Health Policy 118 (2014) 1–7
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Health Reform Monitor
Accountable care organizations in the USA: Types, developments and challenges Andrew J. Barnes a,∗ , Lynn Unruh b , Askar Chukmaitov a , Ewout van Ginneken c a b c
Department of Healthcare Policy and Research, Virginia Commonwealth University, School of Medicine, USA Department of Health Management and Informatics College of Health and Public Affairs, University of Central Florida, USA Department of Health Care Management, Berlin University of Technology, Germany
a r t i c l e
i n f o
Article history: Received 11 February 2014 Received in revised form 3 July 2014 Accepted 25 July 2014
a b s t r a c t A historically fragmented U.S. health care system, where care has been delivered by multiple providers with little or no coordination, has led to increasing issues with access, cost, and quality. The Affordable Care Act included provisions to use Medicare, the U.S. near universal public coverage program for older adults, to broadly implement Accountable Care Organization (ACO) models with a triple aim of improving the experience of care, the health of populations, and reducing per capita costs. Private payers in the U.S. are also embracing ACO models. Various European countries are experimenting with similar reforms, particularly those in which coordinated (or integrated) care from a network of providers is reimbursed with bundled payments and/or shared savings. The challenges for these reforms remain formidable and include: (1) overcoming incentives for ACOs to engage in rationing and denial of care and taking on too much financial risk, (2) collecting meaningful data that capture quality and enable rewarding quality improvement and not just volume reduction, (3) creating incentives for ACOs that do not accept much risk to engage in prevention and health promotion, and (4) creating effective governance and IT structures that are patient-centered and integrate care. © 2014 Elsevier Ireland Ltd. This is an open access article under the CC BY-NC-ND license (http://creativecommons.org/licenses/by-nc-nd/3.0/).
1. Introduction A historically fragmented system of health care delivery in the U.S. where care has been delivered by multiple providers with little or no coordination has, in part, led to ever increasing issues with access, cost, and quality [1]. The Affordable Care Act (ACA), passed in 2010, included provisions to use Medicare, the U.S. near universal public coverage program for older adults, to broadly implement Accountable Care Organization (ACO) models with a triple
∗ Corresponding author at: 830 E Main St, 4th Floor Richmond, VA 23221, USA. Tel.: +1 804 827 4367. E-mail address: [email protected] (A.J. Barnes).
aim of improving the experience of care, the health of populations, and reducing per capita costs [2]. Private payers have followed the Medicare ACO initiatives by initiating their own ACO models [3,4]. The ACOs are widely seen as the main instrument in the ACA to reign in health care expenditures, which stood at 17.7% of GDP in 2011, compared to 11.9% in second-placed Netherlands and 11.6% in third-placed France [5]. The success of the ACOs is thus the key to the success of the overall U.S. health reform effort. But what makes ACOs different from other attempts to improve health care performance in the U.S. and Europe, and can they deliver on their promise? This article provides a general, explanatory overview of ACOs in the U.S. and parallel developments in Europe, describes the current state of ACOs in the U.S. and what makes them different from
http://dx.doi.org/10.1016/j.healthpol.2014.07.019 0168-8510/© 2014 Elsevier Ireland Ltd. This is an open access article under the CC BY-NC-ND license (http://creativecommons.org/licenses/by-nc-nd/3.0/).
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previous payment and health care delivery reform efforts, and concludes with an outlook on the future of ACOs and the challenges that may lie ahead. 2. What are ACOs? There exist manifold definitions of what constitutes a private ACO. On the public side, Medicare ACOs are “groups of doctors, hospitals, and other health care providers, who come together voluntarily to give coordinated high quality care to the Medicare patients they serve” [6]. Beyond this, ACOs are organizations that assume financial responsibility and clinical accountability for the care provided to a defined patient population, where their accountability extends beyond organizational boundaries. Medicare ACOs typically have a minimum of 5000 Medicare beneficiaries assigned to them by CMS for at least 3 years. Beneficiary assignment is retrospective. ACO’s may include a variety of provider organizations such large health systems, hospitals, physician groups (with or without hospitals), or insurers. While ACOs do not have to provide services along a continuum of care, for Medicare ACOs, primary care is used for attributing lives to the ACO. The ACO is responsible for the total cost of care, whether the ACO directly provides it or not [7]. For ACOs to effectively control costs and improve experiences with care and population health, several capabilities or competencies are key. First, a formal legal structure and capable governance should be in place to overcome fragmentation, to reward providers for achieving quality and cost benchmarks, and to foster physician–hospital cooperation. Second, ACOs should link providers along the care continuum, i.e., primary care, specialist, inpatient, post-acute, and outpatient providers. Third, Health Information Technology (HIT) capability should facilitate effective care coordination and disease management and assist with monitoring, analyzing, and reporting quality and cost data to track patient across providers and to improve population health [8–10]. Finally, structures should be in place to negotiate and manage new types of contracts, such as shared savings and/or bundled payment models, with multiple payers. Importantly, the current concept of ACOs is both flexible and vague with regard to payments methods, contractual arrangements and participating organizations, which leaves substantial conceptual latitude for those initiating them. The next sections describe the various programs that are currently being rolled out under Medicare and in the private insurance market. 2.1. Medicare ACO programs Existing Medicare ACO models include the Medicare Shared Savings Program (MSSP), the Advanced Payment Model, and the Pioneer ACO Program (Table 1). Under the MSSP established by the Affordable Care Act, ACOs are meant to catalyze value-based approaches to health care [11]. In the MSSP, ACOs receive financial rewards for controlling costs while improving care delivery. There are two MSSP models that differ in whether ACOs share only savings (one-sided model) with the Centers for Medicare and
