The skilled nursing facility (SNF) industry is an important area for Medicare accountable care organizations (ACOs), Medicare Advantage health plans, and other Medicare programs. How can these organizations appropriately benchmark performance to provide efficient healthcare and reduce spending for SNF services?
Milliman’s Jill Herbold and Anders Larson offer some perspective in their report “Performance of skilled nursing facilities for the Medicare population.” The report highlights several utilization and expenditure metrics for measuring SNF performance. It also explores SNF performance levels across the United States and provides a quantitative assessment of the opportunities to reduce spending for SNF services.
The Department of Health and Human Services (HHS) is striving to link 50% of Medicare payments to alternative payment models by 2018. One of the primary alternative payment models offered to Medicare providers is the Next Generation Accountable Care Organization (NGACO). Due to the potential large risk exposure for organizations considering this model, they should work with an actuary to understand the critical elements driving financial success (or failure). In this article, Milliman’s Charlie Mills, Cory Gusland, and Noah Champagne identify five key financial considerations that all ACOs should review before committing to the program. The considerations are ranked by the authors’ perceived importance, with one being the most important.
5. ACO’s CY2014 experience is the baseline for the first three performance years
4. Risk score changes are capped at 3% from the baseline year to each performance year
3. First dollar savings and losses
2. The 2016 benchmark trends are likely understated
1. In order to achieve savings, participants must outperform trended baseline less discount
On December 18, 2015, the Senate Finance Committee released alternative policy options meant to improve the care of chronic conditions for Medicare beneficiaries. In this article, Milliman’s Michael Polakowski and Nicholas Johnson outline 24 proposals that may have a wide-ranging impact on traditional Medicare, Medicare Advantage, and Medicare accountable care organizations. These policies are still under consideration; the Finance Committee’s bipartisan chronic care working group is requesting feedback and comments by today.
Organizations that employ provider performance metrics can position themselves better for long-term success as provider reimbursement continues to transition from pay-for-volume to pay-for-value. In her article “Evaluating healthcare provider performance,” Milliman’s Jill Herbold discusses how healthcare organizations can select the best metrics to increase the overall performance of their organizations.
Here is an excerpt:
There are many types of providers involved in the delivery of healthcare—tertiary hospitals, primary care and specialty physicians, skilled nursing facilities, and home health providers, to name a few—and each plays a unique role. Though there are commonalities, a unique set of metrics is often useful to evaluate the performance of different provider types.
The specific metrics selected should depend upon the quality and robustness of available data, the ability of providers to control or influence the metric, and the ability to compare the metric across providers in an objective manner. Ideally, metrics address each component of the triple aim (cost, quality, and access) and are aligned with the organization’s financial and other goals. It is important to ensure metrics are appropriate for the particular value-based payment arrangement, the organization’s circumstances, and the population that care is being provided to. For example, skilled nursing facility utilization is an important metric for an aged Medicare population but not for a pediatric Medicaid population. It is helpful to use metrics that can be compared over time so changes can be monitored. Comparison of metrics across peer groups and to targets or benchmarks can potentially be helpful to motivate and drive performance improvements….
To achieve financial and other goals, some organizations are using performance metrics when selecting preferred providers to partner with and driving performance improvements across the organization. More specifically, adjusted performance metrics can be useful as part of:
• Evaluating physician groups and other providers for participation in a narrow network, accountable care organization (ACO), or other affiliation of providers
• Identifying post-acute care and other providers with whom to develop preferred relationships
• Identifying preferred specialty physicians to whom primary care physician can refer patients
• Rewarding participating providers via incentive compensation programs
• Driving performance improvement across hospitals, primary care physicians, specialty physicians, and other providers
Accountable care organizations (ACOs) must analyze the risks associated with each aspect of a shared risk and population-based payment contract to be successful. Attention to detail and data-driven decisions can help ensure that ACOs enter into a sustainable and cost-effective agreement. In this article, Milliman consultant Kim Hiemenz identifies the following eight elements critical to analyzing and understanding these payment contracts.
1. Understanding the attribution model.
2. Projecting population size and contract volume.
3. Modeling the impact of random variation.
4. Analyzing data.
5. Quantifying risk through specific modeling.
6. Setting utilization or financial targets.
7. Forward-thinking contracts.
8. Building trust.
Sponsors of self-funded group health benefits may be able to reduce their healthcare expenditures by entering into a shared savings arrangement with an accountable care organization (ACO). In the latest issue of Milliman’s Benefits Perspectives, actuaries Anders Larson and Paul Houchens highlight some items that plan sponsors should consider regarding such an arrangement. The following is an excerpt from the article.
For plan sponsors determining whether a shared savings arrangement is appropriate, the following are some of the key factors to consider:
• Number of plan participants: For plan sponsors with fewer than 2,000 plan employee participants, independently developing a shared savings arrangement with an ACO may be problematic as the plan may experience significant claims volatility from year to year. Additionally, the plan sponsor may not have the necessary leverage in terms of healthcare service volume to garner favorable terms with the ACO. For plan sponsors with limited size, exploring a shared savings arrangement as part of a purchasing coalition or through an insurer may be beneficial; however, the outcome of the shared savings calculation might not be shared directly with individual plan sponsors.
• Geographic dispersion: ACOs generally have a localized geographic focus. Therefore, for employers with employees dispersed across the country, having an ACO manage the majority of the employee population may be an impossible task. For such employers, they should evaluate how their third-party administrators are building networks on a regional basis. A benchmarking exercise (discussed in the next section) will allow the plan sponsor to determine if its plan is well managed at a regional level. If the network is built with a focus on high-quality, cost-efficient care, the employer may capture the same financial benefits of a shared savings arrangement. Additionally, to the extent a private exchange could contract with ACOs on a regional or local level, the private exchange may offer purchasing power that could not be created independently by a plan sponsor.
• Current healthcare utilization and cost: A plan sponsor that already enjoys partnering with a high-performing provider delivery system may have little financial incentive to deviate from its current arrangement. Employers with predominantly young adult employees also are unlikely to have the same financial savings opportunity from better utilization management as employers with a significant portion of employees with high-risk chronic conditions. Employees with high-risk chronic conditions create a larger variance in potential costs for a plan sponsor, as well as management opportunities for an ACO. As one of the first steps in evaluating whether a shared savings arrangement may be beneficial, plan sponsors should have their healthcare utilization and costs benchmarked relative to expected costs for their participants’ demographics (including population health), plan designs, geographic location, and provider discount level. Such an analysis will identify utilization management opportunities for a shared savings arrangement.