The Accountable Care Paradigm: More than Just Managed Care 2.0 DAVID MUHLESTEIN ANDREW CROSHAW TOM MERRILL CHRISTIAN PEÑA BRENT JAMES
TABLE OF CONTENTS ABSTRACT...... 3 INTRODUCTION. 3 BACKGROUND AND PURPOSE... 4 STUDY DESIGN AND METHODS.... 5 FINDINGS 6 Prior Work... 6 Measured Outcomes...... 7 Process-Level Care Management... 8 Aligned Financial Structures... 10 THE ACCOUNTABLE CARE PARADIGM... 11 LIMITATIONS..... 13 REFERENCES..... 14 LIST OF TABLES AND FIGURES TABLE 1. MEASURED OUTCOMES OF ACCOUNTABLE CARE... 7 TABLE 2. PROCESS-LEVEL CARE MANAGEMENT.. 9 TABLE 3. ALIGNED FINANCIAL STRUCTURES... 11 FIGURE 1. ACCOUNTABLE CARE PARADIGM...... 12 TABLE 4. CORE REQUIREMENTS OF ACCOUNTABLE CARE...... 13
ABSTRACT Accountable care organizations have become an emphasis in health policy circles, but some feel they represent the return of 1990s managed care. Accountable care, however, represents a fundamental rethinking of how care is delivered rather than a narrow focus on costs. By studying the efforts of over 400 organizations experimenting with accountable care, we have developed a paradigm that defines the movement in terms of structural requirements, core processes and expected outcomes. Organizations that adopt accountable care must bear financial risk for a defined population, oversee the clinical component of care and provide measured outcomes of cost and quality. INTRODUCTION The impetus for new payment and delivery models in health care is being largely driven by a widespread acknowledgment among practitioners and policymakers that the fee-for-service (FFS) payment method has failed to adequately control costs while promoting health. While it remains the country s dominant payment approach, it is increasingly clear that a better alignment of incentives is critical to a reduction of overall spending trends. The inclusion of the Accountable Care Organization (ACO) concept in President Obama s signature health care bill has heightened national interest in these entities and their potential to lower costs by improving the quality of health care. 1 Though Medicare s version of ACOs has been formalized in regulation 1, 2, debate continues regarding their purpose and whether they are a reiteration of the negatively viewed Health Maintenance Organizations (HMOs) of past decades that evolved into Managed Care Organizations (MCOs) of today 3, 4, 5. (Throughout this paper, we will use the terms MCO and managed care to refer to this movement, including HMOs.) The debate about the nature of these entities, though, inaccurately presupposes that there is a consistent understanding of accountable care. The accountable care movement represents more than just structural changes to the existing system; rather, it is a complete reinvention of health care payment and delivery in America. Similarities between ACOs and MCOs are apparent: in response to rapidly escalating health care costs, both types of entities accept financial responsibility to manage the health services of a population with financial rewards for doing so in a less costly manner 6. MCOs, though, came to be seen as limiting patient choice and potentially rationing necessary health care services to increase profits through limited networks of providers, stiff gatekeeping requirements and utilization review, resulting in insurer-based death panels where anonymous underwriters determined who received care. This harsh perspective may become the reality for some organizations that adopt the ACO moniker, but it does not accurately represent accountable care.
