Out of options? Providers will face risk under ACOs or medicare advantage

In any other industry, companies work hard to interpret purchasing and regulatory trends and adapt quickly in times of change.

Competitive businesses embrace swift action, where those that linger risk failure.

● A move to digital applications that help consumers and other purchasers connect and build loyalty.
● An acquisition or spin-off of business services to enhance growth.
● Immediate response to negative press.
However, in health care—more specifically healthcare organizations and health systems—change and responsiveness are slow.

Case in point: while government and private health plans are moving to risk-based reimbursement, and health care costs continue to escalate beyond affordability, healthcare organizations are re-inventing revenue cycle strategies and initiatives to optimize Fee-for-Service revenues and investing in consolidation plans that push costs higher.

They still offer few conveniences or price transparency to consumers because they don’t see them as customers, but focus on health plans to deliver patients to them via negotiations.

Has the Provider Window for Preparing for Risk Passed?

Ultimately, health care organizations haven’t prepared for potential financial risk by measuring healthcare cost performance.

Many Medicare Shared Savings Plan (MSSP) Accountable Care Organizations (ACOs) indicate they would rather quit than accept losses that will require payback to Medicare.

As Medicare enrollment nears 80 million beneficiaries and our population continues to age, it is hard to see a future where participation in Medicare is genuinely optional for providers.

With the August 2018 release of the Proposed Rule on ACOs, CMS reinforced their intention to push providers into financial risk.

If providers aren’t prepared, they willl be caught short when the switch flips to financial risk.

Private sector-Medicare ACO partnerships are poised to rise, following a penetration of private health plan ACO enrollees that already outpaces Medicare.

The trend promises to push consumers into that will cap their costs and provide more benefits.

It is clear that a provider stand-off on risk acceptance has little chance of success.

The question is whether providers still have the time to create ACOs and make them work or create a successful venture under any risk-based reimbursement.

The Proposed Rule: Good and Bad for ACOs

The new Proposed Rule requires that ACOs move to financial risk faster, and a longer contract term ensures they are serious about making it work.

Providers can’t avoid losses by reorganizing an ACO, and even if they break up, payback to CMS is still required.

ACOs will be able to offer some financial incentives to patients to maintain health services and can inform beneficiaries of their ACO enrollment, but how the ACO handles this outreach and other customer services will determine whether patients see this feature as positive or negative.

Many hold-out organizations will still find ACOs too risky an endeavor. That said, if providers are unsuccessful or don’t participate, CMS already has a back-up plan—Medicare Advantage (MA)—signaling its support for higher Medicare enrollment in MA.

Providers will have to decide which path is better for them:
● An ACO, where they have the potential to keep and distribute savings earned through their own innovations and initiatives, or;
● Medicare Advantage: The rules are dictated to participants, and their future is based on cost and quality.

Medicare Advantage Plans: New Rewards

Medicare Advantage is the natural fit for an administration that would like to cap costs and minimize regulations.

Run, by insurance companies, Medicare Advantage is a “privatize Medicare” solution, with a difference: it’s already happening. There is no barrier to expanding the MA program because no rules are required for CMS to simply accept new plans and market it more broadly.

Interestingly, Medicare Advantage plans have experienced such rapid growth over the last several years that they account for a third of all Medicare beneficiaries, with some projecting MA will overtake traditional Medicare within a decade.

However, the state-by-state coverage varies, with states like Florida at 65 percent market penetration, and others in the Midwest at 11 percent.

Some of this could be attributed to a payer market strategy, but, interestingly, areas with high ACO activity have lower MA enrollees.

“If these changes are finalized, we will continue to monitor the program’s ability to reduce healthcare spending and improve care quality to inform future program developments, including whether the program provides beneficiaries with the value and choice demonstrated by other Medicare options such as Medicare Advantage.” (Proposed Rule on Shared Saving Plan ACOs)

Providers should see this as a warning that ACOs will be measured against the benchmark set by Medicare Advantage plans.

MedPac, the advisory body on Medicare reimbursement, is also watching MA as a comparison to ACOs and suggests that ACOs’ transition into Medicare Advantage plans is likely, since it will ensure enrollment (and better control) of patients and their services and costs.

MA plans were also recently awarded additional advantages for their participation in Medicare, to further motivate enrollment. They will be able to offer additional benefits to Medicare beneficiaries beyond traditional Medicare such as home modifications and help to allow seniors to stay in their homes.

Finally, under Proposed Rules for MIPS, CMS is granting providers a free pass on MIPS reporting if they participate in a MA risk-based plan.

Options Still Open for Providers to Participate in Medicare

There are essentially five paths organizations can take if CMS adopts the Proposed Rule.