Medicaid Services (CMS) or agree to a larger share of savings in exchange for sharing losses (two-sided model). To determine an individual ACO’s share of savings (or losses), the MSSP calculates initial benchmark costs based on per capita Medicare inpatient and outpatient expenditures on beneficiaries assigned to the ACO averaged over 3 years prior the ACO’s formation [12]. The benchmark costs are updated annually based on overall Medicare cost growths. They are not, however, updated based on achieving savings during the years of program participation. ACOs share the savings between expenditures in the benchmark year and in each of three performance years—up to 50% in the onesided and 60% in the two-sided model based on meeting quality targets [13]. In order to share in savings with CMS, ACOs must meet quality performance standards each performance year in four key domains: (1) patient/caregiver experiences (7 measures), (2) care coordination/patient safety (6 measures), (3) preventive health (8 measures), and (4) at-risk populations including diabetes (2 measures), hypertension (1 measure), ischemic vascular disease (2 measures), heart failure (1 measure), and coronary artery disease (2 measures) (Appendix 1) [14]. Over the 3 year implementation, CMS payment shifts from ACOs simply reporting these measures to bearing risk for meeting performance targets on them. While the MSSP is the most common type of Medicare ACO program, in response to the continuum of provider organization preparedness to participate, two other models were created—Advance Savings Model (ASM) and Pioneer ACO. The ASMs were designed by CMS for smaller or more rural ACOs that lack the infrastructure to participate in the typical MSSP. These organizations receive an advance on expected savings with CMS recouping advancement costs from future shared savings. In contrast, the Pioneer ACO demonstration program started in 2012 for mostly hospital-led systems that already had some of the ACO capabilities in place [8]. The Pioneer ACO program intended to move these provider organizations quickly along the path of ACO development from some to full risk-bearing [11]. The Pioneer model is similar to the “Alternative Quality Contract” model that seven providers in Massachusetts entered into with Blue Cross Blue Shield in 2009 [15]. From the beneficiary’s perspective, care will be coordinated and providers will be compensated for providing better care. Medicare recipients whose doctor has decided to participate in an ACO will be notified in person or by letter. Patients are expected to benefit by filling out less medical history paper work and fewer repeated medical tests due to electronic health records. However, Medicare ACOs cannot oblige patients to only visit certain health care providers [16]. 2.2. Private ACO programs National and regional private insurers started piloting ACO partnerships with select providers with goals to move away from fee-for-service to value-based contracting and to increase coordination of care along the continuum. Models with varying levels of risk-bearing are being tested and
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Table 1 Medicare ACO models as of May 2014a . Medicare shared savings program
Number of ACOs Beneficiaries Key features
a
One-sided
Two-sided
333 (72%)
5 (7%)
Advanced savings model 36 (11%)
4.9 million in 47 states plus the District of Columbia and Puerto Rico Share up to 60% Share up to 50% For physician-based and rural ACOs. Each ACO receives of savings of savings and advances on the shared savings they are expected to earn: share losses • An upfront, fixed payment • An upfront, variable payment based on the number of its historically assigned beneficiaries A monthly payment based on the number of its historically assigned beneficiaries
Data from http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/sharedsavingsprogram/Downloads/All-Starts-MSSP-ACO.pdf.
can range from contracting incentives to full capitation. National and regional insurers that organize providers and bear the burden of assuring accountable care are categorized as insurer ACOs [17]. Insurer ACOs are those that are initiated by a private insurer. However, once initiated, providers, not insurers, will run the ACO. Some private insurers allow providers to test out new clinical models with some elements of fundholding before adopting the CMS’s models [18]. The risk-bearing and services may be shared by the private insurer and the provider as equal partners and these can be categorized as insurer–provider ACOs. Provider driven private ACOs are represented by either single integrated delivery systems or by a partnership of multiple providers, usually hospitals and physician organizations. Provider private ACOs take responsibility for accountable populations, and the role of insurers is generally limited to a risk-based payment [17]. As providers commit to new ways of reimbursement and delivering care for private and public payers, both Medicare and private ACO models will influence how ACOs develop and affect costs, experiences with care, and health in the U.S. For example, while federally backed ACOs drive the ACO formation in the country, private ACOs have the flexibility to experiment with different models of delivery and payment [17]. As no dominant ACO model exists, we can expect a further innovation in the U.S. health care delivery system.
of most NHS-funded services in the UK. The CCGs administer around two-thirds of the NHS budget and by law have to support quality improvement in general practice. All GPs are now legally obliged to join a CCG and are intended to have a greater role in the purchasing of health services and meeting local health care needs. The range of care includes elective hospital care, rehabilitation care, urgent and emergency care, most community health services, mental health, and learning disability services [20]. In Germany, integrated care was fostered through various reform acts since the 2000s, which aimed to improve cooperation between ambulatory physicians and hospitals. However, these initiatives are coordinated by the sickness funds, not the providers, cover only episodes of care, and mostly take place within the existing payment structures [21]. More akin to the ACO concept is Gesundes Kinzigtal (“Healthy Kinzigtal”), centered in Southwest Germany, which covers 31,000 people for the full range of care. Gesundes Kinzigtal is a regional health management company that has a shared savings contract with two sickness funds and which subcontracts integrated care in cooperation with the physicians’ network in the region, although payments still come from the sickness funds. Similar to one-sided MSSPs in Medicare, the company does not share in losses but is rewarded for savings [22].
