Value Based Care and the Role of the ACO by Steven Lash San Diego

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The payment process for hospitals and providers is undergoing a dramatic transformation as payers shift from volume to value. Currently, there are many different value-based models that are being evaluated, Accountable Care Organizations (ACOs) are among the most popular and successful strategies to date.

ACOs, are groups of hospitals, physicians, and other providers who agree to coordinate care for patients.  This is nothing new.  Their goal is to deliver the right care at the right time, which would by definition be the highest quality care at the most efficient price point.

Participants agree to take on responsibility for the total cost of care for their patients. This is not unlike the “capitation” models of the 90s, which were largely were unsuccessful (some called the model decapitation) due to a lack of understanding (as well as having meaningful, timely data available) by all parties as to how best to manage the total risk.

ACOs that reduce the total costs of care for their patient populations generally share in the savings.  In certain models, providers may have to pay back losses if their costs exceed their spending benchmarks.

There is a general consensus, and has been for some time that tying financial incentives to care quality, patient outcomes, and care coordination is a key ingredient for fixing the fee-for-service system. ACOs are and are likely to continue to be a major player in the value-based care and payment transformation by Steven lash San Diego.

Insurance companies and CMS have designed ACO contracts to counteract the incentive to deliver “sick care” and instead, emphasize prevention and wellness through incentive payments and financial risk arrangements. Therefore, ACOs can earn more for delivering care that improves health and reduces hospital utilization when appropriate.

Fundamental to the ACO payment structure are incentive payments. Providers receive fee-for-service payments throughout the measurement period (quarterly and annually). At the end of the period, payers adjust the payments based on the ACO’s quality performance on specified agreed upon metrics.Quality performance also drives whether an ACO qualifies for shared savings payments.

ACOs program of value-based reimbursement by not only tying payments to quality, but also holding providers financially accountable for the total cost of care of their assigned patient population. This financial risk can be “upside” or “downside.”

In upside risk arrangements, providers are able to earn all or a percentage of any savings during the performance period relative to a financial benchmark or budget.

If upside-only contracts incur costs higher than the budget, then the provider does not qualify for shared savings payments. However, the payer does not financially penalize the organization as it would in a contract with downside risk.

Under downside risk contracts, ACOs can still share in the savings if costs are below the budget, but the organization will also have to repay all or a portion of the financial losses if actual care costs exceed the agreed upon budget.

Payers would like to push many more ACOs into downside risk arrangements, which spread the financial responsibility more evenly across stakeholders.

Developing the right clinical and technological support is mission critical to achieving success. The leadership of the ACO must continually identifying areas of opportunity to improve population health management by Steven lash San Diego.

The ACO model is maturing and how that will affect the healthcare industry is yet to be determined. The work currently being done to coordinate care and improve care quality is already having a significant and lasting impact on how providers deliver and get paid for care.