Accountable care differs from managed care of the 1990s in three fundamental ways: [1] the management of health care is assigned to care delivery groups instead of insurers, [2] there is increased focus on measurable health outcomes and [3] enabling technological advancements now exist, including much better risk adjustment, advanced analytics and improved health data management software. Whereas the MCO movement was characterized by cost containment, the ACO movement will be characterized by health management that generates better patient outcomes, which may result in cost containment. Simply identifying macro differences between ACOs and MCOs, though, is insufficient to define the accountable care movement. By studying the entities that are actively engaged in the practice and development of accountable care we crafted a model a paradigm of accountable care. In this paper we present its core structural components, requisite processes and expected outcomes. BACKGROUND AND PURPOSE As part of an ongoing effort to understand changes occurring within the health care system, we have been identifying and tracking organizations nies and joint partnerships with widely varying approaches to achieving these results. Some have adopted new approaches to caring for a population that claim to practice accountable care. 7, 8 During while others resemble MCOs of the past. In this project, we initially identified organizations that self-identified as ACOs and began studying and interviewing these early models. In our efforts to categorize the different models, we found great difficulty in establishing whether an entity was actually practicing accountable care or was simply adopting the title as a means of advertisement or some other purpose. Additionally, we also identified organizations that seemed to operate very similarly to the most advanced self-proclaimed ACOs but refused to adopt the ACO title. Our initial surveys of ACOs have identified multiple models that generally seek to improve quality and lower costs. These ACO efforts are directed by attempting to distinguish between old models and emerging models, we began to identify commonalities between organizations that were redefining care delivery and those that were not. While researching these organizations, we tried to answer two questions: [1] what are organizations doing that led them to adopt the ACO moniker and [2] will these efforts reveal any significant difference from the managed care movement of the past? These two questions led to the development of a useful and necessary definition of accountable care for purposes of our research. In this paper, we present the results of these efforts that have led to the development of the accountable care paradigm. hospital systems, provider groups, insurance compa-
STUDY DESIGN AND METHODS To define accountable care, we first conducted a literature and research review of existing definitions of ACOs. To evaluate organizations practicing goals under a different name. As of March 2013, we have identified 449 ACOs and ACO-like entities sponsored by hospital systems, physician groups, insurers accountable care, we identified entities that selfdescribed and community organizations. 9 We preliminarily as being ACOs or were pursuing the same goals as ACOs and studied these organizations using publicly available sources. Next, we conducted interviews with many of these entities to learn about their structures, their processes and the outcomes they hoped to achieve. Finally, we analyzed our findings from all three research areas (literature review, organizational analysis and interviews) to create our accountable care paradigm. Due to the newness of the ACO name and concepts, we did not limit our research to academic literature. In an effort to be as broad as possible, we evaluated published articles, industry summaries, statutes, regulations and speeches. Additionally, we read reports from the popular press and online social media (such as blog posts attempting to describe ACOs). In addition to evaluating formal definitions, we sought to understand how the term ACO is used informally within the industry. Throughout this analysis we distinguished between definitions of accountable care generally and specific definitions of the Medicare Shared Savings Program (MSSP). To identify organizations that are engaged in accountable care activities, we relied on press releases, industry reports, government announcements, evaluated these organizations using publicly available sources including their own websites and press releases as well as company reports and bond filings. We collected information on the legal structure of the entity, size, geographic location and catchment area, and market. We have conducted over 80 interviews with ACOs and ACO-like entities beginning in late 2011; further interviews are ongoing. (The majority of entities we interviewed for this project self-identify as ACOs while some have adopted other nomenclature to describe their activities.) Organizations that we identified as engaging in accountable care were contacted via phone, email and personal contacts and asked to participate in a survey assessing their activities relating to accountable care. Each organization that agreed to be interviewed was invited to choose the person that they felt was best positioned to answer our questions about their efforts. Interviewees included figures ranging from CEOs to ACO directors. Prior to the interview, a series of questions and topics was sent to the interviewee and then a structured telephone interview was conducted. Data was collected on organizational structure, payment arrangements, patient enrollment, physician relation- industry interviews, conferences and public ships and information technology. All interviews records. We initially focused on organizations that self-identify as being an ACO, but expanded the definition were conducted by Leavitt Partners and KLAS Research. to those that are explicitly pursuing the same
FINDINGS Prior Work In any effort to define accountable care, a distinction must be drawn between the accountable care movement and Medicare Shared Savings Program (MSSP). An MSSP ACO is a payment model established by statute and regulation with a defined structure and specific objectives. 10 The MSSP, however, is only one model of accountable care. Due to the intense focus on MSSP ACOs, many definitions are limited to explanations of the MSSP, but this is insufficient to define the movement as a whole given the extensive activity occurring by non-medicare players, including private and state-level Medicaid efforts. The basis for many definitions of accountable care reference Mark McClellan s formulation of ACOs, which was written soon after the passage of the Affordable Care Act. 11 McClellan defines ACOs as providers who are jointly held accountable for achieving the measured quality improvements and reductions in the rate of spending growth. This definition starts with a structural description (accountable providers) and concludes with an expected outcome (improving quality and lowering costs). Other authors have similar definitions, but expanded on McClellan s to include descriptions of legal structures, information technology requirements, 12, 13, 14, 15 or proposed approaches to delivering care. In popular descriptions of ACOs, the trend is to include some attributes or structural requirements, but continue to focus on the ultimate expectation of 16, 17 improving quality and lowering costs. Past definitions of ACOs consistently define these new entities in terms of their intended outcomes and many go on to include some structural features. Another approach used in the past to define ACOs is based on what they do or the processes that they adopt. Particularly, these authors suggest that the ultimate approach to being accountable is to create a structure that manages the care of patients, achieved by actively coordinating the care that patients receive and directing that care through all are- 16, 18 as within the organization. Similar to Donabedian s work on describing quality, we believe that accountable care must be understood by structural requirements, processlevel foci and ultimate outcomes or goals. 19 Our accountable care paradigm recognizes and applies each of these concepts. As ACOs are most generally defined by their intended outcomes, and accountable care was designed to achieve specific results, we will first discuss the expected outcomes of ACOs as defined by policy makers. Next, we will discuss the findings of our research relating to the process-level aims of ACOs and the core structural requirements that are necessary for the intended aims and goals to be accomplished.