3. Current state of ACOs in the States 2.3. Parallel developments in Europe The American ACO concept combines provider payment and delivery reforms rather than tackling them separately. Similarly, various European countries are also adopting this approach, particularly those in which coordinated (or integrated) care from a network of providers is reimbursed with bundled payments and/or shared savings. Yet there are notable differences, examples include the following. In the Netherlands, health insurers can negotiate a bundled payment to a so-called care group for certain chronic diseases such as diabetes, chronic obstructive pulmonary disease, and vascular risk management. The care group, almost exclusively GPs, then subcontracts with providers such as other GPs, laboratories, dietitians, and specialists [19]. More recently, Clinical Commissioning Groups (CCGs) have replaced primary care trusts as the commissioners
The number of ACOs has been growing strongly since 2010 (Fig. 1) [23]. In 2014, there were 338 ACOs in the country serving nearly 5 million (>10%) Medicare beneficiaries (up from 150 ACOs, and 2.4 million (6%) beneficiaries in 2011) [24,25]. When private (or non-CMS) ACOs are included, the numbers of these organizations exceeded 400 in 2013, covering approximately 14% of Americans [4,24]. The majority of ACOs are located in larger metropolitan areas, with the most populous states – California, Florida and Texas – having 30 or more ACOs each. The southern and Appalachia regions of the country have the most limited ACO activity. While different entities can sponsor an ACO, between 2010 and 2012, hospital systems were the predominant sponsoring entity, i.e. a primary legal organization creating an ACO [17]. However, in 2013, physician led groups have surpassed hospitals as being the most common sponsoring entity, accounting for 51% of all ACOs
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Number of Accountable Care Organizations By Sponsoring Entity 2010-2013 650 600 550 500 450 400 350
Other (e.g. community based organization) Insurer Hospital System
300 250
Physician Group
200 150 100 50 0 2010
2011
2012
2013
Muhlestein D. 2014. Accountable Care Growth in 2014: A Look Ahead. Health Affairs Fig. 1. Number of public and private Accountable Care Organizations by Sponsoring Entity 2010–2013.
[4,26]. A small numbers of ACOs are led by insurers and community based organizations. Why do these providers choose to participate in an ACO rather than rely on traditional Medicare payments? Providers may already have the requisite competencies in place (e.g. quality reporting, IT solutions for integrated care) to manage their services more efficiently, utilize synergy effects, and reach economies of scale to achieve ACO goals. Furthermore, providers may choose to adopt the ACO model because they expect declining traditional Medicare reimbursement. To date, insufficient data on ACO performance preclude forming conclusions on whether ACOs will improve quality and contain costs. The CMS-sponsored physician group practice demonstration programs have provided mixed results from early empirical analysis, reporting some improvements in quality, but with no or only moderate cost containment [27,28]. Pioneer ACOs and Advance Payment ACOs had too short a track record to evaluate effects on quality of care and costs. In July of 2013, nine Pioneer ACOs, nearly one-third, dropped out of the program after the first year with seven of these converting to the MSSP program where they would bear less financial risk [29]. However, the Alternative Quality Contract model in Massachusetts after 2 years led to savings of 1.9% in the first year and 3.3% in the second year achieved by lower prices and reduced utilization. Quality of care, particularly chronic disease management and preventive care, also improved [15]. But, when the costs of administering the program, including bonus payments to providers, were considered, the total cost of health care in the Alternative Contract Quality model likely increased. Analyses of ACO pilots suggest that collaboration, shared values and aims among participating organizations, and market and regulatory issues were important for development of ACO structures and capabilities to deliver accountable care to
patients [30]. However, this work was limited in scope and did not systematically assess external or contextual factors conducive to ACO development. 4. What makes ACOs different? Although ACOs are relatively new, certain concepts and features appear to be related to those that are already in practice in organizations such as Health Maintenance Organizations (HMOs), and in performance improvement programs such as pay-for-performance (P4P) and patientcentered medical homes (PCMHs) (Table 2) [31]. HMOs are a type of managed care organization (MCO) which emerged in the U.S. in the 1980s. With the goal of lowering costs while improving quality, MCOs integrate the insuring of patients with managing their health care. Provider groups contract with MCOs to care for MCO patients. Care is typically managed through the use of practice guidelines, prevention, and disease management (an integration of care for complex and chronic diseases). HMOs are the strongest form of managed care, in that they require patients to stay within the provider network and they incentivize providers to reduce unnecessary care through reimbursements and other mechanisms. Reimbursement mechanisms include capitation (paying a fixed amount per patient for the patient’s care), bonuses, and withholds. HMOs grew for nearly two decades, and appear to have contributed to lowering health care utilization and costs [32]. However, providers and patients objected to the reimbursement and management mechanisms, which many claim led to too much provider financial risk and cases of denial of care. Over time HMOs gave way to Preferred Provider Organizations, and other less strict forms of managed care [33]. Certain ACO features are similar to the HMO model. U.S. ACOs in the Medicare program control costs through
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Table 2 What makes ACOs different? Accountable Care Organizations (ACOs) Similarities
Differences
Lessons to learn
Managed Care Organizations (MCOs)
• Providers have an incentive to reduce unnecessary care • Costs are controlled through financial incentives such as bundling of charges and shared savings • Integration of care could lead to market power and higher prices
• Managing care can control costs but the HMO backlash resulted from providers bearing too much financial risk and patients experiencing strict management leading to denial of care
Pay for Performance (P4P)
• Provider payments are tied to meeting quality targets
• MCOs combine the insuring of patients with managing their health care; ACOs manage and provide care but do not take on the insurance function • Provider groups contract with MCOs to care for MCO patients; ACOs are predominantly organized by providers, not insurers • MCOs require patients to stay within the provider network; ACOs do not • Providers may carry more financial risk with MCOs than with ACOs • MCO financial incentives are focused on reducing utilization while ACO focus is on improving quality. • No differences
PatientCentered Medical Homes (PCMHs)
• An aim is to provide integrated care
• ACOs build in financial incentives to coordinate care; PCMHs do not PCMHs have an explicit goal to involve patients in their care; ACOs do not necessarily have this goal.
