5 Ways to Mitigate ACO Risk Using Analytics

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Winning dicesThe concept of value-based payment is by no means new, however, a series of announcements in the last six months have clarified by what means and the timing that CMS will move ahead with these payment models.

In January 2015, CMS announced aggressive targets, with a goal of putting 50 percent of payments in alternative payment models (like ACOs and bundled payment agreements) by the end of 2018. In March 2015, CMS announced a new ACO pilot program that expands upon the concepts in the Pioneer ACO program.

Pioneer ACOs Achieve Remarkable Results

Next Generation ACOs are designed to test the impact of stronger financial incentives on outcomes. The program offers substantial savings (or losses) of approximately 80 to 100 percent depending on the track chosen. The Next Generation ACO program will likely be small–CMS will choose just 15 to 20 participants–but healthcare organizations will have the option to take more financial risk now that CMS has released an update announcing a third track in the MSSP program modeled after the Pioneer ACOs.

While many organizations are experimenting with value-based payments today, ACOs have mitigated their risk by taking on relatively small financial obligations (and many are participating in upside only arrangements that insulate them from losses). CMS’s move toward models with greater risk and reward shed light on where the industry is headed. Their recent momentum follows the publication of impressive results on the Pioneer ACO program in JAMA. Pioneer participants reported significant decreases in per-beneficiary-per-month spending of approximately $37 per beneficiary and $280 million overall in 2012. Beneficiaries in the Pioneer ACO programs also reported better scores for more timely care and clinician communication.

As CMS deputy administrator for Innovation and Quality, Patrick Conway explained, “These results allow us to expand components of the Pioneer program nationally.”

Learning to Bear Financial Risk for Cost and Quality (and Maximize Rewards)

It’s no surprise that many healthcare organizations have moved from what’s felt like a perpetual pilot phase to a steep upward trajectory of more at-risk contracts and more financial risk.

While the exact structure of the alternative payment models is a point of debate, the overarching trend is clear: the models that survive will be those that successfully bend the cost curve and improve healthcare quality. As the industry transitions from a fee-for-service to a fee-for-value environment, it will move away from a reward system that incents volume to a system that rewards lower cost and better outcomes.

To succeed in this transitional environment and successfully prepare for a fundamentally different reimbursement structure, health care organizations need to invest their efforts in two primary areas: first, developing the skills to successfully manage at-risk contracts and, second, preparing for the substantial business and care delivery transformation required for true population health management.

At Health Catalyst, we use the term accountable care to broadly refer to a set of competencies an organization develops for managing contracts that carry a financial risk for cost and quality.

While population health managementis often used synonymously with accountable care, Health Catalyst uses the term to describe the care delivery transformation that will unfold over the next decade as new systems are designed around incentives that prioritize a focus on patient populations and preventative care.

Leveraging Analytics to Drive Value-Based Payment Initiatives

The biggest challenge for many organizations considering value-based payment agreements is identifying where to begin. A good place to start is looking at the data.

This is not as easy as it seems. By design, an accountable care organization is attempting to coordinate the patient’s experience across the continuum of care. Health care organizations typically face the challenge of attempting to meaningfully analyze data taken from a wide variety of data sources (clinical and claims data, for example) and several different participating providers and payers. A common starting point is to deploy an EDWthat allows them to aggregate the information and conduct meaningful analyses on the common data sets.

Even with an EDW in place, many organizations struggle to get access to the data they want and need. For organizations without at-risk contracts, this typically means not having access to paid claims data and the out-of-network view that accompanies them. However, there is tremendous value in leveraging any available clinical and billing data to get a better understanding of the patient population, areas of cost, and areas of significant variation. While this data only provides a view of what’s happening within the network, it can help focus future contracts on meaningful improvement areas.

With access to paid claims data, it’s possible to conduct similar analyses to identify areas of high payment and variation, but this time with a more holistic in- and out-of-network view, which also allows for the calculation of key metrics like per-member-per-month payments and leakage.

Key Competencies for Accountable Care

As healthcare organizations start to evaluate performance in value-based payment contracts and to build the competencies to manage risk, they should consider five key areas:

  • At-Risk Contract Management: Do you have the ability to monitor and manage your financial performance in your current at-risk contracts? Are you prepared, with data, to actively participate in contract negotiations? At Health Catalyst we are continually surprised by the number of organizations who enter at-risk contracts without the ability to monitor key metrics such as PMPM performance, utilization, and leakage. Without this data, it is difficult – if not impossible — to drill into problem areas, identify the drivers of negative trends, and focus on opportunities for improvement.
  • Network Management: Another significant concern for ACOs is ensuring that they provide high-quality care within their network – instead of incurring high costs for services provided in a setting where there is little control over quality. Here, again, data is key. What services are you providing out of network (leakage)? Are there gaps in your network that are driving your attributed patients to seek high-cost services elsewhere? Have you assigned the most appropriate provider to your attributed patients to ensure they are effectively managed?
  • Care Management: One of the largest sources of investment for an accountable care program is in the care management team that helps address the needs of the highest risk, highest cost patients. With limited resources, focusing these care managers on the patients most in need of services (and most likely to benefit) is critical.
  • Performance Monitoring: As health care organizations take aggressive measures to drive down costs, the industry is relying on quality measurements to ensure that patient care doesn’t suffer. However, absent is the ability to monitor and improve performance on these measures over the course of the year, they serve as little more than a reporting exercise. The better capability to analyze performance on these measures, the greater chance not only quality, but financial performance will improve.
  • Improvement Prioritization: The final key category of inquiry is identifying opportunities for improvement. As you drill into the data and examine the care being provided to the at-risk patient population, where are your biggest areas of cost and variation? Identifying these areas will assist in prioritizing not only care transformation work, but also the opportunities at the center of the at-risk contracts. These questions tie the work being done in the at-risk contracts today and population health management work in the long-term.

Mitigating ACO Risk with Analytics

The real value of analytics in each of these competency areas is to prioritize limited resources on the highest impact areas. Accountable care organizations should consider the most impactful places to invest resources to improve performance on at-risk contracts. Care transformation – or population health management — is facing significant transformation and uncertainty. Providing a common starting point for conversations with executives, physicians, and payers goes a long way toward aligning all involved around common goals and priorities.

For more information about Health Catalyst’s work in the accountable care and population health management spaces, we’d encourage you to review Dr. David Burton’s Accountable Care Transformation Framework and Dr. John Haughom’s book, Health Care: A Better Way.

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