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Insights from ACO Pioneers (Part Three: Payers)

How can healthcare organizations that were built on volume adapt to the arrival of a value-based reimbursement system?  To help answer that question, we’re continuing our four-part series on a new white paper by Allscripts Chief Medical Officers Doug Gentile, MD and Toby Samo, MD exploring the unique perspectives of pioneering Accountable Care Organizations.

In this third part of the series, Drs. Gentile and Samo explore how ACO’s manage their relationship with payers.

To read the white paper in its entirety, go to


Key Takeaways:

  • Negotiate uniform quality measures
  • Get money every quarter
  • Share outcomes with employers

Medicare may be the 800 pound gorilla in healthcare but its sheer size kept it from moving as quickly on ACOs as commercial payers. In fact, according to Parie Garg, Ph.D., a consultant with Oliver Wyman’s healthcare practice, it was commercial payers who first admitted the current cost curve was unsustainable and decided ACOs were part of the answer.

“Now we’re at a place where the market agrees we need to get to value-based care delivery and reimbursement,” said Garg. As a result, Garg said commercial payers have been “more aggressive” than the federal government in launching ACOs and other value-based arrangements with providers. No longer insistent on limiting physicians’ share of savings to 2 percent or 5 percent, payers “realize they must now pay as much as 30 percent upside to physicians willing to participate in some of these models,” she added.

Negotiate Uniform Quality Measures

A key inhibitor of success with pay-for-performance and other value-based payment methods has been the lack of uniform quality measures. Each payer has their own way of measuring success and determining physician payment. This lack of coordination frustrates physicians and makes it difficult to manage contracts in an ACO.

Turning the tables on its payers, Advocate now demands that they adhere to a common set of quality measures, said Mark Shields, MD, MBA, FCAP, Senior Medical Director of Advocate Physician Partners in Chicago.

“Prior to this, every payer had their own pay-for-performance measures, so that the definition of the measure, the way the data was collected, and the threshold at which you earned incentives were all different,” Shields said. “It just was chaos. The docs threw up their hands and said, well, I’ll do my best but the chips will fall where they may. By having the same metrics, the same data collection method across all payers, we’re really able to assist the docs in driving performance. And over time we’ve developed measures that are identical for the physicians and for hospital management.”

Get Money Every Quarter

Before the end of the first year of the program, Advocate has been paid for meeting the quality and cost measures defined in their ACO contract. When they negotiated the original contract, Advocate insisted on receiving money every quarter. “We’ve got infrastructure to pay for as well as incentive funds to pay out to physicians,” explained Shields. “So one of the key components (of our contracting) was a payment after a 90-day claim lag with a 60-day period for risk adjustment and payment calculation.

Share Outcomes with Employers

In seeking to improve their share of savings in an ACO, physicians and hospitals need to convince payers to think differently.  Payers are accustomed to thinking of what providers do as just another widget – they pay for a visit or an admission, for instance. To get them out of that mindset, Shields says, providers need to convince payers that “what they’re paying for is an episode of care or for managing a population over a year.”

A key part of Advocate’s strategy has been to share their quality outcomes with major employers in their catchment area. “When insurance companies understand that their key customers are hearing from us, it helps,” Shields said. “If you’ve been having trouble getting good contracts out of payers, I strongly encourage you to start doing this.”

Michael James, CEO of Genesys PHO in Flint, Mich., has the same advice but he takes it one step further. Rather than share quality outcomes from every patient in an ACO with employers, he suggests sharing outcomes from only that company’s employees.

“Employers, when they understand that we are responsible really to help their employees get healthy, are enthusiastic for this product,” James said. “If they’re providing a PPO contract where they’re paying their providers fee-for-service, and I go to them and say, ‘let me bring an ACO in, you pay us the same fee-for-service you do in the PPO but I can reduce the inflationary costs of your healthcare from 7 percent down to 2 percent. You keep 2 of it and give 3 back to me, your costs go down because your population is getting healthier, and eventually over two to three years you’ll get costs down to the cost of inflation and the consumer price index.  I think employers would be elated with that.”

 Watch for Part 4 of the white paper next week …

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