bundling of charges and “shared savings”, which come from either bonuses, or withholds with bonuses for good performance [12,33]. Costs are also expected to be reduced through improved integration of care which will better manage patients with chronic diseases [31]. Features of the current British CCGs described above are also similar to HMOs. General Practitioners work within a commissioning budget, and the GPs have responsibility for a range of care for a group of patients. This arrangement is similar to the capitated provider budgets in HMOs [34]. However, ACOs differ from HMOs in several respects. First, in Medicare ACOs patients can go to providers outside of their networks [29]. This is an important distinction that may help with patient acceptance of ACOs. Second, providers in ACOs, particularly in the predominant Medicare ACO models, do not bear nearly as much financial risk as provider groups in HMOs, which carried up to 100% of the risk if under global capitation arrangements [35,36]. This may change, and ACOs may bear more risk as their use expands and as the private insurance industry takes up the model. Third, ACOs are formed by provider groups that have a direct interest in improving performance and receiving financial rewards for this, whereas under HMOs performance improvement is mandated from the HMO and providers must share the financial rewards with the HMO [33,37]. Fourth, ACOs are more truly integrated compared to HMOs [31,38]. ACO integration is accomplished through organizational structure and through sharing of electronic records, neither of which were common with HMOs. Fifth, there is now more information about how to manage care than there was in the early days of HMOs [33,38]. ACOs can take advantage of health care guidelines, quality metrics and knowledge about patient costs. Finally, there is an increased emphasis on measurable outcomes, which will
• Limited evidence that P4P works • Providers may “teach to the test” by focusing on outcomes that are rewarded at the expense of other important inputs to improving quality of care • Early evidence suggests patient-centered care, care coordination and integration improves care experiences and health
help ACOs reach performance goals and benchmark their performance. ACOs also borrow from the P4P and PCMH concepts. P4P reimburses health care providers differentially based on whether they meet quality targets. ACO qualityimprovement mechanisms are similar to these P4P programs that reward ACOs for providing high quality care [31]. PCMHs aim to provide patient centered care and reduce the fragmentation of care. In PCMHs patients are involved in their care, and they have an ongoing relationship with a primary care provider who coordinates their care across all providers and health care settings and through all life stages [39]. ACOs’ focus on integration of care is borrowed from PCMH concepts of coordinating patient care [31,35]. However, while ACOs build in financial incentives to coordinate care, PCMHs do not. Another difference is that one of the goals of PCMHs is to involve patients in their care whereas ACOs do not explicitly have this goal [40]. Adoption of P4P, may not be advantageous. So far, P4P has not been shown to significantly improve care or lower costs, so the value of this ACO feature is questionable [41–44]. On the other hand, ACOs may want to emulate PCMHs, as the positive effect of patient-centered care, care coordination and integration is starting to become evident. Although PCMHs have only been around for a few years they have so far had mostly positive reviews [45,46]. Will ACOs be able to take the best from these prior efforts and avoid the pitfalls? The “shared savings” features of ACOs provide incentives to keep unnecessary utilization down, and could therefore lower costs. However, like its HMO counterpart, shared savings could also lead to denial of needed care, especially if reimbursement evolves into capitation. ACOs might also eventually carry too much
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financial risk. A high amount of financial risk could negatively affect the quality of care through organizational instabilities and insolvencies [31,37]. The ongoing challenge for ACOs is to not cross the line that leads to denial of needed care and financial instability. Unlike HMOs, the fact that ACOs are organized by providers themselves rather than managed care companies affords providers better control over their reimbursements and guidelines of care. Further, ACO integration of care may reduce unnecessary utilization, but highly integrated systems could lead to greater consolidation of providers [7,35,40]. This could lead to a high degree of market power, and with that, higher prices. 5. Outlook ACOs are a successor in a long line of health care performance improvement programs in the U.S. [47]. Starting with HMOs and managed care in the 1980s, and going through a series of CMS reimbursement reforms and the implementation of health savings accounts and health information technology, these programs have, so far, not succeeded in improving health care delivery for a sustained period of time [47]. What would make ACOs more successful than their predecessors (and programs from which it has borrowed features)? Are ACOs a radical enough departure that they will instigate breakthroughs in costs and quality or are they just another in a series of policies that fail to make lasting improvements in quality or get spending under control? Such questions are vital to answer for ACOs to have the potential to reform care delivery and payment models in the U.S. The challenges for ACOs are formidable, are not exclusive to ACOs, and include: (1) overcoming incentives for ACOs to engage in rationing and denial of care and taking on too much financial risk, (2) collecting meaningful data that capture quality and enable rewarding quality improvement and not just volume reduction, (3) creating incentives for ACOs that do not accept much risk to engage in prevention and health promotion, and (4) creating effective governance and IT structures that are patient-centered and integrate care. Ongoing monitoring, evaluating, and reshaping of the payment and delivery reforms targeted by ACOs will be key to their success in achieving the triple aim of improving experiences of care and the health of populations while containing costs. Furthermore, in our opinion, a word of caution is needed. ACOs should not be expected to make large improvements in health care performance. ACOs are on the “sharp,” or distal, end of population health and health care expenditures. At the proximal end of population health are socio-economic factors such as environment, community, conditions of employment (or unemployment), income, and food supply [48]. The ACO model, indeed the U.S. health care system, is not designed to substantively influence these social determinants of health. ACOs may lower costs marginally, but expenditures will remain high unless the high demand for acute medical care and the unit price of care, in the US is tackled [49]. To make substantive and lasting improvements in health and health care costs, much more is needed than the creation of ACOs.
