“Population Health & You” is a blog series that explores and advances this exciting, innovative approach to healthcare. Director of Population Health Sam Starbuck sheds light on topics such as downside risk, social determinants of health, and navigating transitions. In this installment, we examine the ways in which physician-led accountable care organizations serve as a model and testing grounds for population health initiatives.
Population health and value-based care both aim to generate a more holistic, effective, and efficient healthcare system. Together, they promise to enhance the patient experience, improve population health metrics and application, reduce health costs for both patients and the federal government, and treat the physician burnout crisis. These four criteria are often referred to as the “Quadruple Aim” of healthcare.
Unfortunately, the volume-to-value transition has made many false starts. When policy lags, primary care providers bear the brunt of it. However, a study in the New England Journal of Medicine shows a beacon of light: physician-led accountable care organizations (ACOs).
ACOs saved $1.1 billion nationally, with the Centers for Medicare and Medicaid Services (CMS) sharing $780 million in savings with providers. Furthermore, physician-led ACOs experienced far better savings than hospitals.
Before we analyze why this is the case, let’s take a step back and examine how ACOs work.
What Are ACOs?
ACOs are healthcare entities that bear both the clinical and financial responsibility of a defined population. In other words, providers in ACOs offer high-quality, coordinated care to their patients — with an emphasis on the chronically ill — by ensuring “patients get the right care at the right time, while avoiding unnecessary duplication of services and preventing medical errors,” according to CMS.
While most ACOs operate under fee-for-service payment models, their incentive structure is ideally geared toward alternative payment arrangements that reward risk by attributing patients to an ACO. The ACO is then reimbursed if they “save” payers and patients money by delivering better health outcomes. In turn, the ACOs distribute these shared savings among the participating physicians. An example of this system is the Medicare Shared Savings Program (MSSP). In the 2017 performance year, Privia Quality Network and several other ACOs did generate shared savings in MSSP, showing that alternative payment arrangements do add value to the healthcare system.
This raises the question: Can ACOs drive the “Quadruple Aim”?
David Nash, MD, MBA, FACP, thinks they can. In an op-ed for MedPage Today, the dean of the Jefferson College of Public Health wrote, “The evidence shows that, collectively, MSSP ACOs have measurably improved quality and saved money for the Medicare program; moreover, spillover effects from these ACOs appear to be changing care delivery more broadly and [lowering] cost growth in local healthcare markets.”
Why PCPs Perform Better
Physician-led, third-year ACOs generated an average of $474 in per-patient Medicare savings compared to hospitals’ $169. Why were savings so much greater for physician-led ACOs?
To start, physician-led ACOs have no incentive to “feed the beast.” Hospital-led ACOs pursue decreased costs and improved outcomes just like physician-led ACOs. However, they must also maintain the significant investments made into their brick-and-mortar infrastructure. In today’s healthcare environment where consolidation is king, hospitals are gobbling up as much of the remaining independent provider landscape as possible in order to create leverage against the payers to negotiate higher fee-for-service rates to support this infrastructure. However, in the value-based world, this strategy backfires as you set up a system meant to drive volume back to the hospital for care that can oftentimes be appropriately delivered elsewhere — if in fact it’s necessary at all — at the expense of ACO performance and cost reduction efforts.
What Are the Key Takeaways?
What is interesting is the advantage that hospitals have given their financial situations. Success in ACOs requires an investment in new infrastructure, which comes at a cost. Even though hospitals have deeper pockets, the investments made by physician-led ACOs are more effective as there are fewer barriers to implement. In a sense, these provider-led groups are nimbler, and that agility counts for a lot in this rapidly changing landscape. In hospital systems, policy changes require sweeping reforms that can bottleneck and slow down the process. However, physician-led ACOs require less administrative buy-in and can implement solutions much more quickly.
This responsiveness is a huge advantage to these ACOs as longevity is a critical factor in success, according to one study. The faster an ACO can shift their strategy and approach (and react to patient needs), the more likely they are to stay up-to-date and, as a result, increase their chances at longevity.
This is especially important as CMS Administrator Seema Verma has proposed an overhaul of MSSP that would penalize ACOs that do not take on greater financial risk, a move that by some experts’ estimates would cause 75 percent of ACOs to leave the program.
For now, it appears physician-led ACOs can indeed drive population health and value-based care initiatives while supporting the ambitious “Quadruple Aim” of healthcare.
Want to learn more about how population health can fix healthcare’s biggest issues? Find more articles on our Population Health page!