American Medical News looks at actuarial skill sets and how they can help physician groups working with new payment models. Here is an excerpt from the article, which is titled “When you need an actuary.”
An actuary can identify which patients should be enrolled in a managed care program and stratify the practice’s patients into groups that carry different levels of risk, said Art Wilmes, an Indianapolis-based principal and consulting actuary for consulting firm Milliman. The actuary can gauge the potential variation in clinical outcomes and the likelihood that a pool of patients will need more care than anticipated by the contract terms.
The actuary’s analysis can help identify which patients’ care and what type of management — for example, congestive heart failure patients versus those with chronic obstructive pulmonary disease — carry the most potential savings and clinical improvement. That way, the practice can decide where best to focus time and effort.
“The key is when you want to optimize your management of a patient, you need to understand whether they will respond to [health] management activities,” Wilmes said. “Those are, in my mind, the tools that health systems and physicians will need.”
As Americans await the Supreme Court’s decision on the Patient Protection and Affordable Care Act (PPACA), many providers are moving forward with efforts to develop accountable care organizations (ACOs). While not always well documented, this movement and other aspects of the PPACA raise questions for medical professional liability (MPL) insurers.
ACOs may be a new market for physician insurers, but the risk insured will be a familiar one.
“How do we approach this market as an opportunity?” asked Chad Karls, principal and consulting actuary for Milliman, Inc., during the session.
The first thing to know is the medical professional liability risks that an ACO will have. “Don’t lose sight of that,” he said. “That is the elephant in the room when it comes to ACO insurance coverage needs. That medical professional liability is the single largest risk.”
Healthcare trends have been on the rise during the last few years and there are growing concerns over the financial stability of the Medicare program. There are also concerns regarding the aging of the Baby Boomers, the increase in average age of enrollees, and an insufficient tax base to cover future funding of the Medicare program. The Patient Protection and Affordable Care Act (PPACA) attempts to address some of these growing concerns by implementing laws and programs aimed at reducing healthcare costs. The Medicare Shared Savings Program (MSSP) as well as the Pioneer program are two such initiatives.
This paper compares the MSSP and Pioneer ACOs and outlines their key features in terms of six major areas: payment arrangements, beneficiary alignment, interim payment methodology, benchmark methodology, trending methodology, and calculation of shared savings/losses.
According to Alison Fleury, CEO of the Sharp HealthCare ACO, the ability to inform beneficiaries ahead of time whether they were assigned to an ACO was an important step in learning about the population Sharp will be managing.
Under the program, beneficiaries who received the majority of their care from a care provider within an ACO network during the past three years are aligned with that ACO.
Finally, the ability to move from a shared-savings model to a population-based payment arrangement was very important for many organizations.
“One thing at least some of the organizations are excited about is that eventually CMS would be willing to go to a capitated approach. I think a lot of these Pioneer ACOs, given that they are leaders in care coordination already, like that option,” said John Pickering, principal consulting actuary with the actuarial and consulting firm Milliman…
The Centers for Medicare and Medicaid Services (CMS) has proposed a shared savings arrangement with hospitals, physicians, and other healthcare providers that integrates and coordinates their services through accountable care organizations (ACOs) and achieves cost savings to Medicare as a result. In return, CMS offers, through the Medicare Shared Savings Program (MSSP), to return a portion of the amounts saved to the ACOs.
MSSP applications are due early in 2012 for ACO starting dates of April 1 or July 1, 2012. An application must include a plan for distributing shared savings or losses to providers within the proposed ACO, but CMS has not spelled out procedures for developing such a plan. Drawing up a savings-distribution plan requires careful, detailed decisions potentially affecting every provider entity within the new system.
The framework for allocating savings within an ACO is described in a new paper; the framework emphasizes rewards for an ACO’s component entities based on their relative contributions to the organization’s total shared savings and quality performance.
The paper focuses on CMS-contracted MSSP ACOs, as contained in the Patient Protection and Affordable Care Act (PPACA) of 2010, because they are facing the task as an immediate issue. However, the approach could also be applied to risk-sharing arrangements within any integrated delivery system.
Managed Healthcare Executive (MHE) pulled together four industry leaders to discuss the prospects for accountable care organizations (ACOs) in the commercial market (as opposed to the Medicare market, where there has been more attention). The panelists included Milliman principal and healthcare actuary Rob Parke. Here is an excerpt from that interview:
MHE: Who is more likely to drive an ACO creation: a payer or a provider? Or does it depend on the market?
Parke It’s generally the payer who drives that. What will drive the payers to push it is cost pressures from their purchasers. Though you could take a look at Massachusetts as an example where Blue Cross has driven a lot of that consolidation in the market with their Alternative Quality Contract, and Medicare is driving that through their Shared Savings program. It’s really driven by cost ratios from purchasers through their agents, the health plans…
Payers will drive to further extend the creation of ACOs and ultimately payers will ensure their future success. My view of what happened in the managed care backlash was that many payers viewed these kinds of arrangements as pure financing arrangements where they globally capitated the provider community—I’m obviously oversimplifying it—and essentially walked away and told the provider community to manage the care. It needs support with tools and data and all of this to help them in their process and in the transition. If they don’t do that, I don’t think it will be sustainable.
Read the full interview here. For more on commercial ACOs, go here and here.
If Medicare payments become restricted, a population-based approach, which is part of year three of Pioneer, will provide some protection for ACOs. We illustrate the dynamics by exploring the interaction of reimbursement, margin, and fixed and variable costs.
Much has been written comparing MSSP’s [Medicare Shared Savings Program's] and Pioneer’s trend methodology. However, the instability in Medicare trend by region makes it difficult to predict what the alternative trend to MSSP or Pioneer, which is the fee-for-service trend, will be in any region. MSSP’s trend methodologoy produces advantageous changes in benchmarks for lower cost areas. In MSSP, an ACO’s 2012 benchmark will be the ACO’s historical experience PMPM plus a fixed amount which corresponds to the national increase in PMPM. This increase in the benchmark from historical experience will be relatively higher for a lower-cost area and lower for a high-cost area. Pioneer’s methodology dampens the advantages and the disadvantages by averaging the fixed amount and the national trend applied to the ACO’s historical experience.
In our model, if Medicare expenditures increase by 10%, operating margin for an ACO with fee-for-service (FFS) payments could double, but if Medicare expenditures decrease by 10%, operating margin could become zero. Pioneer ACOs would yield results in the opposite direction–lower Medicare expenditures would produce the higher operating margin if the ACO can reduce its costs.
The report looks at various other dimensions of ACOs as well, including patient attribution, capital requirements, and the decisions organizations will face as they pursue one of these programs.
The accountable care organization (ACO) model, like the HMO model, aims to promote provider accountability for care coordination. However, in an ACO, there is no gatekeeper primary care physician (PCP), and members can seek care from any provider they choose. In order to measure provider performance in such a system, members must be assigned to providers via an analysis of healthcare claims. Patient attribution methods that support valid and actionable cost and quality metrics will be crucial to the development of an effective ACO model. A new paper by Susan Pantely looks at patient attribution in ACOs.