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[37] Devers K., Berenson R. Can Accountable Care Organizations improve the value of health care by solving the cost and quality quandaries? Timely analysis of immediate health policy issues; Urban Institute, Washington DC, 2009. [38] Emmanuel E. Why Accountable Care Organizations are not 1990s Managed Care Redux. The Journal of the American Medical Association 2012;307(21):2263–4. [39] Rittenhouse DR, Casalino LP, Shortell SM, McClellan SR, Gillies RR, Alexander JA, et al. Small and medium-size physician practices use few patient-centered medical home processes. Health Affairs (Millwood) 2011;30(8):1575–84. [40] Harvard Health Letter. Accountable Care Organizations; Boston, Massachusetts, 2011. Available from: http://www.health.harvard.edu/ [accessed April, newsletters/harvard health letter/2011/April 2011]. [41] Campbell SM, Reeves D, Kontopantelis ESB, Roland M. Effects of pay for performance on the quality of primary care in England. The New England Journal of Medicine 2009;361:368–78. [42] Jha AK, Joynt KE, Orav EJ, Epstein AM. The long-term effect of Premier Pay for Performance on patient outcomes. The New England Journal of Medicine 2012;366:1606–15. [43] Werner RM, Dudley RA. Medicare’s new hospital value-based purchasing program is likely to have only a small impact on hospital payments. Health Affairs (Millwood) 2012;31(9):1932–40. [44] Eijkenaar F, Emmert M, Scheppach M, Schoffski O. Effects of pay for performance in health care: a systematic review of systematic reviews. Health Policy 2013;110(2–3):115–30. [45] Hoff T, Weller W, DePuccio M. The patient-centered medical home: a review of recent research. Medical Care Research and Review; 2012. [46] Jackson GL, Powers BJ, Chatterjee R, Prvu Bettger J, Kemper AR, Hasselblad V, et al. The patient-centered medical home: a systematic review. Annals of Internal Medicine 2013;158(3):169–78. [47] Marmor T, Oberlander J. From HMOs to ACOs: the quest for the Holy Grail in U.S. health policy. Journal of General Internal Medicine 2012;27(9):1215–8. [48] U.S. Health in International Perspective: Shorter Lives, Poorer Health. The National Academies Press; 2013. [49] Anderson GF, Reinhardt UE, Hussey PS, Petrosyan V. It’s the prices, stupid: why the United States is so different from other countries. Health Affairs (Millwood) 2003;22(3):89–105.
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Health Reform Monitor
Accountable care organizations in the USA: Types, developments and challenges Andrew J. Barnes a,∗ , Lynn Unruh b , Askar Chukmaitov a , Ewout van Ginneken c a b c
Department of Healthcare Policy and Research, Virginia Commonwealth University, School of Medicine, USA Department of Health Management and Informatics College of Health and Public Affairs, University of Central Florida, USA Department of Health Care Management, Berlin University of Technology, Germany
a r t i c l e
i n f o
Article history: Received 11 February 2014 Received in revised form 3 July 2014 Accepted 25 July 2014
a b s t r a c t A historically fragmented U.S. health care system, where care has been delivered by multiple providers with little or no coordination, has led to increasing issues with access, cost, and quality. The Affordable Care Act included provisions to use Medicare, the U.S. near universal public coverage program for older adults, to broadly implement Accountable Care Organization (ACO) models with a triple aim of improving the experience of care, the health of populations, and reducing per capita costs. Private payers in the U.S. are also embracing ACO models. Various European countries are experimenting with similar reforms, particularly those in which coordinated (or integrated) care from a network of providers is reimbursed with bundled payments and/or shared savings. The challenges for these reforms remain formidable and include: (1) overcoming incentives for ACOs to engage in rationing and denial of care and taking on too much financial risk, (2) collecting meaningful data that capture quality and enable rewarding quality improvement and not just volume reduction, (3) creating incentives for ACOs that do not accept much risk to engage in prevention and health promotion, and (4) creating effective governance and IT structures that are patient-centered and integrate care. © 2014 Elsevier Ireland Ltd. This is an open access article under the CC BY-NC-ND license (http://creativecommons.org/licenses/by-nc-nd/3.0/).
1. Introduction A historically fragmented system of health care delivery in the U.S. where care has been delivered by multiple providers with little or no coordination has, in part, led to ever increasing issues with access, cost, and quality [1]. The Affordable Care Act (ACA), passed in 2010, included provisions to use Medicare, the U.S. near universal public coverage program for older adults, to broadly implement Accountable Care Organization (ACO) models with a triple
∗ Corresponding author at: 830 E Main St, 4th Floor Richmond, VA 23221, USA. Tel.: +1 804 827 4367. E-mail address: [email protected] (A.J. Barnes).
aim of improving the experience of care, the health of populations, and reducing per capita costs [2]. Private payers have followed the Medicare ACO initiatives by initiating their own ACO models [3,4]. The ACOs are widely seen as the main instrument in the ACA to reign in health care expenditures, which stood at 17.7% of GDP in 2011, compared to 11.9% in second-placed Netherlands and 11.6% in third-placed France [5]. The success of the ACOs is thus the key to the success of the overall U.S. health reform effort. But what makes ACOs different from other attempts to improve health care performance in the U.S. and Europe, and can they deliver on their promise? This article provides a general, explanatory overview of ACOs in the U.S. and parallel developments in Europe, describes the current state of ACOs in the U.S. and what makes them different from
http://dx.doi.org/10.1016/j.healthpol.2014.07.019 0168-8510/© 2014 Elsevier Ireland Ltd. This is an open access article under the CC BY-NC-ND license (http://creativecommons.org/licenses/by-nc-nd/3.0/).