Measured Outcomes The most common approach used by policy makers to define ACOs relies upon what ACOs are intended to accomplish. Targeted outcomes usually include improving the individual experience of care, improving population health and reducing the cost of health care for populations. 20 This so-called triple aim represents the ideal that by improving the health care system, providers will be able to better care for the health needs of the people they treat, resulting in more appropriate care for individual patients, ultimately leading to better health outcomes and lower expenditures on health services. These intended outcomes differ remarkably from classic managed care as they greatly expand the focus beyond costs to include both health and the consumer experience. An important distinction between accountable care and past practices is that these core foci are not only goals, but measured endpoints. In an ACO, each of these three goals must be assessed using validated measurement tools. MCOs had the goal of providing optimal care, but only measured through financial outcomes. By additionally measuring population health and patient satisfaction, accountable care expands the responsibilities of the entities becoming ACOs. With access to outcomes information, an ACO s results (particularly relating to costs and population health) will become central to payment negotiations and will be leveraged by purchasers, such as employers, to choose appropriate health coverage. This will facilitate purchasing based on value as encompassed by lower prices and better outcomes. These core goals represent policy makers objectives for what the health care system should accomplish, but do not establish how they are to be accomplished. This broad definition allows for great flexibility in implementation, but results in an incomplete definition of accountable care. A solo practitioner, arguably, could embrace these goals apart from any larger effort, but few would argue that such an endeavor represents the accountable care movement. While insufficient to define accountable care, the triple aim does provide clear objectives for the accountable care movement and serves as a necessary condition of the accountable care paradigm. TABLE 1. MEASURED OUTCOMES OF ACCOUNTABLE CARE An entity practicing accountable care must strive to: Improve the individual experience of care: Recognize that health care is not simply the sum of clinical endpoints but an experience focused around the patient. Improve population health: View health as a composite of the health status of individuals within a defined population and improve this overall health. Reduce the cost of health care for populations: Recognize that the cost of care is a component of the wellbeing of a population and provide only appropriate care at the lowest cost possible.
Process-Level Care Management A second component of ACOs is their processrelated aims, which are the mechanisms they create and manage to achieve their desired outcomes. This builds on an understanding of both the ultimate goals of an ACO the triple aim and also weaknesses of the past approaches of MCOs. Process-level objectives represent what ACOs are specifically doing to achieve intended outcomes. Our research into ACOs includes both what these organizations are currently doing and what they are striving to achieve in the future. Our interviews have indicated three primary foci of ACOs relating to what they are doing to achieve the intended outcomes: [1] overseeing the clinical provision of care, [2] coordinating that care across the entire spectrum of health services, and [3] implementing appropriate information technology to effectively manage a population s health. These organizations recognize that accountable care will necessarily move away from the myopic costmanagement approaches of the past and embrace more patient-centered, health management strategies of the future. The struggle, though, involves implementing processes to achieve these aims. The most pronounced difference between entities practicing accountable care and classic managed care is direct involvement with the actual provision of care. Many MCOs, for example, evaluate whether they will pay for a specific procedure, but they have little or no input in how or how well a practitioner actually provides that service. 21 While some staffmodel HMOs do oversee some of the delivery of health care, most managed care is unable to both decide whether to furnish services and determine how those services are delivered. Without directly influencing the process of delivering care, an organization is incapable of truly managing the care it provides and being accountable for the outcomes it generates. Providing clinical direction may take a variety of approaches, including promoting adherence to best practices across a provider network, computer assisted decision-making, peer review or other means. The central feature is that, by being involved with the care process, entities can encourage clinical innovation and strengthen care processes. The most important aspect of this requirement is that the accountable entity has the means to affect the care delivery process. The result is that ACOs will either be run by provider groups (such as hospital systems or physician groups) or will be collaborations between insurers and providers. True accountable care cannot exist if the payment for care is separated from the provision of care as was the modus operandi of many insurer-based MCOs. An ACO s process focus is on designing an infrastructure that can coordinate care. Care coordination consists of the accountable entity administratively facilitating the appropriate care for a patient across the continuum of health care services, given the patient s unique circumstances. In particular, these entities must be adept at chronic disease management across specialties and locales. Basic care coordination begins with making use of care
