Next stage of ACO evolution: Bundled payments

Despite the mixed results so far of  Medicare accountable care organizations (ACOs), a new issue brief from the Navigant Center for Healthcare Research and Policy Analysis concludes that the traditional model is here to stay, although it will continue to evolve.

The brief, "The Future of Accountable Care Organizations; How to Create Increased Share Savings with Payers," outlines the new characteristics that will drive the next wave of ACOs, which will likely shift clinical and financial risk to clinically integrated networks featuring bundled payments.

"We've all seen recent publications that the results for ACOs are mixed for cost savings, but we remain optimistic and hopeful that with some changes to operating models, the results will improve over time," Rich F. Bajner, Jr., director in the healthcare practice for Navigant Healthcare and one of the authors of the issue brief, told FierceHealthcare during an exclusive interview.

Most organizations entering into ACO arrangements focus on long-range goals and don't expect to generate immediate results, he says. But among the ACOs that the issue brief studied, 20 percent did generate savings, according to Bajner. Those organizations invested in physician relations, identifying a physician champion to create behavior change, and provided opportunities to align incentives to create a momentum to drive behavior change.

One way for ACOs to achieve long-term success and possible short-term gains is for the industry to adopt and integrate bundled payments--a contract between a payer and provider that requires all anticipated services for an episode of care be included in a single payment, with risk for cost and clinical outcomes borne by providers--into a population health platform, according to the brief. Doing so, Bajner says, will enable ACOs to focus on primary physicians and specialists, creating incentives so physician performance aligns with potential shared savings.

"Bundled payments are expanding very quickly," he says, noting that the payment structure offers ACOs a unique opportunity to manage high-cost, high-volume care, such as entire episodes of joint replacement and coronary artery bypass graft. "Those organizations that are thinking through that lens of post-acute care, are those that are winning uniformly."

The brief provides three takeaways for providers who are in the process of transitioning to the next stage of ACOs, described as ACO 2.0:

  • Do your homework before you sign a contract: "A bad contract to assume risk is worse than no contract," the issue brief states. Consider whether local payers drive the market to the next stage of ACOs; are the economics of the market, such as utilization and enrollment, sufficient to justify the risk; and what capital is required.

  • Pick your partners carefully:  "It's better to have a few of the right players in the front row than lots of players in the back row," the issue brief authors write. Consider how you define your high-performance networks, structure the governance and select providers to create narrow networks that achieve optimal savings and quality.

  • Execute your plan carefully: "Having physician leaders who drive ACO 2.0 and systems in place to measure and monitor savings and outcomes is key," the authors conclude. "Payers want to see ACOs survive as the vehicle whereby they shift risk to providers. Providers may elect to sit on the sideline and participate opportunistically, or engage their market proactively through the ACO 2.0 model that adds bundled payments to its contracting mix."

To learn more:
- here's a summary of the brief
- download the issue brief (.pdf)