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previous payment and health care delivery reform efforts, and concludes with an outlook on the future of ACOs and the challenges that may lie ahead. 2. What are ACOs? There exist manifold definitions of what constitutes a private ACO. On the public side, Medicare ACOs are “groups of doctors, hospitals, and other health care providers, who come together voluntarily to give coordinated high quality care to the Medicare patients they serve” [6]. Beyond this, ACOs are organizations that assume financial responsibility and clinical accountability for the care provided to a defined patient population, where their accountability extends beyond organizational boundaries. Medicare ACOs typically have a minimum of 5000 Medicare beneficiaries assigned to them by CMS for at least 3 years. Beneficiary assignment is retrospective. ACO’s may include a variety of provider organizations such large health systems, hospitals, physician groups (with or without hospitals), or insurers. While ACOs do not have to provide services along a continuum of care, for Medicare ACOs, primary care is used for attributing lives to the ACO. The ACO is responsible for the total cost of care, whether the ACO directly provides it or not [7]. For ACOs to effectively control costs and improve experiences with care and population health, several capabilities or competencies are key. First, a formal legal structure and capable governance should be in place to overcome fragmentation, to reward providers for achieving quality and cost benchmarks, and to foster physician–hospital cooperation. Second, ACOs should link providers along the care continuum, i.e., primary care, specialist, inpatient, post-acute, and outpatient providers. Third, Health Information Technology (HIT) capability should facilitate effective care coordination and disease management and assist with monitoring, analyzing, and reporting quality and cost data to track patient across providers and to improve population health [8–10]. Finally, structures should be in place to negotiate and manage new types of contracts, such as shared savings and/or bundled payment models, with multiple payers. Importantly, the current concept of ACOs is both flexible and vague with regard to payments methods, contractual arrangements and participating organizations, which leaves substantial conceptual latitude for those initiating them. The next sections describe the various programs that are currently being rolled out under Medicare and in the private insurance market. 2.1. Medicare ACO programs Existing Medicare ACO models include the Medicare Shared Savings Program (MSSP), the Advanced Payment Model, and the Pioneer ACO Program (Table 1). Under the MSSP established by the Affordable Care Act, ACOs are meant to catalyze value-based approaches to health care [11]. In the MSSP, ACOs receive financial rewards for controlling costs while improving care delivery. There are two MSSP models that differ in whether ACOs share only savings (one-sided model) with the Centers for Medicare and
Medicaid Services (CMS) or agree to a larger share of savings in exchange for sharing losses (two-sided model). To determine an individual ACO’s share of savings (or losses), the MSSP calculates initial benchmark costs based on per capita Medicare inpatient and outpatient expenditures on beneficiaries assigned to the ACO averaged over 3 years prior the ACO’s formation [12]. The benchmark costs are updated annually based on overall Medicare cost growths. They are not, however, updated based on achieving savings during the years of program participation. ACOs share the savings between expenditures in the benchmark year and in each of three performance years—up to 50% in the onesided and 60% in the two-sided model based on meeting quality targets [13]. In order to share in savings with CMS, ACOs must meet quality performance standards each performance year in four key domains: (1) patient/caregiver experiences (7 measures), (2) care coordination/patient safety (6 measures), (3) preventive health (8 measures), and (4) at-risk populations including diabetes (2 measures), hypertension (1 measure), ischemic vascular disease (2 measures), heart failure (1 measure), and coronary artery disease (2 measures) (Appendix 1) [14]. Over the 3 year implementation, CMS payment shifts from ACOs simply reporting these measures to bearing risk for meeting performance targets on them. While the MSSP is the most common type of Medicare ACO program, in response to the continuum of provider organization preparedness to participate, two other models were created—Advance Savings Model (ASM) and Pioneer ACO. The ASMs were designed by CMS for smaller or more rural ACOs that lack the infrastructure to participate in the typical MSSP. These organizations receive an advance on expected savings with CMS recouping advancement costs from future shared savings. In contrast, the Pioneer ACO demonstration program started in 2012 for mostly hospital-led systems that already had some of the ACO capabilities in place [8]. The Pioneer ACO program intended to move these provider organizations quickly along the path of ACO development from some to full risk-bearing [11]. The Pioneer model is similar to the “Alternative Quality Contract” model that seven providers in Massachusetts entered into with Blue Cross Blue Shield in 2009 [15]. From the beneficiary’s perspective, care will be coordinated and providers will be compensated for providing better care. Medicare recipients whose doctor has decided to participate in an ACO will be notified in person or by letter. Patients are expected to benefit by filling out less medical history paper work and fewer repeated medical tests due to electronic health records. However, Medicare ACOs cannot oblige patients to only visit certain health care providers [16]. 2.2. Private ACO programs National and regional private insurers started piloting ACO partnerships with select providers with goals to move away from fee-for-service to value-based contracting and to increase coordination of care along the continuum. Models with varying levels of risk-bearing are being tested and
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Table 1 Medicare ACO models as of May 2014a . Medicare shared savings program
Number of ACOs Beneficiaries Key features
a
One-sided
Two-sided
333 (72%)
5 (7%)
Advanced savings model 36 (11%)
4.9 million in 47 states plus the District of Columbia and Puerto Rico Share up to 60% Share up to 50% For physician-based and rural ACOs. Each ACO receives of savings of savings and advances on the shared savings they are expected to earn: share losses • An upfront, fixed payment • An upfront, variable payment based on the number of its historically assigned beneficiaries A monthly payment based on the number of its historically assigned beneficiaries
Data from http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/sharedsavingsprogram/Downloads/All-Starts-MSSP-ACO.pdf.
can range from contracting incentives to full capitation. National and regional insurers that organize providers and bear the burden of assuring accountable care are categorized as insurer ACOs [17]. Insurer ACOs are those that are initiated by a private insurer. However, once initiated, providers, not insurers, will run the ACO. Some private insurers allow providers to test out new clinical models with some elements of fundholding before adopting the CMS’s models [18]. The risk-bearing and services may be shared by the private insurer and the provider as equal partners and these can be categorized as insurer–provider ACOs. Provider driven private ACOs are represented by either single integrated delivery systems or by a partnership of multiple providers, usually hospitals and physician organizations. Provider private ACOs take responsibility for accountable populations, and the role of insurers is generally limited to a risk-based payment [17]. As providers commit to new ways of reimbursement and delivering care for private and public payers, both Medicare and private ACO models will influence how ACOs develop and affect costs, experiences with care, and health in the U.S. For example, while federally backed ACOs drive the ACO formation in the country, private ACOs have the flexibility to experiment with different models of delivery and payment [17]. As no dominant ACO model exists, we can expect a further innovation in the U.S. health care delivery system.
of most NHS-funded services in the UK. The CCGs administer around two-thirds of the NHS budget and by law have to support quality improvement in general practice. All GPs are now legally obliged to join a CCG and are intended to have a greater role in the purchasing of health services and meeting local health care needs. The range of care includes elective hospital care, rehabilitation care, urgent and emergency care, most community health services, mental health, and learning disability services [20]. In Germany, integrated care was fostered through various reform acts since the 2000s, which aimed to improve cooperation between ambulatory physicians and hospitals. However, these initiatives are coordinated by the sickness funds, not the providers, cover only episodes of care, and mostly take place within the existing payment structures [21]. More akin to the ACO concept is Gesundes Kinzigtal (“Healthy Kinzigtal”), centered in Southwest Germany, which covers 31,000 people for the full range of care. Gesundes Kinzigtal is a regional health management company that has a shared savings contract with two sickness funds and which subcontracts integrated care in cooperation with the physicians’ network in the region, although payments still come from the sickness funds. Similar to one-sided MSSPs in Medicare, the company does not share in losses but is rewarded for savings [22].
