The evolving ACO landscape

As hundreds of new ACOs try to find their feet in the US, Ron Calhoun at Risk Solutions looks at the landscape forming around them and the challenges they face.

One of the biggest changes in the US healthcare landscape in light of the implementation of the Patient Protection and Affordable Care Act (PPACA), is the creation of accountable care organizations (ACOs) as groups of healthcare providers that come together voluntarily to provide coordinated high quality care to Medicare patients.

According to Ron Calhoun, managing director of Aon Risk Solutions and its Health Care Practice leader, there are now around 310 ACOs in the US. They can be roughly divided into four categories: 155 single provider ACOs, 125 multiple provider ACOs, 17 insurer-sponsored or insurer-only ACOs, and 13 insurer provider ACOs.

Of the 310 ACOs, for some 151 the sponsoring entity is a hospital system, for about 124 the sponsoring entities are physician groups, 31 ACOs are sponsored by community-based organizations and four are sponsored by insurers.

Calhoun says that Aon has seen the fastest growth in physician group ACOs. Of 89 that went live on July 1, 60 percent were formed by physician groups. “That took many of us by surprise. We think it might be signaling a deceleration or slowing of the physician acquisition trend in acute care,” he says.

“We were seeing a lot of integrated delivery systems in large community-based hospitals acquiring physician practices; we’re now seeing that trend start to slow down.”

Other trends Calhoun has observed of late include the fact that most ACOs have a very specific geographic boundary. About 89 percent operate only within one state. Meanwhile, the hotspots for ACO growth are in large population centers where there’s competition between ACOs. The greatest overall activity is in the Midwest, while the most intense ACO competition is in southern California and Boston.

Calhoun adds that many of the large insurers in the US are investing in establishing better care coordination and competencies and they’re promoting risk-based arrangements with ACOs and patient-centered medical homes.

No dominant model has yet emerged in the way ACOs are structured or run. Many view the Medicare shared savings program, the primary vehicle for the Medicare/Medicaid ACOs to participate in, as an interim step rather than a final destination.

“It is important to note that of the 310 ACOs, half are statutory ACOs that have received the green light from the Center for Medicare and Medicaid Services [CMS] to participate in the Medicare shared savings program,” he says. This means that the other half are commercial ACOs targeting the commercial sector as opposed to the Medicare/Medicaid marketplace.

THE CHALLENGES AHEAD

So many different models of ACOs have emerged, based around so many different variables, that it becomes difficult to categorize them. That in itself presents a challenge, Calhoun says. But the focus of most ACOs will be on the pursuit of the goals of accountable care—how they will measure their results based on the 33 Medicare Shared Savings Program (MSSP) quality measures as currently defined. 

The fundamental goals of an ACO are established by the Institute for Healthcare Improvement (IHI), which states what it calls a triple aim: improving health outcomes, lowering costs and ensuring high quality patient-centered care.

But different organizations will pursue those goals in different ways, while Calhoun notes that another challenge is that many organizations not classing themselves as ACOs are aiming at the same targets.
A final challenge is the varied geographic reach of ACOs, especially if this differs from the affiliate hospital coverage area.

Aside from how to categorize them, ACOs also face serious tests in the way they adjust to the new landscape set down by the PPACA. Calhoun identifies some specific weaknesses that are of concern.

“There’s a direct correlation between an ACO’s competence in participating in value-based reimbursement methodologies and their degree of clinical integration,” he notes. “If an ACO is not truly clinically integrated it will struggle in terms of participating in these new risk arrangements, and some will fail as a result.

“I would also say that most ACOs are not fully prepared on the post-acute side of the delivery continuum. A lot of ACOs are struggling with their post-acute strategies—many of them are simply defaulting to home health, but that’s proving to be somewhat inadequate.”

The bottom line for ACOs will be assessing themselves against the 33 MSSP quality standards against which all ACOs will be measured. These are split into four categories: patient/caregiver quality; care coordination and patient safety; preventive health; and managing at-risk populations.

“These 33 quality measures will be the score card for all ACOs. Here’s the question that I asked every ACO I’ve dealt with: how are you going to clinically manage a population in a non-clinical environment? What is your strategy? And that gets back to the weakness in most ACOs’ post-acute strategies.”

STRUCTURAL FLAWS

Aside from the individual challenges ACOs will face, Calhoun also sees some serious flaws in the overall health care delivery system that will come to the fore as the system moves in the direction of accountable care.
Of some 312.2 million US citizens, based on the 2010 US population census, around 169 million receive their benefits through employer-based benefit programs, 44.3 million receive their care through Medicare, 48.6 million through Medicaid and roughly 50.3 million are uninsured.

Calhoun estimates that about 30 million of the 50 million uninsured will be shifting into the Medicaid system in an expansion tied to accountable care. But on top of this, of the 169 million that receive their benefits through employer-based plans, some 60 percent are between the ages of 40 and 65—and will thus be heading towards retirement.

“We have a wave of baby boomers coming through the system and Medicare will double between now and 2035,” he says. “So between 2012 and 2035 the current Medicare enrolment of 44.3 million will double to 88.6 million.”

He cites another worrying statistic. There are roughly 12.5 million American seniors with a form of dementia. Yet there are only 1.6 million skilled nursing beds in the US, many being converted into short and long-term rehab because of more favorable reimbursements. There are a further 2.4 million assisted living beds in the US and 500,000 sub-acute long-term acute care beds.

“So that means that we have roughly 4 million post-acute beds in this country but 12.5 million seniors with one of the 47 forms of dementia,” Calhoun says. “We’re not even talking about the top 15 chronic illnesses that are affecting the senior population. And that is coupled with the fact that the current Medicare population is going to double between now and 2035. That’s an enormous amount of stress bearing down the system from a post-acute perspective.”

Changes must, he believes, eventually be made to the way fees are structured for ACOs. “It’s clear that, given the medical trend we’ve seen over the last decade, the fee-for-service system is not sustainable on its current path,” he says. “Instead there will be a transition towards value-based reimbursement methodologies.

“As painful as it will be, this will be vital for the sustainability of our healthcare delivery system. It will be painful and there will be winners and losers. We are working with our clients to help them mitigate that risk.”