1. Develop an ACO or other APM to incrementally move the organization safely into financial risk.

It’s not too late for providers to organize and establish ACOs or other APMs, if they pursue it with a business perspective.

This assumes that the health care organization has the infrastructure to manage ACO initiatives or, alternatively, a Primary Care Medical Home. It also means That involves mitigating the risks of failure by creating a network with proven history of cost-effectiveness, and a customer services strategy developed with patients to keep them happy.

Because CMS removed the option to continue a shared savings plan with no revenues at risk under the Proposed Rule, the entity must be positioned for savings from Day One.

This means having tight coordination of patient services as well as data and infrastructure at inception, and the attention of specialists and facilities for referral arrangements that will be critical to cost performance.

2. Participate in another ACO or APM with acceptance of its financial risk.

The Proposed Rule makes this an important distinction from the first path because, once created, an ACO cannot reorganize itself to dodge repayment of cost excesses to Medicare.

Organizations that fear the long term impact of an ACO may choose to participate in another as long as there is the possibility of exit, but that flexibility will be unlikely if the organization is a dominant player in the market or the ACO.

Note: Primary care groups should not join an ACO without first vetting the ACO’s potential for success and having validated information about their partner groups in the enterprise.

Success and failure of an ACO occurs as a network and is dependent on the participants.

3. Participate in Medicare Advantage Plans.

Both primaries and specialties can participate in MA plans, negotiating arrangements like any managed care agreement.

MA participation does not negate the possibility of developing an ACO, but it will impact your network and patient group.

Apart from potentially lower fees, this option allows providers to participate with the least disruption to their organizations.

Do not be fooled: Just like ACO plans, MA plans will increasingly depend on financial risk to cap expenditures, returning to capitation for primary care and episodic payments for specialists.

Many MA plans already reimburse in these ways.

So, if your objective is to create your own ACO in the future but you aren’t ready yet, MA has both pros and cons. In particular, if the MA plan contracts with a multispecialty group and pays capitation, a big downside requirement is a claims shop to pay specialists.

Another disadvantage is that participation in MA could syphon off the patient population that would otherwise be attributed to your ACO, because the benefits and capped costs are a strong MA enrollment incentive.

4. Develop a Medicare Advantage Plan.

ACOs can eventually develop their own MA plan. There is discussion around this concept in policy circles, and the potential for greater cost control and enrollment will appeal to some ACOs.

That said, an MA plan can’t make up for a poor network, lack of cost performance monitoring tools and initiatives, and provider engagement.

A MA plan should be considered after success is already achieved as an ACO.

Both primaries and specialists could participate in a MA Plan network, but specialists may be contracted separately, and referrals controlled.

5. Create Specialty Episodes and Bundled Payments.

Specialty/multi-specialty organizations and academic centers have the most difficult and uncertain future under Value-Based Health Care.

Most lack a large enough primary care network to live from inside referrals; they are regional players with a wider geographic draw of patients.

The best path for most specialty organizations is to create episodic payments coupled with a contracting strategy that will achieve targeted savings. But to get there is difficult, demanding that initiatives be established in each specialty to create procedural or medical management episodes.

Nevertheless, future payments using this structure are inevitable, and specialists should at least be monitoring episodes with data and technology, if not actually selling those packages to health plans such as MA plans.

The window is closing quickly for providers to create their own solutions. the market is moving on, and financial risk is inevitable for all providers.

Only those health systems and groups prepared to act like competitive businesses and respond to the changes now will be able to offer attractive solutions to consumers and patients.

It should be noted that these five plans focus on physician strategy, because this is the key to how ACOs work.

All that said, organizations that still want to have ACOs should heed three pieces of advice:
● First, build on existing network and market strengths. There is no time, for example, to turn around a big specialty ship to become a primary-care centric ACO model.

Instead, a specialty-rich organization should build on its strengths to participate in other ACOs and risk-based reimbursements through specialty-appropriate risk models, such as episode-of-care fees.

● Second, ACOs must be ruthless about choosing their member physicians and practices in the network. The days are gone when specialists can be automatically included because they are salaried members of a hospital-based group.

In fact, hospitals should already be separating out multi-specialty groups with single Tax Identification Numbers (TINs) to improve chances of ACO savings.

This doesn’t mean specialists are out—they can participate as the referral network, but patients attributed to them under ACO attribution rules will not improve ACO finances.
● Third, hospital-based ACOs have particular challenges and by-and-large have poor cost results.

Consolidated networks must embark on a different strategy, inventing ACOs that can act like a physician-led enterprise.

Theresa Hush is the CEO and cofounder of Roji Health Intelligence. As an expert at creating consensus for desired change through education and collaboration, Hush helps healthcare organizations take actions that will direct their future through meaningful technology and programs.

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