3. Current state of ACOs in the States 2.3. Parallel developments in Europe The American ACO concept combines provider payment and delivery reforms rather than tackling them separately. Similarly, various European countries are also adopting this approach, particularly those in which coordinated (or integrated) care from a network of providers is reimbursed with bundled payments and/or shared savings. Yet there are notable differences, examples include the following. In the Netherlands, health insurers can negotiate a bundled payment to a so-called care group for certain chronic diseases such as diabetes, chronic obstructive pulmonary disease, and vascular risk management. The care group, almost exclusively GPs, then subcontracts with providers such as other GPs, laboratories, dietitians, and specialists [19]. More recently, Clinical Commissioning Groups (CCGs) have replaced primary care trusts as the commissioners
The number of ACOs has been growing strongly since 2010 (Fig. 1) [23]. In 2014, there were 338 ACOs in the country serving nearly 5 million (>10%) Medicare beneficiaries (up from 150 ACOs, and 2.4 million (6%) beneficiaries in 2011) [24,25]. When private (or non-CMS) ACOs are included, the numbers of these organizations exceeded 400 in 2013, covering approximately 14% of Americans [4,24]. The majority of ACOs are located in larger metropolitan areas, with the most populous states – California, Florida and Texas – having 30 or more ACOs each. The southern and Appalachia regions of the country have the most limited ACO activity. While different entities can sponsor an ACO, between 2010 and 2012, hospital systems were the predominant sponsoring entity, i.e. a primary legal organization creating an ACO [17]. However, in 2013, physician led groups have surpassed hospitals as being the most common sponsoring entity, accounting for 51% of all ACOs
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Number of Accountable Care Organizations By Sponsoring Entity 2010-2013 650 600 550 500 450 400 350
Other (e.g. community based organization) Insurer Hospital System
300 250
Physician Group
200 150 100 50 0 2010
2011
2012
2013
Muhlestein D. 2014. Accountable Care Growth in 2014: A Look Ahead. Health Affairs Fig. 1. Number of public and private Accountable Care Organizations by Sponsoring Entity 2010–2013.
[4,26]. A small numbers of ACOs are led by insurers and community based organizations. Why do these providers choose to participate in an ACO rather than rely on traditional Medicare payments? Providers may already have the requisite competencies in place (e.g. quality reporting, IT solutions for integrated care) to manage their services more efficiently, utilize synergy effects, and reach economies of scale to achieve ACO goals. Furthermore, providers may choose to adopt the ACO model because they expect declining traditional Medicare reimbursement. To date, insufficient data on ACO performance preclude forming conclusions on whether ACOs will improve quality and contain costs. The CMS-sponsored physician group practice demonstration programs have provided mixed results from early empirical analysis, reporting some improvements in quality, but with no or only moderate cost containment [27,28]. Pioneer ACOs and Advance Payment ACOs had too short a track record to evaluate effects on quality of care and costs. In July of 2013, nine Pioneer ACOs, nearly one-third, dropped out of the program after the first year with seven of these converting to the MSSP program where they would bear less financial risk [29]. However, the Alternative Quality Contract model in Massachusetts after 2 years led to savings of 1.9% in the first year and 3.3% in the second year achieved by lower prices and reduced utilization. Quality of care, particularly chronic disease management and preventive care, also improved [15]. But, when the costs of administering the program, including bonus payments to providers, were considered, the total cost of health care in the Alternative Contract Quality model likely increased. Analyses of ACO pilots suggest that collaboration, shared values and aims among participating organizations, and market and regulatory issues were important for development of ACO structures and capabilities to deliver accountable care to
patients [30]. However, this work was limited in scope and did not systematically assess external or contextual factors conducive to ACO development. 4. What makes ACOs different? Although ACOs are relatively new, certain concepts and features appear to be related to those that are already in practice in organizations such as Health Maintenance Organizations (HMOs), and in performance improvement programs such as pay-for-performance (P4P) and patientcentered medical homes (PCMHs) (Table 2) [31]. HMOs are a type of managed care organization (MCO) which emerged in the U.S. in the 1980s. With the goal of lowering costs while improving quality, MCOs integrate the insuring of patients with managing their health care. Provider groups contract with MCOs to care for MCO patients. Care is typically managed through the use of practice guidelines, prevention, and disease management (an integration of care for complex and chronic diseases). HMOs are the strongest form of managed care, in that they require patients to stay within the provider network and they incentivize providers to reduce unnecessary care through reimbursements and other mechanisms. Reimbursement mechanisms include capitation (paying a fixed amount per patient for the patient’s care), bonuses, and withholds. HMOs grew for nearly two decades, and appear to have contributed to lowering health care utilization and costs [32]. However, providers and patients objected to the reimbursement and management mechanisms, which many claim led to too much provider financial risk and cases of denial of care. Over time HMOs gave way to Preferred Provider Organizations, and other less strict forms of managed care [33]. Certain ACO features are similar to the HMO model. U.S. ACOs in the Medicare program control costs through
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Table 2 What makes ACOs different? Accountable Care Organizations (ACOs) Similarities
Differences
Lessons to learn
Managed Care Organizations (MCOs)
• Providers have an incentive to reduce unnecessary care • Costs are controlled through financial incentives such as bundling of charges and shared savings • Integration of care could lead to market power and higher prices
• Managing care can control costs but the HMO backlash resulted from providers bearing too much financial risk and patients experiencing strict management leading to denial of care
Pay for Performance (P4P)
• Provider payments are tied to meeting quality targets
• MCOs combine the insuring of patients with managing their health care; ACOs manage and provide care but do not take on the insurance function • Provider groups contract with MCOs to care for MCO patients; ACOs are predominantly organized by providers, not insurers • MCOs require patients to stay within the provider network; ACOs do not • Providers may carry more financial risk with MCOs than with ACOs • MCO financial incentives are focused on reducing utilization while ACO focus is on improving quality. • No differences
PatientCentered Medical Homes (PCMHs)
• An aim is to provide integrated care
• ACOs build in financial incentives to coordinate care; PCMHs do not PCMHs have an explicit goal to involve patients in their care; ACOs do not necessarily have this goal.
