Why hospital associations are dipping their toes into state-based Medicare ACOs

Medicine Money
Hospitals are giving state-based ACOs a try in an effort to build scale and secure more reliable savings. (Getty/utah7780)

In an effort to build scale and drive greater savings, providers in some regions are banding together in statewide Medicare accountable care organizations (ACOs). 

Hospital associations in Mississippi and Florida have teamed up with Caravan Health, a company that builds ACOs, to make this a reality. Mississippi’s ACO, the first such statewide Medicare ACO in the country, launched in January. Florida’s launched this week. 

Caravan Health CEO Lynn Barr told FierceHealthcare that ACOs should include upward of 100,000 participants to produce typical savings goals of between 1% and 2%. However, most organizations, about 85%, have 25,000 or fewer participants. 

“We realized that the whole model of, ‘We’re going to create this local, regional ACO’...wasn’t actuarially sound,” Barr said. 

Armed with that knowledge and experience in creating and running community health ACOs, Caravan approached the health associations to start a conversation on expanding the model to a statewide approach. 

RELATED: ACOs saved Medicare $2.7B to date, outpacing CMS estimates 

There's a catch, however, Barr said, which is why it was crucial to get the hospital associations on board first: The approach does require competing hospitals to team up. That dynamic can be tricky to navigate, so the hospital associations offer governance and space to resolve any competitive disputes.

"We said, 'Hey, this is really weird.' We're taking a bunch of competing health systems and making them work together for the benefit of their survival," Barr said. "The only people we know who work with competing hospitals are state hospital associations."

The state-based ACOs aim to address two central concerns with the broader model, Barr said. For one, many providers lack the data individually to track what’s working and what’s not in their populations. In addition, smaller providers especially struggle in value-based models—some may not even see enough patients to qualify for ACO status. 

But these challenges aren’t stopping the call for value-based care, Barr said, so it’s crucial for providers to have avenues into these new models that fit their needs. 

“We are going to move from fee-for-service to fee-for-value, there’s really no changing that trajectory,” she said. 

Under the state-based approach, participating providers pool data to track trends and more effectively coordinate care, Barr said. The larger the ACO, the more predictable the savings, she said. 

The model also creates stronger links between rural and urban hospitals that may not have worked together before, she said. More shared data means better referrals and opportunities for telemedicine. 

RELATED: Considering becoming an ACO? These are the common traits of those most likely to succeed  

The state-based models are in their infancy in both Mississippi and Florida, so both are in the recruitment phase. The state hospital associations each have hundreds of members that they’re seeking to draw into the model. 

Timothy Moore, president of Mississippi Hospital Association, said that model would be a good fit for members that are new or inexperienced with ACOs and for those who operate more robust programs already. MHA boasts more than 100 member hospitals and health systems. 

“The healthcare providers of Mississippi are ready for this kind of bold, new approach,” Moore said in an announcement

The Florida Hospital Association includes more than 200 members, and Bruce Rueben, association president, said in an announcement that the ACO program is a key component of its broader strategy to improve care in the state. 

And though these new models are still emerging, Barr said interesting growing in more states. She said several additional state hospital associations are planning to announce their own projects in the coming weeks. 

“I think that the central theme is that it has been decided that providers will become payers,” Barr said. “We did not elect that, we did not choose to become payers, but we will be payers—and if we’re going to be payers, we'd better start acting like payers.”