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Private accountable care organizations take off; What to know about these value-based models

Before diving in providers need to think about the terms of the partnerships and the arrangement of the financial model.

Susan Morse, Managing Editor

Health insurer Aetna manages several private accountable care organizations.

While accountable care organizations piloted by the Centers for Medicare and Medicaid services are expanding due to the government's focus on alternative payment models, ACOs run by private insurers are growing as health systems weigh the benefits of joining.

For starters, getting doctors onboard a value-based model when most of their payments are still in fee-for-service remains a challenge. And not all healthcare providers have a structure in place that can handle coordinated care.

Organizations with private ACO contracts tend to be larger and more advanced than those with government contracts, according to an American Journal of Managed Care study that questioned whether private ACOs were following Medicare's lead.

[Also: Hospitals in ACO's tend to be large, in urban areas]

Providers with private contracts are more likely to be integrated and anchored by a hospital. They achieve higher levels of electronic health record meaningful use among their primary care physicians, have more full-time equivalent primary care physicians and specialists and have experience in pay-for-performance initiatives and other reforms, according to the AJMC study.

Of the estimated 750 public and private ACOs in the country, about half of the contracts are with a private insurer.

About 69 percent of private payer ACO contracts use a shared savings plan and 56 percent included a downside risk component, the AJMA report said. In contrast, only 7 percent of Medicare Shared Savings Program contracts incorporated downside risk, according to the study.

"The drawback to ACOs is losing money," said Freeborn & Peters attorney Deborah Dorman-Rodriguez.

She and Attorney David Kaufman help organizations navigate the regulatory and other issues related to launching an ACO.

"It is difficult to learn how to do this, to manage risk," she said. "I think a lot of it depends on how risk tolerant a provider can be for five years."

Before diving in, Dorman-Rodriguez said, providers need to think about the terms of the partnerships and the arrangement of the financial model.

[Also: Aetna forms ACO with Mercy Health System, St. Mary Medical Center]

"That's where you're going to end up in a make it or break it," Dorman-Rodriguez said. "Also, you have to understand your population. You need to know the marketplace, both in terms of federal and state requirements and business trends. Otherwise, you're already behind the success path."

"ACOs are expanding rapidly," Kaufman said of both the government and commercial market.

Changing from fee-for-service to a value-based model means addressing the cost of care without losing quality, to provide a more efficient delivery system, Kaufman said.

Aiding that model in recent years is better access to data, they said.

"One of the reasons providers had difficulty bearing risk before, they had no access to real-time data, to know what was going on so they could manage the risk," Dorman-Rodriguez said. "Now real-time data is available."

Another upside is the incentive to having more control over finances, Dorman-Rodriguez  said.

"One of the things they say is I really do have the opportunity to exert more control over my compensation," she said. "That's one of the things that's attractive to providers."

The memory of the failed health maintenance organizations from the 1990s may still be fresh for some providers and payers, said Kaufman, who cited published comparisons.

"Maybe this is some of the reluctance, a dissatisfaction with HMOs and a reluctance to follow that model," he said.

Neither Kaufman nor Dorman-Rodrigues have personally heard of comparisons, they said.

"One of the things, ACOs provide more comprehensive care than HMOs did in the past," Kaufman said.

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Most of their clients recognize that fee-for-service does not bring about cost savings, he said.

"That was not true 10 years ago," he said.

Successful ACOs tie payment to measures of quality, safety and patient satisfaction, with both the hospital and doctors on board with that model.

Nearly 80 percent of private ACO contracts tie shared savings to quality performance and 39 percent include added bonus payments for quality performance. Most private contracts include upfront payments through vehicles such as care coordination or care management plans, according to the AJMA.

"I think everyone recognizes the only way to bend the cost curve is to use mechanisms like this," Dorman-Rodrigues said. "Fee-for-service is the wrong incentive."

Twitter: @SusanJMorse