bundling of charges and “shared savings”, which come from either bonuses, or withholds with bonuses for good performance [12,33]. Costs are also expected to be reduced through improved integration of care which will better manage patients with chronic diseases [31]. Features of the current British CCGs described above are also similar to HMOs. General Practitioners work within a commissioning budget, and the GPs have responsibility for a range of care for a group of patients. This arrangement is similar to the capitated provider budgets in HMOs [34]. However, ACOs differ from HMOs in several respects. First, in Medicare ACOs patients can go to providers outside of their networks [29]. This is an important distinction that may help with patient acceptance of ACOs. Second, providers in ACOs, particularly in the predominant Medicare ACO models, do not bear nearly as much financial risk as provider groups in HMOs, which carried up to 100% of the risk if under global capitation arrangements [35,36]. This may change, and ACOs may bear more risk as their use expands and as the private insurance industry takes up the model. Third, ACOs are formed by provider groups that have a direct interest in improving performance and receiving financial rewards for this, whereas under HMOs performance improvement is mandated from the HMO and providers must share the financial rewards with the HMO [33,37]. Fourth, ACOs are more truly integrated compared to HMOs [31,38]. ACO integration is accomplished through organizational structure and through sharing of electronic records, neither of which were common with HMOs. Fifth, there is now more information about how to manage care than there was in the early days of HMOs [33,38]. ACOs can take advantage of health care guidelines, quality metrics and knowledge about patient costs. Finally, there is an increased emphasis on measurable outcomes, which will
• Limited evidence that P4P works • Providers may “teach to the test” by focusing on outcomes that are rewarded at the expense of other important inputs to improving quality of care • Early evidence suggests patient-centered care, care coordination and integration improves care experiences and health
help ACOs reach performance goals and benchmark their performance. ACOs also borrow from the P4P and PCMH concepts. P4P reimburses health care providers differentially based on whether they meet quality targets. ACO qualityimprovement mechanisms are similar to these P4P programs that reward ACOs for providing high quality care [31]. PCMHs aim to provide patient centered care and reduce the fragmentation of care. In PCMHs patients are involved in their care, and they have an ongoing relationship with a primary care provider who coordinates their care across all providers and health care settings and through all life stages [39]. ACOs’ focus on integration of care is borrowed from PCMH concepts of coordinating patient care [31,35]. However, while ACOs build in financial incentives to coordinate care, PCMHs do not. Another difference is that one of the goals of PCMHs is to involve patients in their care whereas ACOs do not explicitly have this goal [40]. Adoption of P4P, may not be advantageous. So far, P4P has not been shown to significantly improve care or lower costs, so the value of this ACO feature is questionable [41–44]. On the other hand, ACOs may want to emulate PCMHs, as the positive effect of patient-centered care, care coordination and integration is starting to become evident. Although PCMHs have only been around for a few years they have so far had mostly positive reviews [45,46]. Will ACOs be able to take the best from these prior efforts and avoid the pitfalls? The “shared savings” features of ACOs provide incentives to keep unnecessary utilization down, and could therefore lower costs. However, like its HMO counterpart, shared savings could also lead to denial of needed care, especially if reimbursement evolves into capitation. ACOs might also eventually carry too much
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financial risk. A high amount of financial risk could negatively affect the quality of care through organizational instabilities and insolvencies [31,37]. The ongoing challenge for ACOs is to not cross the line that leads to denial of needed care and financial instability. Unlike HMOs, the fact that ACOs are organized by providers themselves rather than managed care companies affords providers better control over their reimbursements and guidelines of care. Further, ACO integration of care may reduce unnecessary utilization, but highly integrated systems could lead to greater consolidation of providers [7,35,40]. This could lead to a high degree of market power, and with that, higher prices. 5. Outlook ACOs are a successor in a long line of health care performance improvement programs in the U.S. [47]. Starting with HMOs and managed care in the 1980s, and going through a series of CMS reimbursement reforms and the implementation of health savings accounts and health information technology, these programs have, so far, not succeeded in improving health care delivery for a sustained period of time [47]. What would make ACOs more successful than their predecessors (and programs from which it has borrowed features)? Are ACOs a radical enough departure that they will instigate breakthroughs in costs and quality or are they just another in a series of policies that fail to make lasting improvements in quality or get spending under control? Such questions are vital to answer for ACOs to have the potential to reform care delivery and payment models in the U.S. The challenges for ACOs are formidable, are not exclusive to ACOs, and include: (1) overcoming incentives for ACOs to engage in rationing and denial of care and taking on too much financial risk, (2) collecting meaningful data that capture quality and enable rewarding quality improvement and not just volume reduction, (3) creating incentives for ACOs that do not accept much risk to engage in prevention and health promotion, and (4) creating effective governance and IT structures that are patient-centered and integrate care. Ongoing monitoring, evaluating, and reshaping of the payment and delivery reforms targeted by ACOs will be key to their success in achieving the triple aim of improving experiences of care and the health of populations while containing costs. Furthermore, in our opinion, a word of caution is needed. ACOs should not be expected to make large improvements in health care performance. ACOs are on the “sharp,” or distal, end of population health and health care expenditures. At the proximal end of population health are socio-economic factors such as environment, community, conditions of employment (or unemployment), income, and food supply [48]. The ACO model, indeed the U.S. health care system, is not designed to substantively influence these social determinants of health. ACOs may lower costs marginally, but expenditures will remain high unless the high demand for acute medical care and the unit price of care, in the US is tackled [49]. To make substantive and lasting improvements in health and health care costs, much more is needed than the creation of ACOs.
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