WASHINGTON – Most accountable care organizations, spurred by the Medicare Shared Savings Program, are taking four different approaches to creating new payment models according to a new report sponsored by the Commonwealth Fund, a private foundation promoting a better healthcare system.
The report “Promising Payment Reform: Risk-Sharing with Accountable Care Organizations” prepared by healthcare advocacy organization Catalyst for Payment Reform, in partnership with consulting firm Booz Allen Hamilton, shows that because few providers or private payers have experience with shared-risk payment arrangements, newly created ACOs models vary both in design and how they define shared risk.
[See also: CIGNA says ACO pilots show lower costs, better quality of care; NEJM article spotlights financial risks associated with ACOs]
“It is particularly important to note the very early stage of development of these population-based, shared-risk contracts,” the report noted. “We found few operational shared-risk payment models; most are in development or at an early stage of implementation.”
The report focused on private sector payment models that met criteria along three dimensions: provider risk, inclusion of services, and incentives for quality. Models of interest were those that included a provider risk-sharing component, addressed the broad array or full continuum of patient care/services, and provided meaningful quality incentives.
“While we found dozens of ACO initiatives, only eight met the criteria for inclusion in this study,” the researchers wrote.
Key findings of the report include:
- Payer–provider shared-risk models are in an early developmental phase; there are few operational shared-risk models aside from the traditional capitated HMO model.
- There are varying definitions of shared risk, and shared-risk initiatives use a variety of program designs.
- Providers do not currently have the infrastructure required to take on and manage risk successfully, though some payers are providing infrastructure and other support to providers.
- Shared-risk models have typically evolved from shared-savings programs.
When studying the payment models employed by the eight ACOs studied, the researchers found there were four basic payment models that have been developed to share risk.
- Bonus Payment at Risk. Provider is at risk of not receiving a bonus payment based on quality and/or efficiency performance.
- Market Share Risk. Patients are provided with incentives by lower copays or premiums to select certain providers so providers are at risk of loss of market share.
- Risk of Baseline Revenue Loss. Built on a fee-for-service “chassis”; providers face a financial or payment loss if they fail to meet certain cost or quality thresholds, and/or if actual costs exceed a target cost.
- Financial Risk for Patient Population (Whole or Partial). Providers manage patient treatment costs for all or a designated set of services within a predetermined payment stream and are at risk for costs that exceed payments (e.g., partial/full capitation, global budget).
The researchers noted that models of most interest would be ones that moved away from the “chassis” of the traditional fee-for-service model that provide blended payments combining both fee-for-service payments and incentive payments. However, the researchers said that they “we were unable to find any models currently in place that both move away from fee-for-service and include financial risk to the provider for a patient population.”
One big roadblock to effectively managing risk at the provider level is a lack of HIT infrastructure that can provide the data about both the clinical and financial experience of patients needed to ensure quality of care and lowered costs.
Providers will need to continue improving their infrastructure if they want to be able to assume more risk and create effective ACOs in the future, the report concluded, though even the fledgling ACOs studied will help instruct the creation of future payment models.
“Although this research uncovered several key findings about the development of ACOs and the payment models to support them, it is too early to identify which payment models best align incentives for ACOs with high-quality, high-value care,” the researchers wrote. “The majority of the payment models we studied have a fee-for-service foundation; however, shared risk combined with other base payment approaches can be even more robust. Capitation, bundled payments, and global budgets place the responsibility for managing financial risk more squarely on the shoulders of providers.”
