HEALTHCARE REFORM OCTOBER 2012

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1 HEALTHCARE REFORM Tracking ACO Growth Nationally OCTOBER 2012 The enclosed slides are intended to provide you with a snapshot of how private sector accountable care organizations (ACOs) have formed since the advent of coordinated care agreements under the Medicare program. Private payers, hospitals, physician practices, and other healthcare stakeholders are establishing new partnerships across the country in order to reduce costs, improve quality care, and share financial incentives if certain performance benchmarks are met. These private sector collaborations, many of which have chosen to participate in the federal ACO program, can offer insight to how health reform s Medicare Shared Savings Program (MSSP) will impact healthcare in the years to come. This is one of the many healthcare reform resources HIDA has developed. For more information on healthcare reform, visit or contact HIDA Government Affairs at

2 Providers Increasing Activity As the health reform Medicare Shared Savings Program (MSSP) was established in 2012, many providers also entered new ACO-like partnerships with private payers aimed at improving coordinated care and controlling costs. Major private sector ACO initiatives: Cigna has launched a collaborative accountable care (CAC) program that includes 32 CACs serving 300,000 patients in 16 states Cigna s goal is to have 100 CACs covering one million patients by 2014 Aetna has ten ACO-like agreements with providers in place, and expects to have 20 by the end of 2012 Aetna is investing over $1 billion in a variety of capabilities to support its ACO program, including acquiring a health IT services firm Blue Cross Blue Shield Massachusetts entered into ACO-like Alternative Quality Contracts with 11 provider organizations in , achieving savings of 2.8% Quality care measures for chronic care management, adult preventive care, and pediatric care all improved under a global pay-for-performance system

3 Comparing Medicare and Private Programs Providers participating in ACO agreements with private payers may also choose to participate in the national MSSP program however, private sector agreements may have significant differences in terms of patient volume, eligible participants, financial incentives, and clinical/quality. Eligible Participants Organization Population MSSP Federally qualified health centers, rural health centers, critical access hospitals, acute care hospitals, physician groups and practices ACO board governance (75% of provider entities must be represented), must obtain exclusive tax identification number for ACO 5,000 or more Medicare beneficiaries Private Private insurers; hospital systems, physician practices, health clinics, specialists, other providers Contractual agreement within a provider network with payers Determined by ACO Dartmouth Institute recommends at least 15,000 patients in each participating commercial plan 1 Timeline Three-year contracts; beginning in 2012 Determined by ACO Goal Coordinate care to improve quality and reduce costs Coordinate care to improve quality and reduce costs Total ACOs 153 organizations are participating in such initiatives as of August total organizations are participating in such initiatives as of August ACOs: Frequently Asked Questions, The Dartmouth Institute, The Center for Population Health, retrieved on December MSSP: CMS Adds 88 New Medicare Shared Savings ACOs, CMS, July 9, Private: Growth and Dispersion of ACOs, June 2012 Update, Leavitt Partners, June 2012.

4 Comparing Medicare and Private Programs Payment Fee-for-service MSSP Shared savings model Benchmark created for Medicare Part A and Part B expenditures based on previous spending measures Two models for participants 4 : 1) One-sided model (sharing savings, but not losses, for the entire term of the first agreement) 2) Two-sided model (sharing both savings and losses for the entire term of the agreement, offers greater shared savings) Private Receive a portion of the shared savings from payers, likely based on savings from historical spending patterns Premier ACO partnership 5, which helps coordinate private sector ACOs, anticipates deep operational interactions across a wide spectrum of services to achieve payment incentives, including; 1) Predictive modeling 2) Case management 3) Network and medical management 4) Financial reporting Savings can allow for investments (e.g., in health IT) 4 ACO Providers Fact Sheet, Centers for Medicare & Medicaid Services, October Premier accountable care organizations Driving to a people-centered health system, Premier, Inc

5 Some Markets Quick to Adopt Certain states have experienced a high amount of private sector ACO formation, as some healthcare delivery networks are already increasing coordination and integration. Highest Concentration of ACOs Entity Sponsoring ACO Formation Location 6 Hospital System Physician group Insurer Community-based organization California Texas Massachusetts Michigan New Jersey New York Total 6 Growth and Dispersion of Accountable Care Organizations, Leavitt Partners, June 2012.

6 Breakdown of Healthcare Spending in an ACO Under a Blue Cross Blue Shield Massachusetts Alternative Quality Contract (AQC) agreement that took place from , 7 11 organizations reduced spending in a program similar to new Pioneer Accountable Care Organizations in Medicare. Change in Average Healthcare Spending per Member Total Quarterly Spending Overall By Service/Product Evaluation and Management Procedures Imaging Test Durable Medical Equipment By Site Inpatient professional Inpatient facility Outpatient professional Outpatient facility Ancillary Alternative Quality Contract, Health Affairs, August 2012

7 California, Texas, and Massachusetts Lead the Way 9+ ACOs 5-8 ACOs 1-4 ACOs 0 ACOs On December 19, 2011, CMS announced that Pioneer ACOs will operate in two additional states not listed above, Nevada and Vermont. However, their sponsoring organizations are headquartered in neighboring states (California and New Hampshire, respectively). Source: Growth and Dispersion of Accountable Care Organizations, Leavitt Partners, June 2012 Update.

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