managers who direct patients through the health care system but can extend to predictive analytic health information technology systems, advanced patient monitoring and team-based care delivery programs at extended locations, including the home. ACOs are also experimenting with hotspotting 22 and hovering 23, and are developing new means of increasing patient involvement with their own care. To effectively coordinate the care of a population, ACOs realize that they must be involved with all the care that the patient receives. This is leading to extensive network formation where the organizing entity is able to coordinate the care that is received in ambulatory care locations, inpatient settings and post-acute facilities. The focus is slowly shifting away from a provider-centric worldview, where care was organized by the specialization of the physician, to a patient-focused system, where the care delivery process is built around the needs of the patient. Most ACOS acknowledge being far from reaching their ultimate goals, but the recognition of the need to change is almost ubiquitous. To properly manage a population, entities must identify individuals care needs, track the care they receive and do not receive (such as missed screenings and unfilled prescriptions), anticipate future risks and intervene with appropriate services. Such tasks rely on health information technology (HIT) that was not sufficiently advanced a decade ago to effectively monitor and respond to a population s health needs. HIT investments range from electronic medical records and health information exchanges to patient management software that follows patients through episodes of illness, advanced data mining software that help identify population-level issues and predictive analytics that indicate which patients should receive special attention and monitoring. The skills to technologically manage a population and provide appropriate health care services for that population are a work in progress among all the ACOs we interviewed. TABLE 2. PROCESS-LEVEL CARE MANAGEMENT An entity practicing accountable care must strive to: Oversee the provision of clinical care: The clinical component of care is directed by the same entity that is bearing financial risk. This signifies that insurers, unless they directly partner with care providers that also bear financial risk, cannot practice accountable care. Adopt an administrative infrastructure to coordinate the provision of care across the continuum of health services: Organizations are responsible to direct patients to appropriate facilities to receive necessary services, requiring affiliation with, or acquisition of, a network of locations and services spanning ambulatory care, inpatient facilities, home care and other such entities. Invest in and learn to use appropriate information technology to manage population health: Acquire the technological infrastructure and establish a culture that uses this technology to promote population health.
Aligned Financial Structures The third component of an ACO is the underlying structure of the organization. Existing ACOs have varied structures with respect to payment arrangements, risk-allocation, provider relations, physician leadership, legal structures and infrastructural designs. In our research, we sought to identify the distinguishing characteristics of an ACO that are prerequisites for overseeing the processes of care management and differentiate ACOs from MCOs of the past. We identified two requisite features: [1] ACOs must bear financial risk for the health care needs of a defined population and [2] they must align financial and professional incentives to further the goals of accountable care. The first requirement is that an entity must bear significant financial responsibility for the health care needs and corresponding medical costs of a population. (In so saying, we acknowledge the inherent assumption that the accountable entity be financially responsible for the bulk of the care provided for patients. Bulk could be measured in various ways: by cost, by overall volume of consumption or even by the accountability for a spectrum of listed services.) Bearing responsibility speaks to a contractual obligation or other risk-based agreement where the entity agrees to financial risk associated with the care and measured health outcomes of a defined population of people. The spectrum of financial risk runs from minor incentive payments, upside-only bonus agreements (such as many pay-for-performance and shared-savings programs), to more comprehensive payment bundling and full capitation systems. Financial risk for the care of a population, combined with direct measures of patient outcomes, incents the development of ways to maximize the value of rendered services. This financial requirement of accountable care has long been the core focus of managed care; MCOs accept risk for a population in exchange for monthly premiums. Successful managed care entities pool lives together and correctly assess the actuarial risk for the health care costs of that population. Challenges in accurately assessing risk are buffered by utilization management controls that counterbalance potential provider incentives to provide unnecessary care. However, this approach can lead to withholding necessary care, as many MCOs were accused of doing. The pooling of lives and the focus on population-level management requires that ACOs be relatively large, thus disqualifying smaller groups from practicing accountable care alone. (Patientcentered medical homes (PCMHs) may be able to practice accountable care with affiliation agreements, but alone they are not sufficiently large to bear actuarial risk for a population). Bearing actuarial risk alone, though, is not accountable care, as ACOs are additionally responsible to align incentives to fulfill all the goals of accountable care. The necessity of aligning incentives signifies recognition among early ACOs that strict FFS payment arrangements are neither optimized for encouraging population wellness nor managing population costs. Organizations face major challenges in realigning incentives in both designing appropriate incentive structures and transitioning toward those new models. Some organizations, such as capitated
