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ACOs and Bundled Payments: How the Two Can and Should Coexist

Article · October 3, 2018

Attend virtually any value-based care conference today, and one is likely to observe the healthy, if not uneasy, tension that exists between those who support the accountable care organization (ACO) model and those who support the bundled payment model as a mechanism for attaining the holy grail of health care reform: high quality, low cost of care for all. A skeptical observer might look at these models and wonder if either will enjoy a fate different from the one that befell so many prior reform efforts — think HMOs and capitation. After all, some recently published studies and editorials about the performance of these newer programs have not been glowing.

Health care leaders are asking a number of questions about the ACO and bundled payment models: Are the programs exclusive or can they coexist in a symbiotic relationship? Is there redundancy in these two programs? Do we pick one over the other?

While sorting through these questions, it is important to discern that ultimately, both models are needed: the ACO to enhance primary care, and the bundled payment model to improve specialty care. Each contains building blocks that, together, will strengthen the foundation of a robust population health system. Less clear, however, is what impact the constantly evolving regulatory and political climate will have on these interdependent programs.

Primary Care Elements

In 2012, as a co-founder of Atlantic ACO, one of the original 27 Medicare Shared Savings Program (MSSP) ACOs, I learned firsthand of the resource commitment required to build a successful model of care. Importantly, this required the alignment of primary care physicians, most of whom were independent practitioners within the larger ecosystem of health care.

Key population health management tenets needed to be adopted, including team-based care, analytics-driven clinical decision support, population stratification with targeted care interventions, and the integration of disparate electronic medical records at the point of care. We were successful early because we made focused investments and engaged our primary care physicians effectively. Still, we could have achieved even better outcomes had we found an effective way of engaging specialists. After all, they impact a significant portion of care delivery, health care spending, and clinical outcomes. But the total cost of care orientation of the MSSP program favored primary care physicians and offered minimal incentive for specialists to participate.

Specialty Care Elements

In 2013, CMS’s launch of the Medicare Bundled Payment for Care Improvement (BPCI) program provided a much-needed opening to create momentum around specialist engagement. The model held the promise of success if like-minded specialists could organize around easily defined acute episodes of care.

These episodes had understandable criteria and a clearly delineated opportunity to earn additional revenue (gainsharing) based on their performance against predetermined spend targets. BPCI required specialists to lead the delivery of care for patients falling into certain pre-selected procedural bundles, starting with the acute admission and ending 90 days after inpatient discharge. Success would be determined by the use of evidence-based clinical protocols, appropriate risk screening tools, a coordinated care team, and utilization of the most appropriate and efficient sites of care. Acting in concert, the specialists — along with the entire care team — were now at the nexus to ensure patients would be getting the right care, from the right providers, in the right clinical settings.

Remedy Partners, a convener for thousands of participants with more than half of the BPCI provider volume market share, has shown a total savings rate over more than 9% across all partnerships. On average, it takes about 2 years before seeing meaningful savings in bundled payment programs due to program ramp up, care redesign initiatives, and claims lag to financially recognize improvements, according to internal Remedy data. But the undeniable success from the start of the BPCI and bundled payment program is the increased engagement of specialists as a result of being at the center of patient care and gaining in the savings, just as primary care physicians do within the ACO construct.

Primary and Specialty Alignment

Today, it is increasingly clear that aligning ACOs and bundled payment models is needed to achieve the full potential of this rapidly evolving and dynamic health care market. ACOs are now more mature models of care delivery. The footprint of the ACOs has increased significantly with the number having grown from 27 in 2012 to more than 550 in 2018. But the financial performances against CBO projections have been lagging, where the upside models of the ACO have resulted in increased federal spending by $444 million compared to downside risk ACOs that have reduced federal spending by $60 million. However, the MSSP ACOs should still be considered a success, having produced $1.6 billion in program savings compared to benchmark projections over the life of the program, with increased savings year over year due to ramp up needed for the program build.

The two models — taken together and building on each other’s successes — can have a powerful, positive impact on the quality and cost of care that is delivered to virtually any patient population. Both programs utilize a similar program infrastructure of data analytics, targeted care redesign, workflow re-engineering, team-based care, technology adoption, and financial incentives.

With limited organizational resources to fund competing value-based programs, it is critical to create internal efficiencies by aligning these programs. We have seen incremental improvements as they exist independently, but now these integrated programs can achieve a more meaningful and positive impact by bringing together primary care physicians and specialists.

The primary care physicians in the ACOs have been focused on maintaining health and wellness, with primary, secondary, and tertiary prevention of chronic disease. The weak link in this care journey has always been the specialist-related conditions, when the patient is outside the bounds of this continuum. Bundled payments have enabled us to plug the gap that has existed as one of the weaknesses in the ACO construct: the specialist-driven, acute care episode — the place where costs can increase exponentially, where incentives for primary care physicians and specialists have not been aligned, where communications among providers has broken down, and where primary care physicians have had minimal if any ability to influence decisions and outcomes.

The net effect of the ACO focus on health and prevention combines with the bundled payment focus on managing acute episodes of care and then hands patients back to their primary care providers, which is a powerful combination.

Provider, Payer, and Policymaker Action

It’s no longer a question of whether ACOs and Bundled care payment programs can exist together; rather, it’s now how we create an environment for them to coexist.

Yes, the integration will require care to avoid duplicative or counterproductive efforts. And leaders will face process and payment challenges when primary care and specialty care providers are treating the same patient. These two programs should be deployed in a complementary fashion to help address the historical weaknesses in value-based care program design and execution.

Federal policymakers have recently indicated that they expect far greater returns on their investment in payment reform and they are prepared to hold stakeholders’ feet to the fire. They’ll likely do so by eliminating Medicare value-based care participation options that lack downside risk, which fail to hold organizations accountable for negative performance.

Provider organizations must become adept at delivering care under both of these models as we shift from volume to value-based care. This approach provides an innovative platform for primary care and specialty care integration. ACOs and bundled payment systems are an opportunity for health care providers and payers to work in unison toward improving health for patients and better managing costs. Leaders should be seeking to build on the last several years of experience and momentum by aligning these initiatives and mobilizing these complementary programs while internally leveraging economics of scale and driving increased return on investment. Through the synergy of these programs, we can achieve sustainable transformation of our health care system with payment reform and create an ecosystem of engaged providers that have aligned incentives, all focused on the best patient-centric clinical outcomes and experiences, something we have long strived for.

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