Case 13.1
Incentives in Accountable Care
Organizations
An accountable care organization (ACO)
represents a consortium of doctors, hospitals, and other providers who contract
to take financial responsibility for the quality of care. As such, it faces a
complex incentive problem, needing to identify contracts that allow it to meet
its quality and cost targets. An ACO also needs to establish contracts with
providers that incentivize them to provide efficient, high-quality care. In
addition, the ACO must do this as the providers are simultaneously being paid
using traditional volume-based methods, bundled payments, and a variety of
alternative payment models. Whitman XXXXXXXXXXquotes Micky Tripathi, founder and
CEO of the Massachusetts eHealth Collaborative, as saying, “What makes a
successful ACO? As an industry, we don’t know.”
A consortium that decides to form an ACO
contracts with Medicare for three years. Medicare sets a benchmark that is a
weighted average of spending by beneficiaries that are attributed to the ACO.
One implication is that consortia with high levels of spending in the past find
it easier to meet cost goals. In contrast, commercial ACO contracts are based
on a negotiated rate and a negotiated degree of risk.
For example, UnityPoint Health, a $4
billion system with 43 hospitals across Iowa, Illinois, Wisconsin, and
Missouri, has a physician-led ACO that in 2016 covered 70,672 Medicare
beneficiaries in the Medicare Next Generation ACO model. Through its
self-insured health plan and its ACO contracts with private payers, including
UnitedHealthcare, Wellmark, and Blue Cross and Blue Shield of Illinois, it
covered another 255,379 individuals, with 102,125 of those in full-risk
contracts (UnityPoint Accountable Care XXXXXXXXXXUnityPoint did not reduce costs
in its first attempts at a Medicare ACO but ultimately developed a system for
reducing costs. The system tracks high-risk patients, standardizes care
pathways, uses analytics to understand the population it serves (and the care
being provided), and emphasizes incorporating behavioral health into primary
care.
UnityPoint Clinic, which has 500 physicians
across Iowa and Illinois, now bases 86 percent of compensation on productivity.
By 2020 it plans to have 33 percent of physician compensation based on
productivity, 33 percent based on salary, and 33 percent based on cost,
quality, and satisfaction measures (Barkholz XXXXXXXXXXThe logic is that provider
payments need to be aligned with payments for care.
Discussion Questions
• Why is creating a successful ACO
difficult?
• How many Medicare ACOs are there? How are
they structured?
• How many commercial ACOs are there? How
are they structured?
• How many Medicaid ACOs are there? How are
they structured?
• Is the number of ACOs increasing or
decreasing?
• What outcomes represent success for an
ACO? What predicts success?
• Do ACOs that accept more risk get more
shared savings? Why?
• Do some ACOs improve clinical quality?
How do they do it?
• Do some ACOs improve patient
satisfaction? How do they do it?
• How does being paid in varied ways
complicate ACO design?
• How does being paid in varied ways affect
provider incentives?
• What sort of incentives does pure
volume-based payment create for providers?
• What sort of incentives does a mixed
payment model create for providers?
• What sort of incentives does pure salary
create for providers?
• How does MACRA affect incentives to
create a Medicare HMO?
• What incentives does the Medicare
benchmark create?