ACOs Adopting Varied Payment Models

Twitter icon
Facebook icon
LinkedIn icon
e-mail icon
Google icon

Most accountable care organizations (ACOs) are adopting one of four different approaches to creating new payment models, according to a new report sponsored by the Commonwealth Fund, a private foundation established to promote improvements in the U.S. health care system.

Prepared by health care advocacy organization Catalyst for Payment Reform in partnership with consulting firm Booz Allen Hamilton, the report indicates that newly created ACO models vary in design and definition of shared risk because few providers or private payors have experience with shared-risk payment arrangements. Its findings indicate that payor–provider shared-risk ACO models are in an early developmental phase, with few operational shared-risk models, aside from the traditional capitated HMO model, currently in existence. The report also reveals that in addition to varying definitions of shared risk, there exist a variety of program designs used in shared-risk initiatives.

Providers, the authors write, do not currently have the infrastructure required to successfully assume and manage risk successfully, despite the fact that some payors supply infrastructure and other support to providers. Shared-risk models, they say, have typically evolved from shared-savings programs.

Meanwhile, the four basic payment models developed to share risk include “bonus payment at risk”, “market share risk”, “risk of baseline revenue loss”, and “financial risk for patient population” (whole or partial). Under the “bonus payment at risk” umbrella, the provider is at risk of not receiving a bonus payment based on quality and/or efficiency performance. In the market share risk model, patients are provided with incentives by lower co-pays or premiums to select certain providers, putting the latter at risk of loss of market share.

Constructed on a “fee-for-service” base, the “risk of baseline revenue loss” model is one wherein providers face a financial or payment loss should they fail to meet certain cost or quality thresholds, and/or if actual costs exceed a target cost. In the “financial risk for patient population” model, providers manage patient treatment costs for all or a designated set of services within a predetermined payment stream and face risk for costs that exceed payments.

The authors of the report note that the models of greatest interest are those that deviate from the “chassis” of the traditional fee-for-service model, instead providing combined fee-for-service and incentive payments. However, they claim that they “were unable to find any models currently in place that both move away from fee-for-service and include financial risk to the provider for a patient population.”

Additionally, the researchers state, one major obstacle to effectively managing risk at the provider level is a lack of HIT infrastructure that can offer data about patients’ clinical and financial experiences alike, thereby ensuring quality of care and reduced costs. They deem it incumbent on providers to continue to improve their infrastructure if they wish to be able to assume more risk and create effective ACOs in the future.

For a summary of the report, click here: http://www.commonwealthfund.org/Content/Publications/Fund-Reports/2011/J...