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1 Delivery System Reform: Developing Accountable Care Organizations John Bertko, F.S.A. Visiting Scholar Brookings Institution July 30, 2009 State Coverage Initiatives Slide 2 2 The ACO is the overarching structure within which other reforms can thrive Accountable Care Organization Accountability, Performance Measurement, Shared Savings Bundled Payments HIT Partial Capitation Medical Home Slide 3 3 ACOs will look very different, but a few characteristics are essential Can provide or manage continuum of care as a real or virtually integrated delivery system Are of a sufficient size to support comprehensive performance measurement Are capable of prospectively planning budgets and resource needs 123 Slide 4 4 Accountable Care Organization Hospital Specialists Primary Care Other Possible Components: Home Health Mental Health Rehab Facilities What providers comprise an ACO? It varies. Slide 5 5 How are patients assigned to the ACO? Providers sign agreement to participate with ACO (PCPs must be exclusive to one ACO; Specialists can be part of multiple ACOs) Patients are assigned to their PCP based on the majority of their outpatient E&M visits Slide 6 6 Three components of ACO infrastructure Local Accountability for Cost, Quality, and Capacity Shared SavingsPerformance Measurement Slide 7 7 Healthcare is practiced in local markets Number of Medicare Beneficiaries in Network Percent of Total Beneficiaries Number of Local Networks Patient Loyalty to Local Network Under 5,00021.7%310963.6% 5,000 -10,00026.2%93670.8% 10,000 15,00020.5%43072.9% 15,000 +31.5%37175.6% Illustrative purposes only using 2004 physician data on hospital use; ACO proposal involves no requirements for hospital-based affiliations. From Elliott S. Fisher, Douglas O. Staiger, Julie P.W. Bynum and Daniel J. Gottlieb, Creating Accountable Care Organizations: The Extended Hospital Medical Staff, Health Affairs 26(1) 2007:w44-w57. Slide 8 8 Calculating savings based on spending targets Projected Spending Actual Spending Shared Savings Target Spending Slide 9 9 Ability to predict spending is strong Predicted and actual log age-sex-race Medicare expenditures, 2003- 05, for EHMSs with at least 5000 people. N = 287 R 2 =.94 Error =.04 Percent Slide 10 10 ACO Patient Expenditures Expenditures Attributed to ACO PC P 1 PC P 2 ACO is responsible for all patient expenditures Slide 11 11 $800M (Target Expenditures) - $525M (Traditional Fee for Service Payments) - $115M (Bundled Payments for Specific Conditions) - $150M (PMPM Payments for Medical Home) $10M (Available Shared Savings) Multiple initiatives within the ACO model: (80/20 agreed upon split) $8M to the Providers$2M to the Payers Slide 12 12 ACOs will look different across local markets Negotiation points among stakeholders: Setting expenditure target for ACO Distribution of shared savings (i.e. 80/20, 50/50) Will there be a threshold for savings (i.e. under 2%) Withholds or penalties for spending over target Start-up or interim payments to providers Slide 13 13 How do ACOs reduce expenditures? Through systematic efforts to improve quality and reduce costs across the organization: Using appropriate workforce (increased use of NPs) Improved care coordination Reduced waste (i.e. duplicate testing) Internal process improvement Informed patient choices Chronic disease management Point of care reminders and best-practices Actionable, timely data Choices about capacity Slide 14 14 What will make the ACO successful? Local leadership Engaged stakeholders, broad participation Payers, purchasers, providers and patients Providing the information, tools, support that providers need to make effective changes Fair structure for distributing shared savings It would be nice Integrated delivery system History of successful innovation, implementation of another reform (HIT, clinical innovations) Currently collecting and reporting performance