provider groups, have some experience focusing on population health, but such expertise is uncommon among most early ACOs. Efforts at changing practice patterns are almost as numerous as the ACOs themselves and focus on aligning financial incentives to professional incentives. Financial incentives run the gamut, from performance bonuses to salaried employment. Professional incentives, in contrast, try to get at what fundamentally motivates certain behavior and generally focuses on providers internal de- 24, 25 sire to provide the best care possible. A second, equally difficult challenge, deals with transitioning from existing practices toward new models as organizations struggle to remain viable in the short-term FFS world while moving toward a reimbursement system based on value. In addition to the administrative complexity involved with changing how bills are generated and payments are made, there are significant cultural barriers as innovative leaders seek to reimagine how care is provided. ACOs have great plans for delivering care, but the difficulty of changing decades of past practices cannot be understated. TABLE 3. ALIGNED FINANCIAL STRUCTURES An entity practicing accountable care must strive to: Bear financial risk for the measured health of a population: Organizations agree to take financial responsibility for both the provision of health services and the overall health and satisfaction of the covered population. Align financial and professional incentives to encourage the production of high quality health outcomes: Conscientiously decide to focus on the maintained health of a population and incentivize providers to provide well-care instead of sick-care. THE ACCOUNTABLE CARE PARADIGM Our model for accountable care argues that tion processes and manage population health the accountable care movement is defined through throughout the continuum of care services. The structural requirements, process aims and expected outcomes. With a financial interest in both the cost and outcomes of care, entities are incented to achieve the triple aim. Properly motivated, these hope and belief among these early ACOs is that these processes will lead to the goals of improving patient satisfaction and population health, as well as limiting cost increases (see Figure 1). entities then develop the necessary care coordina-
FIGURE 1. ACCOUNTABLE CARE PARADIGM Measured Outcomes Process-Level Care Management Aligned Financial Structures To simplify the paradigm, a three-part definition must be met for an entity to claim that it is practicing or pursuing accountable care. First, the entity must be financially responsible for the health needs of a population. Second, the entity must coordinate and oversee the clinical provision of care across the continuum of health care services. Third, the entity must be held accountable for the measured outcomes relating to both cost and population health that its care produces. A spectrum of approaches may satisfy each of these requirements, which will lead to different degrees of accountability. Thus, an entity may presently engage in basic accountable care while simultaneously progressing toward an even more accountable model. Many organizations are already experimenting with various models and have taken the first steps toward accountable care. (Due to the newness of accountable care in general, it is premature to evaluate the effectiveness of any one model as most are still being implemented and all are being updated. We will continue to monitor ACO activity and will study the different payment and care coordination models as results become available.) All, though, have room to progress along the accountable care spectrum toward better management of the health and costs of a population.
TABLE 4. CORE REQUIREMENTS OF ACCOUNTABLE CARE Bear financial risk for the health care needs of a defined population Coordinate and oversee the clinical provision of care across the continuum of health care services Provide measured outcomes relating to both cost and population health LIMITATIONS This ongoing study presents a qualitative evaluation of research into ACO activities, and as such, our sample has limitations. We believe our list of ACOs represents the vast majority of ACOs within the United States, but it is almost certainly incomplete. While our repository of information is perhaps the most comprehensive collection of data on organizations participating in this movement, it is limited to publicly available information. Where interviews have occurred, our information about the The accountable care paradigm is a fundamental change from managed care of the 1990s. Past efforts were focused on cost control with minimal interest in population health. They were, at their core, financing arrangements. Accountable care, though, is more than simply a change in how care is financed, but is a shift in how care is delivered; it is a care delivery arrangement. It expands the focus of risk bearers to include measured outcomes of quality, not just costs. Accountable care must be viewed as more than a payment structure or a series of objectives, but as a reinvention of the health care system as a whole. The efforts that organizations take now to adopt accountable care, whether they achieve their intended results or not, will frame the future of the American health care system for the next generation. ACO is more complete, though the interviewees were not selected at random, but were based on the availability of those ACOs. There is the possibility that the experience of the ACOs we have not yet interviewed is different from those that we have interviewed. As the accountable care paradigm is not intended to reflect the experience of any single ACO, but to represent the overall movement, it is unlikely that subsequent interviews will challenge our core findings.
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