable care Changing provider culture and patient behavior Medicare: No enrollment, no lock-in, no change in benefits Shared Savings is likely a modest financial incentive, especially for

ACOs still working with FFS payment • Money is not only motivator

— Improve ability to practice better health care — Better quality of life (greater fulfillment)

Culture Change

• Early and critical step for accepting accountability • Requires evolution in relationship between providers, payers and

patients • Providers and payers must move beyond adversarial negotiations around

payment rates toward collaborations for more efficient care. Not only about payment reform, but also data analytics and benefit redesign to support higher-value care.

• Providers and other providers need to become better at working with each other to coordinate care – includes sharing expert opinions and synthesizing patient-centered outcomes research to develop practice-changing innovations.

• Providers and patients also need to work better together. Requires time to equip patients, and their care support team, with the information needed to feel confident about making efficient and effective health care decisions.

• ACO movement is a great signal that the cultural change is happening - “Intellectual Energy” • Will not be easy, there will be failures as well as success • Need strong commitment and vision

Agenda

• Vision for Health Care Reform • How Accountable Care Organizations (ACOs)

help achieve that Vision? • Early Evidence on ACOs • How ACOs fit with Other Reform Efforts

1 Advance Payment ACO Model Provides upfront capital to rural and small providers to help them become ACOs

2 Pioneer ACO Model Tests advanced ACO models 3 Bundled Payments for Care

Improvement Tests 4 bundled payment models covering physician, hospital and post-acute care services

4 Comprehensive Primary Care Initiative

Multi-payer initiative to strengthen primary care.

5 Federally Qualified Health Center Advanced Primary Care Practice Demonstration

6 Multi-payer Advanced Primary Care

Multi-payer medical home pilot in 8 states

7 Financial Models to Support State Efforts to Integrate Care for Medicare-Medicaid Enrollees

8 State Demonstrations to Integrate Care for Dual Eligibles

Provides $1M planning grants to states to develop new ways to meet the needs of the dual eligible population

9 Innovation Advisors Program Creates a network of delivery system reform experts

10 Reducing Preventable Hospitalizations Among Nursing Facility Residents 11 The Health Care Innovation

Challenge Makes up to $30 million available to support providers in their reform efforts

12 Partnership for Patients Aims to prevent preventable hospital admissions and complications

Health Reform is Much More than ACOs: Activities in Center for Medicare & Medicaid Innovation

Strategic Implementation of Reforms

Payment models are complimentary - ACOs – Accountability of all services for an entire population,

which helps ensure no cost-shifting and overall policy goals of better health and lower total costs are being met

Bundled Payments – Accountability for select services and conditions, which helps ensure important gaps in care are addressed and specialists are included in efforts to better coordinate care

Need to experiment with different approaches Not sure what works best Vary with local market characteristics and provider experience

with care management Providers will need to leverage multiple payment reform

provisions to maximize returns on clinical transformation efforts

How can ACOs fit in a National Health System? (from a US perspective)

Who should assume accountability for value of care? Accountability requires coordinated care over time, as well as across multiple

providers and institutional settings 1. Individual providers? may have to narrow a focus – on specific

patient provider interactions – and not enough resources 2. Health Plans? In good position to facilitate care coordination and

accountability for patient outcomes, but historically have been more focused on costs than value

• 60% of Americans with employer-sponsored insurance companies work for self-insured employers

3. ACOs? Seems like the right fit ACOs offer a global budget approach with flexibility to accommodate various

underlying payment and delivery models Potential to align payment models and incentives across payers

• Critical Mass of volume and types of providers needed to have significant impact on care and enough financial support to implement reforms

Anticipates increasing challenges of FFS payment environment while preserving or increasing net revenues - with a progressive approach